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The Keckley Report

In 2023, Hospitals must Change the Narrative

By December 26, 2022March 1st, 2023No Comments

As the 118th Congress is gaveled in next week, it faces a tough economy, an anxious electorate and global unrest. The triple-demic (flu, RSV, Covid) facing America’s hospitals will be of concern, but beyond that, little attention will be directed to hospitals.

Additional funding for hospitals was not specified in last week’s omnibus package that funds the federal government through September 2023 though programmatic investments in rural, public and mental health were included. But even as nightly news features crowded hospitals responding to the triple-demic, little for hospitals in the 4,155 bill.

There are many reasons for recent federal and state neglect of hospitals: one that must be considered is unflattering media coverage. Consider these headlines from prominent national news outlets:

In recent months, media coverage has also taken aim at hospital profitability: despite the pandemic, impressive financial results for prominent non-profits (Cleveland Clinic, Ascension, Providence, UPMC, AdventHealth, Mayo Clinic, Kaiser Permanente et al) alongside investor-owned systems (HCA Healthcare, Tenet, UHS et al) have been reported in the context of their while charity care policies, non-hospital related ventures and executive compensation.

The net result of this media attention is confusion about the financial condition of America’s hospitals among elected officials, business leaders, the general public and even among hospital boards. In 2023, hospitals must do a better job telling their story with three major adjustments to the narrative:

Messaging: Hospitals tout specialty programs and facilities effectively but do a poor job communicating specifics about affordability, safety, quality and cost-effectiveness to stakeholders including their workforces and referral sources. Lack of transparency is a staple for hospital operations and prices and underlying costs for hospital and physician services is the Achilles heel. Cost estimator tools aren’t enough. The widening stakeholder audiences to which hospital messaging needs attention expect more and better data in the context of the hospital’s performance based on facts.

Policymaking: Hospital policy today is primarily focused on equitable access to hospital inpatient and outpatient activity and the uneven competitive landscape hospitals face against insurers and private equity investors. Consolidation is pitched to communities and regulators as a means of lowering costs though historically those savings have not been realized in consumer and employer premiums and out of pocket obligations. The policy landscape for hospitals must transition from defense to offense. Being a regional system accountable for social determinants of health, accurate diagnostics and evidence-based interventions, accessible whole person primary care services and a compliment of local/virtual specialty services is the hospital’s future. Policymaking efforts toward regulators and elected officials should reflect that shift. Today, it doesn’t. Today, in most state and federal policymaking about hospitals, the focus is still defense of bricks and sticks and attacks on health insurers.

Governance: Most hospital boards are ill-prepared to fulfill their fiduciary role. They lack adequate understanding of the healthcare environment in hospitals will play a role. They rely too heavily on lag indicators about inpatient margins and acute utilization and lack necessary insight about clinical innovations, technologies, consumer needs and values, competition and capital markets upon which strategies for growth and sustainability must be built. System boards are a slight-bit better, but all fall short in scenario planning about the future and anticipating black swans (like the pandemic) that can be contemplated. Re-setting the narrative begins with hospital boards: they’re not ready.

The narrative about hospitals before the pandemic was premised on institutional trust. The narrative during the pandemic was institutional necessity and all were thought of as safety nets. Today, the narrative is shifting to something else…but what that is unclear to most.

Paul

PS Thanks for reading, your comments and suggestions. Happy Holidays all!

 

Quotable: Special Focus on Hospitals

“…when I look at hospitals in general, I don’t see them as much different than they were 20 years ago. We have talked about this movement for a long time, but hospitals are dragging their feet and realistically it’s because they still get paid the same way until we start thinking about how we pay differently or refuse to pay for certain kinds of things in a hospital setting, the inertia is such that they’re going to keep doing it. “

Here’s how hospitals can chart a path to a sustainable financial future Advisory Board Daily Briefing December 22, 2022 www.advisory.com/daily-briefing/2022/12/22/radio-advisory-143

“One of the biggest challenges for health systems facing this barrage of negativity is the sector’s struggle to stand with one voice. For whatever reason, hospitals and health systems have been unable to collectively drive messaging showing that while there are cost issues, to be sure, the overall value provided by these organizations far outweighs the negatives.”

