The Federal Reserve cut interest rates by a quarter point on Wednesday, bringing the target range for the benchmark Fed Funds rate to 1.75%–2%.
Why it matters: The Fed’s 2nd consecutive rate cut reflects worries about the U.S. economy. The trade war and slowing growth around the world have made corporate executives more worried than they’ve been in years.
Nearly 3 in 4 hospital markets around the U.S. are “highly concentrated,” according to a new Healthy Marketplace Index report by the Health Care Cost Institute (HCCI).
Researchers examined more than 4 million commercial inpatient hospital claims between 2012 and 2016 and found 81 out of 112 (72%) were considered “highly concentrated” using the Department of Justice’s Herfindahl-Hirschman Index (HHI). That’s up from 67% in 2012.
“Increasingly concentrated hospital markets have been linked to the rising cost of hospital care by nearly every expert in the field,” said Niall Brennan, president and CEO of HCCI, in a statement.
Funded by the Robert Wood Johnson Foundation, the report found:
“Our findings add to the growing consensus that most localities have highly concentrated hospital markets, and this is becoming increasingly true over time,” Bill Johnson, Ph.D., a senior researcher at HCCI and an author of the report, said in a statement. “The increased concentration we observed can be driven by many factors such as hospital closures, mergers, and acquisitions, changes in hospital capacity, patient preference, or changes in patients’ insurance networks.”
Previous, HCCI reports found inpatient hospital prices were rising in nearly every metro area studied. This new study found a positive relationship—but not a causal relationship—between price increases and increases in hospital market concentration. Those findings align with similar findings correlating consolidation with rising healthcare prices including from the Harvard Global Health Institute and the Robert Wood Johnson Foundation and The Urban Institute.
However, the American Hospital Association recently released its defense of consolidation in a report that argues mergers can improve costs by increasing scale, improving care coordination, reducing capital costs and improving clinical standardization.
Created in 2007, the Medicare Fraud Strike Force has units operating in 23 districts, and has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion. It’s a joint effort between DOJ and HHS to deter healthcare fraud.
According to the most recent statistics, from January, the strike force has brought 2,117 criminal actions, secured 2,754 indictments and recovered $3.3 billion in connection with its investigations.
HHS declared the opioid crisis a national emergency in 2017. And the DOJ is increasingly focusing on fraud related to opioids, including going after medical professionals allegedly involved in the unlawful distribution of opioids and other prescription narcotics.
“Sadly, opioid proliferation is nothing new to Americans,” U.S. Attorney Ryan K. Patrick of the Southern District of Texas said in a statement announcing the charges. “What is new is the reinforced fight being taken to dirty doctors and shady pharmacists,” he said.
The coordinated healthcare fraud enforcement operation across Texas resulted in charges involving networks of “pill mill” clinics that led to $66 million in losses and the distribution of 6.2 million pills, the government said. Sixteen doctors and pharmacists were among those charged.
And that’s on top of last month, when the Health Care Fraud Unit’s Houston Strike Force charged dozens of people in a trafficking network that diverted more than 23 million oxycodone, hydrocodone and carisoprodol pills.
The Texas actions also involved healthcare fraud other than opioid diversion, including fraudulent physician orders for durable medical equipment, fraudulent claims for ambulance services and stealing protected healthcare information.
The separate actions in California, Arizona and Oregon involved schemes that ran the gamut from billing for medically unnecessary compounded drugs, unnecessary cardiac treatments and testing, billing for chiropractic services never provided and a hospice kickback scheme.
Orlando (Fla.) Health opened its sixth freestanding emergency room in Central Florida., Sept. 16, according to The Orlando Business Journal.
The 40,000-square-foot, two-story freestanding ER houses an imaging department, outpatient pharmacy and lab services unit. The ER, located in Lake Mary, Fla., cost $69 million to build.
The opening of Orlando Health’s freestanding ER comes as two rivals that operate in Central Florida — Altamonte Springs-based AdventHealth and national for-profit hospital operator Nashville, Tenn.-based HCA Healthcare — race to build additional freestanding ERs in the state.
