Industry Voices—6 ways the pandemic will remake health systems

https://www.fiercehealthcare.com/hospitals/industry-voices-6-ways-pandemic-will-remake-health-systems?mkt_tok=eyJpIjoiTURoaU9HTTRZMkV3TlRReSIsInQiOiJwcCtIb3VSd1ppXC9XT21XZCtoVUd4ekVqSytvK1wvNXgyQk9tMVwvYXcyNkFHXC9BRko2c1NQRHdXK1Z5UXVGbVpsTG5TYml5Z1FlTVJuZERqSEtEcFhrd0hpV1Y2Y0sxZFNBMXJDRkVnU1hmbHpQT0pXckwzRVZ4SUVWMGZsQlpzVkcifQ%3D%3D&mrkid=959610

Industry Voices—6 ways the pandemic will remake health systems ...

Provider executives already know America’s hospitals and health systems are seeing rapidly deteriorating finances as a result of the coronavirus pandemic. They’re just not yet sure of the extent of the damage.

By the end of June, COVID-19 will have delivered an estimated $200 billion blow to these institutions with the bulk of losses stemming from cancelled elective and nonelective surgeries, according to the American Hospital Association

A recent Healthcare Financial Management Association (HFMA)/Guidehouse COVID-19 survey suggests these patient volumes will be slow to return, with half of provider executive respondents anticipating it will take through the end of the year or longer to return to pre-COVID levels. Moreover, one-in-three provider executives expect to close the year with revenues at 15 percent or more below pre-pandemic levels. One-in-five of them believe those decreases will soar to 30 percent or beyond. 

Available cash is also in short supply. A Guidehouse analysis of 350 hospitals nationwide found that cash on hand is projected to drop by 50 days on average by the end of the year — a 26% plunge — assuming that hospitals must repay accelerated and/or advanced Medicare payments.

While the government is providing much needed aid, just 11% of the COVID survey respondents expect emergency funding to cover their COVID-related costs.

The figures illustrate how the virus has hurled American medicine into unparalleled volatility. No one knows how long patients will continue to avoid getting elective care, or how state restrictions and climbing unemployment will affect their decision making once they have the option.

All of which leaves one thing for certain: Healthcare’s delivery, operations, and competitive dynamics are poised to undergo a fundamental and likely sustained transformation. 

Here are six changes coming sooner rather than later.

 

1. Payer-provider complexity on the rise; patients will struggle.

The pandemic has been a painful reminder that margins are driven by elective services. While insurers show strong earnings — with some offering rebates due to lower reimbursements — the same cannot be said for patients. As businesses struggle, insured patients will labor under higher deductibles, leaving them reluctant to embrace elective procedures. Such reluctance will be further exacerbated by the resurgence of case prevalence, government responses, reopening rollbacks, and inconsistencies in how the newly uninsured receive coverage.

Furthermore, the upholding of the hospital price transparency ruling will add additional scrutiny and significance for how services are priced and where providers are able to make positive margins. The end result: The payer-provider relationship is about to get even more complicated. 

 

2. Best-in-class technology will be a necessity, not a luxury. 

COVID has been a boon for telehealth and digital health usage and investments. Two-thirds of survey respondents anticipate using telehealth five times more than they did pre-pandemic. Yet, only one-third believe their organizations are fully equipped to handle the hike.

If healthcare is to meet the shift from in-person appointments to video, it will require rapid investment in things like speech recognition software, patient information pop-up screens, increased automation, and infrastructure to smooth workflows.

Historically, digital technology was viewed as a disruption that increased costs but didn’t always make life easier for providers. Now, caregiver technologies are focused on just that.

The new necessities of the digital world will require investments that are patient-centered and improve access and ease of use, all the while giving providers the platform to better engage, manage, and deliver quality care.

After all, the competition at the door already holds a distinct technological advantage.

 

3. The tech giants are coming.

Some of America’s biggest companies are indicating they believe they can offer more convenient, more affordable care than traditional payers and providers. 

Begin with Amazon, which has launched clinics for its Seattle employees, created the PillPack online pharmacy, and is entering the insurance market with Haven Healthcare, a partnership that includes Berkshire Hathaway and JPMorgan Chase. Walmart, which already operates pharmacies and retail clinics, is now opening Walmart Health Centers, and just recently announced it is getting into the Medicare Advantage business.

