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The Keckley Report

Hospitals in the Eye of the Storm

By December 9, 2019March 1st, 2023No Comments

Last week, two seemingly unrelated events bracket well the reality for hospitals: they are a prime target for healthcare cost-cutters.


As expected, the American Hospital Association, the Federation of American Hospitals, the Association of American Medical Colleges, the Children’s Hospital Association, and three hospitals in Nebraska, California and Missouri filed a lawsuit in the DC District Court claiming the administration’s mandate requiring public disclosure of hospital prices, costs, and negotiated rates with insurers for 300 “shoppable services” violates their first amendment protections. In its 31-page lawsuit, the litigants call the rule “unlawful several times over.”

Essentially, their opposition boils down to three practical issues:

  • The cost of compliance: the rule requires implementation by January 2021; the hospitals counter that it would impose “severe cost” and a “crushing burden” for many hospitals.

  • The impact of hospital price transparency on consumer healthcare spending: the administration believes price transparency will stimulate consumer shopping and drive down health costs. But healthcare is not a “traditional market” in which consumers drive most purchases. The majority of spending involves expensive drugs, technologies and specialized services for which competition is limited and the consumer’s role in the purchasing decision insignificant.

  • Disclosure of terms and conditions negotiated between insurers and hospitals: Of the three issues, this is, perhaps, the most far-reaching.Contracts between hospitals and insurers are closely guarded secrets. Allowing anyone and everyone, including direct competitors, to know specific terms and conditions for each service will at a minimum be disruptive. Setting aside laws protecting contracts, the result would be chaotic.


Thursday, the CMS Office of the Chief Actuary released it forecast for health spending:

  • The share of the economy devoted to national health-care spending rose to $3.65 trillion in 2018, up 4.6% from 2017. To put this into context, the U.S. spent $11,172 per person (+4% in 2018 vs. +3.5% in 2017), and national health-care spending, which accounted for 17.7% in 2018 is expected to be 19.4% by 2027.

  • The number of people without insurance increased by 1 million in 2018 for the second consecutive year, with 30.7 million individuals uninsured.

  • The net cost of insurance grew 15.3% last year to $164 billion, its fastest rate of increase in 15 years. Overall spending on the program increased 3% to about $598 billion in 2018.

  • In 2018, Medicare spending rose 6.4% compared with 4.2% in 2017, to $750.2 billion though enrollment remained essentially unchanged. The reason: 2.1% growth in medical prices last year: prescription drugs +2.5% in 2018 vs. 1.4% in 2017.

  • Prices for health care goods and services are projected to grow somewhat faster over 2018-27 (2.5% compared to 1.1% for 2014-17).

  • Long-term, CMS projects total healthcare spending will increase 4.8% in 2019 and average 5.7% annually through 2027. And it projects spending for hospitals will increase 5.7% annually through 2027 compared to 6.1% annual growth for prescription drugs and 5.4% for physician services.


The common denominator in these two items is hospital spending: in 2018, total hospital expenditures grew 4.5% to $1,191.8 billion in 2018, or 33% of total spending. While public scorn and media scrutiny has been focused on drug prices, hospitals are clearly next in line.

Opposition to the Final Rule by hospitals is understandable, but it can be no excuse for inaction by hospitals. To start, they must do a much better job in educating the public about how they operate, how costs are calculated and prices set, how differences in clinical approaches, populations served and care is delivered, and how relationships between hospitals, insurers, physicians are structured and how profits are defined and generated.

Second, hospitals must go beyond posting their charge masters and offering out of pocket calculators for patient out of pocket costs. Specific prices for services inclusive of major component costs must be more accessible to patients.

Advancing price transparency solutions that are readily accessible and understandable to consumers is an imperative that’s not without risk for hospitals, but inaction, stonewalling and obfuscating the challenge is not an option.



Surprise Medical Billing Agreement Near, Arbitration Included
Late last week, the Senate health and House Energy & Commerce committees reached an agreement on surprise billing legislation that includes arbitration which they hope to attach the deal to a year-end spending bill. The Energy & Commerce surprise billing proposal previously included a benchmark payment rate and an independent dispute resolution process that would allow providers to appeal claims over $1,250. The Senate’s original proposal included a benchmark payment rate. The bipartisan, bicameral agreement also includes some drug pricing transparency policies, a measure raising the purchasing age for tobacco to 21 and funding for community health centers.

Analysis: Suicide Attempts
The Harvard research team analyzed public records for 309,377 suicide deaths and 1,791,638 nonfatal suicide attempts requiring treatment in an emergency department or 1,556,871 hospitalization records among persons aged 5 years or older. Results: Overall, 8.5% of suicidal acts were fatal. Drug poisoning accounted for 59.4% of acts but 13.5% of deaths; firearms and hanging accounted for only 8.8% of acts but 75.3% of deaths. Firearms were the most lethal method (89.6% of suicidal acts with a firearm resulted in death), followed by drowning (56.4%) and hanging (52.7%).

Study: The Cost of Caregiver Responsibilities
Financial services company Northwestern Mutual conducted a study on the financial impact of caregiving, surveying 1,400 adults who have either previously served as a caregiver or were currently doing so. (Caregivers are those who provide assistance to someone who has a serious health condition and is unable to perform certain functions on their own). Key findings:

  • A majority of caregivers (66%) are both working and serving as a caregiver for someone, and 62% said caregiving duties impacted their work.

  • Men appear to be more professionally impacted by caregiving: Among respondents, 76% of male caregivers balanced caregiving with either a full-time or part-time job or self-employment, compared to 59% of female caregivers. Likewise, 67% of male caregivers said caregiving had impacted their career compared to 58% of women caregivers.

  • 75% of Gen Xers and 73% of millennials said they juggle caregiving duties with a job.

  • 69% of Gen Xers (ages 39-54) and 70% of millennials (ages 23-38) reported that caregiving had an impact on their careers.

  • 19% have had to take days off work and 19% have had to change their work schedules or shifts12% lost income or saw an impact to their long-term earning potential, 11% had to pass up promotions or other opportunities for career advancement and 10% had to cut back on work responsibilities

Modern Healthcare 100 Most Influential Released Today
Today, Modern Healthcare’s 100 Most Influential in Healthcare will be released. It’s coveted recognition. To MH’ credit, this year’s list includes substantially more representation from government, retailers, and insurers than previous years reflective of the industry’s changing landscape. Amazon, CVS and Walmart cracked the top 10. Still missing are influential roles played by private equity, philanthropists, foundations, healthcare journalists, and strategic advisors who play equally prominent roles. And a few ‘interesting’ sidebars: CMS’ Seema Verma is listed #1 while her Boss, HHS Secretary is listed at #18; CVS Aetna holds spots 5 and 6 on the list but Walgreens coming in at #30.

Congress, Courts this week
Both the Senate and the House will be in session next week. Surprise medical billing legislation is expected to be near a vote. Drug pricing legislation is still in limbo though a method linked to an international comparison index is getting attention. And still waiting on Tx. v. Azar appeal that might land the Affordable Care Act back in the Supreme Court next year.


AHA et al v. Azar, December 4, 2019

“Ban on Surprise Medical Bills May Pass After All” New York Times December 8, 2019

Conner et al “Suicide Case-Fatality Rates in the United States, 2007 to 2014: A Nationwide Population-Based Study” Ann Intern Med. 2019. DOI: 10.7326/M19-13

2019 C.A.R.E. Study, Northwestern Mutual

“100 most influential people in healthcare – 2019” Modern Healthcare