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Monthly Archives: May 2017
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Getting In-Network Care is Harder Than You’d Think
Healthcare Triage: Orphan Drugs part 4 – Fixing the System
Drug companies love the Orphan Drug Act. They say it encourages research into breakthrough therapies for people with rare disease. And sometimes that’s true. Lots of the time, though, the companies would’ve pursued the research anyhow. And those same companies have learned to game the Orphan Drug Act in a bunch of different ways, allowing them to jack up their prices for no good reason.
How could we fix the Orphan Drug Act? That’s the topic of this week’s Healthcare Triage.
Financial Performance of Health Insurers: State-Run Versus Federal-Run Exchanges
Synopsis
Researchers compared health insurers’ profitability in 2013 and 2014, the years before and after the introduction of the Affordable Care Act’s (ACA) insurance marketplaces. The median loss for insurers overall in both years was 4 percent. Insurers performed better in states that operated their own health insurance marketplaces than in states that used the federal marketplace, with the difference largely driven by medical loss ratios.
The Issue
“Millions of newly covered beneficiaries presented insurers a golden business opportunity, but the new restrictions on medical underwriting meant that insurers faced uncertain actuarial risk in pricing their products.”
The ACA changed the dynamics of the individual health insurance market with rules intended to expand coverage and reforms to how individual insurance is priced and sold. In the years since the law went into effect, there have been concerns over insurers’ profitability, as some companies have sustained losses or left the market entirely. A Commonwealth Fund–supported study published in Medical Care Research and Review examined insurers’ key financial measures over two years (2013 and 2014) to assess profitability, identify factors driving financial performance, and compare performance in states that ran their own health insurance marketplace and those that used the federal marketplace.
Key Findings
- For established insurers with significant enrollment, profit/loss levels remained statistically the same, with median losses of about 4 percent in both 2013 and 2014.
- Insurers did better in states that operated their own marketplaces. In states with state-run marketplaces, 24 insurers went from a negative profit margin to a positive one in 2014, while 10 were positive in both 2013 and 2014. In total, 34 out of 76 insurers (45%) had positive profit margins in the state-run marketplaces in 2014.
- In the federal marketplace, only four insurers went from a negative to a positive margin in 2014; 15 insurers were positive in both 2013 and 2014. Nineteen of 68 insurers (28%) had positive profit margins in the federal marketplace.
- In states that used the federal marketplace, insurers’ median medical loss ratio—the percentage of insurance premium dollars spent on medical expenses and quality improvement—increased by 10 percentage points, while their median administrative cost ratio dropped by five percentage points. In states with their own marketplaces, there was no significant change in insurers’ medical loss ratio, but the administrative cost ratio dropped three percentage points.
The Big Picture
The authors conclude that the ACA’s implementation in 2014 “did not substantially disrupt the individual market among existing insurers of credible size.” However, they noted differences, largely driven by medical loss ratios, between states that operated their own marketplaces and those using the federal marketplace. Factors that likely contributed to higher profitability include:
- greater efforts by some states to publicize their exchange and generate more enrollment, which may have resulted in a more balanced risk pool;
- political cultures that were more supportive of the ACA in general;
- greater accuracy in actuarial projections; and
- a higher likelihood of expanding Medicaid, which takes higher-risk people out of the marketplace pool.
By focusing on the more manageable of these factors, like expanding outreach and enrollment efforts or improving actuarial projections, states might be able to improve the financial outlook for insurers participating in the marketplaces, the authors say.
About the Study
The authors used two data sets maintained by the Center for Consumer Information and Insurance Oversight, based on mandatory reporting by all regulated health insurers. The final sample included 144 insurers with a total of 7.8 million members. The authors looked at medical loss ratios, administrative costs, and operating profit.
The Bottom Line
The median insurer reported losses of 4 percent in the individual market in both 2013 and 2014, suggesting that the ACA did not substantially disrupt the individual market among established insurers.
Why supply chain is a healthcare leader’s most strategic asset
Healthcare’s movement toward value-based care is not only underscoring the importance of an efficient healthcare supply chain, but also redefining the supply chain leader role.
Once a very transactional process, the supply chain is now considered a core competency for hospitals to reduce waste and lower costs, while supporting patient care initiatives. More and more, supply chain leaders are also taking a seat in C-suite discussions to help executives mitigate potential financial penalties and make more informed decisions under the ever-changing value-based care programs.