Healthcare Value Crisis Redux December 19, 2022 Revive www.reviveagency.com/blog/healthcare-value-crisis

“Healthcare services is the largest vertical within PE healthcare investing, accounting for roughly 10% of PE buyout and growth deals overall in the US in 2022. The vertical includes traditional healthcare providers that offer medical treatment in hospitals, clinics, residential facilities, and homes. PE firms currently have $62.0 billion in dry powder available to deploy in healthcare services, which translates to roughly $150 billion in cumulative company enterprise value.”

US PE Middle Market Report Pitchbook December 14, 2022 www.pitchbook.com

“Hospitals in the United States charge patients as much as 1,800% more than their costs amid the coronavirus pandemic, according to a new study. The 100 most expensive hospitals in the United States charge between $1,129 and $1,808 for every $100 of their costs, according to a study by National Nurses United, the largest nurses’ union in the country. Overall, hospitals across the US charge an average of $417 for every $100 of their costs. The average markup has more than doubled over the past two decades. The markups have resulted in hospital profits skyrocketing by 411% from 1999 to 2017, hitting a record $88 billion.”

Hospital Profits Soar While Millions Face Economic Hardship Headline Health November 22, 2020 https://headlinehealth.com/hospital-profits-soar-while-millions-face-economic-hardship

“Hospital and health system leaders are preparing to navigate what could be an exceptionally turbulent 2023…The vast majority of health system leaders (85%) said staffing challenges would have a major impact on their strategy for 2023; 76% cited inflation as a significant factor. Affordability issues for patients, shrinking margins, and ongoing supply chain disruptions were among the other stiff headwinds that our respondents anticipate. “(based on Deloitte’s survey of 71 health system leaders)

Tina Wheeler, Health Care sector leader, Deloitte, LLP 2023 Outlook for Health Care Could margins/staffing stall progress to the Future of Health December 13, 2022 /www2.deloitte.com/us/en/blog/health-care-blog/2022/2023-outlook-for-health-care-could-margins-staffing-stall-progress-to-future-of-health.html

“The U.S. health care system ranks last on measures of equity among similar high-income countries.1 Although policymakers and payers have increasingly looked to hospitals to help reduce inequities, there’s been less focus on their role in addressing health-related social needs (HRSNs). Such needs are related to food insecurity, housing instability, a lack of access to transportation, an inability to afford utility bills, and exposure to interpersonal violence, among other concerns. Despite the strong links between HRSNs and health outcomes, recent evidence suggests that only one quarter of U.S. hospitals screen for these five needs.”

Sandhu et al Hospitals and Health Equity — Translating Measurement into Action December 24, 2022 www.nejm.org

Covid

CDC: U.S. life expectancy fell again in 2021: Last week, the CDC reported that U.S. life expectancy fell to 76.4 years in 2021 vs. 77 years in 2020, driven by the effects of the pandemic as well as the opioid epidemic. There were more than 3.4 million deaths in the U.S. in 2021 (835.4/100,000), an increase of 5.3% (80,502) over 2020. In May, the United States officially surpassed 1 million deaths from COVID-19–one in every 331 people in the US. The nation has reached almost 1.08 million coronavirus deaths as of early December.

Centers for Disease Control www.cdc,gov

Regulation: The Omnibus Bill

$1.65 trillion Omnibus Bill passed to avoid government shutdown: Friday, the House passed a 4115-page omnibus spending package for 2023 which the Senate had passed Thursday. Key healthcare provisions:

·       Physicians: Doctors were facing 4.5% Medicare reduction at the end of the year but the final language included a 2% cut: in 2023 and a 3.5% cut in 2024. Note: for 2023, the Centers for Medicare & Medicaid Services (CMS) reduced the MPFS conversion factor by 4.48% (to $33.06), a second straight year of conversion factor decreases.

·       Medicaid: A measure allowing states to kick patients off of Medicaid (Medicaid determinations)-prohibited during the pandemic — starting April 1, 2023 instead of July, 2023. The bill provides a more gradual process for winding down the increased payments. Beginning in April, the federal matching rate would decline from 6.2% to 5%until June; from July 1 to the end of September, the rate would drop to 2.5%; and from October to the end of 2023, decrease to 1.5 %. The proposal also allows states to permanently offer Medicaid members 12 months of postpartum coverage.

