Monthly Archives: March 2017

How the world’s richest doctor gave away millions — then steered the cash back to his company

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How the world’s richest doctor gave away millions — then steered the cash back to his company

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He was greeted like a star philanthropist.

The world’s richest doctor had just made a $12 million gift to the University of Utah. Members of the university community were urged to come thank him. And so, a crowd gathered.

For months, Dr. Patrick Soon-Shiong would continue to reap praise for his generosity in publicity put out by the university. Not mentioned in any of the tributes: $10 million of his donation would be sent right back to one of his companies. And the contract for his gift was worded in a way that left the University of Utah with no other choice.

The university health system did get free and valuable information for genetics research through the deal. But a STAT investigation has found that Soon-Shiong benefited even more from his charitable donation.

He got reams of patient data to help him build a new commercial product meant to assess patients’ risk of rare and inherited diseases. He got a stream of cash for one of his struggling companies.

And the deal made it possible for his company to inflate, by more than 50 percent, the number of test orders it reported to investors late last year while updating them on interest in a flagship product, a diagnostic tool known as GPS Cancer. Soon-Shiong’s team counted genetic sequencing ordered by the University of Utah in those order numbers — even though the work for the university did not have anything to do with diagnosing or recommending treatments for cancer patients.

Even in the world of academic donations, which the wealthy often use to burnish their image or advance pet causes, the arrangement stands out as highly unusual.

STAT has previously detailed how Soon-Shiong’s high-profile cancer moonshot initiative achieved little scientific progress in its first year, instead functioning primarily as a marketing tool for GPS Cancer.

The University of Utah deal — laid out in contracts obtained by STAT through a public records request — illustrates how Soon-Shiong boosted his business through his philanthropy. He has been accused of doing just that in at least two legal filings, but the Utah contracts offer the first concrete example, spelled out in black and white.

Four tax experts who reviewed the contracts at STAT’s request all agreed that the Utah deal was suspicious. Two said it appeared to violate federal tax rules governing certain charitable donations, amounting to indirect self-dealing by Soon-Shiong and his foundations.

“They’re laundering the funds through the University of Utah,” said Marc Owens, a tax lawyer with Loeb & Loeb. Owens, who said the contracts appeared to violate federal rules, previously spent a decade as head of the Internal Revenue Service’s tax-exempt division.

The other two legal experts said the contracts were cleverly worded in a way that would likely steer clear of self-dealing — but agreed that, at the very least, they raised serious questions about Soon-Shiong’s intent.

“We pretty clearly have an optics problem,” said Morey Ward, a tax lawyer with Ropes & Gray who represents tax-exempt organizations.

Soon-Shiong’s spokeswoman, Jen Hodson, did not answer a list of emailed questions or return calls from STAT. Soon-Shiong has denied STAT’s repeated requests for an interview dating back to last fall.

 

Quest to Lower Drug Prices Pits Trump Against Formidable Opponents

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Aiming to significantly reduce medication prices presents the president with golden opportunities and a set of daunting challenges, healthcare industry experts say.

President Donald Trump has said medication prices are too high and he plans to address the problem.

During his presidential campaign, Trump called for Medicare to negotiate drug pricing. In January, the president criticized the lobbying efforts of pharmaceutical companies and suggested again that the federal government should negotiate drug prices.

Although he faces high hurdles, the president appears to be on the right track, says Olusegun Ishmael, MD, MBA, an emergency room physician at Paris Community Hospital in Paris, IL, and former insurance company executive.

“The biggest insurer in this country is the U.S. government—between the Veterans Administration, Medicaid, and Medicare. The government should do the same thing that UnitedHealthcare and all the Blues do to negotiate pricing based on their volume,” he says.

Insurers and foreign governments have been leveraging their purchasing power to negotiate drug prices for decades, Ishmael says.

“If someone walks into CVS or Walgreens without insurance and wants to get a prescription, they will pay almost twice as much as the UnitedHealthcare pricing. The reason is volume—it is a numbers game. As an insurer, when I have a certain amount of volume, I go to my pharmacy benefit management company and say, ‘I am bringing you a million lives.'”

Obstacles ahead as GOP begins ObamaCare repeal

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Obstacles ahead as GOP begins ObamaCare repeal

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Republicans who have vowed for years to repeal and replace ObamaCare are now seeking to turn their campaign pledge into reality, with markups of legislation potentially beginning this week.

With narrow majorities in the House and Senate, Republicans won’t be able to pass healthcare legislation unless they remain united.

That could prove difficult, as there are several knotty issues raised by the repeal effort that threaten to push lawmakers into opposing camps.

Here are the four biggest issues that Republicans will have to resolve before an ObamaCare repeal bill can reach President Trump’s desk.

Tax credits

One of the biggest sticking points for Republicans is how to provide tax credits to help people pay for health insurance.

While there is broad support in the GOP for providing assistance through the tax code, they are at odds over the details.

House Republican leaders are pushing for a refundable, advanceable tax credit — something conservatives have denounced as a new government entitlement.

“I think there is still a significant divide within the conference on how you deal with refundable tax credits,” said Rep. Mark Sanford (R-S.C.), a member of the conservative House Freedom Caucus.

“I think the refundable tax credit in its present form represents a new entitlement,” he said, adding that he would have “very, very strong reservations” about supporting a bill that included them.

Sen. Rand Paul (R-Ky.) has compared the refundable tax credits to the subsidies some people get under ObamaCare.

“The problem that I have with a new refundable tax credit is it’s essentially a subsidy by another name,” he said last month.

“ObamaCare had subsidies. If we call them refundable tax credits, have we really done anything other than change the name? So I think that’s a problem.”

