Category Archives: Health Policy

Another round of debate over hospital consolidation

Posted on by • Posted in 2020 Election Issues, Antitrust, Health Policy, Health System, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Hospital, Hospital Industry, Market Consolidation, Market Power, Mergers & Acquisitions, Monopoly, Monopoly Behavior, Out of Pocket Expenses, Quality, Quality of Care • Leave a comment

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Are hospital mergers a good thing or a bad thing?

Much of the answer to that question depends on what happens after the merger—does the combined organization provide better, more efficient care, or does it use its increased leverage to raise prices? Yet another round of back and forth on this issue took place this week, as the American Hospital Association (AHA) released the results of a study it commissioned from economic analysis firm Charles River Associates (CRA), while a group of academic antitrust specialists countered with their own briefing in response.

The AHA study, based on interviews with select health system leaders and econometric analysis by CRA, shows (surprise, surprise) that consolidation decreases hospital expenses by 2.3 percent, reduces mortality and readmissions, and reduces revenue per admission by 3.5 percent—indicating that the “savings” from consolidation are being passed along to purchasers. The economists, including Martin Gaynor at Carnegie Mellon, Zack Cooper at Yale, and Leemore Dafny at Harvard, countered in their briefing (surprise, surprise) that CRA’s research was biased in favor of hospitals, and cited numerous academic studies that indicate that hospital consolidation drives overall healthcare costs higher.

Beyond the predictable debate, our view is that consolidation can and should lead to better quality and lower prices—but that it largely hasn’t delivered on that promise. The prospect of “integrated care” that’s often touted by consolidation advocates hasn’t materialized in most places, both because hospital executives haven’t pushed hard enough on strategies to produce it, and because the market lacks sufficient incentives to encourage it.

Judge approves $55M sale of Hahnemann residency programs

Posted on by • Posted in Academic Medical Center, Bankruptcy, Chapter 11, Creditors, Health Policy, Health System, Hospital, Hospital Industry, Lawsuit, Residency Programs • Leave a comment

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/judge-approves-55m-sale-of-hahnemann-residency-programs.html

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Bankruptcy judge approves sale of Hahnemann residency slots
 
This week a Federal judge ruled that the owner of Hahnemann University Hospital could move forward with the sale of the system’s more than 550 residency slots as part of a plan to pay off creditors. The training slots will be sold to a consortium of health systems led by Thomas Jefferson University Hospitals for $55M. Hahnemann had previously agreed to sell the positions to Reading, PA-based Tower Health before they were outbid by the Jefferson consortium, who will keep the majority of the positions—and new physician labor—in the Philadelphia area.

The judge noted the difficulty of the decision, saying it was the kind of case that would “cause a judge to lie awake at night”. The ruling is huge win for debtors, and a blow to the Federal government, which strongly opposed the sale and has seven days to appeal.

Should it stand, the case could set the precedent that residents and the positions they hold are an asset that can be negotiated for and sold. Interns and residents provide low-cost labor that is essential for 24/7 coverage in many large hospitals, and the complex system of allocating and funding of residency training slots is a funds transfer from the Federal government to health systems.

Allowing hospitals to sell those slots to the highest bidder could undermine the stability of urban hospitals, particularly those who are investor-owned, as owners look to maximize short-term profits.

 

 

 

AHA says hospital mergers are good — economists say otherwise

Posted on by • Posted in 2020 Election Issues, American Hospital Association (AHA), Health Policy, Hospital Industry, Market Consolidation, Market Power, Mergers & Acquisitions, Monopoly, Monopoly Behavior, Quality, Quality of Care • Leave a comment

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/aha-says-hospital-mergers-are-good-economists-say-otherwise.html

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The American Hospital Association released a report stating that hospital acquisitions allow providers to provide better care at a lower cost to patients.

The report, which revisited an analysis concluding similar results three years ago, found acquisitions decrease cost due to the increased size of a combined system as well as clinical standardization.

