Tit for Tat battles in healthcare are nothing new. Last week, they were on full display.
- Health insurers and drug manufacturers squared off in national ad campaigns accusing the other of complicity in keeping drug costs high.
- The House Energy and Commerce and Ways and Means Committees held hearings challenging non-profit hospital tax exemptions as momentum builds for a new site neutral payment policy opposed by the American Hospital Association. In tandem, Indiana Republican Rep. Victoria Spartz reintroduced “Combatting Hospital Monopolies Act,”– a bill April 20 that would allow the FTC to enforce antitrust rules among the nation’s more than 2,900 nonprofit hospitals.
The intensity of these battles is likely to increase because healthcare affordability is a kitchen-table issue and the public’s paying attention. Executive compensation in hospitals, drug companies and health insurers is a flashpoint: the disparity between pay packages for healthcare CEOs and their rank-and-file employees is widening. Books and documentaries about healthcare rogue operators like Theranos and Purdue draw wide audiences. And announcements like the Kaiser Permanente-Geisinger deal last week lend to the industry’s growing kinship with BIG BUSINESS.
The corporatization of U.S. healthcare has endangered its future. The time has come to revisit its purpose, refresh its structure and re-organize its finances.
- Revisit its purpose: The modern health system has evolved through economic cycles, population growth, scientific explosion and shifting demand. Regulations, roles and money has followed. The integration of artificial intelligence is the next threshold in its evolution unlocking efficiencies heretofore unimagined and capabilities that enable self-care and customization. Might the system’s purpose shift from producing products and services for patients to enabling individuals to care for themselves and others more effectively? Might price and cost transparency in each sector be without pre-condition and barriers? And might the system’s true north be health and wellbeing rather than utilization and revenue growth?
- Refresh its structure: The system’s fundamental flaw is structural: the U.S. operates a health system of caregivers and facilities that serve its majority and a separate system of 3000 public health programs that serve the rest. Though long acknowledged, social determinants of health play second fiddle to specialized services to populations that are insured. The destination for the system must be health + social services, not health or human services, and the fiduciary role of its prominent non-profit institutions to steward the transition. In tandem, the system’s financing (through insurance) and delivery (through services and facilities) must necessarily be integrated so investments in prevention, population health management and care coordination are optimized.
- Re-organize its finances: The health system’s primary financing is derived primarily from direct government appropriations (vis a vis tax collections from individuals and employers) and profits earned by its operators and suppliers. Its capital investing is increasingly dependent on private equity that seeks profits in 5-6 years for its limited partner investors. In systems of the world with better outcomes and lower costs, government financing plays a bigger role balancing prevention and social services with the needs of the sick. The U.S. financing system rewards taking care of health problems after they’re manifest in hospitalization or medication management and insignificant investment elsewhere. Capitalizing innovation across the system is an imperative: otherwise, risk-taking by private investors in the system will default to short-term returns. And the public’s long-term wellbeing is compromised.
Most of the food fights in healthcare like last week’s revolve around each sector’s unique response to the three challenges above. That’s why they exist: to protect the interests of their members and advocate on their behalf. All believe their mission and vision is essential to the greater good and the moral high ground theirs. Some are imperiled more than others: not for profit, rural and safety net hospitals, long-term care operators, direct caregivers and public health programs at the top of this list.
Educating lawmakers is necessary but what’s needed is serious, objective forward-looking definition of the U.S. health system’s future. The tit for tat game will not solve anything. That’s where we are.
Paul
PS: Bipartisanship in Congress is rare. Hospitals, particularly non-profit hospitals, may be the exception. Bipartisan headwinds are swelling and adversaries organizing. Members of Congress appear keen to assert more influence in how hospitals operate. Price transparency, cost controls, site-neutral payments, charity care, pay equity and funding for non-patient care activity are on their radar. Hospitals, especially large not-for-profit multi-hospital systems, have joined drug manufacturers and pharmacy benefits managers as targets for reformers seeking lower cost and greater accountability. As the debt ceiling is debated and FY24 federal budget is crafted, softening support for healthcare will take its toll across the industry and create unintended negative consequences for all.
Resources
John Commins “AHIP, PhRMA Swap Blame for High Healthcare Costs” Health Leaders April 26, 2023 /www.healthleadersmedia.com
Quotable
Re: hospital oversight: “Let’s be clear: Hospitals are integral parts of our communities, and we recognize the effects of high labor costs, inflation, and ever-increasing government regulation. But the question before us is: Should we support hospitals through a complex and opaque network of cross-subsidies with unintended consequences, like consolidation, that increase costs for patients? Or do we separately work on a transparent, accountable way to support hospitals that need it?”
