Hospital buy-ups of physician practices under fresh FTC scrutiny

FTC takes tech scrutiny to heart of Silicon Valley

Dive Brief:

  • The Federal Trade Commission sent orders to six health insurance companies to obtain patient-level claims data for inpatient, outpatient, and physician services from 2015 to 2020, the agency said Thursday.
  • The FTC wants to figure out how hospitals’ acquisitions of physician practices has affected competition.  
  • The agency sent orders to some of the nation’s largest insurance companies, including UnitedHealthcare, Anthem, Aetna, Cigna, Florida Blue and Health Care Service Corporation.

Dive Insight:

This action is part of a larger effort underway at the agency to consider new questions and areas of study to help it understand the ultimate impact of mergers. The hope is that those studies will yield evidence to better equip the agency to legally challenge mergers in the future. 

Health economists cheered the news online following the FTC’s Thursday’s announcement about studying physician practice buy-ups. 

Martin Gaynor, former director of FTC’s Bureau of Economics, tweeted: “This is a big deal – a huge # of physician practices are now owned by hospitals.” Gaynor is a health economist at Carnegie Mellon.

“Important step to advance FTC’s understanding of the market and could improve their ability to win cases,” Emily Gee, a health economist at the Center for American Progress, tweeted.

In the orders, the FTC asks the insurers for data such as the total billed charges of all health providers, total deductibles, copays and coinsurance paid by the patient. It also asks for data tied to each inpatient admission and outpatient and physician episodes during the time period in question, which will likely result in a barrage of data for the agency to review.   

“The study results should aid the FTC’s enforcement mission by providing much more detailed information than is currently available about how physician practice mergers and healthcare facility mergers affect competition,” the agency said in a statement. 

This area of study expands the agency’s current work. One area already of interest within this broader retrospective merger review program is the scrutiny of labor markets. 

The agency has traditionally focused on how healthcare tie-ups affect prices. But the agency has signaled that it is increasingly interested in how mergers and acquisitions ultimately affect workers’ wages, including nurses.

One area of concern for the FTC is states’ willingness to greenlight COPAs, or certificates of public advantage (COPAs), which essentially shield mergers from federal antitrust regulators in exchange for prolonged state oversight.

In 2019, the agency sent orders to five insurance companies seeking data to study the impact of COPAs.  

Bill to end antitrust exemption for health insurers awaits Trump’s signature

Health Insurance Antitrust Exemption Ending

Congress passed a bill that would end an antitrust exemption for health insurers, and the legislation is expected to be signed by President Donald Trump, according to The National Law Review

On Sept. 21, 2020, the U.S. House of Representatives passed the Competitive Health Insurance Reform Act of 2020, with the Senate passing the Act on Dec. 22, 2020.

The bill would repeal parts of the McCarran-Ferguson Act that exempt insurance businesses from most federal regulation, including antitrust regulation. When the bill passed the House, Rep. Peter DeFazio, D-Ore., who introduced the bill, said, “As long as this exemption is still on the books, health insurance companies legally can, and do, collude to drive up prices, limit competition, conspire to underpay doctors and hospitals, and overcharge consumers.”

Proponents of the McCarran-Ferguson Act have said it sets up important state authorities. The National Association of Insurance Commissioners has said, “The McCarran-Ferguson Act is as relevant today as it was when it was adopted. It contains the basic delegation of authority from Congress to the states with respect to the regulation and taxation of the business of insurance. It has been affirmed as the law of the land in the Gramm-Leach-Bliley Act and in the Dodd-Frank Act.”

The Competitive Health Insurance Reform Act of 2020 was presented to President Trump for his signature on Jan. 1. He was expected to sign the legislation before pro-Trump rioters stormed the Capitol Jan. 6.

FTC signals nurses’ wages will become important measure in antitrust enforcement

https://www.healthcaredive.com/news/ftc-signals-nurses-wages-important-measure-antitrust-enforcement-hospitals/589142/

The Federal Trade Commission is revamping a key tool in its arsenal to police competition across a plethora of industries, a development that could have direct implications for future healthcare deals.

In September, the FTC said it was expanding its retrospective merger program to consider new questions and areas of study that the bureau previously has not researched extensively.

One avenue it will zero in on is labor markets, including workers and their wages, and how mergers may ultimately affect them.

