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Monthly Archives: July 2019
Cartoon – Trying to Please
Cartoon – Never, ever, think outside the box
Cartoon – Sale or Threat?
New Jersey health systems complete merger
Marlton, N.J.-based Virtua Health completed its acquisition of Camden, N.J.-based Lourdes Health System July 1, creating an organization with 280 care locations and more than 13,000 employees.
Virtua said the transaction will reshape healthcare in south New Jersey by combining the care Virtua provides with the specialized care Lourdes provides — particularly in cardiovascular surgery, complex neurosurgery and transplant services areas.
“The value we place on the patient experience and performance improvement — coupled with our commitment to quality and community involvement — will make a tremendous impact on the health and well-being of the patients we serve,” Dennis W. Pullin, president and CEO of Virtua, said in a news release.
The acquisition has been a monthslong process. Talks started when Carbondale, Pa.-based Maxis Health — the parent company of Lourdes and a subsidiary of Livonia, Mich.-based Trinity Health— entered into a nonbinding agreement March 8, 2018, to sell Lourdes to Virtua. The boards of Maxis and Virtua signed a definitive agreement to proceed with the deal in June 2018. Last month — after regulatory review from New Jersey and federal agencies — New Jersey Superior Court Judge Paula Dow approved the transaction, according to Virtua.
Through the acquisition, Virtua has taken ownership of Our Lady of Lourdes Medical Center in Camden, Lourdes Medical Center of Burlington County, Lourdes Medical Associates and Lourdes Cardiology Services.
The combined organization has more than 100 buildings and 2,850 clinicians.
Hospitals could multiply in Florida as state cancels certificate-of-need requirement
Florida lawmakers eliminated a regulatory process that limited how many hospitals and specialty services could be built in the state, according to the Orlando Sentinel.
Beginning July 1, general hospitals won’t need to secure a certificate of need to build a facility or start a new service, such as pediatric and adult open-heart surgeries, organ transplants, neonatal intensive care units and rehab programs.
In two years, the second part of the bill will go into effect, which cancels the certificate of need requirement for some specialty hospitals, such as children’s and women’s hospitals, rehab hospitals, psychiatric and substance misuse hospitals, and others.
Altamonte Springs, Fla.-based AdventHealth and Orlando (Fla.) Health told the Orlando Sentinel they will accelerate their construction projects that were on deck to go through the certificate-of-need application or were tied up in regulatory red tape. Nashville, Tenn.-based HCA Healthcare did not say how the change would affect its building plans in Florida.
Roughly 35 states have certificate-of-need laws, according to National Conference of State Legislatures data cited by the Orlando Sentinel.
Out-of-pocket costs rising even as patients transition to lower-cost care settings
Patients saw increases of up to 12% in their out-of-pocket responsibilities for inpatient, outpatient and ED care in 2018.
A new TransUnion Healthcare analysis has found that most patients likely felt a bigger pinch to their wallets as out-of-pocket costs across all settings of care increased in 2018. The new findings were made public yesterday at the 2019 Healthcare Financial Management Association Annual Conference in Orlando.
The analysis reveals that patients experienced annual increases of up to 12% in their out-of-pocket responsibilities for inpatient, outpatient and emergency department care last year.
In 2017, the average inpatient cost was $4,068; the average outpatient cost was $990; and the average emergency department cost was $577.
In 2018, the average inpatient cost was $4,659; the average outpatient cost was $1,109; and the average emergency department cost was $617.
FUELING THE TREND
There are certain factors that are influencing this trend, according to Jonathan Wiik, principal of healthcare strategy at TransUnion Healthcare.
“Patients are becoming more aware that emergency care is expensive and somewhat inefficient,” Wiik said. “No one wants to go to the emergency room unless we have to, because we don’t want to deal with the time there or the expense. They aren’t the best place to get primary or even urgent care.”
Another factor, he said, is that providers realize the emergency department is a care setting of last resort for many. Providers want to make sure that have room in the ED for cases that are real emergencies, so they’re essentially curating their patients, steering patients to the most cost effective settings possible — often primary care, which is the least expensive setting.
Noting that the biggest annual increases were in inpatient and outpatient care, Wiik said that was largely a function of utilization and just a general wariness, in addition to the fact that most EDs have pretty flat contracts. Financial communication with patients is also an issue.