Opening comments by House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-WA) at Health Subcommittee hearing titled “Lowering Unaffordable Costs: Legislative Solutions to Increase Transparency and Competition in Health Care.” Chair Rodgers on Lowering Health Care Costs: This Bipartisan Work is the Right Thing for Patients (house.gov)April 26, 2023
Re: tax exempt hospitals: “In sum, hospitals do more than any other sector of health care to promote and protect the health of their communities.
Tax-exempt hospitals have special obligations to their communities in exchange for that privilege. They report the amounts they spend on community benefits yearly and conduct a community needs assessment at least every three years. There is no doubt that these hospitals both meet and exceed any requirements and expectations that attach to the privilege of tax exemption. The essential facts are:
For the most recent tax year for which comprehensive information is available (2019), tax-exempt hospitals devoted nearly 14% of their total expenses to community benefit programs, about half of which was for financial assistance and certain other means tested community benefits.
The most recent report by the international accounting firm EY demonstrated that the return to taxpayers for hospitals’ federal tax exemption is $9-to-$1; that is for every one dollar of tax exemption taxpayers receive $9 of community benefits. That is a remarkable return by any standard.”
Testimony of the American Hospital Association for the Committee on Ways and Means Subcommittee on Oversight of the U.S. House of Representatives “Tax-Exempt Hospitals and the Community Benefit Standard” April 26, 2023 /www.aha.org/testimony/2023-04-26-aha-testimony-committee-ways-and-means-subcommittee-oversight
Re: Increased Congressional scrutiny of non-profit hospitals: “Nonprofit hospitals could be subject to investigations for anticompetitive conduct under a bipartisan House plan. Why it matters: The nonprofits comprise nearly half of all facilities in the U.S. but fall outside the purview of the Federal Trade Commission. There’s been growing concern in Congress over secret contracting practices and other behavior that some lawmakers contend justifies beefing up oversight. The details: The bill from Reps. Victoria Sparta (R-Ind.) and Pramila Jayapal (D-Wash.) would expand antitrust enforcement to non-profit hospitals under the Federal Trade Commission Act, allowing the commission to investigate facilities’ anticompetitive behavior. Of note: Non-profits have also come under scrutiny for offering less uncompensated care relative to earnings, as well as for aggressive bill collection practices. The Biden administration FTC has been more aggressive in challenging health care behavior, particularly hospital mergers. The Spartz-Jayapal measure joins a list of reform proposals addressing providers that Congress could take up after debt-ceiling negotiations.”
HCCI analysis of commercial claims from 2017-2021 Health Cost and Utilization Report (HCCUR) https://healthcostinstitute.org/health-care-cost-and-utilization-report/annual-reports
Re: alternative payment models and provider consolidation: “Two trends have transformed the health care industry in the past decade: the rise of alternative payment models and the rapid consolidation of health care providers…there is limited evidence linking alternative payment models and provider consolidation. Providers can succeed at these models without consolidating. Going forward, researchers should build the evidence base on this topic, and policy makers should consider designing models in ways to reduce incentives for consolidation…
Through more evidence and model design, we can avoid alternative payment models that have the potential to create more consolidated providers. Otherwise, the modest savings from these models may be overshadowed by the price increases triggered by more consolidation. If this happens, we may all end up paying more for health care.”
CMS Researcher Fang He “Have Alternative Payment Models Led To Provider Consolidation?” Health Affairs April 28, 2023 https://www.healthaffairs.org/content/forefront/have-alternative-payment-models-led-provider-consolidation
Re: executive compensation in healthcare: “Business has never been better for the largest health insurers in the country, which led to another record-setting windfall last year for their chief executives.
In 2022, the CEOs of the seven major publicly traded health insurance and services conglomerates — CVS Health, UnitedHealth Group, Cigna, Elevance Health, Centene, Humana, and Molina Healthcare — combined to make more than $335 million, according to a STAT analysis of annual financial disclosures. That was 18% more than the record from 2021. High-flying stock prices again fueled a vast majority of the gains.
More than half of the total, $181 million, went to a single executive: Joseph Zubretsky, the CEO of Molina, an insurance company that gets all of its revenue from taxpayer-funded health programs….
The data shows health insurance CEOs still make more than the averages and medians of other top brass within the broader health care industry, and significantly more than the average employee. Their pay packages also tend to be at the top of all the largest companies, aside from technology giants.”
