Cartoon – Our Only Option
Monthly Archives: February 2018
Cartoon – Incentivized Justice
Henry Ford Allegiance ‘Reluctantly’ Settles DOJ Antitrust Suit
The Jackson, Michigan–based health system agrees to stop coordinated anti-competitive business activities with competitors, but insists that it did nothing wrong.
Henry Ford Allegiance Health has settled its three-year antitrust fight with state and federal prosecutors, just weeks before the case was set for trial in federal court.
The Department of Justice and the Michigan Attorney General’s office filed suit in 2015, alleging that Henry Ford Allegiance Health and three other health systems in south central Michigan carved up the territory and insulated themselves from competition by agreeing to withhold outreach and marketing in each other’s respective counties.
The three other health systems, Hillsdale Community Health Center; Community Health Center of Branch County in Coldwater; and ProMedica Health System in Toledo, OH, settled their suits two years ago.
“As a result of Allegiance’s per se illegal agreement to restrict marketing of competing services in Hillsdale County, Michigan consumers were deprived of valuable services and healthcare information,” Assistant Attorney General Makan Delrahim in DOJ’s Antitrust Division said in a media release. “By prohibiting further anticompetitive conduct and educating Allegiance executives on antitrust law, this settlement will ensure that consumers receive the fruits of robust competition.”
The proposed settlement was filed Friday in U.S. District Court for the Eastern District of Michigan, where the case was scheduled to go to trial on March 6.
Allegiance said in prepared remarks that it felt compelled to settle even though it did nothing wrong.
“We reluctantly chose to settle this litigation because continuing to defend ourselves against the United States and State of Michigan became too costly,” the health system said. “This decision, regrettable but necessary, requires us to discontinue our defense of this case before the Court could rule on any of the highly contested issues raised in the litigation.”
DOJ’s settlement with Allegiance expands on the earlier settlements with the other three health systems, which means that Allegiance cannot communicate, coordinate or limit marketing or business development with competitors. The agreement ends the health system’s carve out in Hillsdale County. Allegiance must also file annual compliance reports and submit to compliance inspections, and reimburse state and federal prosecutors for the court costs.
DOJ said the deal includes several new provisions that are now included in all new consent decrees that add greater specificity and accountability.
“The proposed settlement will make it easier and more efficient for the department to enforce the decree by allowing the department to prove alleged violations by a preponderance of the evidence,” Delrahim said. “These provisions will encourage a stronger commitment to compliance and will ease the strain on the department in investigating and enforcing possible violations.”
Patricia Wagner, an antitrust attorney with Epstein Becker Green and a disinterested observer, said DOJ is applying more rigorous benchmarks for its consent decrees.
“When you do your annual report you have to document that everybody got their four hours of training and you have to provide the materials that were used in those training sessions. If DOJ asks, you’d have to provide a lot of who had what conversations, and when,” Wagner said. “Instead of just having a general ‘you will comply with this consent order and verify annually that you are doing so,’ it is giving organizations the steps that DOJ thinks they need to take in order to comply with the consent judgements.”
“If I am a CEO of a hospital maybe I am thinking about how to get ahead of this situation. Should I have someone who is responsible for antitrust compliance?” she said. “All hospitals have large compliance programs that are usually focused, as they should be, on fraud and abuse and licensure issues. It seems like a natural evolution to say ‘maybe we should be thinking about including antitrust in that larger compliance program.'”
Henry Ford Allegiance Health operates the only hospital in Jackson County, MI. The system also operates primary care, physical rehabilitation, and diagnostic facilities in several counties in south central Michigan. Allegiance joined Henry Ford Health System in 2016.
Allegiance’s statement in full reads as follows:
Allegiance Health and the Department of Justice have settled an antitrust case brought by the DOJ against Allegiance Health in 2015. The original complaint alleged that Allegiance Health entered into an agreement with Hillsdale Community Health Center to limit marketing in Hillsdale County.
We reluctantly chose to settle this litigation because continuing to defend ourselves against the United States and State of Michigan became too costly. This decision, regrettable but necessary, requires us to discontinue our defense of this case before the Court could rule on any of the highly contested issues raised in the litigation.
We still deny unlawful conduct of any kind, and the settlement does not include any admission of liability. Despite almost three years of litigation, there was no finding of wrong doing by the Court, and, as recently as December, the Court contemplated dismissing the action in its entirety. In addition, the Court has never ruled that the citizens of Hillsdale County were harmed by our marketing strategy.
