The Blame and Shame Game spikes in election cycles as candidates pit themselves against their opponents. Healthcare plays its own version: last week is indicative:
- Monday, the Federal Trade Commission announced expansion of its ongoing investigation into the business practices of Fresenius and Davita—the 2 dialysis providers that control 70% of the $180 billion dialysis market. This focus is on their use of non-compete contracts with physicians used by the companies to manage their clinical workforce. Background: In April, 2024, the FTC issued a rule outlawing non-compete agreements widely used in employment contracts with clinicians.
- Tuesday, the House Oversight Committee heard testimony from the CEOs of the Big 3 pharmacy benefits managers (CVS Caremark, Express Scripts and OptumRx) who control 80% of the PBM market the same day they released the results of the Committee’s 32-month investigation into their business practices. It followed release of the FTC’s interim report that reached similar conclusions. The conclusion in both reports: PBMs hurt consumers by forcing them to pay higher prices for their drugs prices.
- Wednesday, STATNews released a scathing assessment of UnitedHealth Group based on its exclusive investigation. Its conclusion: ‘UHG has used its financial muscle and political connections to acquire medical practices, outpatient facilities and squeeze Medicare for excessive payments to its Medicare Advantage program.’
- Thursday, the Senate Health Education, Labor and Pensions Committee announced it subpoenaed Steward Health Chair and CEO Dr. Ralph de la Torre to testify under oath about his bankrupt company’s financial dealings September 12. The underlying theme: with the aid of financial engineering by private equity, its executives and private investors have profited handsomely while their employees and the hospitals have been plundered.
Despite origins in differing sectors of healthcare (dialysis, PBMs, health insurance and hospitals), there are notable similarities in the four:
- They center on investor-owned companies that grew dramatically to dominance in their markets or sectors. Some might be considered “too big to fail.”
- They focus on business practices and allegations that each prioritizes their shareholders’ profits over the needs of their patients, employees, enrollees, the federal government and communities where they operate.
- They seek clear evidence from the companies that consumers have not been nor are they likely harmed by the organization’s business practices (including the prices they pay for the services received).
- They garner unwanted attention from regulators and verifiable coverage from investigative journalists. Each of these do their homework well: denial/disregard are not options.
- And they call specific attention to the compensation each organization’s Board awards its executives. Regulators and media associate disclosures of executive compensation as essential elements for the public’s understanding of an organization’s performance.
As Congress heads home for their August recess this week and Campaign 2024 intensifies, there’s no doubt healthcare issues will be prominent in local, state and national news. It’s also likely much of that coverage will be negative due to mounting cynicism about the industry’s business, consolidation, and opaque pricing and intensifying blame and shame games between hospitals and insurers, primary care and specialty physicians, PBMs and drug manufacturers, public health and healthcare delivery and others.
Blame and shame rhetoric about these tensions is not new, but its intensity is higher than ever as are the stakes. Blame and Shame is Chapter Two in most organization’s playbooks. Chapter One, the organization’s mission, vision, purpose and strategic plan is often missing and frequently premised on false assumptions. Thus, the “strategy” defaults to calling out the wrongdoings/shortcoming of adversaries and critics and little more. And their rhetoric is laced with terms for which accountability is suspect i.e. community benefit, affordability, value, quality and others.
In my view, the healthcare system is greater than any of its parts and desperately in need of systemic transformation. The Blame and Shame Game detracts from its pursuit of meaningful change (though it feels good to blame others).
Organizations like the Business Roundtable, Conference Board, Bipartisan Policy Center, US Chamber of Commerce and others must step in to neuter the Blame and Shame Game and force the system to accountability and transformation.
Here’s too much at stake to expect any inside sector to do this on its own: Blame and Shame is easier.
Paul
Quotables
Re: Lame duck session of Congress: “We may be living in unpredictable times, but one thing that is predictable — and will never change — is that hospitals will always be a source of hope and healing.
We will always be focused on promoting wellness as well as caring for the sick and injured. And we will always be cornerstones of the communities we serve as we work together to advance health in America.”