Bob Herman Health insurance CEOs set another record for pay in 2022 April 27, 2023 www.statnews.com
Re: balancing profit and purpose in healthcare: “I believe the kind of moral and ethical superiority that the Hippocratic oath puts on one’s mind is unparalleled in the business world.
Let’s bring true patient care back. Let’s settle for smaller profits. Let’s be happy with a smaller year-end bonus. That money just went towards saving lives. That should be enough of a bonus for us.
Cutting corners, diluting the employee roster, buying from the lowest bidder and accepting a medication that is 90% as effective as the brand name are bad bets. They fulfill short-term goals, but at what expense?”
Shakeel Ahmed, CEO Atlas Surgical Group (St. Louis) “Putting Health Back In Healthcare: Advice To Change The Industry” Forbes April 19, 2023 www.forbes.com/sites/forbesbusinesscouncil/2023/04/19/putting-health-back-in-healthcare-advice-to-change-the-industry
Re: Kaiser-Geisinger deal: “Kaiser Permanente’s announced acquisition of Geisinger Health via a newly formed entity, Risant Health, signals a new era of health system- scale–VBC enablement, a space Optum Insight has also explored. We are cautiously optimistic that this trend will expedite VBC adoption by leading health systems, but broad and deep industry change remain far off. Geisinger already offers its own MA plan and is well known for its population health programs… an ideal candidate for an accelerated VBC transition. The prospect of an enabler helping to move a less sophisticated health system toward value would require long time horizons, considerable capital investment, and strong internal alignment.”
Pitchbook Value-Based Care: An Investor’s Guide April 26, 2023 https://files.pitchbook.com/website/files/pdf/Q2_2023_PitchBook_Analyst_Note_Value-Based_Care_An_Investors_Guide
Re: private investing in healthcare: “Higher rates, together with a cloudy economic outlook, may well humble private equity. The business of buying, managing and selling heavily indebted firms is more difficult today than at any point during the past decade. Returns look far less attractive now that yields have jumped on fixed-income investments. Private-equity managers could once rely on rising valuations and cheap debt to fuel returns. Now they will have to wring efficiency improvements from the firms they own.
Yet for the private-markets giants, private equity is becoming less of a focus. When Blackstone reported its first-quarter results on April 20th, for instance, the company’s credit funds stole the limelight. During the quarter they received a big chunk of inflows from investors, and assets under management in the firm’s credit-and-insurance arm now exceed those in private equity. In recent years both Apollo and KKR have acquired big insurers, which in turn are big investors in debt.”
Private markets remain attractive, even in a higher-rate world The Economist April 27, 2023 www.economist.com/leaders/2023/04/27/private-markets-remain-attractive-even-in-a-higher-rate-world
Polling
PatientView: Drug manufacturers trust highest in North America: PatientView surveyed 2,207 patient groups in 27 disease states from 90 countries between November 2022 and February 2023. Findings:
- 60% of patient groups believed brand-name drugmakers maintained an “excellent” or “good” corporate reputation in 2022, up slightly from 59% the year before
- 32% reported that the 42 brand-name companies examined did an “excellent” or “good” job of improving access to medicines last year; 52% thought the companies did a “fair” to “poor” job of providing access. The industry ranked poorly on this issue on every continent across the globe, except in North America. Results were worst in Africa.
- 65% of the groups believe that the companies provide products that benefit patients, and 60% reported that the industry continues to be innovative. The biggest improvement was made in patient relations, climbing to 54% from 36% in 2018.
- 14% of the groups said the companies last year had fair pricing policies, 19% believed pricing was transparent, and 26% maintained the companies engaged patients properly in R&D. However, the showings were still above what was reported in 2018.
- Brand-name drugmakers scored higher than any other group in the health care sector above pharmacies, biotech companies, generic manufacturers, and health insurers. The companies with the worst reputation were pharmacy benefit managers, with just 16% of the groups endorsing their work, which largely consists of devising formularies, or lists of covered medicines.
Corporate Reputation of Pharma 2022 www.patient-view.com
Economy
HCCI: Healthcare spending rebound in 2021: Highlights of the Health Care Cost Institute’ annual report based on claims from major commercial payers including Aetna, Humana, Kaiser Permanente and Blue Health Intelligence:
- Average health spending for people with employer-sponsored coverage reached $6,457, up 15% from the 2020 average of $5,630. Spending declined by 4% in 2020 as utilization decreased.
- Care utilization increased by 13% between 2020 and 2021following a 7% decline from 2019 to 2020. Prices grew by 2% on average during that window, reflecting the pandemic-driven delays in low-cost preventive services.
- Healthcare prices have climbed by 21% overall between 2017 and 2021, with the largest increase for inpatient hospital care: hospital prices grew by 28% in that four-year window, even as utilization of inpatient care declined.