To ensure they’re using devices and medical supplies in the most efficient ways possible, hospitals must turn to data, according to Peter Mallow, PhD, program director of health economics, market access and reimbursement for Dublin, Ohio-based Cardinal Health.
Dr. Mallow and Steve Thompson, director of strategic solutions for Cardinal Health, recently spoke with Becker’s Hospital Review about the evolving role of supply chain leaders and shared strategies for using data to better inform patient care and reduce supply chain inefficiencies.
Hackensack Meridian Health, JFK Health sign definitive agreement to merge
The boards of trustees of Edison, N.J.-based JFK Health and Hackensack Meridian Health, also in Edison, signed a definitive agreement to merge the two health systems following five months of due diligence.
The transaction is subject to regulatory approval. If the merger is successful, the combined entity will consist of a total of 15 hospitals and academic medical centers, along with a network of physician practices, ambulatory surgery centers, assisted living facilities and outpatient centers, among other health facilities. The merged entity will employ a staff of more than 33,000 individuals and more than 7,000 physicians.
The organizations first revealed plans to affiliate in November 2016.
The financial terms of the deal were not disclosed.
“Choosing the right partner that provides the highest-quality care and value to the communities we serve is essential. We are thrilled JFK wants to be part of Hackensack Meridian Health. We believe JFK Health will be a great addition to our network,” said Robert Garrett, co-CEO of Hackensack Meridian Health. “We will continue to improve the well-being of communities with more cost-effective care that delivers quality, safe outcomes, clinical excellence and a superior experience.”
“In a rapidly changing healthcare environment that stresses the efficient delivery of care, this merger strengthens and aligns our two organizations to maximize our population health initiatives and increase access for everyone,” said Raymond Fredericks, president and CEO of JFK Health. “Hackensack Meridian Health’s culture of caring is one that matches our values and principles sustained during JFK’s 50-year history.”
CHS records $199M net loss, says divestiture spree is over
Franklin, Tenn.-based Community Health Systems posted a net loss of $199 million in the first quarter after recording net income of $11 million in the same period of the year prior.
CHS said revenues dipped to $4.49 billion in the first quarter of this year, down from $4.99 billion in the same period of 2016. The decrease in revenue was attributable, in part, to lower patient volume. On a same-facility basis, admissions were down 1.5 percent in the first quarter of this year. When adjusted for outpatient activity, admissions decreased 1.4 percent year over year.
Although CHS kept operating expenses in check in the first quarter, one-time charges took a toll on the company’s bottom line. CHS said its first-quarter financial results included $250 million in impairment charges and losses related to the sale of some of its hospitals.
Commenting on the company’s financial results, CHS Chairman and CEO Wayne T. Smith said, “We are focused on performance improvements that we believe will yield additional efficiencies as we move through 2017. At the same time, we are making progress with our portfolio rationalization strategy as we work to create a stronger, more sustainable company for the future and further reduce our debt.”
To improve its finances and reduce its nearly $15 billion debt load, CHS put a turnaround plan into place last year. As part of the plan, the company is selling off 30 hospitals, which includes 11 hospitals it divested this week. Twelve other transactions are under definitive agreement and seven are under letter of intent, Mr. Smith said on a first quarter earnings call Tuesday.
“We’re about finished with our divestiture process, this 30 just about lines it up,” said Mr. Smith. “There may be one or two more, but we are not specifically thinking about doing anything significant for the rest of the year.”
Why an Interim Leader Might Be Right for Your Hospital Now
http://go.healthtechs3.com/webmail/65212/301376317/512fd82f27c1c374fcb87b63770e819d
Hospitals face difficult transitions every time a leader departs; maintaining momentum, restoring trust with the board, physicians and staff, financial turnarounds, and more. The right interim leader – at the right time – can provide the expertise and guidance to steer the hospital through difficult straits, often providing the right combination of new strength and leadership for rapid financial or operational turnarounds (or even just a cultural change) when it would be tough for an incumbent to make the necessary changes. While transitions can be somewhat scary, the right interim can ease the fears of the hospital and the community just by having a “seasoned” pro ready to step in when you need expert help.