It’s an area that could be ripe for scrutinizing healthcare deals, and the FTC has already begun to use this argument to bolster its case against anticompetitive tie-ups. Prior to this new argument, the antitrust agency — in its legal challenges and research — has primarily focused on how healthcare mergers affect prices.

The retrospective program is hugely important to the FTC as it is a way to examine past mergers and produce research that can be used as evidence in legal challenges to block future anticompetitive deals or even challenge already consummated deals.

“I do suspect that healthcare is a significant concern underlying why they decided to expand this program,” Bill Horton, an attorney with Jones Walker LLP, said.

So far this year, the FTC has tried to block two proposed hospital mergers. The agency sued to stop a proposed tie-up in Philadelphia in February between Jefferson Health and Albert Einstein Healthcare Network.

More recently, the FTC is attempting to bar Methodist Le Boneheur in Memphis from buying two local hospitals from Tenet Health in a $350 million deal.

In both cases, the agency alleges the deals will end the robust competition that exists and harm consumers in the form of higher prices, including steeper insurance premiums, and diminished quality of services.

The agency has long leaned on the price argument (and its evidence) to challenge proposed transactions. However, recent actions signal the FTC will include a new argument: depressed wages, particularly those of nurses.

In a letter to Texas regulators in September, the FTC warned that if the state allowed a health system to acquire its only other competitor in rural West Texas, it would lead to limited wage growth among registered nurses as an already consolidated market compresses further.

As part of its arguments, the FTC pointed to a 2020 study that researched the effects on labor market concentration and worker outcomes.

Last year, the agency sent orders to five health insurance companies and two health systems to provide information so it could further study the affect COPAs, or Certificates of Public Advantage, have on price and quality. The FTC also noted it was planning to study the impact on wages.

FTC turned to review after string of defeats

A number of losses in the 1990s led the agency to conduct a hospital merger retrospective, Chris Garmon, a former economist with the FTC, said. Garmon has helped conduct and author retrospective reviews.

Between 1994 and 2000, there were about 900 hospital mergers by the U.S Department of Justice’s count. The bureau lost all seven of the cases they attempted to litigate in that time period, according to the DOJ.

The defendants in those cases succeeded by employing two types of defenses. The nonprofit hospitals would argue they would not charge higher prices because as nonprofits they had the best interests of the community in mind. Second, hospitals tried to argue that their markets were much larger than the FTC’s definition, and that they compete with hospitals many miles away.

Retrospective studies found evidence that undermined these claims. That’s why the studies are so important, Garmon said.

“It really is to better understand what happens after mergers,” Garmon said. It’s an evaluation exercise, given many transaction occur prospectively or before a deal is consummated. So the reviews help the FTC answer questions like: “Did we get it right? Or did we let any mergers we shouldn’t let through?”

FTC moves to block New Jersey hospital acquisition

  • The Federal Trade Commission is suing to block New Jersey’s largest health system, Hackensack Meridian Health, from acquiring a close competitor, Englewood Health. That system operates Englewood Hospital, an independent hospital and one of the last in the area, according to the Star-Ledger.   
  • After the tie-up, Hackensack would control three of the six acute care hospitals in Bergen County, the most populated county in the state.
  • The loss of competition between the two would leave insurers with few options and would allow Hackensack to obtain higher prices from insurers, leading to higher premiums and higher out-of-pocket costs for consumers, the FTC alleged in a statement Thursday.

In each case, the FTC has argued the deals would eliminate close competitors and lead to higher costs and lower quality of care.

Hackensack Meridian Health announced the intent to merge in October 2019.

At the time, Hackensack said Englewood would become a tertiary hub for Hackensack with a focus on a slew of services lines including cardiovascular care, neurosciences and oncology. Englewood said it would also benefit from the affiliations Hackensack enjoyed with Memorial Sloan Kettering Cancer Center.

As part of the announcement, Hackensack committed to invest $400 million in Englewood Health.

Hackensack operates its flagship hospital, Hackensack University Medical Center, and partially owns Pascack Valley Medical Center, which are both within 10 miles of Englewood Hospital, according to the FTC.

FTC sues to halt Methodist Le Bonheur’s bid to buy 2 Tenet Memphis hospitals

Le Bonheur has plans to buy Memphis hospitals, Federal Trade Commission  against it | News Break

The Federal Trade Commission (FTC) filed a lawsuit to stop Memphis, Tennessee-based Methodist Le Bonheur Healthcare’s $250 million acquisition of two hospitals in the area owned by Tenet Healthcare.