- Per-person spending on prescription drugs, based on the cost at the point-of-sale, rose 29% between 2017 and 2021.Spending increased the most on immunological therapies followed by hormone therapies, which includes insulin, birth control and thyroid condition treatments,
Health Cost and Utilization Report (HCCUR) https://healthcostinstitute.org/health-care-cost-and-utilization-report/annual-reports
Wages up, GDP growth slowing: Wages and salaries for private-sector U.S. workers were up 5.1% in March vs. + 1.2% from December, the Labor Department said Friday. But data released Thursday showed that GDP, adjusted for inflation, increased at 1.1% annual rate in the first quarter. Companies have begun posting fewer job openings, and previously overheated sectors of the economy, like housing and tech, have cooled dramatically.
Bureau of Labor Statistics www.bls.gov
Hospitals
Kaiser-Geisinger deal announced: Last Wednesday, Kaiser Permanente announced it is acquiring 10-hospital Geisinger Health in a deal described as the first step toward a new multisystem value-based care organization. The new entity, called Risant Health, will be a nonprofit organization that operates “separately and distinctly from Kaiser Permanente’s core integrated care and coverage model,” the organizations said.
Oakland, California-based Kaiser Permanente is among the country’s largest nonprofit systems with 39 hospitals. Its operations span eight states coast to coast with roughly 13 million members who receive care through its integrated model. The organization reported $95.4 billion in operating revenue across 2022 as well as a $1.3 billion operating loss and a nearly $4.5 billion net loss Geisinger is a nonprofit system based in Danville, Pennsylvania, with 10 hospital campuses and a health plan covering about 600,000 members. It reported $6.9 billion in operating revenue during 2022 as well as $239 million in operating losses and $842 million in net losses.
Kaiser Permanente www.kaiserpermanente.org
.Study: non-profit hospital charity care shrinking while trustee compensation increasing: “Nonprofit hospitals are required to pursue charitable missions to justify their taxpayer subsidies, which include exemptions from federal and state income taxes, property tax, and sales tax and the privilege of receiving tax-deductible charitable contributions and issuing tax-exempt bonds. These missions may come in the form of charity care and other types of community benefit, as defined by the Internal Revenue Service (IRS). Nonprofit organizations’ trustees represent the interest of a wide range of stakeholders and fulfill critical fiduciary duties to ensure that management decisions are aligned with the advancement of the hospital’s charitable missions. Trustees are usually motivated to contribute to the nonprofit organization’s charitable mission, and many are uncompensated.”
Researchers analyzed IRS Form 990 filings for 2,550 hospitals in 2011 and 2,058 hospitals in 2019. Findings:
- Among nonprofit hospitals that compensated their trustees, the mean value of each hospital’s average trustee compensation increased 57% between 2011 and 2019, from $31,964 to $50,156. The average trustee compensation increased 46%, from $12,823 to $18,693.
- The average charity-care-to-expense ratio for compensating hospitals fell from 2.5% in 2011 to 1.6% in 2019, which was a greater decline than that for non-compensating hospitals, which experienced a decline from 2.5% to 2.2%t during the same period.
- “After controlling for various board and hospital characteristics and state fixed effects, we found that a $10,000 increase in average trustee compensation was associated with a 0.02-percentage-point reduction in the charity-care-to-expense ratio or approximately $66,000–$77,000 of charity care for an average hospital. The average amount of charity care provided by nonprofit hospitals was $6.6 million in 2019.”
“The negative association between trustee compensation and charity care provision suggests that trustees’ motivations and activities, as well as the underlying organizational priorities in some trustee-compensating hospitals, may have deviated from hospitals’ stated charitable missions. Future research is warranted to identify whether a causal relationship exists between trustee compensation and charity care provision or whether both are reflections of certain underlying organizational attributes, such as hospital executives’ priorities.”
Bai et al Trustee Compensation and Charity Care Provision In US Nonprofit Hospitals Health Affairs April 2023 https://doi.org/10.1377/hlthaff.2022.00620
Care Management
Study: OUD baby treatment: “Although clinicians have traditionally used the Finnegan Neonatal Abstinence Scoring Tool to assess the severity of neonatal opioid withdrawal, a newer function-based approach — the Eat, Sleep, Console care approach — is increasing in use. Whether the new approach can safely reduce the time until infants are medically ready for discharge when it is applied broadly across diverse sites is unknown….