  • Telehealth: A measure extending pandemic-era rules to make telehealth coverage more flexible through the end of 2024.
  • APMs: Extension of value-based care bonuses sent to physicians that participate in alternative payment models though the bonus will drop next year from 5% to 3.5%.
  • Hospital at Home: Extension of the CMS hospital-at-home waiver through 2024 to, allow hospitals to handle emergency and inpatient cases outside of a facility. As of November, there were 114 health systems and 256 hospitals approved to provide hospital care in a home setting.
  • Rural hospitals: Extension of rural hospital program funding i.e., home health rural add-on payment of 1%, federal subsidies for the education of health professionals serving in rural areas and the Small Rural Hospital Improvement Grant Program. But the 3.925% rate cut for home health providers is still slated to take effect in January.
  • Opioids: Several measures addressing the opioid crisis, including $1.575 billion in state grants for substance abuse prevention and treatment  and provisions of the Mainstreaming Addiction Treatment Act i.e. elimination of a DEA requirement that clinicians get an extra certification to prescribe buprenorphine, the NOPAIN Act, which improves access to FDA-approved non-opioid therapies for outpatient surgical procedures and others.
  • Pandemic Preparedness: A measure creating an Office of Pandemic Preparedness and Response within the White House to facilitate reports to Congress and more frequent reviews of the Strategic National Stockpile. Related: A measure putting the Advanced Research Projects Agency for Health (ARPA-H) under the NIH to focus on AI enabled pandemic preparedness and response programs.
  • FDA: A measure allowing the FDA to require post-market approval studies for drugs approved under the accelerated approval pathway. Also gives FDA new powers to oversee baby formula and cosmetics, and to try to ensure that drugs granted a speedy approval undergo further testing to confirm they work.
  • Mental Health: Several measures funding mental health services, including grants for maternal mental health, Medicare coverage for marriage and family counselors and mental health counselors beginning in 2024. Related: Funding for marketing and outreach efforts for the nation’s new three-digit mental health hotline, 988. It transitions other mental health hotlines, including one for veterans, to the national network.
  • CDC: $9.2 billion in funding to the Centers for Disease Control and Prevention, a $760 million boost over fiscal year 2022. More than half of this boost is dedicated to public health preparedness to help prepare for another pandemic. The bill also has $350 million in “flexible funding” for public health infrastructure, which is a 75% boost. The law also makes the director of the Centers for Disease Control and Prevention into a Senate-confirmed position.
  • Antitrust: Additional funding through increased fees would rise for merger filings raising an estimated $190 million and increasing funding available for the Federal Trade Commission and the Justice Department’s antitrust division.
  • Private Equity: Requires the SEC to redo a 100-plus-page economic analysis in an early 2022 proposal, so it “adequately considers the disparate impact on emerging minority and women-owned asset management firms.”

Hospitals

Study: majority of hospitals benefit from DSH program drug discounts: The most recent data (2011-2015) indicate that 57.2% of 4466 general acute care hospitals analyzed received disproportionate share hospital payments, totaling more than $14.5 billion, in 2015. The majority of payments went to hospitals with Medicaid shares above the state-specific median (89.1 % hospitals with uncompensated care shares above the state-specific median (60.6%), or hospitals deemed as disproportionate share per statutory definitions (64.6%). However, among all hospitals receiving these payments, up to 31.6% of payments were allocated to hospitals that did not meet a given definition, and 3.2 percent went to hospitals that met none of them. “These findings suggest that although the majority of the payments were targeted to hospitals serving low-income patients, opportunities exist to better align allocation with statutory goals and intent or to revise applicable statute.”

Chatterjee et al Variation and Changes in The Targeting of Medicaid Disproportionate Share Hospital Payments2022https://doi.org/10.1377/hlthaff.2022.00153

Hospital ownership data to be public The Biden administration on Tuesday plans to announce it will release ownership data for all 7,000 hospitals that participate in Medicare in an effort to boost transparency. “The move comes amid a rapid increase in private equity investments in hospitals, resulting in an increasingly concentrated market. Private equity firms owned about 4% of hospitals as of last year.” Per HHS, the data will allow closer scrutiny of hospital consolidation and provide information useful to consumers.

