A San Francisco Superior Court judge has granted preliminary approval of the $575 million settlement agreement Sutter Health reached in the antitrust case that alleges it drove up healthcare prices in Northern California through anticompetitive practices.
A hearing for final approval of the settlement has been set for July 19, according to the judge’s order issued Tuesday.
Now, class members, or certain self-funded payers in California, will be notified of the preliminary approval and may object to part or all of the settlement agreement.
Dive Insight:
This preliminary approval comes more than a year after Sutter Health first agreed to settle the case with the plaintiffs, including California Attorney General Xavier Becerra, now nominee for HHS secretary, and a grocer’s union.
To put the settlement and all its elements in motion, it must first be approved by a judge. Tuesday’s order moves the case one step closer to final approval.
That 2019 settlement came on the eve of a court case that was supposed to lay out in open court how the regional powerhouse’s practices led to higher healthcare costs.
Even though the settlement averted a trial, it was designed to force Sutter to change some of these practices. As part of the settlement, Sutter agreed to stop “all-or-nothing” contracting and instead allow insurers and other payers to contract with some, but not all, of Sutter’s facilities.
The settlement is also designed to limit what patients pay out-of-network in an effort to shield them from exorbitant, surprise medical bills.
Sutter Health has tried to delay the $575 million antitrust settlement, citing the fallout from the novel coronavirus that has squeezed providers, including Sutter.
The health system, though battered by the pandemic’s fallout, was still able to post net income of $134 million for 2020, in part thanks to investment income. However, it did report an operating loss of $321 million as expenses outpaced revenue. Sutter said it was launching a sweeping review of its finances and operations as a result.
The litigation was first initiated in 2014 when the grocer’s union, joined by other plaintiff’s, filed suit against Sutter’s practices. It ultimately drew the attention of Becerra’s office.
A coalition of health groups and others sued HHS March 9 over a Trump administration rule that was finalized the day before President Joe Biden’s inauguration.
The lawsuit, pending in U.S. District Court of the Northern District of California, alleges that thousands of HHS regulations could disappear because of the Securing Updated and Necessary Statutory Evaluations Timely, or SUNSET, rule. The rule requires HHS to review its existing 18,000 regulations within several years. If the review isn’t completed, the rule automatically expires, according to NPR.
“The rule does not even specify which of the department’s 18,000 existing regulations are exempted under the limited exceptions. In other words, the outgoing administration planted a ticking time bomb set to go off in five years unless HHS, beginning right now, devotes an enormous amount of resources to an unprecedented and infeasible task,” the complaint states.
The complaint further allegesthat the rule exceeds the authority of HHS and creates uncertainty and instability in the U.S. healthcare system at a time when the public needs clear guidelines because of the pandemic.
The plaintiffs are asking the court to declare that the rule is arbitrary and capricious and to vacate it.
The plaintiffs are Santa Clara County, Calif., the National Association of Pediatric Nurse Practitioners, the American Lung Association, the Center for Science in the Public Interest, the California Tribal Families Coalition and the Natural Resources Defense Council.
Chinese investor Tianqiao Chen and his group of companies have a 7.1 percent stake in Franklin, Tenn.-based Community Health Systems after recently selling more than 1.7 million shares of the company, according to a Securities and Exchange Commission filing.
Mr. Chen and his Shanda Group company affiliates sold 1.73 million shares of CHS from March 4-5 for between $8.70 and $8.73 per share, bringing in a total of $15.1 million. The move comes after he sold more than 16 million shares of CHS between Nov. 10 and Jan. 15.
Mr. Chen, a pioneer in China’s online gaming industry, began buying up shares of CHS in 2016. The last public comment the investor made about CHS was in 2018, when Shanda Group said it had a “good relationship” with CHS and supported the company’s strategy and management team.
Providence Health posted a $306 million operating loss for 2020 as the system’s patient service revenue declined by nearly $1 billion due to COVID-19.
Providence struggled with a major decline in patient volumes, which were down 9% compared to 2019 and led to a 5% decline in net patient service revenue.
While volumes have recovered since an initial decline at the onset of the pandemic, “operational recovery continues to be variable and market-specific as the pandemic continues across our footprint,” the 51-hospital system said in its earnings report released late Monday.