Rick Pollack, President and CEO, American Hospital Association Speaking Up for Priorities That Will Help Hospitals Advance Health for Patients and Communities | AHA News
Re: UnitedHealth Group STAT investigation: “This is the first in a periodic series about how UnitedHealth Group wields its unrivaled physician empire to boost its profits and expand its influence.
UnitedHealth Group started out as a small, Minnesota health insurance company and has since morphed into a modern-day Standard Oil, exerting unmatched dominance over health care in the United States.
It’s no secret that UnitedHealth is a colossus: It’s the country’s largest health insurer and the fourth-largest company of any type by revenue, just behind Apple. And thanks to a series of stealthy deals, almost 1 in 10 U.S. doctors — some 90,000 clinicians — now either work for UnitedHealth or are under its influence, more than any major clinic chain or hospital system.
But behind those statistics, there’s a lot UnitedHealth doesn’t want you to know. A STAT investigation reveals the untold story of how the company has gobbled up multiple pieces of the health care industry and exploited its growing power to milk the system for profit. UnitedHealth’s tactics have transformed medicine in communities across the country into an assembly line that treats millions of patients as products to be monetized.
Central to these tactics is UnitedHealth’s unrivaled leverage over physicians, whose diagnoses help determine how much private insurers get paid for covering older adults…
From the start, the takeover of physician practices by the nation’s largest health care company has been carefully choreographed. “I would ask you to begin to think about UnitedHealth Group and the construct of its business, its capabilities, its reach in the marketplace, as a health care system unto itself.” (Stephen Hemsley, former CEO of UnitedHealth,2005 Investor Conference)
Medicare Advantage insurers have gamed the system by excessively coding their members, resulting in massive overpayments to the companies. Overpayments based on coding alone are expected to total $50 billion this year, more than the Department of Justice’s entire budget, according to the Medicare Payment Advisory Commission, a group of experts that advises Congress on Medicare. Since 2007, MedPAC estimates Medicare Advantage insurers have reaped $217 billion in coding overpayments from the federal government.
As the country’s biggest Medicare Advantage insurer and its biggest physician group, nobody is better positioned to extract massive sums from the program than UnitedHealth. The company is still facing a federal lawsuit alleging it continued to collect government money based on millions of patient diagnoses it knew were incorrect. UnitedHealth has disputed the allegations and continues to contest them in court.
While UnitedHealth operates in a completely different industry than did Standard Oil, they have unmistakable similarities, starting with their ambitions to stealthily expand. When Standard Oil was acquiring competing oil refineries in the 1860s and 1870s, the conglomerate did so with little trace. Under its founder John D. Rockefeller, Standard Oil scooped up nearly all the refineries in the Cleveland area, but few newspapers were aware of the growing monopoly.
Inside UnitedHealth’s doctor empire | STAT (statnews.com)
Re: WSJ Investigation of PBMs: “The drug middlemen that promise to control costs have instead steered patients toward higher-priced medicines and affiliated pharmacies—steps that increase spending and reduce patient choice, a House investigation found.
The pharmacy-benefit managers, or PBMs, have devised formularies of preferred medicines that encouraged use of higher-priced drugs over lower-priced alternatives, the Republican-led House Committee on Oversight and Accountability found.
The PBMs have also made patients pay more to use their local pharmacy rather than a mail-order pharmacy affiliated with the manager, according to a committee report reviewed by The Wall Street Journal.
“There’s a credibility issue with the PBMs. There’s a transparency issue with the PBMs,” said Oversight Chairman James Comer (R., Ky.) at a hearing with PBM executives Tuesday. “You have anticompetitive policies.”
A spokesman for the Pharmaceutical Care Management Association, a trade association that represents PBMs, said the firms save patients and health plans $1,040 per person per year on drug costs. Too many recent conversations addressing drug costs narrowly focus only on PBMs and reflect a one-sided view informed directly by the pharmaceutical industry’s blame game,” he said. “The committee is missing the big picture.”