Biden administration to publish hospital ownership data for first time The Hill  |   December 20, 2022 thehill.com/policy/healthcare/3782066-biden-administration-to-publish-hospital-ownership-data-for-first-time/

Hospital 340B program participation scrutinized: Per the HRSA report:

  • Hospitals that meet the definition of rural referral centers are ramping up drug purchases under the program at a faster rate than any other type of 340B hospital, by more than 700% over five years.
  • Cumulatively, 340B hospitals wrote off 2.7% of their patient revenue as charity care, or assistance to needy patients, in their most recent Medicare filings. The figure for the non-340B hospitals was almost identical, at 2.6%. Some of the hospitals with the lowest charity-care rates were 340B hospitals.

“The data raise questions about the program’s growth and purpose. In some cases, the program appears to be bolstering profits in well-off areas more than it is underwriting services in less-privileged neighborhoods.”

Many Hospitals Get Big Drug Discounts. That Doesn’t Mean Markdowns for Patients WSJ December 20, 2022 www.wsj.com/articles/340b-drug-discounts-hospitals-low-income-federal-program

Study: Use of high intensity billing codes for ED visits increased 400% since 2006: Researchers performed an observational study of US treat-and-release ED visits using data from the Nationwide Emergency Department Sample. Results:

“In 2006, 4.8% of treat-and-release ED visits exhibited high-intensity billing increasing to 19.2% by 2019. The proportion of visits for older patients, those with more comorbidities, and those with nonspecific but potentially serious diagnoses grew. Of the observed growth in high-intensity billing, 47 percent was expected, based on changes in administrative measures for patient case-mix and care services. Any emergency care reimbursement reform must account for growing patient complexity and an evolving role for EDs in the health care system.”

Janke et al Trends in Treat-And-Release Emergency Care Visits with High-Intensity Billing in the US, 2006–19 Health Affairs December 2022 https://doi.org/10.1377/hlthaff.2022.00484

Study: hospital reputation associated with physician reputation: Researchers performed a cross-sectional, US population-based survey of consumers (N = 23,410) exploring this association. Findings:

  • Consumers commonly agree (56%) that a hospital’s reputation is the same as its quality of health care.
  • Consumers also associate hospital reputation with the belief that they will be less like to suffer a complication or die although the strength of these relationships were modest.
  • Consumers who were male, Hispanic, African American, married, self-reported as healthy, and had a recent hospitalization) were less likely to believe that reputation and quality were equivalent.

“This data suggests that consumers link the construct of hospital reputation with objective health care quality, but this pattern of behavior is of concern, particularly when reputation does not align with objective data.”

Akbolat et al. The mediating role of hospital reputation in the effect of doctor reputation on patients’ loyalty, International Journal of Healthcare Management, DOI: 10.1080/20479700.2022.2062853

Ziemba et al Consumers’ Association of Hospital Reputation With Healthcare Quality Journal of Healthcare Quality July/August 2019 https://pubmed.ncbi.nlm.nih.gov/

Study: ACO hospital alignment for surgery: In this cohort study of 2 797 337 surgical admissions at 3427 hospitals, total payments for 90-day surgical episodes were lowest when ACO-assigned beneficiaries underwent surgery at a hospital participating in the same ACO as theirs, whereas payments were highest for unassigned beneficiaries treated at ACO-participating hospitals or nonparticipating hospitals.

“In this cohort study evaluating hospital and beneficiary ACO alignment and surgical spending, savings were noted for beneficiaries treated at hospitals in the same ACO. Allowing ACOs to encourage or require surgical procedures in their own hospitals could lower Medicare spending on surgery.”

