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Monthly Archives: November 2019
Cartoon – A Long Term Quick Fix
The fall of a major specialty pharmacy
https://www.axios.com/newsletters/axios-vitals-00d53b0a-89cb-415d-81ab-8501d2bab6da.html
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.
- Diplomat made a gross profit of $268 per prescription last quarter.
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.
SANFORD HEALTH CEO FAULTS UNITYPOINT HEALTH FOR FAILED MERGER TALKS
https://www.healthleadersmedia.com/strategy/sanford-health-ceo-faults-unitypoint-failed-merger-talks
The leader who had been in line to helm the post-merger entity said his potential merger partner’s board ‘failed to embrace the vision.’
KEY TAKEAWAYS
The merger would have created one of the nation’s 15 largest health systems.
The party that backed out cited a desire to maintain its existing corporate structure.
There seems to be some finger-pointing between Sanford Health, based in Sioux Falls, South Dakota, and UnityPoint Health, based in Des Moines, Iowa, after talks of a major potential merger between the two Midwestern health systems flatlined.
The two nonprofits had been exploring a plan to combine their operations and form a 76-hospital system with $11 billion in annual revenue and operations across 26 states. When they announced their letter of intent last June, they said the deal would form one of the nation’s 15 largest health systems.
But each acknowledged in separate statements Tuesday that their merger would not come to fruition.
Sanford Health President and CEO Kelby Krabbenhoft blamed the leaders of UnityPoint Health for the outcome.
“We were excited at the opportunity our combination would have provided to create a new health system of national prominence,” Krabbenhoft said in a statement. “The executive management teams and physicians worked diligently for 18 months to provide a merger recommendation to the boards.”
“We are disappointed that the UnityPoint Health board failed to embrace the vision,” he said. “Our focus now is on the patients and communities we serve and the 50,000 people working tirelessly to support them.”
Krabbenhoft had been expected to serve as president and CEO of the post-merger organization, while UnityPoint Health President and CEO Kevin Vermeer had been expected to serve as senior executive vice president.
Vermeer said UnityPoint decided to walk away from the deal after carefully considering its potential.
“Our organization concluded we can most effectively fulfill our mission by maintaining our existing corporate structure,” Vermeer said in a statement released to HealthLeaders. “As a leader in the delivery of value-based care, UnityPoint Health remains strong and competitively positioned for the future.”
The statement says UnityPoint has “great respect for Sanford Health and the relationships we’ve developed.”
In a letter to Sanford employees, Krabbenhoft said the parties were each scheduled to vote separately Tuesday on the deal but UnityPoint met a day earlier and voted 13–6 against the merger, as Melanie Evans reported for The Wall Street Journal.
Spokespeople for Sanford and UnityPoint didn’t immediately respond Wednesday to questions from HealthLeaders about the timing of UnityPoint’s vote.
CMS pitches ramped up oversight of Medicaid payments, promises block grant guidance
UPDATE: Nov. 13, 2019: This brief has been updated to include comments from provider groups.
Dive Brief:
- CMS proposed a new rule Tuesday that would establish stricter requirements for states to report information on supplemental Medicaid payments to providers in a bid to clamp down on spending and promote transparency.
- The agency will also soon release guidance on how states can test alternative financing approaches in the safety net program like block grant and per-capita cap proposals for “certain optional adult populations,” CMS Administrator Seema Verma said Tuesday at the National Association of Medicaid Director’s annual conference in Washington, D.C.
- Later this year, CMS will also issue guidance on how states can promote value-based payments and social determinants of health factors in Medicaid, Verma said. The Center for Medicare and Medicaid Innovation is currently developing several new payment models to push providers to take on more risk for their patient populations in those programs.
Dive Insight:
The moves are in line with sweeping changes from the Trump administration moving more power to the states and asking more from recipients. The CMS administrator teased late last month the agency would soon release new guidance for states to inject flexibility into their Medicaid programs.