Standalone emergency departments are on the rise in Florida because of overcrowded ERs on hospital campuses, according to the report.
A consortium of four health systems that was expected to submit a bid for St. Christopher’s Hospital for Children in Philadelphia bowed out of the auction, according to The Philadelphia Inquirer.
The hospital, which is being sold through the bankruptcy process, received two takeover bids: One from West Reading, Pa.-based Tower Health and Drexel University in Philadelphia, and another from Santa Ana, Calif.-based KPC Global.
Four healthcare organizations based in Philadelphia that teamed up in July to explore the acquisition of St. Christopher’s did not submit a bid. The consortium was led by Jefferson Health and also included Einstein Healthcare Network, Philadelphia College of Osteopathic Medicine and Temple Health.
“As a consortium responsible for 60 percent of patient activity to St. Chris with three safety-net hospitals, we remain very interested in collaboration with whoever the winning bidder is to ensure continued access and quality of care for our pediatric patients,” Jefferson said in a statement to The Philadelphia Inquirer. “We look forward to supporting the provision of these needed services for the children of our community.”
If the two bids submitted for St. Christopher’s Hospital for Children qualify as valid bids, an auction will be held Sept. 19, according to the report.
https://www.healthcaredive.com/trendline/labor/28/#story-4
Healthcare employment is growing at a record pace, but wages remain stagnant, which some experts say likely results in part from the trend of consolidating health systems.
The latest Bureau of Labor Statistics numbers show the industry gained 49,000 jobs in March and 398,000 over the past 12 months. Analysts at Jefferies say the month-to-month growth is the second largest increase on record for the sector. Healthcare job growth has surpassed non-healthcare job growth and nudging the share of total jobs to an all time high, according to consulting firm Altarum.
Hospital employment grew by 14,000 jobs in March, adding up to a total of 120,000 for the combined first quarter of 2019. BLS tallied ambulatory jobs at 27,000 and home health and skilled nursing jobs at 9,000.
At the same time, real average weekly earnings for production and non-supervisory employees across sectors grew 0.1% over the month according to BLS. That growth in earnings is due to an increase in average weekly hours.
For nurses and pharmacists working in hospitals in heavily concentrated markets, annual wage growth has been lagging behind national rates by as much as 1.7 times. That’s according to researchers Elana Prager and Matt Schmitt, of Kellogg and UCLA, respectively, whose working paper compares wage growth rates in markets where mergers have occurred.
The paper drew the ire of the American Hospital Association.
“Among the many serious concerns about the study are its lack of rigor in the definitions and assumptions it used, and absence of data on total compensation and the recognition of other obvious factors that could affect wage growth,” an AHA spokesperson said in a statement criticizing media coverage of the research.
Academics researching the impacts of consolidation have asked the Federal Trade Commission to look at the impact horizontal mergers have on labor and consumers before they become difficult to challenge. FTC green-lit hundreds of horizontal hospital mergers over the past decade, maxing out at 115 in 2017, according to the National Institute for Health Care Management. In 2009, there were 50 such deals.
A Penn Law paper on mergers and labor markets published last year found employer consolidation has had a direct impact on wages and productivity in concentrated labor markets in the past. Wages, the authors write, tend to dilute when competition is scarce and labor concentration is “very high, as high or higher overall than product market concentration.”
Jason Plagman, a healthcare analyst at Jefferies, agreed, telling Healthcare Dive it becomes an “oligopsony situation where there are only a handful of buyers of a product” — in this case, labor — “you tend to see [employers] exert more control.”
As AHA noted, hospital and health systems tend to offer non-wage benefits, “such as employer-sponsored insurance, time off and education benefits” rather than increase wages. That’s an important caveat, said Dennis Shea, a health policy professor at Penn State.
