Category Archives: Market Consolidation

Prospect Medical Group to add 10,000 physicians with 3 acquisitions

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https://www.beckershospitalreview.com/hospital-transactions-and-valuation/prospect-medical-group-to-add-10-000-physicians-with-3-acquisitions.html?utm_medium=email

Prospect Medical Group to acquire three physician practices

Prospect Medical Group will double in size when it completes the acquisition of three medical practices later this year. 

Prospect Medical Group, owned by Los Angeles-based Prospect Medical Holdings, entered into an agreement April 22 to acquire certain assets of CalCare IPA and Los Angeles Medical Center IPA, both of which serve Los Angeles County, and Vantage Medical Group in San Diego, San Bernardino and Riverside, Calif.

The transaction, which is subject to customary closing conditions and approvals from contracted health plans, is expected to close this summer. 

The three independent medical associations, representing more than 10,000 physicians, will join Prospect’s existing network of about 10,000 providers when the transaction closes.

“This is a great opportunity to expand Prospect’s system of coordinated care to a much larger market,” said Prospect Medical Systems CEO Jim Brown. “Our vision is that everyone has access to quality health care when they need it, and we look forward to partnering with a new network of physicians to make that a reality.”

 

 

 

 

Doctors Without Patients: ‘Our Waiting Rooms Are Like Ghost Towns’

Posted on by • Posted in 2020 Election Issues, Antitrust, Bankruptcy, Cash, Cash Reserves, Coronavirus, Crisis, Crisis Management, Economic Crisis, Financially Distressed, Market Consolidation, Market Power, Market Share, Medical Group, Medicare, Pandemic, Physician, Physician Practice Management, Primary Care, Private Equity, Public Health, Public Safety, Vaccination, Vaccine • Leave a comment

18 of the Spookiest Ghost Towns in America - Most Haunted Places

As visits plummet because of the coronavirus, small physician practices are struggling to survive.

Autumn Road in Little Rock, Ark., is the type of doctor’s practice that has been around long enough to be treating the grandchildren of its eldest patients.

For 50 years, the group has been seeing families like Kelli Rutledge’s. A technician for a nearby ophthalmology practice, she has been going to Autumn Road for two decades.

The group’s four doctors and two nurse practitioners quickly adapted to the coronavirus pandemic, sharply cutting back clinic hours and switching to virtual visits to keep patients and staff safe.

When Kelli, 54, and her husband, Travis, 56, developed symptoms of Covid-19, the couple drove to the group’s office and spoke to the nurse practitioner over the phone. “She documented all of our symptoms,” Ms. Rutledge said. They were swabbed from their car.

While the practice was never a big moneymaker, its revenues have plummeted. The number of patients seen daily by providers has dropped to half its average of 120. The practice’s payments from March and April are down about $150,000, or roughly 40 percent.

“That won’t pay the light bill or the rent,” said Tabitha Childers, the administrator of the practice, which recently laid off 12 people.

While there are no hard numbers, there are signs that many small groups are barely hanging on. Across the country, only half of primary care doctor practices say they have enough cash to stay open for the next four weeks, according to one study, and many are already laying off or furloughing workers.

“The situation facing front-line physicians is dire,” three physician associations representing more than 260,000 doctors, wrote to the secretary of health and human services, Alex M. Azar II, at the end of April. “Obstetrician-gynecologists, pediatricians, and family physicians are facing dramatic financial challenges leading to substantial layoffs and even practice closures.”

By another estimate, as many as 60,000 physicians in family medicine may no longer be working in their practices by June because of the pandemic.

The faltering doctors’ groups reflect part of a broader decline in health care alongside the nation’s economic downturn. As people put off medical appointments and everything from hip replacements to routine mammograms, health spending dropped an annualized rate of 18 percent in the first three months of the year, according to recent federal data.

While Congress has rushed to send tens of billions of dollars to the hospitals reporting large losses and passed legislation to send even more, small physician practices in medicine’s least profitable fields like primary care and pediatrics are struggling to stay afloat. “They don’t have any wiggle room,” said Dr. Lisa Bielamowicz, a co-founder of Gist Healthcare, a consulting firm.

None of the money allocated by lawmakers has been specifically targeted to the nation’s doctors, although the latest bill set aside funds for community health centers. Some funds were also set aside for small businesses, which would include many doctors’ practices, but many have faced the same frustration as other owners in finding themselves shut out of much of the funding available.

Federal officials have taken some steps to help small practices, including advancing Medicare payments and reimbursing doctors for virtual visits. But most of the relief has gone to the big hospital and physician groups. “We have to pay special attention to these independent primary care practices, and we’re not paying special attention to them,” said Dr. Farzad Mostashari, a former health official in the Obama administration, whose company, Aledade, works with practices like Autumn Road.

“The hospitals are getting massive bailouts,” said Dr. Christopher Crow, the president of Catalyst Health Network in Texas. “They’ve really left out primary care, really all the independent physicians,” he said.

“Here’s the scary thing — as these practices start to break down and go bankrupt, we could have more consolidation among the health care systems,” Dr. Crow said. That concerns health economists, who say the steady rise in costs is linked to the clout these big hospital networks wield with private insurers to charge high prices.