“We shouldn’t ration care but instead make how we pay for care more rational,” Verma said Tuesday. “Medicaid must move toward value-based care.”
Speaking to the Medicaid directors Tuesday, Verma said the changes are aimed preserving Medicaid for future generations.
“Going forward there will be no new [State Innovation Model] grants, no more open-ended one-off district waivers,” she said. “We must move forward with a more unified, cohesive approach across payers, across CMS, across states.”
The proposed rule, called Medicaid Fiscal Accountability (MFAR), will add more scrutiny to supplemental payments, which are Medicaid payments to providers in addition to medical services rendered to Medicaid beneficiaries, such as payments supporting quality initiatives or bolstering rural or safety net providers.
Some states rely heavily on these additional payments to offset low Medicaid reimbursement or support struggling hospitals. Provider lobbies did not take kindly to the new rule.
“We share the government’s desire to protect patients and taxpayers with transparency in federal programs, but today’s proposal oversteps this goal with deeply damaging policies that would harm the healthcare safety net and erode state flexibility,” Beth Fledpush, SVP of policy and advocacy for America’s Essential Hospitals, said in a statement.
AEH, which includes more than 300 member hospital and health systems, many of which are safety net providers, asked CMS to withdraw the proposal. The American Hospital Association told Healthcare Dive it was still reviewing the rule and declined comment.
However, government oversight agencies like the Government Accountability Office and the Office of Inspector General have recommended changes to these payments, which have increased from 9.4% of Medicaid payments in 2010 to 17.5% in 2017, according to CMS.
MFAR would also propose new definitions for “base” and “supplemental” payments in order to better enforce statutory requirements around and eliminate vulnerabilities in program spending.
Verma has long teased CMS support of block grants, an idea popular with conservatives, but Tuesday’s speech solidifies the agency’s support of such proposals. A handful of red states have been mulling over capped spending to gain more clarity around budgets.
In September, Tennessee unveiled its plan to move to a block grant system that would set a floor for federal contributions adjusted on a per capita basis if enrollment grows. Any savings would be shared between the state and the government.
Tennessee must submit a formal application to CMS to later than Nov. 20. If approved, it would become the first state to use a block grant funding mechanism in Medicaid. Additionally, Utah submitted a waiver application seeking per-capita Medicaid caps in June; Oklahoma Gov. Kevin Stitt, a Republican, is reportedly considering such a program; and Alaska and Texas have both commissioned block grant studies.
Federal investigators probe Ascension, Google project
The Office of Civil Rights of HHS is asking for more information about Google’s “Project Nightingale” with St. Louis-based Ascension, according to a Nov. 12 The Wall Street Journal report.
Investigators “will seek to learn more information about this mass collection of individuals’ medical records to ensure that HIPAA protections were fully implemented,” OCR Director Roger Severino told WSJ.
Ascension and Google partnered last year to gather and share patient information to create healthcare solutions. Physicians and patients from 21 Ascension locations were not informed that information was being shared with Google. It is estimated that Google will gather data on 50 million patients.
Patient data that is being secretly shared with Google includes lab results, diagnoses and hospitalization records, reports WSJ. In some instances, Google has access to patients’ complete health history, including names and dates of birth.
Although Ascension employees have questioned the ethical and technological ways Google is gathering data, privacy experts said it appears to be acceptable under federal law. Hospitals are generally allowed to share data with business partners without informing patients if the information is used “only to help the covered entity carry out its healthcare functions.”
An Ascension spokesperson said patient data wouldn’t be used to sell ads, reports WSJ.
“We are happy to cooperate with any questions about the project. We believe Google’s work with Ascension adheres to industry-wide regulations (including HIPAA) regarding patient data, and comes with strict guidance on data privacy, security and usage,” a spokesperson for Google said in a statement to WSJ.