The debate comes as nurses unions have been pushing hard for additional staff and higher wages for hospital workers in consolidated states like California, New York, Massachusetts and Pennsylvania. Hospital consolidation has raised prices as much as 20% to 40% when they occur in the same market, according to National Institute for Health Care Management, with some prices reaching as much as 55%.
Unions argue hospitals can afford to pay extra to hire more nurses. Jefferies analyst Plagman said it’s not that easy. About 50% of hospital revenue goes to salary, wages and benefits, he said, and half of that chunk of revenue goes to nurses. “If they give a 3% raise to all nurses, that’s a big impact on their overall expense line,” Plagman said.
The lack of competition bars labor from seeking work elsewhere. A nurse in a concentrated labor market can’t quit their job to work for the hospital down the street, because it’s probably owned by the same health system, Shea said.
Shea and Plagman agreed that movement of labor away from concentrated markets is one way to break the wage slump. But lack of mobility was one of the consequences of concentration found in a National Bureau of Economic Research published in February 2018. The paper suggests a negative relationship between consolidated markets and wages that becomes more pronounced with higher levels of concentration and only increases over time.
Pay raises have historically been pushed by labor unions, and though some hospitals have already raised wages, few have been inclined to raise staffing levels as well.
“Strikes are picking up,” Shea said. “That’s always an indicator that wage and salary growth will pick up a little bit.”
While labor disruption has been on the rise over the past year, Plagman said he expects employment and wage growth to continue at the current pace. At some point, he said the market will have to resolve itself.
“What we’re seeing is hospitals and healthcare providers are hiring, but they’ve been very disciplined over the past few years giving raises to nurses and therapists,” Plagman said.
In testimony to the FTC in October, economist Alan Kreuger alleged employers in concentrated markets “collude to hold wages to a fixed, below-market rate,” even when the economy is booming. Union membership has plummeted 25% since 1980, and without a counterweight to balance the power of a monopsony, he argued, employers are free to set wages at will — even if they lag behind inflation rates.
Pressures to contain costs and move from volume to value is forcing health system executives to be extra delicate with their labor expenses. When nurses strike, hospitals have temps at the ready. That’s a boon for staffing agencies like AMN Healthcare Services and Cross Country Healthcare.
Cost control in healthcare is a bit like “pushing on a balloon,” Shea said.
Slow growth or declines in one sector means business is booming for another. In this case, ambulatory added 27,000 jobs month-to-month in March, up from 22,000 in February, and Jefferies analysts are looking favorably at temporary staffing agencies.
While “all indicators” say healthcare wages should be pushed up, Shea said, he wouldn’t be surprised if the growth rate continued to limp along for a little while longer.
https://www.healthcaredive.com/trendline/labor/28/#story-1
Hospitals are often the biggest employers in many towns and medium-sized cities, but their job creation has been uneven at best in recent months. According to an analyst note from Jefferies, employment by hospitals dropped by 2,000 on a seasonally adjusted basis, although that grew to a net 1,000 new jobs on an unadjusted basis.
By comparison, hospitals added a seasonally adjusted 9,000 new jobs in June, 25,000 on an unadjusted basis. However, much of that boost was created by the minting of new residents who just graduated from medical schools.
Hospital employment is still growing at a 1.8% annual clip (compared to 1.4% as of July 2018), although that’s down from the 2.1% rate reported in April.
“Overall, healthcare employment growth continues to demonstrate strong momentum, but hospital jobs growth appears to be moderating,” the analysts said. Inpatient providers account for more than 5.2 million jobs nationwide.
However, Jefferies’ analysts believe that healthcare will continue to be a big job engine for the foreseeable future.
“We believe the supply of clinical labor continues to struggle to keep pace with solid demand growth, resulting in tight clinician labor markets and strong demand for healthcare temp staffing services,” they said.
Although healthcare job growth has been extremely robust, wages have been stagnant in recent years, a phenomenon attributed in part to continued consolidation among industry players.
The ambulatory care segment has been growing rapidly in recent years. Its addition of 29,000 new jobs was up from 17,000 in June, and significantly outpaced the year-to-date average monthly growth of 22,000.