 

Repeal of Health Law Faces a New Hurdle: Older Americans

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Republican plans to repeal the Affordable Care Act have encountered a new obstacle: adamant opposition from many older Americans whose health insurance premiums would increase.

AARP and its allies are bombarding congressional offices with objections as two House committees plan to vote on the Republicans’ bill this week.

If the law is repealed, the groups say, people in their 50s and 60s could see premiums rise by $2,000 to $3,000 a year or more: increases of 20 percent to 25 percent or higher.

Under current rules, insurers cannot charge older adults more than three times what they charge young adults for the same coverage. House Republican leaders would allow a ratio of five to one — or more, if states choose.

Insurers support the change, saying it would help them attract larger numbers of young customers.

The current rating restrictions, they say, have increased premiums for young adults, discouraging them from enrolling.

But the Republican proposal would “increase the financial burden of older Americans, making coverage significantly less affordable,” says a letter to Congress from the Leadership Council of Aging Organizations, a coalition of nonprofit groups that represent the interests of older Americans.

The letter was addressed to Representative Greg Walden, Republican of Oregon and the chairman of the Energy and Commerce Committee, one of two House panels planning to vote this week on a bill that would roll back major provisions of President Barack Obama’s signature domestic accomplishment.

David M. Certner, the legislative policy director of AARP, said the proposal would have “a severe impact on Americans age 50 to 64 who have not yet become eligible for Medicare.”

At the same time, Mr. Certner said, the Republican proposal could reduce the financial assistance available to help people pay insurance premiums.

Republicans say their proposal would reduce insurance prices by stimulating competition and by allowing insurers to sell a leaner, less expensive package of benefits.

 

 

Risk Adjustment at Heart of “Incredibly Complex” Health Care Reform

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President Donald Trump’s core principles for health care include ensuring that Americans with pre-existing conditions have access to coverage, and that Americans should be able to purchase the health insurance plan they want, not one forced on them by the government. Each of these goals is laudable and achievable, taken separately. But President Trump and others are about to confront what others have learned the hard way: Achieving both goals simultaneously is extremely challenging.

Those attempting to implement the Affordable Care Act (ACA) have faced the dilemma under easier conditions and, even after years of trying, have not solved it. Unless President Trump’s technocrats can fix something known as “risk adjustment” that has bedeviled the Obama administration, his dual principles cannot coexist.

The problem arises from the peculiarities of insurance markets. If insurance policies can vary greatly in their coverages and networks, people will tend to sort themselves into the coverages and networks that fit them best.

On the surface, this sounds great: Americans get the plans they want, not uniform plans put together by some government bureaucrat who knows best or is attempting to use insurance to achieve political goals. But in the unique case of insurance markets, there are adverse consequences.

With a great diversity of plans available, people who believe themselves to be high-risk usually purchase policies that have great coverages and broad networks. People who believe themselves to be low-risk usually purchase policies with lesser coverages and narrower networks. This separation means that the policies with great coverages are going to start to get really expensive, because they are full of higher-risk policyholders.

Neither Democrats nor Donald Trump want to let insurers charge people buying the same policy different rates based on their health conditions. And they don’t want to let insurers impose pre-existing condition limits that would make the more generous policies less expensive for insurers to service. The result, under these constraints, is that only one group of people will buy the premium policies: People with really, really expensive medical conditions.  The price of these policies go up until they essentially no one can afford them.

In the end, almost everyone else would migrate to lesser policies, and we would end up with an unstable environment in which only policies with poor coverages and narrow networks are really able to survive. So, yes, insureds and insurers on paper have freedom to design policies that they actually want, but the market this freedom produces is fatally unstable.

 

Uncompensated Hospital Care Costs Sink to Record Low in California

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Uncompensated Care in California

As California’s uninsured rate plummeted during the first two years of the implementation of the Affordable Care Act (ACA), uncompensated care costs for California’s hospitals followed suit, declining 52% from $3.1 billion in 2013 to $1.5 billion in 2015, according to data from the California Office of Statewide Health Planning and Development (OSHPD) now available on ACA 411. This progress may be in peril, however, if efforts to repeal and replace the ACA are successful and the uninsured population increases.

The most common way to measure the cost of uncompensated care is to combine charity care and bad debt. Charity care refers to the costs for patients with a demonstrated inability to pay. Bad debt refers to the costs for patients who were considered to have the financial ability to pay — or for whom the ability to pay was never determined — but who have not done so.

While we expected to see dropping uncompensated care costs because of the increase in Californians with health insurance under the ACA, the magnitude of the decline is notable when placed into historical context. The data show that in 2015, California hospitals’ uncompensated care costs as a percentage of operating costs reached 1.7% according to the author’s analysis of OSHPD Hospital Annual Financial Data — the lowest rate in more than a decade. This mirrors national trends. For the same year, the American Hospital Association reported that US hospital uncompensated care costs (charity care and bad debt) as a percentage of total hospital expenses reached a 25-year low of 4.2% (PDF).

Estimating the cost of hospital uncompensated care is an imperfect science, and the available data have limitations. For example, the California OSHPD data above do not include uncompensated care provided by Kaiser Foundation hospitals, which provide about 10% of general acute hospital care in California.

In addition, some hospital reimbursement rates (such as Medi-Cal and Medicare) often do not cover the costs of providing care. These shortfalls are not reflected in measures of uncompensated care, as the measure is not designed to capture under-compensated care.

Still, uncompensated care, as measured by OSHPD in the chart above and in other national metrics, has been tracked for years. The steep decline between 2013 and 2015 is unparalleled and a sign of major progress.

The uncertain future of the ACA makes it difficult to predict what will happen with health care financing. However, it is clear that if changes to federal health legislation increase the uninsured population, the uncompensated care burden on hospitals will rise again as fewer people can afford care they receive at hospitals. That won’t be good for California’s people or its hospitals.