The agency said in the federal lawsuit filed Friday that the acquisition of two Memphis-based hospitals known as Saint Francis would imperil competition in the area.

Competition would dampen for a “broad range of inpatient medical and surgical diagnostic and treatment services that require an overnight hospital stay,” the FTC said in a release Friday. “If the proposed acquisition is consummated, healthcare costs will rise.”

FTC said only four hospital systems provide general services to the area. If the deal goes through, the new health system would control approximately 60% of the Memphis market.

“It’s clear that patients in the Memphis area have benefited from the competitive pressure that Saint Francis brings to bear on Methodist, through lower rates, more options for insurers and patients, and quality improvements,” said Daniel Francis, deputy director of the FTC’s Bureau of Competition, in a statement.

FTC is seeking a preliminary injunction to halt the deal until completion of a trial next year.

This is the latest move by the FTC to combat hospital mergers. Last year, the FTC launched a probe into the effects of health system mergers on prices and healthcare quality.

Methodist and Tenet said in a joint statement they are reviewing the lawsuit and were bewildered by the move.

“We are surprised by the FTC action given the strong support for the transaction by local stakeholders, including leading local health plans, physicians, employers and community leaders,” the statement said. 

Intermountain, Sanford to merge into 70-hospital system

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/intermountain-sanford-to-merge-into-70-hospital-system.html?utm_medium=email

Top 10 Largest Health Systems in the U.S.

Salt Lake City-based Intermountain Healthcare and Sioux Falls, S.D.-based Sanford Health have signed a letter of intent to merge. 

The boards of both nonprofit organizations unanimously approved on Oct. 23 a resolution to support moving forward with the due diligence process. Pending regulatory and state approvals, the merger is expected to close in 2021. 

“We’re hoping that the actions taken … just 72 hours ago will culminate in a combined organization next summer,” Kelby Krabbenhoft, president and CEO of Sanford Health, said during an Oct. 26 news conference. 

Existing boards of trustees from both systems will join to form a combined board, and Gail Miller, chair of the Intermountain board, will serve as board chair of the merged organization. 

Marc Harrison, MD, president and CEO of Intermountain, will serve as president and CEO of the combined system, which will operate 70 hospitals and employ more than 89,000 people. Mr. Krabbenhoft will serve as president emeritus. 

“These are two great organizations with strong histories that are economically and clinically very strong,” Dr. Harrison said during the news conference. “This is something that should happen for the future of American healthcare.” 

Intermountain will be the parent company of the combined organization, and the merged system will be headquartered in Salt Lake City. 

Einstein warns of cuts, ‘death spiral’ without Jefferson merger

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/einstein-warns-of-cuts-death-spiral-without-jefferson-merger.html?utm_medium=email

How to emerge from a 'death spiral' in stocks - MarketWatch

In a court filing, Einstein Healthcare Network warned that a move by the Federal Trade Commission to block its merger with Jefferson Health could lead to a “death spiral” at its Philadelphia flagship safety-net hospital, according to the Philadelphia Business Journal.

In court documents opposing an FTC analysis of the merger, Einstein said that its financial condition has deteriorated since 2017, resulting in operating losses averaging about $30 million per year.

Einstein said it will incur even greater losses, largely because of the challenging payer mix and large underinsured or uninsured population of its flagship Philadelphia medical center. 

Without a merger, “Einstein [would have to] dramatically cut its services at Einstein Medical Center Philadelphia, leading to job losses and even further reductions in maintenance and needed investment, precipitating a ‘death spiral’ that would jeopardize access to health care for many of Philadelphia’s underserved residents,” Einstein wrote in the documents, according to the Philadelphia Business Journal. 

The FTC announced in February its intent to sue to block the proposed merger, arguing that combining the two systems would reduce competition in Philadelphia and Montgomery counties.

“Jefferson and Einstein have a history of competing against each other to improve quality and service,” the FTC said in February. “The proposed merger would eliminate the robust competition between Jefferson and Einstein for inclusion in health insurance companies’ hospital networks to the detriment of patients.”

Einstein and Jefferson Health countered that a combined system still would face competition from other hospitals and operate in a challenging market dominated by one healthcare insurer, according to the report. 