A PBM-sponsored analysis, released Monday, said prices of drugs subject to PBM negotiations don’t increase as much as other drugs and PBMs save their customers money.
The committee issued its report following a 32-month investigation and ahead of the hearing on PBMs Tuesday. Executives leading the three largest PBMs testified before the House committee today.
Drug Middlemen Push Patients to Pricier Medicines, House Probe Finds – WSJ
Re: Harris-Trump Presidential platforms on healthcare: “There is no Clinton health reform plan or (then) controversial Obamacare plan to command the attention of voters in this presidential election…Nevertheless, health is likely to be a consequential factor in the campaign. Here’s how.
First and foremost, it will be a campaign weapon for the vice president. That starts (and has already started) with abortion and reproductive rights…
From there, expect Vice President Harris to attempt to tie former President Trump to a long list of proposals made by various conservative groups that support him to roll back public programs and insurance coverage. These include plans that would dilute protections for pre-existing conditions, let enhanced ACA subsidies lapse, transform Medicare into a voucher-like program, place a time limit on Medicaid eligibility, and severely cut and cap Medicaid and hand it off to the states…
Former President Trump and Republicans have their own issues on which they have similar advantages, including immigration and inflation, and they are already pushing them. (This is a political analysis, and no judgement is intended here about the merits of claims made by either side, or the techniques used to make them).
The Democratic advantage on health is about the same size as the Republican advantage on immigration…
Substantive health policy platforms do matter in the election, but more for signaling than substance…
All of these policies have two common attributes: voters can understand them and talking about them sends a signal…
Policy proposals made in elections are often more about signaling than details and substance…
Playing offense on abortion and health and signaling concern about kitchen table worries to voters are the most important roles health will play in the presidential election. Policy platforms and plans will matter far less this time.”
The Role of Health Care in the New Presidential Election | KFF
Re: Community benefit and hospital tax exemptions: “Nonprofit hospitals are deemed tax exempt by the Internal Revenue Services (IRS) in exchange for an obligation to provide charitable contributions to the community. Specifically, the 1956 Revenue Ruling 56-185 defines the “charity care standard” that enables hospitals to qualify for nonprofit status by providing care to “indigent members of the community” at reduced or no cost. The 1969 Revenue Ruling 69-545 broadens this prerequisite to allow hospitals to qualify by contributing to “community benefit.” Re: Not-for-profit tax hospital exemption: This community benefit is frequently fulfilled by establishing medical training programs or investing in population health. Given that nonprofit hospitals comprise 58% of community hospitals, socioeconomically disadvantaged populations often turn to nonprofit hospitals to receive care. Yet, a lack of a minimum requirement to demonstrate community benefit has nonprofit hospitals skirting their patient responsibilities while also engaging in acquisition maneuvers to limit competition. Unless better definitions and regulations become reality, the actions of these hospitals will continue to hurt the patients who need help the most.
Recent unscrupulous behavior by some nonprofit hospitals has cast doubt on whether the benefits they provide justify the tax exemption they receive…
The ambiguity of “community benefit” for nonprofits to interpret leads to the high variability in actual benefits to communities…
Granting tax-exempt, nonprofit status to non-adherent hospitals can also empower these hospitals to reduce market competition…
While anticompetitive behavior is not unique to nonprofit hospitals, only nonprofit hospitals are able to evade standard antitrust regulation because of a key limitation in FTC jurisdiction.
Moreover, hospitals ironically need to exercise market power to qualify for nonprofit status since they must make a profit to invest in “community benefit” beyond normal hospital operating costs. This vicious cycle amplifies the importance of serial acquisitions and market monopoly formations. With higher costs for insured patients and less charity care for low-income or uninsured ones, the current IRS tax exemption criteria for nonprofit hospitals needs a more tailored definition of “community benefit” and a better way to enforce its code.