Specifically, the AHA said hospital acquisitions lead to a 2.3 percent reduction in annual operating expenses at acquired hospitals. The study also said readmission and mortality rates decline at merging hospitals, and acquired hospitals see revenues per admission decline 3.5 percent, suggesting “savings that accrue to merging hospitals are passed on to patients and their health plans.”

However, the AHA’s findings — which were largely based on interviews with leaders of 10 health systems who weren’t randomly surveyed — contradict a wealth of economic data published that argues the opposite.

Last year, researchers found hospitals in monopoly markets, compared to hospitals in markets with four or more competitors, have prices that are 12 percent higher. In markets with four or more competitors, hospitals have lower prices and take on more financial risk, researchers said. Another independent analysis found hospital prices rise after hospitals combine. Researchers have also questioned whether consolidation really leads to better quality.

 

US health care: An industry too big to fail

Posted on by • Posted in 2020 Election Issues, Health Policy, Health System, Hospital, Hospital Industry, Pharmaceutical Industry, Price Transparency, Pricing, Social Good, Transparency • Leave a comment

https://theconversation.com/us-health-care-an-industry-too-big-to-fail-118895

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As I spoke recently with colleagues at a conference in Florence, Italy about health care innovation, a fundamental truth resurfaced in my mind: the U.S. health care industry is just that. An industry, an economic force, Big Business, first and foremost. It is a vehicle for returns on investment first and the success of our society second.

This is critical to consider as presidential candidates unveil their health care plans. The candidates and the electorate seem to forget that health care in our country is a huge business.

Health care accounts for almost 20% of GDP and is a, if not the, job engine for the U.S. economy. The sector added 2.8 million jobs between 2006 and 2016, higher than all other sectors, and the Bureau of Labor Statistics projects another 18% growth in health sector jobs between now and 2026. Big Business indeed.

This basic truth separates us from every other nation whose life expectancy, maternal and infant mortality or incidence of diabetes we’d like to replicate or, better still, outperform.

As politicians and the public they serve grapple with issues such as prescription drug prices, “surprise” medical bills and other health-related issues, I believe it critical that we better understand some of the less visible drivers of these costs so that any proposed solutions have a fighting chance to deflect the health cost curve downward.

As both associate chief medical officer for clinical integration and director of the center for health policy at the University of Virginia, I find that the tension between a profit-driven health care system and high costs occupies me every day.

The power of the market

Housing prices are market-driven. Car prices are market-driven. Food prices are market-driven.

And so are health care services. That includes physician fees, prescription drug prices and non-prescription drug prices. So is the case for hospital administrator salaries and medical devices.

All of these goods or services are profit-seeking, and all are motivated to maximize profits and minimize the cost of doing business. All must adhere to sound business principles, or they will fail. None of them disclose their cost drivers, or those things that increase prices. In other words, there are costs that are hidden to consumers that manifest in the final unit prices.

To my knowledge, no one has suggested that Rolls-Royce Motor Cars should price its cars similarly to Ford Motor Company. The invisible hand of “the market” tells Rolls Royce and Ford what their vehicles are worth.

Prescription drugs pricing has different rules

Ford can (they won’t) tell you precisely how much each vehicle costs to produce, including all the component parts that they acquire from other firms. But this is not true of prescription drugs. How much a novel therapeutic costs to develop and bring to market is a proverbial black box. Companies don’t share those numbers. Researchers at the Tufts Center for the Study of Drug Development have estimated the costs to be as high as US$2.87 billion, but that number has been hotly debated.

What we can reliably say is that it’s very expensive, and a drug company must produce new drugs to stay in business. The millions of research and development(R&D) dollars invested by Big Pharma has two aims. The first is to bring the “next big thing” to market. The second is to secure the almighty patent for it.

U.S. drug patents typically last 20 years, but according to the legal services website Upcounsel.com: “Due to the rigorous amount of testing that goes into a drug patent, many larger pharmaceutical companies file several patents on the same drug, aiming to extend the 20-year period and block generic competitors from producing the same drug.” As a result, drug firms have 30, 40-plus years to protect their investment from any competition and market forces to lower prices are not in play.