Atrium, Wake Forest Baptist merge to create 42-hospital system

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/atrium-wake-forest-baptist-merge-to-create-42-hospital-system.html?utm_medium=email

Wake Forest Baptist, Atrium Health merge into a 'single enterprise' to be  based in Charlotte | Local | journalnow.com

Charlotte, N.C.-based Atrium Health and Winston-Salem, N.C.-based Wake Forest Baptist Health have completed their merger, creating a 42-hospital system with more than 70,000 employees. 

With the transaction complete, Wake Forest Baptist Health and Wake Forest School of Medicine will become the “academic core” of Atrium Health. The health system said it plans to build a second campus of the school of medicine in Charlotte. 

“As the healthcare field goes through the most transformative period in our lifetime, in addition to a new medical school, our vision is to build a ‘Silicon Valley’ for healthcare innovation spanning from Winston-Salem to Charlotte,” Atrium President and CEO Eugene A. Woods said in a news release. “We are creating a nationally-leading environment for clinicians, scientists, investors and visionaries to collaborate on breakthrough technologies and cures. Everything we do will be focused on life changing care, for all, in urban and rural communities alike. And we will create jobs that provide inclusive opportunities to enhance the economic vitality of our entire region.”

Atrium cited an independent economic analysis that showed the direct and indirect annual employment impact of the combined system exceeds 180,000 jobs. 

“The impact of the strategic combination will be far-reaching, elevating North Carolina as a clear destination of choice to receive medical care for people all across the nation,” said Julie Ann Freischlag, MD, CEO of Wake Forest Baptist Health and dean of Wake Forest School of Medicine. “Through our combined, nationally recognized clinical centers of excellence in multiple specialties, we will be able to expand our research in signature areas, such as cancer, cardiovascular, regenerative medicine and aging, and target bringing research breakthroughs to the community in less than half the time of the national average.”

Mr. Woods will serve as president and CEO of the combined system, and Dr. Freischlag was appointed chief academic officer for Atrium Health in addition to her current positions. 

A 16-member board of directors appointed by the Charlotte Mecklenburg Hospital Authority and Wake Forest University Baptist Medical Center will govern the new nonprofit enterprise. 

Election 2020: Trump and Biden’s starkly diverging views on healthcare

https://www.healthcaredive.com/news/presidential-election-2020-trump-biden-different-healthcare-policies-ACA-coronavirus/585184/?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202020-10-01%20Healthcare%20Dive%20%5Bissue:29992%5D&utm_term=Healthcare%20Dive

Spoiler: the 2 nominees differ on almost everything.

President Donald Trump and Democrat nominee Joe Biden’s starkly contrasting views on healthcare were laid bare during this week’s chaotic debate. But some major industry executives noted at a recent conference they’ve done relatively well under Trump and could likely weather a Biden presidency, given his moderate stance and rejection of liberal dreams of “Medicare for All.”

The former vice president stresses incremental measures to shore up President Barack Obama’s landmark Affordable Care Act. Trump’s campaign website has no list of healthcare priorities, making his record even more relevant to attempts to forecast his future policies.

“I think a lot of the president’s second term agenda will be extensions of things he’s done in his first term,” Lanhee Chen, domestic policy director at Stanford University’s Public Policy program, said at AHIP in September.

Either way, the impact of whoever lands in the White House next year still matters for the industry’s future.

And 33 seats in the Senate are also up for grabs in November, complicating the outlook. Two scenarios would likely lead to health policy gridlock, according to analysts and DC experts: Trump wins regardless of Senate outcome, or Biden wins and Republicans maintain control of the Senate. A third scenario, where Biden wins and Democrats retake the Senate, would be the most negative for healthcare stocks, Jefferies analysts say, while the other two outcomes would be a net positive or mostly neutral.

Here’s a look at where the candidates stand on the biggest healthcare issues: the coronavirus pandemic, the Affordable Care Act, changes to Medicare and Medicaid and lowering skyrocketing healthcare costs.

COVID-19 response

Trump

Of all wealthy nations, the U.S. has been particularly unsuccessful in mitigating the pandemic. The U.S. makes up 4% of the global population, but accounted for 23% of all COVID-19 cases and 21% of all deaths as of early September.