Providence generated $25.6 billion in operating revenue in 2020, slightly above the $25 billion that it generated the year before. However, Providence’s expenses shot up to $25.9 billion, a major spike from the $24.8 billion it paid for in 2019. This led to an operating deficit of $306 million.
A major reason was the system’s response to the COVID-19 pandemic, which Providence got a jump start on as it was the first U.S. hospital system to treat a patient with the virus.
“The impact included a significant reduction in revenue, coupled with an increase in costs incurred for [personal protective equipment] and pharmaceuticals, and increases in labor costs for staffing to serve those impacted by the virus,” Providence’s report said.
Net patient service revenue was $19 billion for 2020, down by nearly $1 billion from the $19.9 billion it posted in 2019.
Providence’s non-operating income totaled $1 billion in 2020 compared to $1.1 billion the previous year. The non-operating income, which is made up of investment gains, helped to “recoup operating losses resulting from the pandemic and offset reimbursement shortfalls from Medicaid and Medicare coverage, allowing us to serve vulnerable populations while balancing our financial standing,” the report said.
Providence’s operating earnings before interest, depreciation and amortization (EBITDA) was $1.1 billion, or 4.4% of its operating revenues. This was a decline from the $1.6 billion (6.2%) in EBITDA for 2019.
The system also got $957 million in relief funding under the CARES Act, which partly offset the losses from lower volumes, the report said.
Providence is an outlier among other larger for and not-for-profit systems that ended 2020 in the black. For instance, Mayo Clinic posted a net operating income of $728 million, helped by $587 million in donations and a massive increase in business from its lab division to help provide COVID-19 tests.
University of Pittsburgh Medical Center also posted a $1 billion profit for 2020 thanks to a boost of enrollment in its insurance business.
COVID-19 accelerated a number of trends already brewing in the healthcare industry, and that’s not likely to change this year, according to a new report from CVS Health.
The healthcare giant released its annual Health Trends Report on Tuesday, and the analysis projects several industry trends that are likely to define 2021 in healthcare, ranging from technology to behavioral health to affordability.
“We are facing a challenging time, but also one of great hope and promise,” CVS CEO Karen Lynch said in the report. “As the pandemic eventually passes, its lessons will serve to make our health system more agile and more responsive to the needs of consumers.”
Here’s a look at four of CVS’ predictions:
1. A looming mental health crisis
Behavioral health needs were a significant challenge in healthcare prior to COVID-19, but the number of people reporting declining mental health jumped under the pandemic.
Cara McNulty, president of Aetna Behavioral Health, said in a video attached to the report that it will be critical to “continue the conversation around mental health and well-being” as we emerge from the pandemic and to reduce stigma so people who need help seek it out.
“We’re normalizing that it’s important to take care of our mental well-being,” she said.
Data released in December by GoodRx found that prescription fills for depression and anxiety medications hit an all-time high in 2020. GoodRx researchers polled 1,000 people with behavioral health conditions on how they were navigating the pandemic, and 63% said their depression and/or anxiety symptoms worsened.
McNulty said symptoms to look for when assessing whether someone is struggling with declining mental health include whether they’re withdrawn or agitated or if there’s a notable difference in their self-care routine.
2. Pharmacists take center stage
CVS dubbed 2021 “the year of the pharmacist” in its report.
The company expects pharmacists to be a key player in a number of areas, especially in vaccine distribution as that process inches toward broader access. They also offer a key touchpoint to counsel patients about their care and direct them to appropriate services, CVS said.
CVS executives said in the report that they see a significant opportunity for pharmacists to have a positive impact on the social determinants of health.
“We’ve found people are not only open and willing to share social needs with their pharmacists but in many cases, they listen to and act on the advice and recommendations of pharmacists,” Peter Simmons, vice president of transformation, pharmacy delivery and innovation at CVS Health, said in the report.
3. Finding ways to mitigate the cost of high-price therapies
Revolutionary drugs and therapies are coming to market with eye-popping price tags; it’s not uncommon to see new pharmaceuticals priced at $1 million or more. For pharmacy benefit managers, this poses a major cost challenge.
To address those prices, CVS expects value-based contracting to take off in a big way. And drugmakers are comfortable with the idea, according to the report. Novartis, for example, is offering insurers a five-year payment plan for its $2 million gene therapy Zolgensma, with refunds available if the drug doesn’t achieve desired results.