While the pandemic has wreaked widespread havoc across the economy, shuttering restaurants and department stores and throwing tens of millions of Americans out of work, doctors play an essential role in the health of the public. In addition to treating coronavirus patients who would otherwise show up at the hospital, they are caring for people with chronic diseases like diabetes and asthma.

Keeping these practices open is not about protecting the doctors’ livelihoods, said Michael Chernew, a health policy professor at Harvard Medical School. “I worry about how well these practices will be able to shoulder the financial burden to be able to meet the health care needs people have,” he said.

“If practices close down, you lose access to a point of care,” said Dr. Chernew, who was one of the authors of a new analysis published by the Commonwealth Fund that found doctor’s visits dropped by about 60 percent from mid-March to mid-April. The researchers used visit data from clients of a technology firm, Phreesia.

Nearly 30 percent of the visits were virtual as doctors rushed to offer telemedicine as the safest alternative for their staff and patients. “It’s remarkable how quickly it was embraced,” said Dr. Ateev Mehrotra, a hospitalist and associate professor of health policy at Harvard Medical School, who was also involved in the study. But even with virtual visits, patient interaction was significantly lower.

Almost half of primary care practices have laid off or furloughed employees, said Rebecca Etz, an associate professor of family medicine at Virginia Commonwealth University and co-director of the Larry A. Green Center, which is surveying doctors with the Primary Care Collaborative, a nonprofit group. Many practices said they did not know if they had enough cash to stay open for the next month.

Pediatricians, which are among the lowest paid of the medical specialties, could be among the hardest hit. Federal officials used last year’s payments under the Medicare program to determine which groups should get the initial $30 billion in funds. Because pediatricians don’t generally treat Medicare patients, they were not compensated for the decline in visits as parents chose not to take their children to the doctor and skipped their regular checkups.

“This virus has the potential to essentially put pediatricians out of business across the country,” said Dr. Susan Sirota, a pediatrician in Chicago who leads a network of a dozen pediatric practices in the area. “Our waiting rooms are like ghost towns,” she said.

Pediatricians have also ordered tens of thousands of dollars on vaccines for their patients at a time when vaccine rates have plunged because of the pandemic, and they are now working with the manufacturers to delay payments for at least a time. “We don’t have the cash flow to pay them,” said Dr. Susan Kressly, a pediatrician in Warrington, Pa.

Even those practices that quickly ramped up their use of telemedicine are troubled. In Albany, Ga., a community that was an unexpected hot spot for the virus, Dr. Charles Gebhardt, a doctor who is treating some infected patients, rapidly converted his practice to doing nearly everything virtually. Dr. Gebhardt also works with Aledade to care for Medicare patients.

But the telemedicine visits are about twice as long as a typical office visit, Dr. Gebhardt said. Instead of seeing 25 patients a day, he may see eight. “We will quickly go broke at this rate,” he said.

Although he said the small-business loans and advance Medicare payments are “a Godsend, and they will help us survive the next few months,” he also said practices like his need to go back to seeing patients in person if they are to remain viable. Medicare will no longer be advancing payments to providers, and many of the small-business funding represents a short-term fix.

While Medicare and some private insurers are covering virtual visits, which would include telephone calls, doctors say the payments do not make up for the lost revenue from tests and procedures that help them stay in business. “Telehealth is not the panacea and does not make up for all the financial losses,” said Dr. Patrice Harris, the president of the American Medical Association.

To keep the practices open, Dr. Mostashari and others propose doctors who treat Medicare and Medicaid patients receive a flat fee per person.

Even more worrisome, doctors’ groups may not be delivering care to those who need it, said Dr. Mehrotra, the Harvard researcher, because the practices are relying on patients to get in touch rather than reaching out.

Some doctors are already voicing concerns about patients who do not have access to a cellphone or computer or may not be adept at working with telemedicine apps. “Not every family has access to the technology to connect with us the right way,” said Dr. Kressly, who said the transition to virtual care “is making disparities worse.”

Some patients may also still prefer traditional office visits. While the Rutledges appreciated the need for virtual visits, Kelli said there was less time to “talk about other things.”

“Telehealth is more inclined to be about strictly what you are there for,” she said.

Private equity firms and large hospital systems are already eying many of these practices in hopes of buying them, said Paul D. Vanchiere, a consultant who advises pediatric practices.

“The vultures are circling here,” he said. “They know these practices are going to have financial hardship.”