It remains to be seen how effective the new guidelines are in holding private-equity firms responsible for these anticompetitive practices. Meanwhile, congressional leaders should work with the IRS in narrowing the “community benefit” standard for nonprofit hospitals. The stakes have never been higher in getting these regulations right so that underserved communities can receive the charity care that they so desperately need.
Re: Trilliant on Hospital Rankings: “Last week, U.S. News and World Report released its 35th annual hospital rankings…
Existing hospital rankings and ratings provide ordinal scores or ordered lists (i.e., best to worst) based in part on a variety of quality-centric measures, including HCAHPS, 30-day risk-adjusted mortality rate and readmission rates. Over time, the “best” or “top” hospital lists have become an element in strategic planning despite being designed for consumer use. The U.S. News & World Report rankings aim to help consumers understand the “best” place to receive certain types of healthcare services, while Leapfrog Group scores hospitals on patient safety. Healthgrades provides a review of clinical outcomes across multiple conditions to identify the hospitals with the “best” outcomes. While CMS Care Compare is intended to educate patients and provide consumer-curated scores, it also is used to incentivize performance, with Federal reimbursement levels (i.e., Medicare, Medicaid) subject to change based on a hospital’s rating score.
The current ratings and rankings lack comparative elements, which leads hospitals, health systems and other health economy stakeholders to make arbitrary and incomplete parallels between a particular hospital and some of the nation’s “top” hospitals. Hospitals do not know how dissimilar they are to some of the nation’s top hospitals on different metrics, nor do they know which hospitals they are most like.
Moreover, the well-documented unaffordability of U.S. healthcare is a critical part of the longstanding “Triple Aim,” but none of the popularized benchmarking methodologies account for measures related to cost of care in tandem with quality (i.e., value). Do some hospitals have comparable quality but starkly different prices? Absolutely. There is no observed correlation between price and quality in healthcare services at the national level, as exemplified with the comparison of negotiated rates and 30-day mortality rates for COPD at acute care hospitals in Chicago.”
Economy
WSJ: Interest rate cut this week unlikely: At its meeting that ends this Wednesday, the Federal Reserve is unlikely to lower the federal borrowing rate (currently 5.3%) but is expected to lower it at its September meeting. “The Fed’s newfound readiness to cut rates reflects three factors: better news on inflation, signs that labor markets are cooling and a changing calculus of the dueling risks of allowing inflation to remain too high and of causing unnecessary economic weakness.”
Recent reports:
- The Core CPI A that excludes food and energy prices fell to 2.6% in June from 4.3% one year earlier and a peak of 5.6% two years ago (Commerce Department)
- The unemployment rate has climbedthis year to 4.1% in June from 3.7% at the end of last year, “largely because hiring has slowed and it is taking new workers or those re-entering the workforce longer to find work.” (Labor Department)
A Fed Rate Cut Is Finally Within View – WSJ
The national debt: “Debt held by the public at the end of fiscal year 2023 was 97% of gross domestic product (GDP). The Congressional Budget Office (CBO) projects that within five years, that ratio will exceed the previous all-time high of 106% of GDP and will rise to 166% of GDP by 2054 if laws remain the same. Those high levels of debt would far exceed the 50-year historical average of 47% of GDP. Our national debt is growing rapidly because of a fundamental imbalance between spending and revenues that will continue to expand in future years. CBO projects that federal spending will rise from 23.1 % of GDP in 2024 to 27.3% in 2054 as a result of three main drivers: an aging population, rising healthcare costs per capita, and rapidly escalating interest costs. Revenues under CBO’s projections would be insufficient to meet the promises that have been made, growing from 17.5 percent of GDP to 18.8 percent over the same period. As a result of the fundamental imbalance between spending and revenues, the existing large level of debt, and higher interest rates, federal interest costs continue to eat up more and more of the budget.”
PGPF_Solutions_Initiative_2024_Full_Report.pdf
Insurers
KFF Report: Medicare Advantage enrollee utilization of hospitals 2023 v. 2022: “MA represents a growing share of total hospital inpatient days”.