Home healthcare services added 11,000 new jobs last month alone — the highest rate since 2017. The segment’s annual growth rate is currently 5.3%, up from 3.2% in July 2018.
The nursing home segment added another 1,000 jobs.
Health systems and physician groups have dominated the Denver healthcare market in recent years, but a new study indicates that employer-purchasers and health plans are poised to disrupt that dynamic.
Supported by existing legislation, activism from local businesses, and the efforts of Gov. Jared Polis, the Denver market is at a ‘tipping point,’ according to a Catalyst for Payment Reform (CPR) and the Colorado Business Group on Health (CBGH) report released Thursday morning.
The study specifically referenced the RAND report from May which found that payers were paying rates to providers well above Medicare levels, noting that employers have an opportunity to pressure insurers to engage providers in contract arrangements that better align with care rendered.
Researchers believe that payment reform is achievable in Denver, suggesting six policy recommendations to business groups, lawmakers, and insurers, including the expansion of price transparency measures and promotion of benchmarking prices relative to Medicare.
Corralling healthcare prices has been a primary issue in Colorado this year, with the state most recently pursuing a reinsurance program that Polis expects to lower premiums by 18%.
The study found that four major health systems, HCA Holdings, Centura Health, UC Health, and SCL Health, accounted for 85% of patient admissions in 2017. On the Herfindahl-Hirschman Index, this level is considered “moderately concentrated” but the report highlights that it also means the market is “concentrated enough to stifle price competition.”
While providers have concentrated in the market through continuous merger activity, the study found that insurers are governed by strict regulations. The result has been Coloradans facing 13% higher prices compared to the national average and 5% high utilization rates.
Two of the recommendations offered by the study were to align two-sided risk arrangements with Medicaid and the Polis-Primavera “Roadmap to Affordability,” the governor’s strategic initiative to make care more affordable, as well as to implement benefit designs to “encourage consumers seek higher value care.” The study also urges that employer-purchases to pursue value-oriented programs that hold providers accountable to the listed targets.
However, in an interview with HealthLeaders earlier this year, Centura Health CEO Peter Banko said the system was going to “pause on the mad rush” to value-based care models, citing the direction the market was taking on the issue.
As highlighted in the RAND report, CPR and CBGH believe that building on purchaser momentum through a statewide purchase cooperative can be an effective method at changing the market dynamics in Denver.
Similar to the Employers’ Forum of Indiana, an employer-led healthcare coalition which collaborated on the RAND report, the Peak Health Alliance, a Summit County-based purchaser cooperative, has sought to combat rising healthcare prices in the Denver area. The report states that Peak Health, which represents 6,000 covered lives, has already negotiated a “very aggressive” reduction in rates with Centura.
Bob Smith, MBA, executive director of CBGH, said that the report gives employer-purchasers “the tools to make changes” to the Denver healthcare market and stem the tide of rising prices.
“Healthcare costs, primarily driven by high prices and seemingly unwarranted increases, are edging out salary growth and economic development,” Smith said in a statement. “These trends are taking a toll on every employer from school districts to manufacturers and are simply not sustainable.”
Smith urged lawmakers to act on the report’s suggested reforms but also said that employers now have “the responsibility to act.”
https://www.healthleadersmedia.com/strategy/ceo-kevin-spiegel-leaves-erlanger-amid-physicians-rancor
The top executive of Erlanger Health System, based in Chattanooga, Tennessee, has left the organization after months of smoldering conflict with some of the nonprofit’s physicians.
President and CEO Kevin Spiegel’s departure was immediate, according to a statement released Wednesday by board chairman Mike Griffin, who offered his well-wishes to the departing leader.
Spiegel, who had been on the job more than six years, reportedly said his separation from the organization was a mutual decision.
“We’re still working out the details, and hopefully that’ll be complete by the board meeting in two weeks,” Spiegel told the Times Free Press‘ Elizabeth Fite. “This is a great hospital, and it’s a great organization, and it’s only going to do better and better things.”