Here’s the hidden cost punchline: concurrently, several other drugs in their R&D pipelines fail along the way, resulting in significant product-specific losses . How is a poor firm to stay afloat? Simple, really. Build those costs and losses into the price of the successes. Next thing you know, insulin is nearly US$1,500 for a 20-milliliter vial, when that same vial 15 years ago was about $157.

It’s actually a bit more complicated than that, but my point is that business principles drive drug prices because drug companies are businesses. Societal welfare is not the underlying use. This is most true in the U.S., where the public doesn’t purchase most of the pharmaceuticals – private individuals do, albeit through a third party, an insurer. The group purchasing power of 300 million Americans becomes the commercial power of markets. Prices go up.

The cost of doing business, er, treating

I hope that most people would agree that physicians provide a societal good. Whether it’s in the setting of a trusted health confidant, or the doctor whose hands are surgically stopping the bleeding from your spleen after that jerk cut you off on the highway, we physicians pride ourselves on being there for our patients, no matter what, insured or not.

Allow me to state two fundamental facts that often seem to elude patient and policymaker alike. They are inextricably linked, foundational to our national dialogue on health care costs and oft-ignored: physicians are among the highest earners in America, and we make our money from patients. Not from investment portfolios, or patents. Patients.

Like Ford or pharmaceutical giant Eli Lilly, physician practices also need to achieve a profit margin to remain in business. Similarly, there are hidden-to-consumer costs as well; in this case, education and training. Medical school is the most expensive professional degree money can buy in the U.S. The American Association of Medical Colleges reports that median indebtedness for U.S. medical schools was $200,000.00 in 2018, for the 75% of us who financed our educations rather than paying cash.
Our “R&D” – that is, four years each of college and medical school, three to 11 years of post doctoral training costs – gets incorporated into our fees. They have to. Just like Ford Motors. Business 101: the cost of doing business must be factored into the price of the good or service.

For policymakers to meaningfully impact the rising costs of U.S. health care, from drugs to bills to and everything in between, they must decide if this is to remain an industry or truly become a social good. If we continue to treat and regulate health care as an industry, we should continue to expect surprise bills and expensive drugs.

It’s not personal, it’s just…business. The question before the U.S. is: business-as-usual, or shall we get busy charting a new way of achieving a healthy society? Personally and professionally, I prefer the latter.

 

 

 

California legislature passes bill requiring Kaiser Permanente to follow financial disclosure laws

Posted on by • Posted in Health Policy, Health System, Hospital, Hospital Industry, Transparency • Leave a comment

https://www.healthcarefinancenews.com/node/139106?mkt_tok=eyJpIjoiT1RkbU5UVXpNMlkyTm1NeiIsInQiOiJ3YVpITnV3WlVcL0dzcGgxQVkxMHFBZjFOSFZLXC9SZ0pHd3ZuUE5aWGt6MHMxbXpoMG9GeDJxSUc1cVVjXC9cL2loR2tnd1lXb050QzFXXC9SU2hHQnZZQVdWQ1lZNlMwRTFWbXV2TUIwXC9MMlNYcFwvdkluODBUWXRwaEdHZTNndUZYN3QifQ%3D%3D

The bill would require Kaiser Permanente to provide more data about the revenue and profits of individual hospitals.

Legislation requiring healthcare giant Kaiser Permanente to follow more of the same financial disclosure laws as other healthcare providers in California passed the Senate Monday and now heads to Gov. Gavin Newsom, who has 10 days to decide whether to sign it into law.

The bill, SB 343, would require Kaiser Permanente to provide more data about the revenue and profits of individual hospitals, whereas now it lumps those figures for all facilities into two broad categories: “Northern California” and “Southern California.” Of the roughly 400 hospitals operating in California, all but the 35 owned by Kaiser Permanente must comply with financial reporting requirements on a per-facility basis.