“Most people can’t afford the average out-of-pocket, so providers are really trying to educate patients as early as they can about those costs,” said Wiik. “Emergency care is a really hard place to educate people on finances, let alone collect on them.”
RISING COSTS
The analysis found that, during a hospital visit, patients are likely experiencing cost increases that continue the trend of higher out-of-pocket costs. About 59% of patients in 2018 had an average out-of-pocket expense between $501 and $1,000 during a healthcare visit. This was a dramatic increase from 39% in 2017. Conversely, the number of patients that had an average out- of-pocket expense of $500 or below decreased from 49% in 2017 to 36% in 2018.
And with out-of-pocket costs increasing, the trend toward consumerism is growing as more patients, payers and providers transition to lower cost settings of care.
One example: Inpatient care, traditionally the most expensive healthcare option, has seen a leveling off with the percentage of price estimates remaining at 8% between 2017 and 2018. The percentage of outpatient services estimates, generally about one-quarter of the cost of inpatient services, rose in that same timeframe from 65% to 73%.
“Patients are likely seeing more providers and payers recommending that they take advantage of cost-effective healthcare options, which brings down costs for all parties,” said Wiik. “This is especially important as costs continue to rise in all areas of healthcare, particularly in inpatient, outpatient and emergency department services.”
This is having an impact on providers, payers and patients, he said.
“Let’s pretend Joanna had an MRI in her head, and that ran $3,200. That might have been paid by Blue Cross Blue Shield, and $100 out of Joanna’s pocket. Now Joanna’s paying $300. Most patients don’t look up how much the MRI’s going to be. They just get the bill later and try to figure it out. I think the patient portion of the bill is going to be in the 35, 40% range very soon. What that means is we’re quickly approaching half of the bill coming from the patient and half from the payer. That’s not insurance anymore, that’s a bank account.”
A recent Kaiser Family Foundation study indicated that 34% of patients are finding it difficult to pay their deductible before insurance kicks in. In addition to patients being challenged to make payments, the trend is that providers are also feeling the pressure of increased denial rates and write-offs, which is increasing bad debt.
Considering these factors together — increased out-of-pocket expenses, a patient’s challenge to make payment, and increased denial rates — collecting payments from all payers is critical for providers. In order for providers to ensure they receive payment for the patient-care services rendered, it is vital that they implement strategies that maximize reimbursements.
Medical costs projected to increase 6% by 2020, says PwC
Utilization is still being dampened by high deductibles and other cost sharing, but at the expense of employee satisfaction.
Medical costs are rising, and by this time next year costs will likely show a modest increase of about 6% over the past two years, according to a new report from PwC, PricewaterhouseCoopers.
After figuring in health plan changes such as increased employee cost sharing and network and benefit changes, PwC’s Health Research Institute, which conducted the study, projects a net growth rate of 5 percent. Even with employers’ actions, market forces likely will still overrun the efforts to quell them.
Prices, not utilization, are continuing to fuel healthcare spending. Utilization is still being dampened by high deductibles and other cost sharing, but at the expense of employee satisfaction with their health plan. In response, employers are inserting themselves more forcefully into the healthcare delivery equation.
WHAT’S THE IMPACT
Beyond market forces, HRI identified three “inflators” that will, influence the medical cost trend.
One is that drug spending will grow faster. Between 2020 and 2027, retail drug spending under private health insurance is projected to increase at a rate of 3 percent to 6 percent a year as the impact of generics on spending plateaus, biosimilars continue to see slow uptake, and costly new therapies enter the market.
Chronic diseases will also be a major issue. Obesity and Type 2 diabetes continue to produce high rates of hypertension and cardiovascular disease. Sixty percent of adults have a chronic disease, with 40 percent managing two or more. For employers, per capita health spending on someone with a complex chronic illness is eight times that of a healthy person.
Lastly, employers are beginning to recognize the importance of helping their employees manage their mental health and wellbeing. Nearly 75 percent of employers offer mental health disease management programs, the report found. Anytime access is expanded, costs will go up in the short term, though it may have the opposite effect long-term.
And speaking of the opposite effect, there are a few “deflators” HRI recognized that will likely slow down the medical cost trend.
HRI predicts that in 2020, more companies will take action to make sure healthcare is accessible to their employees, opening and expanding clinics as a strategy to control the cost trend. Thirty-eight percent of large employers offered a worksite clinic in 2019, up from 27 percent in 2014.