Upon completion of the webinar, participants will understand:
- What the right interim can mean for your organization
- How s/he can provide unbiased continuity and stability for the institution and its staff and do the sometimes necessary “heavy lifting”
- How to define what the right interim leader looks like – traits, skills, and fit
Amendment to ACA Repeal-and-Replace Bill Likely to Increase Premiums and Decrease Covered Services for Many
Yesterday, House Republicans released an amendment to the American Health Care Act (AHCA), their proposed repeal and replacement of the Affordable Care Act (ACA). Congressional Budget Office (CBO) projections of its effects on coverage and the federal budget are not yet available.
The amended version of the AHCA is still likely to significantly increase the numbers of uninsured Americans, raise the cost of insurance for many of the nation’s most vulnerable citizens, and, as originally proposed in the AHCA, cut and reconfigure the Medicaid program. The new amendment specifically allows states to weaken consumer protections by, for example, permitting insurers to charge people with preexisting conditions higher premiums.
What the Amendment Leaves in Place
The amended proposed bill does little to change many provisions of the original AHCA including:
- a phase out of the ACA’s Medicaid expansion;
- capped federal payments to states for their Medicaid programs;
- flat premium tax credits for individual market coverage that adjust for age but not income or premiums;
- the option for insurers to charge older people as much as five times what they charge young people;
- replacement of the ACA’s individual mandate penalties with a premium surcharge for those who fail to maintain continuous coverage;
- repeal of taxes that helped fund the ACA’s coverage provisions;
- state funding for reinsurance or other programs to stabilize the individual market.
The CBO estimated in March that the combined effects of these provisions would increase the number of people without health insurance by 24 million by 2026. Older Americans would be particularly hard hit by the bill, experiencing much higher premiums relative to the ACA and the greatest coverage losses.
What the Amendment Changes
The amendment offers states the option to apply for waivers to reduce ACA consumer protections that have enabled people with health problems to buy private health insurance. Beginning in 2019, states could waive the ban on charging people with preexisting conditions higher premiums, as long as states set up special programs to help people with conditions like cancer or heart disease who could no longer afford coverage. States could also change the ACA’s required minimum package of health benefits for health plans sold in the individual and small-group markets.
Despite the fact the federal ban on preexisting condition exclusions would remain under the AHCA, as Tim Jost points out, insurers could reach the same end by not covering services like chemotherapy that sick people need, or by charging very high premiums for individuals with expensive, preexisting problems. In addition, waiving the ACA’s essential benefit requirement could weaken other consumer protections like bans on lifetime and annual benefit limits and caps on out-of-pocket costs.
States that allowed higher premiums for people with health problems would be required to set up programs such as high-risk pools or reinsurance for high claims costs. Or under an AHCA amendment proposed earlier in the month, states could also participate in an “invisible risk-sharing” program, a hybrid between a high-risk pool and reinsurance for high claims costs. But while reinsurance options might protect insurers from high claims costs, giving them the ability to charge premiums based on health status would result in many people with preexisting conditions facing unaffordable premiums. As for high-risk pools, prior research has found that such pools operated by states before the ACA were expensive both for states and for people enrolled in them, and covered only a small fraction of the individuals who would have benefited.
States that had these programs in place could also let insurers charge premiums based on health for people who had not maintained continuous coverage in the prior year.
Looking Forward
Setting aside the amended AHCA’s potential effects on the health and health care of Americans, many questions and uncertainties remain about the bill’s timing and fate. First, the rush to introduce and pass it quickly seems likely to run afoul of Congress’ need to pass a spending bill this week that will keep the federal government funded beyond April 28. So it could be weeks before an amended AHCA gets serious consideration in the House. An important benefit of delay would be to give the CBO time to analyze the impact of the amendments.
Second, the fate of the amended AHCA in the Senate remains uncertain. Some possible provisions – affecting essential health benefits, premium increases based on health, and other features – may not withstand scrutiny by the Senate parliamentarian as she evaluates whether they are appropriate parts of a budget reconciliation bill, and thus exempt from filibuster. Furthermore, many moderate Senate Republicans reportedly have concerns about the Medicaid provisions of the AHCA.
Third, the complex legislative maneuvering around the AHCA should not detract attention from the fundamental facts. Health insurance saves lives and protects Americans from crippling medical debt and even bankruptcy. Changes to existing legislation that result in fewer insured Americans will undermine the health and quality of life of millions of people, as well as increase economic inequality in this country.
HENRY KOTULA 