Public health experts assign the majority of the blame to an uncoordinated federal response, with the president electing to take a largely hands-off approach to the virus that’s killed nearly 207,000 people in the U.S. to date. That backseat stance is unlikely to change if Trump is elected to a second term.

In March, Trump said a final COVID-19 death toll in the range of 100,000 to 200,000 Americans would mean he’s “done a very good job.”

Critics blame shortages of supplies like test materials, personal protective equipment and ventilators, especially in the crucial early days of the pandemic, on Trump’s approach. States and healthcare companies have also reported challenges with shifting federal guidelines on topics from risk of infection to hospital requirements for reporting COVID-19 caseloads.

Trump has also pushed unproven treatments for COVID-19, giving rise to concerns about political influence on traditionally nonpartisan agencies like the Food and Drug Administration and the Centers for Disease Control and Prevention.

These concerns have colored Operation Warp Speed, the administration’s public-private partnership to fast-track viable vaccines. The operation received $10 billion in funds from Congress, but administration officials have also pulled $700 million from the CDC, even as top health officials face accusations of trying to manipulate CDC scientific research publications.

Fears that political motivations, not clinical rigor, are driving the historically speedy timeline could lower public trust in a vaccine once it’s eventually approved.

Trump has also repeatedly refused to endorse basic protections like widespread mask wearing, often eschewing the face covering himself in public appearances. He’s consistently downplayed the severity of the pandemic, saying it’ll go away on its own while suggesting falsely that rising COVID-19 cases were solely due to increased testing.

While Trump’s list of priorities for his second term include “eradicating COVID-19,” the plan is short on details. His most aggressive promise has been approval of a vaccine by the end of this year and creating all “critical medicines and supplies for healthcare workers” for a planned return to normal in 2021, along with refilling stockpiles to prepare for future pandemics.

Biden

Biden, for his part, would likely work to enact COVID-19 legislation and dramatically change the role of the federal government in pandemic response first thing if elected.

The Democratic candidate says he would re-assume primary responsibility for the pandemic. He plans to “dramatically scale up testing” and “giving states and local governments the resources they need to open schools and businesses safely,” per an August speech in Wilmington, Delaware.

Biden says he’d take a backseat to scientists and allow FDA to unilaterally make decisions on emergency authorizations and approvals.

The candidate supports reopening an ACA enrollment period for the uninsured, eliminating out-of-pocket costs for COVID-19 treatment, enacting additional pay and protective equipment for essential workers, increasing the federal match rate for Medicaid by at least 10%, covering COBRA with 100% premium subsidies during the emergency, expanding unemployment insurance and sick leave, reimbursing employers for sick leave and giving them tax credits for COVID-19 healthcare costs.

Trump opposes most of these measures, though he did sign COVID-19 relief legislation that upped the Medicaid match rate by 6.2% and extended the COBRA election period, though without subsidies.

Biden has said he’d be willing to use executive power for a national mask mandate, though ensuring compliance would be difficult. He’d also rejoin the World Health Organization, which Trump pulled the U.S. out of in May.

Affordable Care Act

Trump

On his first day in office, Trump issued an executive order saying: “It is the policy of my Administration to seek the prompt repeal of the Patient Protection and Affordable Care Act.” But after the Republican repeal-and-replace effort floundered in 2017, the administration began steadily chipping away at key tenets of the decade-old law through regulatory avenues.

Trump has maintained he’ll protect the 150 million people with preexisting conditions in the U.S. But despite publicly promising a comprehensive replacement plan on the 2015 campaign trail (and at least five times this year alone), Trump has yet to make one public. The president did in September sign a largely symbolic executive order that it’s the stance of his administration to protect patients with preexisting conditions.

The president doesn’t mention the ACA in his list of second term priorities. The omission could have been intentional, as Trump is backing a Republican state-led lawsuit seeking to overturn the sweeping law, now pending in front of the U.S. Supreme Court and scheduled for oral arguments one week after the election.

The death of liberal justice Ruth Bader Ginsburg puts the law in an even more precarious position.

And Trump’s health agencies have enacted myriad policies keeping the law from functioning as designed.

The president signed legislation zeroing out the individual mandate penalty requiring people to be insured in 2017. The same year, he ended cost-sharing reduction payments to insurers, suggesting that would cause the ACA to become “dead.” But the marketplace generally stabilized.