We reaffirm our belief that we promoted competition in south central Michigan and benefitted the citizens of Hillsdale County in undeniable ways. The terms of the settlement allow us to continue our marketing strategies in order to best serve the people of south central Michigan including Hillsdale County.
Trump’s Budget Would Cut HHS Funding 21%; Azar Approves
The White House calls for an increase in funding for veterans healthcare services, while proposing cuts to HHS and a repeal of the Affordable Care Act.
President Donald Trump released his budget proposalMonday for fiscal year 2019. It includes overall reductions in nondefense spending while also increasing funding for veterans healthcare services.
The White House’s $4.4 trillion budget request to Congress comes days after a two-year, $300 billion bipartisan budget deal was signed into law following the second government shutdown in as many months.
Though Congress is unlikely to vote on a singular budget, the various provisions listed in the executive proposal outline the legislative agenda the Trump administration would like to pursue in 2018.
“I applaud President Trump for laying out his vision for the country in today’s budget request and welcome his partnership as the Energy and Commerce Committee works to tackle several shared priorities,” said Rep. Greg Walden, R-Ore., chairman of the House Committee on Energy and Commerce in a statement. “Many of the administration’s other proposals to lower health care costs complement our continued commitment to addressing the cost drivers across every facet of our nation’s health care system.”
Below is a breakdown of the proposals affecting the healthcare world, including cuts to the Department of Health and Human Services (HHS), Medicare, a repeal-and-replace plan for the Affordable Care Act (ACA), and more money for veterans healthcare.
Major cuts to HHS
The proposal features a $68.4 billion budgetary line for HHS, a 21% reduction in funding compared to FY 2017. The budget also proposes a $451 million cut to training programs for health professionals, arguing the initiatives “lack evidence that they significantly improve the nation’s health workforce.”
If adopted, the policies would extend Medicare’s solvency by eight years, according to the budget proposal. Current projections estimate Medicare will become insolvent by 2029. The Trump administration also proposed a limit on Medicaid reimbursements to federal providers at no more than the cost of providing services to beneficiaries.
“The President’s budget makes investments and reforms that are vital to making our health and human services programs work for Americans and to sustaining them for future generations,” said HHS Secretary Alex Azar in a statement. “In particular, it supports our four priorities here at HHS: addressing the opioid crisis, bringing down the high price of prescription drugs, increasing the affordability and accessibility of health insurance, and improving Medicare in ways that push our health system toward paying for value rather than volume.”
Bundled payments for community-based medication-assisted treatment would see an opportunity to expand through the budget proposal, with the White House highlighting a new Medicare reimbursement for methadone treatment.
Medicare beneficiaries would also be able to save for out-of-pocket costs by allowing tax deductible contributions to health savings accounts associated with high deductible health plans offered by employers or Medicare Advantage.
The budget proposes a ‘$5 returned for every $1 spent’ policy for the Medicare Health Care Fraud and Abuse Control, a $45 million increase compared to FY 2017 which totals $770 million,. The White House believes the additional funding will bolster the program’s efforts to “identify and prevent fraudulent or improper payments from being paid in the first place.”
Two-part ACA repeal
Arguing that “national healthcare spending trends are unsustainable,” the budget offers a solution in the form a two-part repeal of the Affordable Care Act.
Modeled on the Graham-Cassidy proposal, the first step would focus on providing block grants to states for healthcare spending plans.
The Market-Based Health Care Grant Program, the new block grant program, would offer states and consumers with options outside of the ACA’s “insurance rules and pricing restrictions.” The administration believes this will address high premium costs and rising deductibles.
The second part of the plan focuses on Medicaid reform, specifically the repeal of Medicaid expansion spurred on by the ACA, as well as reducing “state gimmicks” like provider taxes. This move would shift federal authority over healthcare access to states, which could in turn design individualized plans.
Major increase for veterans healthcare
Continuing with a campaign promise to address issues facing veterans, Trump’s budget proposal includes an increase in spending for veterans healthcare programs over the next three fiscal years.
For FY 2019, the Veterans Health Administration would receive $70.7 billion, a 9.6% increase compared to FY 2017. By 2020, that number rises to $75.6 billion in advance appropriations for VA medical care program costs.
This covers 9.3 million enrollees in the Veterans Affairs health system.