WHAT’S THE IMPACT

The new requirements for Kaiser Permanente would include breaking out expenses and revenue at each facility; breaking out revenue by type of payor at each facility (Medicare, Medi-Cal or private insurance); and breaking out rate increases by type of service (hospital, physician services, pharmacy, radiology and laboratory).

For Kaiser Permanente to comply with the legislation, it is estimated it would need to hire two workers to compile and distribute related data on a quarterly basis. The corporation has 250,000 employees and operating revenue of nearly $80 billion.

Kaiser Permanente, despite being a nonprofit healthcare system, has reported $11 billion in profits since Jan. 1, 2017 — including $5.2 billion just in the first half of 2019. It has made more in profits in the first six months of 2019 than it has ever recorded in an entire year and sits on reserves of more than $37 billion. Meanwhile, premiums for Kaiser patients have gone up year after year as part of a rate-setting process.

With Kaiser controlling more than 65% of insured Californians with large group healthcare coverage, SB 343 would allow employers and others to negotiate fair rates when purchasing health insurance for their workers.

The measure passed the California Assembly 58-13 on Aug. 22, and it is supported by a coalition of healthcare, consumer, business and worker advocates.

Kaiser Permanente did not immediately respond to a request for comment.

THE LARGER TREND

In June, Kaiser Permanente announced plans to construct a new headquarters — The Kaiser Permanente Thrive Center — in Oakland, bringing together staff currently spread out across multiple locations. The health system said the impetus behind the $900 million project is reducing annual operating costs and delivering more affordable care and coverage.

Officials say the new downtown Oakland building will reduce operational costs by more than $60 million annually, addressing facilities maintenance, inefficient utility expenses, and rising commercial real estate leases. Reinvesting these savings will help the health system advance its mission of providing quality, affordable care.

ON THE RECORD

“For too long, Kaiser Permanente has operated under a different set of rules when it comes to financial transparency, and this bill will finally bring the corporation more in line with other hospitals and insurance companies,” said Sen. Richard Pan, D-Sacramento, the author of SB 343. “Employers and individual Kaiser customers deserve to know if they are getting value when Kaiser increases their premiums and copays.”

 

 

Many Americans clueless about out-of-pocket medical costs, study finds

Posted on by • Posted in 2020 Election Issues, ACA, Bad Debt Expense, Health Insurance Coverage Adequacy, Health Policy, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Out of Pocket Expenses, Underinsured, Uninsured • Leave a comment

https://www.beckershospitalreview.com/finance/many-americans-clueless-about-out-of-pocket-medical-costs-study-finds.html?origin=cfoe&utm_source=cfoe

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When it comes to out-of-pocket medical costs, many people are unaware of their potential financial burden, according to a new study released by Discover Personal Loans, a provider of banking tools and resources across various financing options.

For the study, researchers examined the average cost of certain medical procedures and compared them to perceptions of costs from 969 surveyed U.S. residents.

Four takeaways from the study:

1. Researchers found that a three-day hospitalization, knee replacement surgery and an appendectomy had the greatest variation of average actual costs compared to average perceived costs.

2. For example, surveyed Americans perceived the average cost of a three-day hospitalization to be $11,013, while the actual average cost posted on Healthcare.gov is about $30,000. That’s a variation of 63 percent.

3. The variation between average actual cost and average perceived cost for a knee replacement surgery and an appendectomy were 34 percent and 32 percent, respectively.

4. Surveyed Americans anticipate spending $2,016 for an emergency room visit, up 5 percent from the average actual cost from the Health Care Cost Institute and cited by CNN, $1,917.

Read more about the study here.

 

 

 

Recession could come in 6 to 9 months, Morgan Stanley says

Posted on by • Posted in 2020 Election Issues, Bad Debt Expense, Health Industry Job Growth, Health Insurance Coverage Adequacy, Health Policy, Out of Pocket Expenses, Recession, Rev Cycle Management, Underinsured, Uninsured • Leave a comment

https://www.beckershospitalreview.com/strategy/recession-could-come-in-6-to-9-months-morgan-stanely-says.html?origin=cfoe&utm_source=cfoe

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Recent moves from President Donald Trump to raise tariffs on Chinese goods are leading the global economy closer to the brink of recession, according to a Morgan Stanley note cited by Newsweek.