- Medicare Advantage grew from 13% to 23% of inpatient hospital days, and as of 2022, nearly half (48%) of all Medicare inpatient hospital days were attributable to Medicare Advantage enrollees.
- Three in ten hospitals had more inpatient days from Medicare Advantage enrollees than traditional Medicare enrollees in 2022.The share of hospitals with more Medicare Advantage than traditional Medicare inpatient days grew from 5% in 2015 to 30% in 2022.
- Medicare Advantage inpatient day shares have grown fastest at non-metropolitan hospitals.The share of inpatient hospital days attributable to Medicare Advantage enrollees more than doubled in non-metropolitan counties between 2015 and 2022.
- The share of inpatient hospital days for Medicare Advantage enrollees varied widely across counties in 2022.Medicare Advantage inpatient day shares were highest in counties with higher Medicare Advantage penetration, and lowest in those with lower Medicare Advantage penetration.
Medicare Advantage Enrollees Account for a Rising Share of Inpatient Hospital Days | KFF
Wyman on Insurer trends: “A confluence of market forces, technological advancements, and evolving market dynamics are forcing health plans to rethink their strategies.”
- Specialize or die,
- Drug spending explosion will challenge healthcare affordability
- Consumer-driven market can’t be ignored
- The technology infrastructure and AI imperative
- Diversify, Enable, or Optimize return?
Trends Will Determine Which Health Plans Thrive or Falter (oliverwyman.com)
Investing
Pitchbook: 2Q2024 Healthcare investment scenario: “Performance split: Within healthcare services, hospitals, rehabilitation & long-term care stocks continue to easily outperform major indexes, while behavioral health & home-based care stocks are also up year to date (YTD). By contrast, payers & payviders, value-based care (VBC), and other healthcare services stocks have underperformed the S&P 500 and Nasdaq YTD. The VBC group continues to be particularly hard-hit as valuations tumble from previous highs in the face of persistent unprofitability and increased utilization.
Q2_2024_Healthcare_Services_Public_Comp_Sheet_and_Valuation_Guide_Preview.pdf (pitchbook.com)
Regulators
FTC-Dialysis: The Federal Trade Commission is expanding its scrutiny of health care to the growing dialysis market and investigating whether industry giants DaVita and Fresenius Medical Care are squeezing out competitors by restricting kidney doctors from changing jobs–part of a wider FTC focus on noncompete agreements that are often used in the health care labor force but that the agency says stifle business innovation. The stakes are especially high in dialysis where DaVita and Fresenius control at least 70% of a market expected to be worth more than $180 billion by the next decade.
Senate HELP-Steward Health: The Senate Health, Education, Labor and Pensions Committee committee will commence its investigation into the Steward Health Care this week and last week subpoenaed its Chair and CEO Dr. Ralph de la Torre, to testify at a hearing Sept. 12. Special attention will be on its executive compensation: Dr. de la Torre received two “vendor reimbursement” payments totaling $600,000. The details behind the reimbursements were not revealed in the documents. His total compensation for the 12-month period was more than $5.2 million. Fourteen Steward executives received at least $1 million in overall compensation, including multiple bonus payments, in the 12-month period before the health system filed for bankruptcy.
Eastern District of PA-FTC Non-Compete Rule: On Tuesday, Judge Kelley Brisbon Hodge of the Eastern District of Pennsylvania denied a request for injunction against the FTC’s rule that would ban almost all employee non-compete agreements nationwide. Judge Hodge ruled that the plaintiff in this case, ATS Tree Services, failed to demonstrate both that it would be subject to irreparable harm from the rule and that the FTC is exceeding its statutory authority by implementing this rule. The latter part of this opinion diverges from another recent district court ruling issued by Judge Ada Brown of the US District Court for the Northern District of Texas in early July, which granted its plaintiffs a preliminary injunction on the grounds that “the FTC lacks substantive rulemaking authority with respect to unfair methods of competition.” Note: The FTC rule applies to companies organized to make a profit, so the new regulation will not apply to many non-profit hospitals.