 

 

 

 

Beaumont-Summa merger on pause as COVID-19 batters hospitals

Posted on by • Posted in Antitrust, Competition, Coronavirus, Crisis, Crisis Management, Employee Furlough, Employee Layoffs, Employee Pay Cuts, Health System, Hospital, Hospital Industry, Market Consolidation, Market Uncertainty, Mergers & Acquisitions, Strategy • Leave a comment

https://www.healthcaredive.com/news/beaumont-summa-merger-on-pause-as-covid-19-batters-hospitals/576535/

Dive Brief:

  • Michigan’s largest health system, Beaumont Health, is delaying its merger with Ohio-based Summa Health as the two continue to battle the coronavirus pandemic. “We didn’t plan this, but we are deferring that [the merger] until we have a little more clarity about the impact of this crisis,” Beaumont Health CEO John Fox said Wednesday.
  • Beaumont said it is temporarily laying off more than 2,400 employees, or nearly 7% of its workforce, as the pandemic has forced the system to halt inpatient and outpatient surgeries, cutting off an entire revenue stream. Among the job cuts, 450 positions have been permanently eliminated, while most of the other 2,400-plus positions involved administrative staff and others who are not directly caring for patients. Administrators have also said they’re taking pay cuts and Fox’s pay has been reduced by 70%.
  • The deal was recently approved by state and federal regulatory agencies, Summa Health told Healthcare Dive.

Dive Insight:

The deal is still on the table and the two are working on finalizing a path forward, Summa Health told Healthcare Dive.

“That said, the immediate priority is for both Summa and Beaumont to focus first and foremost on caring for our patients, employees, physicians and communities as we are impacted by the COVID-19 pandemic,” a spokesperson said.

The marriage between the two health systems is supposed to give Beaumont Health a foothold in Northeast Ohio, putting it in closer competition with Cleveland Clinic. In addition to its four hospitals, Summa also operates its own health plan, SummaCare, which provides coverage to 46,000 people.

Beaumont operates eight hospitals with 145 outpatient sites and has 38,000 employees.

Earlier this year, the two signed a definitive agreement and, together, Beaumont and Summa, are expected to create a $6.1 billion system in terms of total annual revenue with $4.7 billion from Beaumont and $1.4 billion from Summa.

However, the fallout from COVID-19 is likely to hamper those figures.

Beaumont reported a net loss of about $278 million during the first quarter of 2020, compared to about $408 million during the prior-year period. The system reported the virus only started affecting it in the last two weeks of March.

 

 

 

 

A landmark post-COVID physician group acquisition in California

Posted on by • Posted in Cash, Cash Reserves, Coronavirus, Financially Distressed, Health Insurance Industry, Market Consolidation, Market Power, Mergers & Acquisitions, Physician Independent Network (IPA), Physician Multispecialty Network, Physician Practice Management, Strategy • Leave a comment

https://mailchi.mp/39947afa50d2/the-weekly-gist-april-17-2020?e=d1e747d2d8

Brown & Toland Reviews | Glassdoor

Blue Shield of California announced last Friday that its healthcare services division, Altais, is acquiring Brown & Toland Physicians, a multispecialty network of 2,700 physicians serving 350,000 patients in the greater San Francisco Bay Area. Brown & Toland, formed in 1993, is a clinically-integrated network of independent physicians that has received much attention nationally for its risk-based contracting as both a Medicare Pioneer Accountable Care Organization, as well for its landmark contract to manage state workers and retirees in the California Public Employees’ Retirement System (CalPERS).

While few details of the deal have been released, Altais says it will provide Brown & Toland with both capital for growth, and a technology platform that includes practice management, analytics tools, telehealth and electronic health record assistance. Brown & Toland’s CEO, Kelly Robinson, said the partnership would enable the group to expand geographically.

While Blue Shield’s purchase of Brown & Toland is the first noteworthy payer acquisition of physician practices we’ve seen in the post-COVID era, it’s likely just the first of many to follow in coming months. As we reported last week, the majority of physician groups—especially smaller independent practices—are suffering significant financial strain, which will likely make groups of all sizes more open to partnership options.

Recent reports suggest that payers in particular may be weathering the economic shocks of the crisis relatively well. This week UnitedHealth Group (UHG) announced it exceeded Q1 earnings targets, and would maintain its pre-COVID earnings guidance for the year, citing savings from cancelled routine care and elective procedures. Should payers continue to fare well, it’s likely that UHG and other health plans could enjoy an advantage in deploying the capital necessary to roll up distressed physician practices.

 

 

 

 

Hospital M&A update: 6 latest deals

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https://www.beckershospitalreview.com/hospital-transactions-and-valuation/hospital-m-a-update-6-latest-deals.html?utm_medium=email

Looking at Hospital M&A Activity in the Value-Based Care World ...

Six transactions involving hospitals and health systems announced, finalized or advanced in the last month:

1. Bankrupt Verity Health to sell 384-bed hospital to Prime Healthcare Services
Bankrupt Verity Health System will sell its 384-bed hospital in Lynnwood, Calif., to for-profit hospital operator Prime Healthcare Services.

2. Kootenai Health acquires 2 hospitals from Essentia Health
Coeur d’Alene, Idaho-based Kootenai Health has acquired two hospitals from Duluth, Minn.-based Essentia Health.

3. West Virginia hospital on brink of closure secures buyer
A bankruptcy court has approved a $3.7 million bid for Williamson (W.Va.) Hospital. The new owner, Williamson Health & Wellness Center, will take over the facility on April 30.

4. Christus Health finalizes acquisition of AdventHealth’s 170-bed hospital
Christus Health has finalized its acquisition of Central Texas Medical Center, a 170-bed facility in San Marcos.