In a recent research note, Morgan Stanley said if President Trump goes through with proposals to raise existing tariffs and China responds, the global economy would fall into recession in the next six to nine months. Specifically, Morgan Stanley’s U.S. public policy lead, Michael Zezas, said the tariffs would be what pushes the global economy into recession.

“Friday’s escalation of tariffs between the U.S. and China suggests they’ve not moved any closer on the key negotiation points that have separated them since May 5,” he said, according to Newsweek. “Neither side sees the benefit to cooperating as better than hanging tough. … We expect that tensions will continue to escalate at least until the costs of doing so are too big to ignore.”

The president said Aug. 23 that he plans to raise existing tariffs to 30 percent from 25 percent on $250 billion of Chinese goods starting Oct. 1. Additionally, he proposed tariffs on another $300 billion of Chinese imports to increase from 10 percent to 15 percent over the coming months. The president’s proposals come after China said it will impose tariffs on another $75 billion of U.S. imports, and that it would reinstate tariffs on auto products that were previously suspended.

Read more here.

 

 

 

The plight of America’s rural health care

Posted on by • Posted in 2020 Election Issues, ACA, Bankruptcy, Health Insurance Coverage Adequacy, Health Policy, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Out of Pocket Expenses, Patient Safety, Rural Health, Rural Hospital, Safety Net Hospitals, Safety-Net Providers, Underinsured, Uninsured • Leave a comment

https://www.axios.com/the-plight-of-americas-rural-health-care-a34b6c66-7674-4f78-abdc-33f8e711a601.html

Illustration of a tractor plowing a field in the shape of a heart monitor that is petering out

Rural America is stuck in a cycle of increasingly vulnerable patients with declining access to health care.

Why it matters: Rural patients often can’t afford care, are being hounded by hospitals and collection agencies over their unpaid bills, and are facing the reality of life in communities where the last hospital has closed.

Rural Americans tend to be older, sicker and lower-income than urban Americans. They suffer from higher rates of obesity, mental health issues, diabetes, cancer and opioid addiction, as my colleagues Stef Kight and Juliet Bartz reported.

  • They’re also more likely to be uninsured or covered by Medicare or Medicaid, which pay doctors and hospitals less than private insurance does.
  • A small and shrinking population, mostly covered by insurance plans that don’t pay very much, many of whom need a lot of care, puts more financial pressure on providers, especially hospitals. Physician shortages are common.

What they’re saying: “Rural hospitals have long been right there on the edge on average, and we’re seeing more and more of them flip over to red,” said Mark Holmes, a professor at UNC-Chapel Hill and director of the Cecil G. Sheps Center for Health Services Research.

And hospital closures often exacerbate the problems communities were already facing.

  • Hospitals are often the largest or second-largest employer in a rural community.
  • 113 rural hospitals have closed since 2010, according to the Sheps Center.
  • These are disproportionately located in the South — the region with the nation’s worst health outcomes, and where most states haven’t expanded Medicaid — leaving hospitals with more uninsured patients.
  • A 2018 study in Health Affairs found that Medicaid expansion is “associated with improved hospital financial performance and substantially lower likelihoods of closure, especially in rural markets.”

The bottom line: “What we have here is not one root cause; there’s multiple things going on here,” Holmes said. “All these sort of modest kind of trends are adding up to something that’s quite considerable.”

Go deeper:

  • Bloomberg Businessweek reported on eastern Montana’s sole psychiatrist, despite being the state with the nation’s highest suicide rate.
  • The Washington Post detailed a hospital in Missouri’s practice of suing its patients for payment — money that the hospital needed but patients generally don’t have.
  • Kaiser Health News and NPR have profiled the fallout in a rural community in Kansas after its sole remaining hospital closed, which included a 2-week lapse in nearby emergency care.