The administration has also increased access to skimpier but cheaper coverage that doesn’t have to comply with the 10 essential health benefits under the ACA. The short-term insurance plans widely discriminate against people with pre-existing health conditions, even as a growing number of Americans, facing rising healthcare costs, enrolled, according to a probe conducted by House Democrats this year.

Trump has also encouraged state waivers that promote non-ACA plans, cut funding for consumer enrollment assistance and outreach, shortened the open enrollment period and limited mid-year special enrollments.

​Despite his efforts, the ACA has grown in popularity among voters on both sides of the aisle, mostly due to provisions like shoring up pre-existing conditions and allowing young adults to stay on their parent’s insurance until age 26.

Biden

If elected, Biden would likely roll back Trump-era policies that allowed short-term insurance to proliferate, and restore funding for consumer outreach and assistance, political consultants say.

Building on the law is the linchpin of Biden’s healthcare plan. The nominee has pledged to increase marketplace subsidies to help more people afford ACA plans through a number of policy tweaks, including lowering the share of income subsidized households pay for their coverage; determining subsidies by setting the benchmark plan at the pricier “gold” level; and removing the current cap limiting subsidies to people making 400% of the federal poverty level or below.

Biden maintains as a result of these changes, no Americans would have to pay more than 8.5% of their annual income toward premiums. They could save millions of people hundreds of dollars a month, according to a Kaiser Family Foundation analysis. Commercial payers mostly support these efforts, hoping they’ll stabilize the exchanges.

But a second prong of Biden’s health strategy is deeply unpopular with private insurers: the public option. Biden’s called for a Medicare-like alternative to commercial coverage, available to anyone, including people who can’t afford private coverage or those living in a state that hasn’t expanded Medicaid.

The rationale of the public plan is that it can directly negotiate prices with hospitals and other providers, lowering costs across the board. However, market clout will depend on enrollment, which is still to-be-determined.

Critics see the plan, which by Biden’s estimate would cost $750 billion over 10 years, as a down payment on Medicare for All. And the private sector worries it could threaten the very profitable healthcare industry, which makes up about a fifth of the U.S. economy.

Medicare

Trump

Neither Trump nor Biden supports Medicare for All, dashing the hopes of supporters of the sweeping insurance scheme for at least another four years.

“It has a pulse — it’s not dead — I just don’t see it happening in any near term,” John Cipriani, vice president at public affairs firm Global Strategy Group, said at AHIP.

Trump has promised to protect Medicare if elected to a second term, and it’s unlikely he’d make any major changes to the program’s structure or eligibility requirements, experts say.

But Medicare is quickly running out of money, and neither Trump nor Biden has issued a complete plan to ensure it survives beyond 2024. Political consultants think it’ll teeter right up to the edge of insolvency before lawmakers feel compelled to act.

The president’s administration has allowed Medicare to pay for telehealth and expanding supplemental benefits in privately run Medicare Advantage programs, efforts that would likely bleed into his second term — or Biden’s first, given general bipartisan support on both, experts say.

Under Trump, HHS did pass a site-neutral payment policy, cutting Medicare payments for hospital outpatient visits in a bid to save money. But Democratic lawmakers have argued Trump’s calls to get rid of the federal payroll tax, which partially funds Medicare, could throw the future of the cash-strapped program in jeopardy.

The president has also signed legislation experts say accelerated insolvency, including the Tax Cuts and Jobs Act of 2017, the Bipartisan Budget Act of 2018 and the Further Consolidated Appropriations Act of 2020, which repealed the ACA’s Cadillac tax — a tax on job-based insurance premiums above a certain level.

Nixing that tax lowered payroll tax revenue, also dinging Medicare’s shrinking trust fund.

Trump’s proposed budget for the 2021 fiscal year floated culling about $450 billion in Medicare spending over a decade. And repealing the ACA would also nix provisions that closed the Medicare prescription drug “donut hole,” that added free coverage of preventive services and reduced spending to strengthen Medicare’s winnowing Hospital Insurance Trust Fund.

Biden

Biden has proposed lowering the Medicare age of eligibility to 60 years, with the option for people aged 60-64 to keep their coverage if they like it. The idea is popular politically, though providers oppose it, fearful of losing more lucrative commercial revenue.