5. CarePoint Health reaches deal to sell New Jersey hospital
After months of uncertainty about a potential sale, Jersey City, N.J.-based CarePoint Health has agreed to sell one of its hospitals to Bayonne, N.J.-based BMC Hospital.

6. Penn Highlands Healthcare to absorb Pennsylvania hospital
Tyrone (Pa) Hospital plans to integrate with DuBois, Pa.-based Penn Highlands Healthcare, the two organizations announced March 18.

 

 

 

Geisinger, AtlantiCare sever merger

Posted on by • Posted in Health System, Hospital, Hospital Industry, Lawsuit, Market Consolidation, Market Power, Mergers & Acquisitions • Leave a comment

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/geisinger-atlanticare-sever-merger.html

HFMA: Mergers will significantly impact care delivery system ...

Danville, Pa.-based Geisinger and Atlantic City, N.J.-based AtlantiCare have reached an agreement to part ways, the two health systems announced March 31. 

AtlantiCare has been part of the Geisinger system since 2015, when the Danville, Pa.-based system acquired it.

The decision to separate comes after months of negotiations between the two parties after AtlantiCare voted to break away from Geisinger in September 2019.

In response to the September vote, Geisinger sued AtlantiCare in an attempt to stop the health system from leaving. In the lawsuit, Geisinger accused AtlantiCare of violating the signed merger agreement.

The merger agreement, signed in 2014, allowed AtlantiCare to terminate the merger within 10 years, but only if Geisinger became controlled by a for-profit organization or affiliated with a religious organization. Neither of those circumstances occurred, according to the lawsuit.

The lawsuit didn’t disclose the reason the New Jersey health system wanted to regain its independence.

However, now the two parties have reached a mutual agreement to go their separate ways. 

Geisinger has also agreed to drop the lawsuit.

“Throughout this process, both Geisinger and AtlantiCare have been guided by the desire to do what is best for the people and communities we serve in Pennsylvania and New Jersey. We believe this agreement best supports the long-term health and wellness of our communities and makes the best use of our nonprofit resources today and into the future. We remain committed to working together to ensure the continued delivery of high-quality healthcare services,” the two systems said in a joint statement.

The separation of the two organizations is expected to take six to 18 months. 

 

 

 

 

 

Amazon Worker Fired After Staging Walkout Over Company’s Handling Of Coronavirus Risk

Posted on by • Posted in Coronavirus, Infection Control, Infectious Virus, Leadership, Living Wage, Management, Market Consolidation, Market Power, Pandemic, Public Health, Public Safety, Sick Leave, Strike, Unfair Labor Practices, Worker Rights, Workers Compensation, Workflow Environment, Workforce Shortages, Wrongful Dismissal • Leave a comment

https://www.yahoo.com/huffpost/amazon-fires-worker-chris-smalls-033240313.html

Amazon Worker Fired After Staging Walkout Over Company's Handling ...

Amazon fired an employee who helped organize a walkout at one of its fulfillment centers over the company’s response to the ongoing coronavirus pandemic on Monday.

Chris Smalls, the employee who helped organize the demonstration, said he felt Amazon had failed to enact adequate measures to protect workers at the facility as many Americans turn to online shopping as stay-at-home mandates expand around the country. Smalls was one of a small group who walked out at a fulfillment center on Staten Island, demanding the company close the site and sanitize it before reopening. He said Amazon had notified employees at the warehouse of one confirmed case of the virus but claimed there were several others that hadn’t yet been reported.

Shortly after the strike, Smalls was terminated after working at Amazon for five years.

“Amazon would rather fire workers than face up to its total failure to do what it should to keep us, our families, and our communities safe,” Smalls said in a statement obtained by HuffPost. “I am outraged and disappointed, but I’m not shocked. As usual, Amazon would rather sweep a problem under the rug than act to keep workers and working communities safe.”

Amazon disputed Smalls’ account in a statement on Monday, saying he had been warned several times for “violating social distancing guidelines” and had been fired after failing to stay home. The company said Smalls’ claims were “simply unfounded.”

“He was also found to have had close contact with a diagnosed associate with a confirmed case of COVID-19 and was asked to remain home with pay for 14 days, which is a measure we’re taking at sites around the world,” a company spokesperson told HuffPost. “Despite that instruction to stay home with pay, he came onsite today, March 30, further putting the teams at risk. This is unacceptable and we have terminated his employment as a result of these multiple safety issues.”

The company also said just 15 employees out of 5,000 at its Staten Island location had participated in the demonstration.

“Our employees are heroes fighting for their communities and helping people get critical items they need in this crisis,” the spokesperson said. “Like all businesses grappling with the ongoing coronavirus pandemic, we are working hard to keep employees safe while serving communities and the most vulnerable.”

The Washington Post notes workers in at least 21 Amazon warehouses and shipping facilities in the U.S. have tested positive for the virus.

Employees at several other major companies staged walkouts on Monday. Workers at Instacart, the grocery delivery company, went on strike nationwide to demand better protections, including hazard pay and expanded paid sick leave. And employees at Whole Foods, owned by Amazon, said they planned to hold a nationwide “sick out” on Tuesday.