 

 

 

 

Rates for Affordable Care Act plans aren’t going up much

Posted on by • Posted in 2020 Election Issues, ACA, Health Insurance Industry, Health Policy, High Deductible Health Plans, High Premiums, Out of Pocket Expenses, Underinsured, Uninsured • Leave a comment

https://www.axios.com/affordable-care-act-plans-premiums-arent-going-up-much-1bfabbbe-5b97-400b-8c19-023bd7e4e545.html

Image result for Rates for Affordable Care Act plans aren't going up much

Premiums for Affordable Care Act coverage are going down in some places, and barely rising in others.

The big picture: Health insurers raised ACA rates dramatically over the past few years, largely due to political chaos. But their plans have still proven to be extremely profitable. Now many companies are lowering premiums as they expect to send money back to their customers.

Driving the news: Blue Cross Blue Shield of North Carolina is reducing the average premium for ACA plans by 5.5% in 2020.

  • Nationally, average ACA premiums are basically flat for next year and are going down in a handful of states, according to an analysis by ACA tracker Charles Gaba.

Between the lines: Insurers jacked up ACA premiums after the Trump administration cut off cost-sharing subsidies and nullified the individual mandate, and as Republicans threatened to eradicate the entire law, among other things. Now, they’re correcting for that overpricing.

  • BCBS of North Carolina CEO Patrick Conway said in an interview premiums are falling because the plan cut some providers from its already narrow network and changed the way it pays some hospitals. But he also said the company has “more expertise in the market than when we started.”
  • BCBS of North Carolina’s ACA plans have been extremely lucrative — in fact, too lucrative. The ACA requires insurers to spend at least 80% of their premiums on medical care, or rebate the difference back to their customers.
  • In the first quarter of this year, BCBS of North Carolina spent just 67 cents of every premium dollar on care for most of its ACA plans, according to financial documents.
  • Many other insurers are in the same boat.

The bottom line: ACA plans for many middle-class people remain prohibitively expensive — often around $600 a month for individuals who get no subsidies. But for those who get financial help, “this is a stable, functional, mature market,” said David Anderson, a health policy researcher at Duke University.

 

Health care costs as much as a new car

Posted on by • Posted in 2020 Election Issues, ACA, Health Insurance Coverage Adequacy, Health Policy, High Deductible Health Plans, High Drug Prices, High Premiums, Out of Pocket Expenses, Underinsured, Uninsured • Leave a comment

https://www.axios.com/health-care-costs-insurance-premiums-deductibles-car-580fa6c8-0dd2-427b-8dda-c898d568e51e.html

Illustration of a car key with a health plus on the unlock button.

Buying a new car every year would be a very impractical expense. It would also be cheaper than a year’s worth of health care for a family.

Why it matters: The cost-shifting and complexity of health insurance can hide its high cost, which crowds out families’ other needs and depresses workers’ wages.

By the numbers: Health care for a family covered by a large employer cost, on average, $22,885 last year.

  • That’s $2,000 more than the sticker price for a brand-new Volkswagen Beetle.
  • If the iconic Beetle isn’t your style, $22,885 would also be more than enough to get you a Ford Focus ($17,950), a Toyota Corolla ($18,600) or a Hyundai Sonata ($22,050).

Between the lines: Roughly $15,000 of that $22,885 comes from employers’ contribution to their workers’ premiums. That share alone is enough to buy a basic sedan.

  • Workers chip in an average of $4,706 per year premiums, and then spend an additional of $3,020 out of pocket. Combined, that’s almost 4 times more than the average family spends on gas in a year.

The Beetle is being discontinued in the U.S. after this year. But as health care costs continue to rise, they’ll be comparable to even fancier cars. They’re already inching up toward the cheapest Cadillac — a familiar car metaphor.

  • The Affordable Care Act’s “Cadillac tax” was intended to put downward pressure on prices by taxing the most generous health plans. But it actually affects a broad range of plans, and Congress has delayed the tax until 2022. The House has voted to repeal it altogether.