Legislators on Nov. 12 also commented on the project. Presidential hopeful Sen. Amy Klobuchar of Minnesota said that there needs to be government oversight for the amount of data Google is handling, adding there are “very few rules of the road in place regulating how it is collected and used.”
Google has mapped out plans to develop a search tool that would aggregate patient data into a central location. Ascension physicians would then be able to use the tool to more quickly access patient information.
Ascension leader Eduardo Conrado, executive vice president of strategy and innovations for Ascension, shared his reactions to the WSJ Nov. 11 report on Project Nightingale on Nov. 12. Find his commentary here.
The Role of Private Equity in Driving Up Health Care Prices
https://hbr.org/2019/10/the-role-of-private-equity-in-driving-up-health-care-prices
Private investment in U.S. health care has grown significantly over the past decade thanks to investors who have been keen on getting into a large, rapidly growing, and recession-proof market with historically high returns. Private equity and venture capital firms are investing in everything from health technology startups to addiction treatment facilities to physician practices. In 2018, the number of private equity deals alone reached almost 800, which had a total value of more than $100 billion.
While private capital is bringing innovation to health care through new delivery models, technologies, and operational efficiencies, there is another side to investors entering health care. Their common business model of buying, growing through acquisition or “roll-up,” and selling for above-average returns is cause for concern.
Take the phenomenon of surprise bills: medical invoices that a patient unexpectedly receives because he or she was treated by an out-of-network provider at an in-network facility. These have been getting a lot of attention lately and are driven, at least in part, by investor-backed companies that remain out of network (without contracts with insurers) and can therefore charge high fees for services that are urgently or unexpectedly required by patients. Private equity firms have been buying and growing the specialties that generate a disproportionate share of surprise bills: emergency room physicians, hospitalists, anesthesiologists, and radiologists.
In other sectors of the economy, consumers can find out the price of a good or service and then choose not to buy it if they don’t believe it to be worth the cost. In surprise bill cases, they can’t. Patients are often unaware that they need these particular services in advance and have little choice of physician when they use them.
To blunt growing bi-partisan political support for protecting patients from surprise bills, various groups have lobbied against legislation that would limit the practice. They include Doctor Patient Unity, which has spent more than $28 million on ads and is primarily funded by large private-equity-backed companies that own physician practices and staff emergency rooms around the country. Their work seems to be having an impact: efforts to pass protections have stalled in Congress.
Physician practices have been a popular investment for private equity firms for years. According to an analysis published in Bloomberg Law, 45 physician practice transactions were announced or closed in the first quarter of 2019. At the current pace, the number of deals to buy physician and dental practices will surpass 250 this year, far exceeding 2018 totals. Yes, these investments can provide independent physicians and small practices with an alternative to selling themselves to hospitals and can help them deal with administrative overhead that takes them away from the job they were trained to perform: providing care. But, at least in some cases, the investors’ strategy appears to be to increase revenues by price-gouging patients when they are most vulnerable.
Surprise billing from investor-backed physician practices isn’t the only problem. Private-equity-owned freestanding emerging rooms (ERs) are garnering scrutiny because of their proliferation and high rates. The majority of freestanding ER visits are for non-emergency care, and their treatment can be 22 times more expensive than at a physician’s office.
However lucrative in the short run, private investor-backed companies that hurt consumers are not likely to perform well financially in the long term. Unlike many other markets, health care is both highly regulated and highly sensitive to the reality or appearance of victimizing the sick and vulnerable. Consumer outrage leads quickly to government intervention.
Investors will benefit most by solving the health care system’s legion of problems and by adding true value to our health system — delivering high-quality services at affordable prices and eliminating waste. Those that try to maximize their short-term profits by pushing up prices without adding real healthcare benefits are likely to find that those strategies are unsustainable. Lawmakers and regulators won’t let them get away with such practices for long.
Happy Veteran’s Day
It is the Soldier
Thank You for Your Service
HENRY KOTULA 