Workers at the Staten Island warehouse were first told last week that an employee had tested positive for the novel coronavirus, but they told HuffPost’s Emily Peck that business was “normal” and “running just as it had been” after the declaration. Others said they were afraid of getting sick at work, saying there wasn’t enough protection equipment on site, such as hand sanitizer or masks.

Amazon said it has extended a range of benefits to help protect workers during the pandemic, including extended paid leave options for some employees and increased health and safety measures. Employees diagnosed with COVID-19 are entitled to up to two weeks of paid leave, and Amazon says it notifies workers at sites with infected individuals.

The ongoing efforts by warehouse workers throughout the coronavirus pandemic have garnered support from several lawmakers. Rep. Alexandria Ocasio-Cortez (D-N.Y.) wrote Monday that the employees were simply “demanding dignity.”

“When people work an hourly job, it’s suggested in many ways that you‘re unimportant or expendable,” she wrote on Twitter. “Except you aren’t. Everyone deserves safe work, paid leave, & a living wage.”

 

 

 

The U.S. Tried to Build a New Fleet of Ventilators. The Mission Failed.

Posted on by • Posted in Centers for Disease Control & Prevention (CDC), Coronavirus, Dept of Health and Human Services (HHS), Health Policy, Intensive Care (ICU), Market Consolidation, Market Power, Medical Device, Medical Ethics, Pandemic, Public Health, Public Safety, Ventilators • Leave a comment

The U S Tried to Build a New Fleet of Ventilators The Mission ...

As the coronavirus spreads, the collapse of the project helps explain America’s acute shortage.

Thirteen years ago, a group of U.S. public health officials came up with a plan to address what they regarded as one of the medical system’s crucial vulnerabilities: a shortage of ventilators.

The breathing-assistance machines tended to be bulky, expensive and limited in number. The plan was to build a large fleet of inexpensive portable devices to deploy in a flu pandemic or another crisis.

Money was budgeted. A federal contract was signed. Work got underway.

And then things suddenly veered off course. A multibillion-dollar maker of medical devices bought the small California company that had been hired to design the new machines. The project ultimately produced zero ventilators.

That failure delayed the development of an affordable ventilator by at least half a decade, depriving hospitals, states and the federal government of the ability to stock up. The federal government started over with another company in 2014, whose ventilator was approved only last year and whose products have not yet been delivered.

Today, with the coronavirus ravaging America’s health care system, the nation’s emergency-response stockpile is still waiting on its first shipment. The scarcity of ventilators has become an emergency, forcing doctors to make life-or-death decisions about who gets to breathe and who does not.

The stalled efforts to create a new class of cheap, easy-to-use ventilators highlight the perils of outsourcing projects with critical public-health implications to private companies; their focus on maximizing profits is not always consistent with the government’s goal of preparing for a future crisis.

“We definitely saw the problem,” said Dr. Thomas R. Frieden, who ran the Centers for Disease Control and Prevention from 2009 to 2017. “We innovated to try and get a solution. We made really good progress, but it doesn’t appear to have resulted in the volume that we needed.”

The project — code-named Aura — came in the wake of a parade of near-miss pandemics: SARS, MERS, bird flu and swine flu.

Federal officials decided to re-evaluate their strategy for the next public health emergency. They considered vaccines, antiviral drugs, protective gear and ventilators, the last line of defense for patients suffering respiratory failure. The federal government’s Strategic National Stockpile had full-service ventilators in its warehouses, but not in the quantities that would be needed to combat a major pandemic.

In 2006, the Department of Health and Human Services established a new division, the Biomedical Advanced Research and Development Authority, with a mandate to prepare medical responses to chemical, biological and nuclear attacks, as well as infectious diseases.

In its first year in operation, the research agency considered how to expand the number of ventilators. It estimated that an additional 70,000 machines would be required in a moderate influenza pandemic.

The ventilators in the national stockpile were not ideal. In addition to being big and expensive, they required a lot of training to use. The research agency convened a panel of experts in November 2007 to devise a set of requirements for a new generation of mobile, easy-to-use ventilators.

In 2008, the government requested proposals from companies that were interested in designing and building the ventilators.

The goal was for the machines to be approved by regulators for mass development by 2010 or 2011, according to budget documents that the Department of Health and Human Services submitted to Congress in 2008. After that, the government would buy as many as 40,000 new ventilators and add them to the national stockpile.

The ventilators were to cost less than $3,000 each. The lower the price, the more machines the government would be able to buy.

Companies submitted bids for the Project Aura job. The research agency opted not to go with a large, established device maker. Instead it chose Newport Medical Instruments, a small outfit in Costa Mesa, Calif.

Newport, which was owned by a Japanese medical device company, only made ventilators. Being a small, nimble company, Newport executives said, would help it efficiently fulfill the government’s needs.

Ventilators at the time typically went for about $10,000 each, and getting the price down to $3,000 would be tough. But Newport’s executives bet they would be able to make up for any losses by selling the ventilators around the world.

“It would be very prestigious to be recognized as a supplier to the federal government,” said Richard Crawford, who was Newport’s head of research and development at the time. “We thought the international market would be strong, and there is where Newport would have a good profit on the product.”