It would make about 20 million more people eligible for the insurance, but could also add even more stress onto the program, experts say. Biden’s campaign says it would be financed separately from the current Medicare program, with dollars from regular tax revenues, and will reduce hospital costs.

Biden also says he’d add hearing, vision and dental benefits to Medicare.

Medicaid

Trump

Trump’s tenure has also been defined by repeated efforts to prune Medicaid. The president has consistently backed major cuts to the safety net insurance program, along with stricter rules for who can receive coverage. That’s likely to continue.

Republican lawmakers maintain the program costs too much and discourages low-income Americans from getting job-based coverage, and have enacted policies trying to privatize Medicaid. The Trump administration took a step toward a long-held conservative dream earlier this year, when CMS invited state waivers that would allow states to deviate from federal standards in program design and oversight, in exchange for capped funding.

So far, no states have enacted the block grants.

The administration also aggressively encouraged states to adopt work requirements, programs tying Medicaid coverage to work or volunteering hours. A handful of states followed suit, but all halted implementation or rolled back the idea following fierce public backlash and legal ramifications.

And repealing the ACA would ax Medicaid expansion, which saved some 20,000 lives between 2014 and 2017, according to the Center on Budget and Policy Priorities.

Biden

Biden, however, wants to preserve expansion, and would take a number of other steps to bolster the program, including increasing federal Medicaid funding for home- and community-based services. The roughly 4.8 million adults in states that elected not to expand Medicaid would be automatically enrolled into his public option, with no premium and full Medicaid benefits.

Additionally, states that have expanded Medicaid could elect to move their enrollees into the public option, with a maintenance-of-effort payment.

Lowering costs of drugs and services

Trump

Efforts to lower prescription drug costs have defined Trump’s healthcare agenda in his first term, and been a major talking point for the president. That’s more than likely to continue into a second term, experts say, despite a lack of results.

Trump did cap insulin costs for some Medicare enrollees, effective 2021. He also signed legislation in 2018 banning gag clauses preventing pharmacists from telling customers about cheaper options.

But despite fiery rhetoric and a litany of executive orders, Trump has made little if any concrete progress on actually lowering prices. One week into 2020, drugmakers had announced price hikes for almost 450 drugs, despite small price drops earlier in Trump’s tenure.

Trump has proposed several ideas either dropped later or challenged successfully by drugmakers in court, including allowing patients to import drugs from countries like Canada, banning rebates paid to pharmacy benefit manufacturers in Medicare and forcing drugmakers to disclose the list prices of drugs in TV ads.

The president has signed recent executive orders to lower costs largely viewed as pre-election gambits, including one tying drug prices in Medicare to other developed nations and another directing his agencies to end surprise billing. Implementation on both is months away. Trump has also promised to send Medicare beneficiaries $200 in drug discount cards before the election, an effort slammed as vote-buying that would cost Medicare at least $6.6 billion.

Both Trump and Biden support eliminating surprise bills but haven’t provided any details how. That “how” is important, as hospitals and payers support wildly different solutions.

Biden

Biden also has a long list​ of proposals to curb drug costs, including allowing the federal government to negotiate directly with drug manufacturers on behalf of Medicare and some other public and private purchasers, with prices capped at the level paid by other wealthy countries. Trump actually supported this proposal in his 2016 campaign, but quickly dropped it amid fierce opposition from drugmakers and free market Republican allies.

Biden would also cap out-of-pocket drug costs in Medicare Part D — but wouldn’t ban rebates, as of his current plan, allow consumers to import drugs (subject to safeguards) and eliminate tax breaks for drug advertising expenses.

He would also prohibit prices for all brand-name and some generic drugs from rising faster than inflation under Medicare and his novel public option. Biden would create a board to assess the value of new drugs and recommend a market-based price, in a model that’s shown some efficacy in other wealthy countries like Germany.

Both Biden and Trump say they support developing alternative payment models to lower costs. But they diverge on the role of competition versus transparency in making healthcare more affordable. In a rule currently being challenged in court, Trump’s HHS required hospitals to disclose private negotiated prices between hospitals and insurers, with the hope price transparency will allow consumers to shop between different care sites and shame companies into lowering their prices.

Biden, by comparison, says he would enforce antitrust laws to prevent anti-competitive healthcare consolidations, and other business practices that jack up spending. Trump has been mum on the role of M&A in driving healthcare costs, and inherited a complacent Federal Trade Commission that’s done little to reduce provider consolidation. Until a contentious hospital merger in February this year, the FTC hadn’t opposed a hospital merger since 2016.