CVS said the potential for these therapies is clear, but many payers want to see some type of results before they fork over hundreds of thousands.
“Though the drug may promise to cure these patients for life, these are early days in their use,” said Joanne Armstrong, M.D., enterprise head of women’s health and genomics at CVS Health, in the report. “What we’re saying is, show us the clinical value proposition first.”
CVS said it’s also offering a stop-loss program for gene therapy to self-funded employers contracted with Aetna and/or Caremark to assist them in capping the expenses associated with these drugs.
4. Getting into the community to address diabetes
Diabetes risk is higher among vulnerable populations, such as Black patients, and addressing it will require local and community-based solutions, CVS executives said in the report. Groups at the highest risk for the disease are less likely to live in areas with easy access to a supermarket, for example, which boosts their risk of unhealthy eating, according to the report.
The two key hurdles to addressing this issue are access and affordability. The rise in retail clinics and ambulatory care centers can get at the access issue, as they can offer a way to better meet patients where they are.
At CVS’ MinuteClinics, patients can walk in and receive a number of services to assist them in managing diabetes, including screenings, consultations with providers and connections to diabetes educators who can assist with lifestyle changes.
Retail locations can also assist with medication costs, creating a one-stop-shop experience that’s easier for many diabetes patients to slot into their daily lives, CVS said.
“Diabetes is a case study in how a more connected experience can translate to simpler, affordable and more accessible care for underserved communities,” said Dan Finke, executive vice president of CVS Health and president of its healthcare benefits division.
The COVID-19 pandemic has accelerated the pace of artificial intelligence adoption, and healthcare leaders are confident AI can help solve some of today’s toughest challenges, including COVID-19 tracking and vaccines.
The majority of healthcare and life sciences executives (82%) want to see their organizations more aggressively adopt AI technology, according to a new survey from KPMG, an audit, tax and advisory services firm.
Healthcare and life sciences (56%) business leaders report that AI initiatives have delivered more value than expected for their organizations. However, life sciences companies seem to be struggling to select the best AI technologies, according to 73% of executives.
As the U.S. continues to navigate the pandemic, life sciences business leaders are overwhelmingly confident in AI’s ability to monitor the spread of COVID-19 cases (94%), help with vaccine development (90%) and aid vaccine distribution (90%).
KPMG’s AI survey is based on feedback from 950 business or IT decision-makers across seven industries, with 100 respondents each from healthcare and life sciences companies.
Despite the optimism about the potential for AI, executives across industries believe more controls are needed and overwhelmingly believe the government has a role to play in regulating AI technology. The majority of life sciences (86%) and healthcare (84%) executives say the government should be involved in regulating AI technology.
And executives across industries are optimistic about the new administration in Washington, D.C., with the majority believing the Biden administration will do more to help advance the adoption of AI in the enterprise.
“We are seeing very high levels of support this year across all industries for more AI regulation. One reason for this may be that, as the technology advances very quickly, insiders want to avoid AI becoming the ‘Wild Wild West.’ Additionally, a more robust regulatory environment may help facilitate commerce. It can help remove unintended barriers that may be the result of other laws or regulations, or due to lack of maturity of legal and technical standards,” said Rob Dwyer, principal, advisory at KPMG, specializing in technology in government.
Healthcare and pharma companies seem to be more bullish on AI than other industries are.
The survey found half of business leaders in industrial manufacturing, retail and tech say AI is moving faster than it should in their industry. Concerns about the speed of AI adoption are particularly pronounced among small companies (63%), business leaders with high AI knowledge (51%) and Gen Z and millennial business leaders (51%).
“Leaders are experiencing COVID-19 whiplash, with AI adoption skyrocketing as a result of the pandemic. But many say it’s moving too fast. That’s probably because of current debate surrounding the ethics, governance and regulation of AI. Many business leaders do not have a view into what their organizations are doing to control and govern AI and may fear risks are developing,” Traci Gusher, principal of artificial intelligence at KPMG, said in a statement.
Future AI investment
Healthcare organizations are ramping up their investments in AI in response to the COVID-19 pandemic. In a Deloitte survey, nearly 3 in 4 healthcare organizations said they expect to increase their AI funding, with executives citing making processes more efficient as the top outcome they are trying to achieve with AI.
Healthcare executives say current AI investments at their organizations have focused on electronic health record (EHR) management and diagnosis.