Federal officials were pleased. In addition to replenishing the national stockpile, “we also thought they’d be so attractive that the commercial market would want to buy them, too,” said Nicole Lurie, who was then the assistant secretary for preparedness and response inside the Department of Health and Human Services. With luck, the new generation of ventilators would become ubiquitous, helping hospitals nationwide better prepare for a crisis.

The contract was officially awarded a few months after the H1N1 outbreak, which the C.D.C. estimated infected 60 million and killed 12,000 in the United States, began to taper off in 2010. The contract called for Newport to receive $6.1 million upfront, with the expectation that the government would pay millions more as it bought thousands of machines to fortify the stockpile.

Project Aura was Newport’s first job for the federal government. Things moved quickly and smoothly, employees and federal officials said in interviews.

Every three months, officials with the biomedical research agency would visit Newport’s headquarters. Mr. Crawford submitted monthly reports detailing the company’s spending and progress.

The federal officials “would check everything,” he said. “If we said we were buying equipment, they would want to know what it was used for. There were scheduled visits, scheduled requirements and deliverables each month.”

In 2011, Newport shipped three working prototypes from the company’s California plant to Washington for federal officials to review.

Dr. Frieden, who ran the C.D.C. at the time, got a demonstration in a small conference room attached to his office. “I got all excited,” he said. “It was a multiyear effort that had resulted in something that was going to be really useful.”

In April 2012, a senior Health and Human Services official testified before Congress that the program was “on schedule to file for market approval in September 2013.” After that, the machines would go into production.

Then everything changed.

The medical device industry was undergoing rapid consolidation, with one company after another merging with or acquiring other makers. Manufacturers wanted to pitch themselves as one-stop shops for hospitals, which were getting bigger, and that meant offering a broader suite of products. In May 2012, Covidien, a large medical device manufacturer, agreed to buy Newport for just over $100 million.

Covidien — a publicly traded company with sales of $12 billion that year — already sold traditional ventilators, but that was only a small part of its multifaceted businesses. In 2012 alone, Covidien bought five other medical device companies, in addition to Newport.

Newport executives and government officials working on the ventilator contract said they immediately noticed a change when Covidien took over. Developing inexpensive portable ventilators no longer seemed like a top priority.

Newport applied in June 2012 for clearance from the Food and Drug Administration to market the device, but two former federal officials said Covidien had demanded additional funding and a higher sales price for the ventilators. The government gave the company an additional $1.4 million, a drop in the bucket for a company Covidien’s size.

Government officials and executives at rival ventilator companies said they suspected that Covidien had acquired Newport to prevent it from building a cheaper product that would undermine Covidien’s profits from its existing ventilator business.

Some Newport executives who worked on the project were reassigned to other roles. Others decided to leave the company.

“Up until the time the company sold, I was really happy and excited about the project,” said Hong-Lin Du, Newport’s president at the time of its sale. “Then I was assigned to a different job.”

In 2014, with no ventilators having been delivered to the government, Covidien executives told officials at the biomedical research agency that they wanted to get out of the contract, according to three former federal officials. The executives complained that it was not sufficiently profitable for the company.

The government agreed to cancel the contract. The world was focused at the time on the Ebola outbreak in West Africa. The research agency started over, awarding a new contract for $13.8 million to the giant Dutch company Philips. In 2015, Covidien was sold for $50 billion to another huge medical device company, Medtronic. Charles J. Dockendorff, Covidien’s former chief financial officer, said he did not know why the contract had fallen apart. “I am not aware of that issue,” he said in a text message.

Robert J. White, president of the minimally invasive therapies group at Medtronic who worked at Covidien during the Newport acquisition, initially said he had no recollection of the Project Aura contract. A Medtronic spokeswoman later said that Mr. White was under the impression that the contract had been winding down before Covidien bought Newport.

In a statement Sunday night, after the article was published, Medtronic said, “The prototype ventilator, developed by Newport Medical, would not have been able to meet the specifications required by the government, nor at the price required.” Medtronic said that one problem was that the machine was not going to be usable with newborns.

It wasn’t until last July that the F.D.A. signed off on the new Philips ventilator, the Trilogy Evo. The government ordered 10,000 units in December, setting a delivery date in mid-2020.

As the extent of the spread of the new coronavirus in the United States became clear, Dr. Anthony S. Fauci, director of the National Institute of Allergy and Infectious Diseases, revealed on March 15 that the stockpile had 12,700 ventilators ready to deploy. The government has since sped up maintenance to increase the number available to 16,660 — still fewer than a quarter of what officials years earlier had estimated would be required in a moderate flu pandemic.

Last week, the Health and Human Services Department contacted ventilator makers to see how soon they could produce thousands of machines. And it began pressing Philips to speed up its planned shipments.

The stockpile is “still awaiting delivery of the Trilogy Evo,” a Health and Human Services spokeswoman said. “We do not currently have any in inventory, though we are expecting them soon.”