Also, payers are designing plans to encourage members to choose free-standing facilities and in-home care rather than more expensive sites. How those benefits are designed, and how employees perceive the costs, will shape the effectiveness of site of care strategies. Payers and employers are aiming to grow the role of telemedicine as employees grow more comfortable with it, especially if out-of-pocket costs are lower and the quality doesn’t suffer.
WHAT ELSE YOU SHOULD KNOW
The trend has implications for employers, payers, providers and even pharmaceutical and life science companies.
For payers, it becomes important to benchmark the prices paid commercially against a common reference point such as Medicare. With this information it’s possible to pursue value-based arrangements with high-performing and lower-cost providers, in addition to negotiating better contracted rates on existing fee-for-service arrangements.
For providers, a value line strategy is necessary as employers and consumers look for high quality care for a low cost. Providers armed with a value line strategy are more likely to be included in health plans’ high-performance networks, and are better positioned to directly contract with employers.
Providers should also understand what risk they can take on to guarantee a health outcome, and the cost structure needed to make them profitable in doing so. Providers should understand and manage both the risk inherent in their ability to deliver care and the risk of the population they’re managing — from health status to the social determinants impacting their health — to help them design appropriate clinical interventions and non-clinical support services.
For employers, it becomes imperative to understand their role as the purchaser of healthcare for employees and join the ranks of employer activists, pursuing new solutions to lower costs, improve access and enhance quality. Pharmaceutical and life science companies, meanwhile, should go beyond the basic outcomes-based arrangements currently in place and consider exploring and expanding alternative financing arrangements, such as subscription models for unlimited access to a product for a set period of time, or a mortgage model to finance expensive specialty drugs over time.
THE LARGER TREND
The PwC study loosely mirrors the findings of an October report from the Altarum Center for Value in Health Care, which found prices and spending in healthcare growing steadily, but at a moderate pace.
The country’s healthcare spending habits are at a level nearly double that of similar countries. Spending per capita in the U.S. is more than $9,000, compared to just over $5,000 in other Western nations, and because prices are growing slowly but steadily, spending is doing the same.
Purdue Pharma struggling amid lawsuits
Purdue, the maker of OxyContin, is facing sluggish sales, a dwindling workforce and restructuring challenges as it fights a slew of lawsuits claiming that the company contributed to the opioid epidemic, WSJ reports.
- The company’s revenue is expected to be less than $1 billion this year for the first time in a decade, and it has said it’s considering filing for bankruptcy.
- Sales for OxyContin have been declining since 2010, as providers have changed their prescribing habits and the public has grown more aware of the threat of opioid addiction.
Purdue’s financial reliance on OxyContin was a result of business decisions made by the company and its board, including members of the Sackler family — which is also under legal scrutiny.
- The company’s leaders are now more focused on dealing with the ongoing litigation than growing the business, sources told the WSJ.
When a hospital wields monopoly power
NorthBay Healthcare, a not-for-profit hospital system in California, recently gave a candid look into how it operates, telling investors it has used its negotiating clout to extract “very lucrative contracts” from health insurance companies.
Why it matters: This is a living example of the economic theories and research that suggest hospitals will charge whatever they want if they have little or no competition, Axios’ Bob Herman reports.
Details: NorthBay owns two hospitals and several clinics in California’s Solano County. Kaiser Permanente owns the only other full-service hospital in the county, and Sutter Health operates some medical offices. (A NorthBay spokesperson argued the system is “more akin to the David among two Goliaths.“)
Three health insurers have terminated their contracts with NorthBay over the past couple years. During a June 19 call with bondholders, executives explained why this has happened.
“We’ve been able to maintain very lucrative contracts without the competition. And what the payers are saying is, they would like us to be like 90% of the rest of the United States in terms of contract structure.”
— Jim Strong, interim CFO, NorthBay Healthcare
Between the lines: NorthBay’s revenue has increased by 50% over the past few years, from $400 million in 2013 to $600 million in 2018, due in large part to its natural monopoly and oligopoly over hospital services.
- This is exactly what we should expect to happen when sellers have the upper hand over buyers, economists say.
NorthBay also serves as a cautionary tale for price transparency, the policy fix du jour.
- “If the health care system is consolidated, consumers don’t have anywhere else to go,” said Sunita Desai, a health economist at NYU. “Even if they see the prices of a given hospital, they’re limited in terms of how much they can ‘shop’ across providers.”
HENRY KOTULA 