Herrel et al Association of Medicare Beneficiary and Hospital Accountable Care Organization Alignment With Surgical Cost Savings JAMA Health Forum December 22,2022;3(12): e224817. doi:10.1001/jamahealthforum.2022.4817

Polling

KFF: majority favor price transparency, mental health priorities in next Congress: Kaiser Family Foundation poll of 1259 U.S. adults conducted November 29-December 6, 2022:

  • 60% said passing a law to make healthcare prices more transparent to patients should be a “top priority” for the next Congress, 35% said transparency laws were “important, but not a top priority.”  and 31% say Congress should prioritize continuing funding for COVID-19 vaccines and treatment.
  • 54% said strengthening requirements to ensure parity for mental and physical health should be a top priority, and 51% said increasing funding for mental health should be a top priority.
  • 65% say passing a law to make abortion legal in all states is important, including four in ten (42%) who say it should be a top priority for Congress.
  • 91% say they are concerned about increases in health care costs for individuals, including six in ten who say they are very concerned, nearly double the share who say they are very concerned about increases in government insurance programs like Medicare and Medicaid (34%) or about increases in health care costs paid by employers (31%). About half (48%) of the public say they are very worried about increases in health care costs for the nation as a whole.
  • Although there is great concern among the public about increases in health care costs, many have false impressions about where most U.S. health care money is spent. When asked where they think most health care spending goes, the most frequent answer given by the public is prescription drugs (36%), followed by hospitals (30%), long-term care (19%), and physician services (11%). Analyses of overall national health spending in 2020 found that the largest share of the U.S. health care dollar is spent on hospitals, while physicians/clinics and prescription drugs account for a smaller share of national health expenditures.

KFF Health Tracking Poll December 2022: The Public’s Health Care Priorities for The New Congress December 20, 2022

OnePoll: health system innovations: Per the Ribbon Health online survey of 1000 US consumers conducted by OnePoll in November: In response to “What innovations are you excited about in the current state of U.S. healthcare?” respondents were most excited about…

  • Improved insight into how much care will cost ahead of time (48%)
  • Telehealth options (37%)
  • More accessible mental health services (39%)
  • Artificial intelligence that will improve processes, allowing doctors to spend more time with patients (20%)
  • 62% do not trust their health plan when they are searching for care, and only 28% said they are likely to use their health plan’s website to search for a provider.

PK Note: OnePoll uses its panel for this survey allowing respondents to participate until 1000 participated limiting the projectability of these findings.

Ribbon Health November 2022 https://go.ribbonhealth.com

Study: bias toward unvaccinated: “Across three conjoint experimental studies (N=15,233 from 21 countries), we demonstrate that vaccinated people express discriminatory attitudes towards the unvaccinated, as high as the discriminatory attitudes suffered by common targets like immigrant and minority populations. In contrast, there is an absence of evidence that unvaccinated individuals display discriminatory attitudes towards vaccinated people, except for the presence of negative affect in Germany and United States.”

  • In the U.S. specifically, the vaccinated were 10% likely to respect an unvaccinated person’s “right to residence,” such as to live in their neighborhood, and 8% less likely to support an unvaccinated person’s application for citizenship.
  • They were 28% more likely to agree that the unvaccinated should have limited freedom of movement (for example, not being allowed to sit beside them on a bus).
  • Vaccinated people in the U.S. were 16% more likely to have antipathy toward those who remain unvaccinated than toward the vaccinated.

Bor et al Discriminatory Attitudes Against the Unvaccinated During a Global Pandemic Nature December 8, 2022 www.nature.com

Prescription Drugs

ICER: 7 of 10 price increases not justified, recommends 80% cut to Paxlovid: In its latest report on Unsupported Price Increases (UPI) of prescription drugs in the United States, ICER found:

  • 7 out of 10 high-expenditure drugs had substantial 2021 net price increases that were not supported by new clinical evidence; these increases accounted for $805 million in additional costs over one year.
  • Medicare Part B drugs with high list price increases in 2020 lacked adequate supporting new evidence, directly raising annual out-of-pocket expenses for Medicare patients by up to $3,200 per year.

ICER also cut its suggested price range for the Pfizer Covid-19 pill, called Paxlovid, by more than 80%, partly to reflect the decreased disease burden as the Omicron variant of the coronavirus tends to cause less severe illness. It suggested U.S. price based on the benefits and value to patients was in the range of $563 to $906 per treatment course—below its previous assessment of $3,600 to $5,800 per course. The U.S. government has bought nearly 24 million Paxlovid courses from Pfizer at around $530 a course. The company has not yet indicated pricing for a move to a commercial market.

ICER Identifies Most Significant 2021 US Drug-Price Hikes Unsupported by New Clinical Evidence ICER December 9, 2022 www.icer.org