In this cluster-randomized, controlled trial at 26 U.S. hospitals, we enrolled infants with neonatal opioid withdrawal syndrome who had been born at 36 weeks’ gestation or more. At a randomly assigned time, hospitals transitioned from usual care that used the Finnegan tool to the Eat, Sleep, Console approach. During a 3-month transition period, staff members at each hospital were trained to use the new approach.” Results:
- A total of 1305 infants were enrolled. In an intention-to-treat analysis that included 837 infants who met the trial definition for medical readiness for discharge, the number of days from birth until readiness for hospital discharge was 8.2 in the Eat, Sleep, Console group and 14.9 in the usual-care group for a rate ratio of 0.55. The incidence of adverse outcomes was similar in the two groups.
- The system reduced the average hospital stay for babies from 22 days to six days, and the share of newborns of mothers on opioids being treated with morphine dropped to 14% from 98%.
L.W. Young Eat, Sleep, Console Approach or Usual Care for Neonatal Opioid Withdrawal NEJM April 30, 2023 www.nejm.org/clinical-medicine
Urban Institute study: transportation access linked to health:
- 21% of U.S. adults without access to a vehicle or public transit went without needed medical care last year. Individuals who lacked access to a vehicle but reported neighborhood access to public transportation services were less likely to skip needed care (9%).
- 5% of all U.S. adults reported forgoing healthcare due to transportation barriers.
- Black adults (8%), adults with low family incomes (14%), and adults with public health insurance (12%) were all more likely to forgo needed care due to difficulty finding transportation.
- Adults with a disability (17%) were more than three times as likely to report skipping care due to transportation concerns.
“Conclusion: Reliable access to transportation, whether it be a vehicle or neighborhood public transit, is a social driver of health in the United States.”
Karpman et al “More than One in Five Adults with Limited Public Transit Access Forgo Health Care Because of Transportation Barriers” RWJF Brief Apr-26-2023 www.rwjf.org/en/insights/our-research/2023/04/more-than-one-in-five-adults-with-limited-public-transit-access-forgo-healthcare-because-of-transportation-barriers
Regulation
CMS proposed new transparency guidelines: The Trump-era Executive Order required hospitals to post the prices for 300 shoppable services in both consumer-friendly and machine-readable formats online starting January 1, 2023. As of April 2023, CMS has issued more than 730 warning notices, 269 requests for corrective action plans and issued fines to 4 hospitals.
Under the new enforcement guidelines released last week, CMS will standardize how long hospitals have to complete each step of the transparency process and start automatically issuing fines to those who miss deadlines. CMS will also no longer issue warnings to hospitals that make no attempt to post prices but instead immediately request the hospital submit a corrective action plan. The average time to complete a case cycle is 195 to 220 days. Under the updated enforcement, CMS officials said the average time should be cut to not more than 180 days.
Hospital Price Transparency Enforcement Updates CMS April 26, 2023 www.cms.gov/newsroom/fact-sheets/hospital-price-transparency-enforcement-updates
CMS proposes improvements to Medicaid & CHIP enrollee experiences: Last Thursday, the Centers for Medicare & Medicaid Services (CMS) proposed two new rules aimed at improving access to Medicaid and the Children’s Health Insurance Program (CHIP) and stipulate improvements in state and MCO interactions with enrollees.
The two rules — the Ensuring Access to Medicaid Services proposed rule and Managed Care Access, Finance, and Quality proposed rule — would:
- Establish national maximum standards for some appointment wait times for Medicaid or CHIP managed care enrollees, and strengthen reporting requirements related to network adequacy for Medicaid or CHIP managed care plans
- Require states to conduct independent “secret shopper” surveys of Medicaid or CHIP managed care plans to make sure appointment wait times meet the standards and that provider directories are accurate
- Require disclosure of provider payment rates in Medicaid fee-for-service and managed care plans
- Increase transparency rules for setting Medicaid payment rates for home and community-based services, and institute a requirement that at least 80% of Medicaid payments for personal care, homemaker, and home health aide services be spent on payment for direct care workers and not administrative costs or profits
- Strengthen how states use state Medical Care Advisory Committees, through which stakeholders provide guidance to state Medicaid agencies about health and medical care services, to make sure all states are using these committees optimally
- Require states to conduct enrollee experience surveys in Medicaid managed care annually for each plan, to gather input directly from enrollees
- Establish a framework for states to implement a Medicaid or CHIP quality rating system, which enrollees could use to compare Medicaid or CHIP managed care plans based on quality of care, cost, access to providers, and other factors
The Biden-Harris Administration Proposes New Standards to Help Ensure Access to Quality Health Care in Medicaid and CHIP CMS April 27, 2023 www.cms.gov