Erlanger’s board is expected to pick Spiegel’s successor in two weeks, at its regularly scheduled board meeting, according to Griffin’s statement.
Spiegel’s exit comes less than two weeks after the board held a special public meeting to talk about physicians’ concerns and criticism of Erlanger’s senior leadership team.
Spiegel is the third high-ranking Erlanger executive to leave since Fite reported in June on a letter from the Medical Executive Committee explaining its reasons for a unanimous vote of “no confidence” in the current executive leadership team. The other two were Executive Vice President and Chief Operating Officer Rob Brooks and Vice President of Patient Safety and Quality Pam Gordon.
Spiegel has been credited with leading Erlanger out of choppy financial waters, but he has also been caught up in a number of controversies, as the Times Free Press reported.
Click to access wf1341834-cmo-campaign-wyatt-decker-article-part1.pdf
In part 1 of an executive interview series, CEO and physician Wyatt Decker discusses his perspectives on today’s challenges and opportunities for reinventing health care.
IMAGINE THIS SCENARIO: there are 200 people in a room and each person has a serious health condition. Cost is not a barrier to each of these people receiving their prescribed treatment. A question is asked — how many of you would book a flight to a different country to get your care? You guessed it. No hands go up.
Dr. Wyatt Decker is chief executive officer of OptumHealth and an emergency medicine physician who brings more than two decades of service within the Mayo Clinic. He held dual roles as chief medical information officer for Mayo Clinic and CEO of Mayo Clinic in Arizona. Dr. Decker often conducts this experiment with audiences to underscore the quality of care delivered in the United States. We often hear about the problems of health care. No doubt, there are deep and serious problems. However, in scenarios like the one above, we understand that the quality of care delivered by our nation’s physicians is among the finest available. So why do we hear so much about what’s wrong?
According to Dr. Decker, the real opportunities for reinventing health care lie in improving system access, increasing affordability and meeting consumer preferences. “ All of these things really require us to think deeply about how health care is delivered and how can we do it better,” he says. In part 1 of a recent conversation, Dr. Decker shares lessons learned and offers his perspective on where today’s health care executives and clinical leaders should focus.
What is your take on the state of the health care industry today? What challenges are driving the need to rethink health care systems and delivery?
THE CHALLENGE OF HEALTH CARE ACCESS: “ People want to get to a doctor or a health care team and they can’t. Either because they are underinsured or they don’t have the financial resources. They don’t know where to go or sometimes there just aren’t enough doctors or the right type of doctor, whether it’s primary care or a specialist available in their area to see.”
THE CHALLENGE OF HEALTH CARE AFFORDABILITY:
“ We hear a lot about affordability of health care and outof-pocket cost can be very high, but also the health care system itself is very expensive. So how do we make it more affordable for large employers, individuals, consumers and even the government itself? Can we get on a more sustainable path?”
THE CHALLENGE OF CONSUMER PREFERENCES: “ Most people who’ve experienced the health care system feel that it isn’t focused around their needs, schedules or preferences. We’re entering an era where in most other industries there’s lots of personalization and consumer focus. Health care has been very slow to evolve. We need to make it an experience where people feel appreciated, valued and respected. Not just that they’re getting great quality care, but also that their preferences and needs are being met.”
“ Our nation’s care providers are deeply committed and among the best-trained in the world. But I also see them in a system that is struggling. Emergency departments are, at times, the last resort for people who lack resources and access to care. I’ve seen patients struggle to manage chronic conditions without the right support and how the absence of good guidance can create confusion.”
Clearly, the need to reinvent in all aspects of health care is top of mind for many. But it can be difficult to figure out where to start. Can you discuss where you think it’s smart for leaders to focus?
“ We should all be thinking about how we drive towards a health care system that really creates and adds value to people’s lives,” says Dr. Decker. Here’s his advice on key areas of focus.