 

 

 

 

MedPAC’s report to Congress: 7 takeaways

Posted on by • Posted in Health Policy, Health System, Home Health, Hospice, Hospital, Hospital Industry, Inpatient Rehab Hospital, Long Term Care Hospital, Market Consolidation, Market Power, Medicare, Medicare 340B Drug Discount Program, Medicare Payment Advisory Commission (MedPAC), Physician, Physician Compensation, Physician Practice Management, Skilled Nursing Facility, Surgery Center • Leave a comment

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The Medicare Payment Advisory Commission released its March 2020 report on Medicare payment policy to Congress, which includes a chapter analyzing the effects of hospital and physician consolidation in the healthcare sector.

Here are seven takeaways:

1. Medicare’s Insurance Trust Fund is likely to run out without changes. Trustees from Medicare estimate that the program’s Hospital Insurance Trust Fund, mostly funded through a payroll tax, will be depleted by 2026. To keep the fund solvent for the next 25 years, Medicare trustees advise that the payroll tax immediately be raised from 2.9 percent to 3.7 percent, or Part A spending to be reduced by 18 percent.

2. MedPAC recommends boosting payment rate for three sectors:

  • Hospitals. MedPAC recommended a 3.3 percent raise in Medicare payments for hospitals next year. The commission said it wants to give hospitals a 2 percent boost overall and tie the other 1.3 percent to quality metrics to motivate hospitals to reduce mortality and improve patient satisfaction. Currently, CMS has scheduled a 2.8 percent increase in 2021 Medicare payments.
  • Outpatient dialysis services. MedPAC recommended that the End Stage Renal Disease Prospective Payment System base payment rate is raised by the amount determined under current law. This is projected to be a boost of 2 percent
  • Long-term care hospitals. The commission recommended a 2 percent increase in the payment rates for long-term care hospitals in 2021.

3. MedPAC recommends unchanged payment rates for four sectors:

  • Physicians: Under current law, there is no update to the 2021 Medicare fee schedule base payment rate for physicians who treat Medicare patients. MedPAC is recommending that CMS keeps the physician rate the same as it is this year.
  • Surgery centers. MedPAC recommended eliminating an expected 2.8 percent payment rate bump for surgery centers next year. It said its decision was due to not having enough cost data from surgery centers.
  • Skilled nursing. MedPAC is recommending skilled nursing facilities receive no change to their base rate next year to better align payments with costs while exerting pressure on providers to keep their cost growth low.
  • Hospice. MedPAC recommends that the hospice payment rates in 2021 be held at their 2020 levels

4. MedPAC recommends payment rate reductions for two sectors: 

  • Home health. The commission recommended a 7 percent reduction in home health payment rates for 2021.
  • Inpatient rehabilitation hospitals. MedPAC is recommending that CMS reduce the payment rate to inpatient rehabilitation facilities by 5 percent for fiscal year 2021.

5. MedPAC builds on its recommendation to revamp quality programs. MedPAC is furthering its recommendation to replace Medicare’s four current hospital quality programs with a single hospital value incentive program. MedPAC said it believes that this recommendation would provide hospitals  higher aggregate payments than they would get under current law.

6. MedPAC’s findings on hospital and physician consolidation. MedPAC said that consolidation gives providers greater market power, which has a statistically significant association with higher profit margins for treating non-Medicare patients. Higher non-Medicare margins also are associated with higher standardized costs per discharge. But the direct association between market power and standardized costs per discharge is statistically insignificant, the commission found.

“The effect of consolidation on hospitals’ costs is not clear in theory or from our current analysis. From a theoretical standpoint, the merger of two hospitals could initially create some efficiencies and bargaining power with suppliers. But over time, higher prices from commercial payers could loosen hospitals’ budget constraints and lead to higher cost growth, thus offsetting any efficiency gains,” MedPAC’s report states.

7. MedPAC’s findings on the 340B Drug Discount Program. MedPAC was asked to analyze whether the availability of 340B drug discounts creates incentives for hospitals to choose more expensive products than they would without the program. MedPAC studied the effect of 340B market share on higher drug spending on cancer treatments between 2009 and 2017. The commission found that for two of the five cancer types studied, 340B participation boosted prices by about $300 per patient per month. However, the boost in spending attributed to 340B was much smaller than the general increase in oncology spending, which includes rising prices and the launch of new products with high drug prices. For example, cancer drug spending grew by more than $2,000 per patient month for patients with breast cancer, lung cancer, and leukemia/lymphoma.

“The MedPAC report released today uses rigorous analysis and finds little evidence 340B participation influences cancer drug spending. Modest differences may be attributable to the types of patients treated in 340B facilities. The safety-net hospitals that participate in the 340B drug-pricing program are essential providers of cancer care in this nation, especially to patients who are living with low incomes, those living with disabilities, and patients requiring more complex oncology care,” said Maureen Testoni, president and CEO of 340B Health, an association that represents more than 1,400 hospitals participating in the 340B program.

Access MedPAC’s full report here. 