 

 

 

 

Moody’s: Hospital financial outlook worse as COVID-19 relief funds start to dwindle

https://www.fiercehealthcare.com/hospitals/moody-s-hospital-financial-outlook-worse-as-covid-19-relief-funds-start-to-dwindle?mkt_tok=eyJpIjoiWTJZek56Z3lNV1E0TW1NMyIsInQiOiJKdUtkZE5DVGphdkNFanpjMHlSMzR4dEE4M29tZ24zek5lM3k3amtUYSt3VTBoMmtMUnpIblRuS2lYUWozZk11UE5cL25sQ1RzbFpzdExcL3JvalBod3Z6U3BZK3FBNjZ1Rk1LQ2pvT3A5Witkc0FmVkJocnVRM0dPbFJHZTlnRGJUIn0%3D&mrkid=959610

For-profit hospitals are expected to see a financial decline over the next 12 to 18 months as federal relief funds that shored up revenue losses due to COVID-19 start to wane, a recent analysis from Moody’s said.

The analysis, released Monday, finds that cost management is going to be challenging for hospital systems as more surgical procedures are expected to migrate away from the hospital and people lose higher-paying commercial plans and go to lower-paying government programs such as Medicaid.

“The number of surgical procedures done outside of the hospital setting will continue to increase, which will weaken hospital earnings, particularly for companies that lack sizeable outpatient service lines (including ambulatory surgery centers),” the analysis said.

A $175 billion provider relief fund passed by Congress as part of the CARES Act helped keep hospital systems afloat in March and April as volumes plummeted due to the cancellation of elective procedures and reticence among patients to go to the hospitals.

Some for-profit systems such as HCA and Tenet pointed to relief funding to help generate profits in the second quarter of the year. The benefits are likely to dwindle as Congress has stalled over talks on replenishing the fund.

“Hospitals will continue to recognize grant aid as earnings in Q3 2020, but this tailwind will significantly moderate after that,” Moody’s said.

Cost cutting challenges

Compounding problems for hospitals is how to handle major costs.

Some hospital systems cut some costs such as staff thanks to furloughs and other measures.

“Some hospitals have said that for every lost dollar of revenue, they were able to cut about 50 cents in costs,” the analysis said. “However, we believe that these levels of cost cuts are not sustainable.”

Hospitals can’t cut costs indefinitely, but the costs for handling the pandemic (more money for personal protective equipment and safety measures) are going to continue for some time, Moody’s added.

“As a result, hospitals will operate less efficiently in the wake of the pandemic, although their early experiences in treating COVID-19 patients will enable them to provide care more efficiently than in the early days of the pandemic,” the analysis found. “This will help hospitals free up bed capacity more rapidly and avoid the need for widespread shutdowns of elective surgeries.”

But will that capacity be put to use?

The number of surgical procedures done outside of the hospital is likely to increase and will further weaken earnings, Moody’s said.

“Outpatient procedures typically result in lower costs for both consumers and payers and will likely be preferred by more patients who are reluctant to check-in to a hospital due to COVID-19,” the analysis said.

The payer mix will also shift, and not in hospitals’ favor. Mounting job losses due to the pandemic will force more patients with commercial plans toward programs such as Medicaid.

“This will hinder hospitals’ earnings growth over the next 12-18 months,” Moody’s said. “Employer-provided health insurance pays significantly higher reimbursement rates than government-based programs.”

Bright spots

There are some bright spots for hospitals, including that not all of the $175 billion has been dispersed yet. The CARES Act continues to provide hospitals with a 20% add-on payment for treating Medicare patients that have COVID-19, and it suspends a 2% payment cut for Medicare payments that was installed as part of sequestration.

The Centers for Medicare & Medicaid Services also proposed increasing outpatient payment rates for the 2021 fiscal year by 2.6% and in-patient rates by 2.9%. The fiscal year is set to start next month.

Patient volumes could also return to normal in 2021. Moody’s expects that patient volumes will return to about 90% of pre-pandemic levels on average in the fourth quarter of the year.

“The remaining 10% is likely to come back more slowly in 2021, but faster if a vaccine becomes widely available,” the analysis found.