To date, the technology has proved its value in reducing errors and improving medical outcomes for patients, according to executives. Around 40% of healthcare executives said AI technology has helped with patient engagement and also to improve clinical quality. About a third of executives said AI has improved administrative efficiency. Only 18% said the technology helped uncover new revenue opportunities.
But AI investments will shift over the next two years to prioritize telemedicine (38%), robotic tasks such as process automation (37%) and delivery of patient care (36%), the survey found. Clinical trials and diagnosis rounded out the top five investment areas.
At life sciences companies, AI is primarily deployed during the drug development process to improve record-keeping and the application process, the survey found. Companies also have leveraged AI to help with clinical trial site selection.
Moving forward, pharmaceutical companies will likely focus their AI investments on discovering new revenue opportunities in the next two years, a pivot from their current strategy focusing on increasing profitability of existing products, according to the survey. About half of life sciences executives say their organizations plan to leverage AI to reduce administrative costs, analyze patient data and accelerate clinical trials.
Industry stakeholders are taking steps to advance the use of AI and machine learning in healthcare.
The Consumer Technology Association (CTA) created a working group two years ago to develop some standardization on definitions and characteristics of healthcare AI. Last year, the CTA working group developed a standard that creates a common language so industry stakeholders can better understand AI technologies. A group also recently developed a new standard to advance trust in AI solutions.
On the regulatory front, the U.S. Food and Drug Administration (FDA) last month released its first AI and machine learning action plan, a multistep approach designed to advance the agency’s management of advanced medical software. The action plan aims to force manufacturers to be more rigorous in their evaluations, according to the FDA.
The recommendation would double the number of people eligible, but some experts worry about possible false positives and follow-up tests.
A federally appointed task force recommended a major increase in the number of Americans eligible for free screening for lung cancer, saying expanded testing will save lives and especially benefit Black people and women.
The U.S. Preventive Services Task Force, an independent group of 16 physicians and scientists who evaluate preventive tests and medications, said people with a long history of smoking should begin getting annual low-dose CT scans at age 50, five years earlier than the group recommended in 2013. The group also broadened the definition of people it considers at high risk for the disease.
The changes mean that 15 million people, nearly twice the current number, will be eligible for the scans to detect the No. 1 cancer killer in the United States. Under the Affordable Care Act, private insurers must cover services, without patient cost-sharing, that receive “A” or “B” recommendations from the task force. The lung-cancer screening recommendation received a “B” rating. Medicare also generally follows the group’s guidance.
The recommendation was welcomed by many lung-cancer specialists but drew a more cautious reaction from some physicians who noted that the test can produce false positives — flagging a spot or growth that is benign — and lead to potentially costly and invasive follow-up tests such as biopsies.
Lung cancer killed more than 135,000 people in the United States last year, according to the National Cancer Institute. Smoking and increasing age are the biggest risk factors, although nonsmokers also develop the disease, sometimes as a result of genetic mutations.
Overall, the five-year survival rate for lung cancer is about 20 percent, but it is higher when the disease is caught at the earliest stages. In recent years, the death rate for non-small cell lung cancer — the most common form — has declined, partly reflecting decreases in smoking but also new treatments targeted at specific genetic mutations or alterations.
To update its 2013 recommendation, the task force commissioned a study of the latest data on lung-cancer screening and did modeling on the best age to start the screening.
The conclusion was that broadening eligibility would save a substantial number of lives, the task force said in an article Tuesday in the Journal of the American Medical Association.
The new recommendation applies to adults ages 50 to 80 who have smoked about a pack of cigarettes a day for 20 years. The 2013 version, which had the higher age threshold, was for those who smoked the equivalent of a pack a day for 30 years. In both cases, the policy applies to current smokers or those who have quit within the past 15 years. Someone who stopped smoking 20 years ago would not be eligible.
The task force said the changes will increase the number of Black people and women who will be eligible for screening and who tend to smoke fewer cigarettes than White men yet still are vulnerable to lung cancer. African Americans, the group said, have a higher risk of lung cancer than White men even with lower levels of smoking exposure. It said it hopes the new recommendation will increase the use of the test; estimates are that fewer than 5 percent of eligible Americans have been screened for lung cancer.
Roy S. Herbst, a lung-cancer specialist at the Yale Cancer Center, was enthusiastic about the recommendation. He said more screening would mean more cancer caught at an earlier stage, when there is a better chance of treating or curing it.