 

 

 

 

Experts agree that Trump’s coronavirus response was poor, but the US was ill-prepared in the first place

Posted on by • Posted in 2020 Election Issues, ACA, Centers for Disease Control & Prevention (CDC), Coronavirus, Health Insurance Benefit Design, Health Insurance Coverage Adequacy, Health Policy, Health System, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Hospital, Hospital Industry, Infection Control, Infectious Virus, Life Expectancy, Market Consolidation, Market Failure, Market Power, Mortality, Out of Pocket Expenses, Out-of-Network, Pandemic, Public Health, Public Safety, Safety Net Hospitals, Safety-Net Providers, Sick Leave, Surprise Bills, Underinsured, Uninsured, Vaccination, Vaccine • Leave a comment

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As the coronavirus pandemic exerts a tighter grip on the nation, critics of the Trump administration have repeatedly highlighted the administration’s changes to the nation’s pandemic response team in 2018 as a major contributor to the current crisis. This combines with a hiring freeze at the Centers for Disease Control and Prevention, leaving hundreds of positions unfilled. The administration also has repeatedly sought to reduce CDC funding by billions of dollars. Experts agree that the slow and uncoordinated response has been inadequate and has likely failed to mitigate the coming widespread outbreak in the U.S.

As a health policy expert, I agree with this assessment. However, it is also important to acknowledge that we have underfunded our public health system for decades, perpetuated a poorly working health care system and failed to bring our social safety nets in line with other developed nations. As a result, I expect significant repercussions for the country, much of which will disproportionately fall on those who can least afford it.

Decades of underfunding

Spending on public health has historically proven to be one of humanity’s best investments. Indeed, some of the largest increases in life expectancy have come as the direct result of public health interventions, such as sanitation improvements and vaccinations.

Even today, return on investments for public health spending is substantial and tends to significantly outweigh many medical interventions. For example, one study found that every US$10 per person spent by local health departments reduces infectious disease morbidity by 7.4%.

However, despite their importance to national well-being, public health expenditures have been neglected at all levels. Since 2008, for example, local health departments have lost more than 55,000 staff. By 2016, only about 133,000 full-time equivalent staff remained. State funding for public health was lower in 2016-2017 than in 2008-2009. And the CDC’s prevention and public health budget has been flat and significantly underfunded for years. Overall, of the more than $3.5 trillion the U.S. spends annually on health care, a meager 2.5% goes to public health.

Not surprisingly, the nation has experienced a number of outbreaks of easily preventable diseases. Currently, we are in the middle of significant outbreaks of hepatitis A (more than 31,000 cases), syphilis (more than 35,000 cases), gonorrhea (more than 580,000 cases) and chlamydia (more than 1,750,000 cases). Our failure to contain known diseases bodes ill for our ability to rein in the emerging coronavirus pandemic.

Failures of health care systems

Yet while we have underinvested in public health, we have been spending massive and growing amounts of money on our medical care system. Indeed, we are spending more than any other country for a system that is significantly underperforming.

To make things worse, it is also highly inequitable. Yet, the system is highly profitable for all players involved. And to maximize income, both for- and nonprofits have consistently pushed for greater privatization and the elimination of competitors.

As a result, thousands of public and private hospitals deemed “inefficient” because of unfilled beds have closed. This eliminated a significant cushion in the system to buffer spikes in demand.

At any given time, this decrease in capacity does not pose much of a problem for the nation. Yet in the middle of a global pandemic, communities will face significant challenges without this surge capacity. If the outbreak mirrors anything close to what we have seen in other countries, “there could be almost six seriously ill patients for every existing hospital bed.” A worst-case scenario from the same study puts the number at 17 to 1. To make things worse, there will likely be a particular shortage of unoccupied intensive care beds.

Of course, the lack of overall hospitals beds is not the most pressing issue. Hospitals also lack the levels of staffing and supplies needed to cope with a mass influx of patients. However, the lack of ventilators might prove the most daunting challenge.

Limits of the overall social safety net

While the U.S. spends trillions of dollars each year on medical care, our social safety net has increasingly come under strain. Even after the Affordable Care Act, almost 30 million Americans do not have health insurance coverage. Many others are struggling with high out-of-pocket payments.

To make things worse, spending on social programs, outside of those protecting the elderly, has been shrinking, and is significantly smaller than in other developed nations. Moreover, public assistance is highly uneven and differs significantly from state to state.

And of course, the U.S. heavily relies on private entities, mostly employers, to offer benefits taken for granted in other developed countries, including paid sick leave and child care. This arrangement leaves 1 in 4 American workers without paid sick leave, resulting in highly inequitable coverage. As a result, many low-income families struggle to make ends meet even when times are good.

Can the US adapt?

I believe that the limitations of the U.S. public health response and a potentially overwhelmed medical care system are likely going to be exacerbated by the blatant limitations of the U.S. welfare state. However, after weathering the current storm, I expect us to go back to business as usual relatively quickly. After all, that’s what happened after every previous pandemic, such as H1N1 in 2009 or even the 1918 flu epidemic.

The problems are in the incentive structure for elected officials. I expect that policymakers will remain hesitant to invest in public health, let alone revamp our safety net. While the costs are high, particularly for the latter, there are no buildings to be named, and no quick victories to be had. The few advocates for greater investments lack resources compared to the trillion-dollar interests from the medical sector.

Yet, if altruism is not enough, we should keep reminding policymakers that outbreaks of communicable diseases pose tremendous challenges for local health care systems and communities. They also create remarkable societal costs. The coronavirus serves as a stark reminder.