Additionally, the budget provides $8.6 billion for veterans mental health and suicide prevention programs, and $11.9 billion would be used to enhance and expand veterans’ access to high-quality community care.
The administration proposes the consolidation of the Veterans Choice Program and other community care programs into a new, unified program: the Veteran Coordinated Access & Rewarding Experiences program.
Northwestern Medicine to open $399M hospital
Northwestern Medicine Lake Forest (Ill.) Hospital will open its $399 million replacement facility March 3, reports the Chicago Tribune.
Set on a 160-acre campus, the new 500,000-square-foot hospital houses 114 private inpatient rooms, 72 outpatient care spaces, 106 clinic examination rooms and eight operating rooms. The surrounding campus has 7,000 feet of bicycle paths, 700 trees and a six-acre bond.
The new facility will replace the existing, aging Lake Forest Hospital. The old hospital will be partially demolished, while other parts may be repurposed.
Construction on the replacement facility began in August 2014.
PwC Strategy: 12 plays for disruptors in healthcare
We see three classes of potential plays for a consortium of companies that band together, ranging from the least disruptive (and quickest to implement) to the most disruptive (with the longest time to implement).
In early February, Amazon, JPMorgan Chase, and Berkshire Hathaway announced a partnership to tackle rising healthcare costs for their U.S. employees.
The announcement, which didn’t do much beyond outlining the formation of the partnership, is a sign of the times. The details of the Amazon–JPMorgan Chase–Berkshire Hathaway plan, which, notably, does not involve a health industry incumbent, have yet to be fully revealed. Although the three companies have a substantial number of U.S. employees — 1.1 million between them — they are not aiming to produce value via scale. The consortium’s stated goal is to help improve health costs via technology, and to create value by providing greater transparency and competition, reallocating risk, and eliminating waste and intermediaries.
But the announcement is interesting for a few reasons. Even though it is directed at the companies’ own employees, it highlights the types of capabilities and platforms that may be needed to win in the future health marketplace. It points to the potential for new entrants to disrupt incumbents in insurance and care delivery. And it throws into relief the kinds of bold moves that resilient players can afford to make.
The Plays
A consortium between companies with complementary capabilities and scale has the potential to optimize the matching of supply and demand within healthcare via new mechanisms (i.e., exchanges), the facilitation of easier transactions (including faster, multichannel delivery), and new products (such as wellness and healthcare bundles). And as a consortium begins to target health spending successfully, it could move from lower to higher clinical complexity and from local to national marketplaces.
Accordingly, we see three classes of potential plays for a consortium of companies that band together, ranging from the least disruptive (and quickest to implement) to the most disruptive (with the longest time to implement). They are incremental innovation (testing the waters with gradual and piecemeal innovation); technology and analytics (enabling the improvement and redesign of the existing system); and radical disruption (creating new platforms, marketplaces, and ecosystems).
Incremental Innovation Plays
- Buy/partner with a third-party administrator. Use the buying power provided by the companies’ large number of members to buy or partner with a third-party administrator, thus removing the need for payors. The service could then be extended to other employers.
- Offer near-site clinics. Leverage the combined physical footprint of the consortium members to invest in up-front care that would in turn reduce downstream hospital costs. This would include partnering with facilities/care delivery providers and recruiting general practitioners to offer on- or near-site primary care clinics.
- Enable direct-to-provider contracting. Segment the employee base into groups — e.g., chronic conditions, healthy, risky — and directly contract with providers to manage those populations.
- Enter pharmaceutical/durable medical equipment (DME) distribution and manufacturing. Ship drugs in one convenient monthly package directly from manufacturers, use cloud computing to create a more efficient pharma supply chain. A consortium could potentially expand into the manufacturing of biosimilars and generics drugs.
Technology and Analytics Plays
- Offer virtual services. Build or host a network of virtual care services such as telehealth and second opinions, and eventually evolve to operate a “virtual hospital” in which specialists supervise medical care from a distance.
- Offer a customized consumer (member/employer) portal. Leverage data and analytics capabilities to personalize consumer engagement and experience, provide targeted concierge services, and integrate health and productivity incentives.
- Offer data-driven insights. Use data collection, tracking, and management to automate discovery, fuel AI-enabled decision making, and offer insights to stakeholders on, for example, the relative effectiveness of wellness programs.
- Offer services for providers/employers. Leverage data, technology, and analytics capabilities to relieve the administrative and regulatory burden for providers and employers.