“We have to find these lung cancers early,” he said. “It’s a very minimal test.”
Some physicians and researchers were more cautious. Daniel S. Reuland, a professor of medicine at the University of North Carolina School of Medicine, co-wrote an updated analysis of benefits and harms that also ran in JAMA. Screening high-risk people with low-dose CT, the article said, “can reduce lung cancer mortality but also causes false-positive results leading to unnecessary tests and invasive procedures, overdiagnosis, incidental findings, increases in distress, and, rarely, radiation-induced cancers.”
Reuland noted that follow-up tests can be nerve-racking and costly. For that reason, he and other physicians, in a third JAMA article, called on the Centers for Medicare and Medicaid Services to continue to require doctors and patients to undergo “shared decision-making” — an in-depth discussion about the pluses and minuses of the screening.
Otis Brawley, an oncologist at Johns Hopkins University who has raised questions about lung-cancer screening, said he does not object to expanding the criteria but argued that all the tests should be performed at hospitals with extensive experience, to minimize the likelihood of false positives.
“You have to have a good program,” Brawley said. “A number of centers that are offering it should not be offering it. So those centers are perpetuating disparities, not reducing them.”
John Wong, a member of the task force and an internist at Tufts Medical Center in Boston, countered that the benefits of screening — and of finding a potentially lethal malignancy at an early, curable stage — far outweigh the harms.
Although follow-up tests involving what turns out to be a benign growth might cause short-term anxiety and be costly, he said, “if you miss a lung cancer, then it might spread and shorten your life.”
Jefferson’s hospital network will grow to 18 locations with Einstein’s three general acute care hospitals and an inpatient rehabilitation hospital.
The merger between Pennsylvania-based Jefferson Health and Einstein Healthcare Network can now close after the Federal Trade Commission voted to withdraw its opposition to the deal, Jefferson Health announced this week.
The deal is now expected to be finalized within the next six months.
Earlier this year, the FTC voted 4-0 to voluntarily dismiss its appeal to the Third Circuit of the district court, according to the commission’s case summary.
Once the deal is complete, Jefferson’s network of hospitals will grow to 18 with the addition of Einstein’s three general acute care hospitals and an inpatient rehabilitation hospital.
WHY IT MATTERS
Merger plans were first announced in 2018 in a deal estimated to be worth $599 million.
The FTC initially blocked the merger because it believed it would reduce competition in the Philadelphia and Montgomery counties.
It alleged the deal would give the two health systems control of at least 60% of the inpatient general acute care hospital services market in North Philadelphia, at least 45% of that market in Montgomery County, and at least 70% of the inpatient acute rehabilitation services market in the Philadelphia area.
But late last year, a federal judge blocked the FTC’s attempt to stop the merger. Judge Gerald Pappert of the U.S. District Court for the Eastern District of Pennsylvania wrote that the FTC failed to demonstrate that there’s a credible threat of harm to competition. He pointed to other competitors in the region, such as Penn Medicine, Temple Health and Trinity Health Mid-Atlantic.
The FTC and the Commonwealth of Pennsylvania attempted to appeal the court’s decision, but after Jefferson and Einstein filed a motion to withdraw the case, the commission unanimously voted to drop its appeal.
THE LARGER TREND
The FTC is taking a closer look at healthcare mergers and acquisitions to better understand how physician practice and healthcare facility mergers affect competition. Earlier this year, it sent orders to Aetna, Anthem, Florida Blue, Cigna, Health Care Service Corporation and United Healthcare to share patient-level claims data for inpatient, outpatient and physician services across 15 states from 2015 through 2020.
The analysts expect activity to ramp up moving forward, however. They predict that as health systems evaluate their business strategies post-pandemic, those in strong positions will take advantage of other systems’ divestitures to grow their capabilities and expand into new markets.
ON THE RECORD
“We are excited to have Einstein and Jefferson come together, as our shared vision will enable us to improve the lives of patients, the health of our communities and enhance our health education and research capabilities,” said Ken Levitan, the interim president and CEO of Einstein Healthcare Network.
“By bringing our resources together, we can offer those we care for – particularly the historically underserved populations in Philadelphia and Montgomery County – even greater access to high-quality care.”
HENRY KOTULA 