Another reality check on hospital beds

https://www.axios.com/newsletters/axios-vitals-1a6dd9a6-5198-4abf-812f-dbf8dd8e67cb.html

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Hospital beds are not filling up like they used to, but that doesn’t mean hospitals want their beds to be empty, Axios’ Bob Herman reports.

What they’re saying: Even though more patients are being treated in outpatient clinics rather than hospitals, “we’ll still be able to keep our beds pretty full,” Don Scanlon, chief financial officer at Mount Sinai Health System, said this week at an investor lunch held at Goldman Sachs headquarters in New York City.

Details: Mount Sinai, a not-for-profit hospital system based in Manhattan with $5 billion in annual revenue, is preparing to sell $475 million in bonds, and was making its pitch to bondholders about why buying that debt would be a good deal.

Between the lines: Mount Sinai’s discharges have trended down, but the hospital doesn’t want to lose the bigger dollars tied to inpatient stays. And the system wants to reassure municipal investors they will see returns.

  • As a result, Mount Sinai has invested more money in outpatient centers in other parts of New York that serve as “feeders” for its main city hospitals, Scanlon said.

The bottom line: Mount Sinai, Trinity HealthBanner Health and a host of other hospital systems have openly touted plans to boost or retain admissions even though they say they want to keep people out of the hospital. This is a fundamental disconnect between “value-based care” and the system’s financial incentives.

Go deeper: How banks and law firms make millions from hospital debt

 

The fall of a major specialty pharmacy

https://www.axios.com/newsletters/axios-vitals-00d53b0a-89cb-415d-81ab-8501d2bab6da.html

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Diplomat Pharmacy, which sells medications to people with complex conditions and acts as a drug benefit middleman, is a shell of itself. The company was worth more than $3 billion in its heyday in 2015, but is now worth a little more than $200 million after a disastrous third quarter.

The bottom line: Larger specialty drug players — owned by Cigna, CVS Health and UnitedHealth Group — have crushed Diplomat with their size, Axios’ Bob Herman reports.

  • Now, Diplomat is running out of cash and is being forced to sell assets, or the entire company, because it has “substantial doubt surrounding our ability to continue,” the company said in its earnings report.

By the numbers: Diplomat’s main business, which distributes high-cost infusion drugs and other medicines that you don’t find at your typical pharmacy, is still lucrative.

The pharmacy benefit manager business, which Diplomat just got into a couple years ago, has been a mess.

  • Health insurers continue to drop Diplomat’s PBM, including one of Diplomat’s largest clients.

What to watch: Diplomat executives will have to spell out their plans for a full or partial sale before the end of the year.

  • Diplomat “would be perfect” for a company like Amazon, according to a high-ranking person who worked at Diplomat.
  • Amazon now owns PillPack, but lacks a PBM and is not involved with these kinds of specialty medications.