Radical Disruption
- Develop a B2B and B2C clinical capacity exchange/marketplace. Much as Airbnb does with rooms and OpenTable does with restaurant tables, enable care-delivery providers to monetize current and excess capacity and let consumers identify, compare (on price, quality, and availability), and book needed clinical capacity at the required time and for the needed procedure.
- Develop a direct-to-employer (D2E) reverse auction platform. Similar to a private exchange, the D2E platform would let employers segment their employee base by micro geographic and risk segments, aggregate similar risk pools across employers, and enable payors or health plans to offer customized plan options for consumers. Shortening the distribution chain and bundling healthcare products and services would make healthcare more shoppable.
- Roll out an encounter-based, claimless model. Partner with large care-delivery organizations that cover the full continuum of care and are in risk-sharing/capitated arrangements to create an encounter-based, claimless network. For certain populations or certain types of care, patients would have unlimited access to physicians without having to file claims.
- Develop next-generation healthcare connectivity platform. Create a consumer-centric, plug-and-play connectivity platform, aimed at improving the overall health, wealth, and productivity of individuals. Much in the same way that a financial portal accommodates a range of products and services, this platform would allow payors, providers, consumers, and external partners to coordinate whole health and wellness products and services. Imagine logging onto an Amazon-like portal, filling out a risk assessment, receiving advice, interacting with nurses, and having Alexa act as a concierge to set up appointments, order pharmaceuticals, and provide behavioral nudges.
The Responses
Regardless of the plays they pursue, consortia will force incumbent stakeholders to create a more competitive market and more clearly define their value. As such, they will only add to the pressure being placed on the industry by disruptive and aggressive mergers, such as the one between CVS and Aetna.
The fact that a new group of entrants, blessed with deep pockets and strong capabilities, is potentially entering the market only heightens the urgency for the industry to focus on its strategy. Companies that react with one-off moves to respond to these announcements, or that stand still, are going to get disrupted. At the same time, in this evolving landscape, resilient first movers and fast followers will have the opportunity to gain a sustainable advantage. As we’ve noted, there are a series of no regrets, offensive, and option value moves that can increase all stakeholders’ ability to remain resilient and win in such a turbulent landscape.
No regrets moves, which make sense regardless of how the future develops, would include payors developing more effective technology and analytics, providers creating more holistic care protocols, and pharmaceutical companies teaming up with employers to manage costs more effectively. All players would benefit from the ability to explain and justify their prices and link them clearly to value.
Offensive moves, aimed at enabling the organization to get to a strategic destination first or faster, include providers partnering with new employer consortia to streamline the drug supply chain, pharmacy benefit managers (PBMs) expanding their business model to include broader medical benefits, and employers creating their own health consortia.
Option value moves offer a more nuanced way for companies to approach the future. These are low-risk, low-regret initiatives that preserve or afford the opportunity to participate in new markets and develop new products. They could include PBMs providing value-added services, such as tying reimbursements to the performance of high-cost specialty drugs, or retail pharmacies working with large employers to create near-site clinics, or employers considering forming their own consortia.
As we noted at the outset, a great deal is still unknown about the intent and potential of the Amazon, JPMorgan Chase, and Berkshire Hathaway health consortium effort. But one thing is clear: All stakeholders in the healthcare ecosystem need to ensure that their business models are resilient and allow for timely responses and the flexibility to evolve.
North Carolina treasurer asks UNC Health Care for $1B bond to ensure cost savings from pending merger
North Carolina Treasurer Dale Folwell is calling for Chapel Hill, N.C.-based UNC Health Care to issue a $1 billion performance bond to guarantee cost savings from the health system’s pending merger with Charlotte, N.C.-based Atrium Health, according to The News & Observer.
UNC Health Care and Atrium Health, previously named Carolinas HealthCare, signed a letter of intent to merge in August 2017, but the systems have released few details about the proposed deal.
“With a lack of details on this merger and little evidence that mergers like this have generated savings for the public, I feel I have a fiduciary responsibility to pursue this guarantee that will protect North Carolina taxpayers,” Mr. Folwell said in a statement to The News & Observer.
UNC said it will work with the state treasurer to develop ways to meet state employees’ healthcare needs at the lowest cost. However, cutting costs is not the system’s top priority. “Our No. 1 job is taking care of patients. We do not control inflation or other variables associated with the cost of care,” UNC said in a statement to The News & Observer.
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HENRY KOTULA 