PAYMENT MODELS: “ Move towards payment models that actually reward the correct behaviors in health care. What do I mean by that? The pay-per-value model — rewarding groups of providers to keep people well and healthy — is far more powerful than the traditional fee-for-service model.”
LOCAL ECOSYSTEMS: “ Recognize that health care is local. It’s important to create ecosystems that deliver great, connected care for individuals throughout the health spectrum. This means the patient and their health data move seamlessly between specialists, hospitals, ambulatory care centers, and so on. These kinds of networks and interoperability of data is crucial to create a successful health care system.”
SOCIAL DETERMINANTS OF HEALTH: “ Health care outcomes are driven not only by the quality and capabilities of the health care provider, but also by social determinants of health. Good health care addresses things like access to good nutrition, social connections, transportation and more that can limit the ability for a person to get and stay healthy. For example, in-home health visits to help patients who have difficulty traveling or easily obtained referrals to social and community services can really enable success.”
From your perspective, what could health care reinvention mean to a patient, provider or health plan?
TO PATIENTS: “ It means a health care system where instead of waiting for something to go wrong, there is a team helping you proactively flourish and be healthy. It means a simple phone call or an app or a video chat could advise you on when you might be at risk of developing a serious condition before you develop it. It means a system that is always there for you, almost like a guardian angel. It helps you navigate the system and your journey towards health and wellness. It means all of this in a health care system that is easy to access, affordable, high-quality and compassionate.”
TO PROVIDERS: “ Providers have high rates of frustration and even burnout with their own profession. Reinvention looks to reduce the very heavy clerical burden driving these trends. Doctors today spend about two hours of clerical and non-visit care for every hour of direct patient care that they provide. However, when you talk to doctors, they find the most fulfillment in engaging directly with patients and making a difference in their care. Reinvention means relieving exhausted providers of administrative and clerical duties that don’t bring enjoyment or result in improved care and outcomes.”
TO HEALTH PLANS: “ Health plans are frustrated because they pay for a lot of care that evidence shows doesn’t improve outcomes or help patients on their journey to health and wellness. Payers are happy to pay for health care if it’s necessary. But it doesn’t make sense to pay for care that doesn’t add value. Reinvention means reducing this financial waste to bring down the cost of coverage for everyone.”
“ We have an opportunity now to make the health care system work better for everyone. Improve access and affordability for patients, allow doctors to spend more time with patients, and increase efficiencies within health plans. There’s an opportunity to help people connect the dots and get everyone working together.”
You’ve been a practicing physician and a business leader. Tell us the lessons learned from this unique vantage point.
“ I have spent most of my career as a practicing physician in busy, level 1 trauma centers and emergency departments. In that environment, you see health care at its finest and also how the health system can be challenging. I think in amazement of the times I’ve seen teams of people — multiple physicians, nurses and technicians — come together as one unit to save someone from a major trauma. I also have great admiration for the persistence of doctors who save lives by diagnosing life-threatening conditions through nuanced symptoms.
I’m a deep believer that in health care, we need to place the patient at the center of everything we do. I always remind young doctors and medical students…imagine for a moment that your patient is you or a loved one. You’d want the doctor to listen and explain things in a compassionate and thoughtful manner. You’d want them to be focused. You’d want them to recognize your unique history and what’s important to you. The notion of putting the patient at the center of everything is something that I have carried with me throughout my career. I have also dedicated myself to developing better models of care and systems that allow doctors and care teams to function seamlessly, be high-performing and deliver great outcomes for patients.”
“ I have an appreciation for how powerful it can be when you work to reduce waste, create care that’s efficient and care that is patient-focused. Today I’m focused on an interesting juxtaposition — creating the right mix of scalable innovations that help our whole nation succeed in health care while also improving the personal and individual patient health care experience.”
STAY TUNED FOR PART 2 of this executive interview series to learn more about Dr. Wyatt Decker’s perspectives on the intersection of technology and health care, the human impact of transformation and physician burn-out.
HENRY KOTULA 