Meanwhile, Walgreens has announced it is partnering with VillageMD to provide primary care within its stores.

The intent of these organizations clear: Large employees see real business opportunities, which represents new competition to the traditional provider models.

It isn’t just the magnitude of these companies that poses a threat. They also have much more experience in providing integrated, digitally advanced services. 

 

4. Work locations changes mean construction cost reductions. 

If there’s one thing COVID has taught American industry – and healthcare in particular – it’s the importance of being nimble.

Many back-office corporate functions have moved to a virtual environment as a result of the pandemic, leaving executives wondering whether they need as much real estate. According to the survey, just one-in-five executives expect to return to the same onsite work arrangements they had before the pandemic. 

Not surprisingly, capital expenditures, including new and existing construction, leads the list of targets for cost reductions.

Such savings will be critical now that investment income can no longer be relied upon to sustain organizations — or even buy a little time. Though previous disruptions spawned only marginal change, the unprecedented nature of COVID will lead to some uncomfortable decisions, including the need for a quicker return on investments. 

 

5. Consolidation is coming.

Consolidation can be interpreted as a negative concept, particularly as healthcare is mostly delivered at a local level. But the pandemic has only magnified the differences between the “resilients” and the “non-resilients.” 

All will be focused on rebuilding patient volume, reducing expenses, and addressing new payment models within a tumultuous economy. Yet with near-term cash pressures and liquidity concerns varying by system, the winners and losers will quickly emerge. Those with at least a 6% to 8% operating margin to innovate with delivery and reimagine healthcare post-COVID will be the strongest. Those who face an eroding financial position and market share will struggle to stay independent..

 

6. Policy will get more thoughtful and data-driven.

The initial coronavirus outbreak and ensuing responses by both the private and public sectors created negative economic repercussions in an accelerated timeframe. A major component of that response was the mandated suspension of elective procedures.

While essential, the impact on states’ economies, people’s health, and the employment market have been severe. For example, many states are currently facing inverse financial pressures with the combination of reductions in tax revenue and the expansion of Medicaid due to increases in unemployment. What’s more, providers will be subject to the ongoing reckonings of outbreak volatility, underscoring the importance of agile policy that engages stakeholders at all levels.

As states have implemented reopening plans, public leaders agree that alternative responses must be developed. Policymakers are in search of more thoughtful, data-driven approaches, which will likely require coordination with health system leaders to develop flexible preparation plans that facilitate scalable responses. The coordination will be difficult, yet necessary to implement resource and operational responses that keeps healthcare open and functioning while managing various levels of COVID outbreaks, as well as future pandemics.

Healthcare has largely been insulated from previous economic disruptions, with capital spending more acutely affected than operations. But the COVID-19 pandemic will very likely be different. Through the pandemic, providers are facing a long-term decrease in commercial payment, coupled with a need to boost caregiver- and consumer-facing engagement, all during a significant economic downturn.

While situations may differ by market, it’s clear that the pre-pandemic status quo won’t work for most hospitals or health systems.

 

 

 

Feds sue to block Geisinger’s partial acquisition of 132-bed hospital

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/feds-sue-to-block-geisinger-s-partial-acquisition-of-132-bed-hospital.html?utm_medium=email

Federal Antitrust Compliance Attorneys - Oberheiden, P.C.

The U.S. Justice Department sued to block Danville, Pa-based Geisinger’s partial acquisition of a 132-bed hospital in Lewisburg, Pa. 

In the antitrust suit, filed Aug. 5, prosecutors said Geisinger and Evangelical are close competitors for inpatient acute care for patients in six counties in Pennsylvania.

As a result, Geisinger’s plan to acquire a 30 percent ownership stake in Evangelical Community Hospital would “fundamentally” alter the relationship between the two organizations and reduce incentives to “compete aggressively against each other,” the complaint reads.

The suit also claims the agreement between the two parties would result in higher prices, lower care quality and reduced access to inpatient hospital services.

The Justice Department said Geisinger initially sought to acquire Evangelical  Community Hospital in full. But, instead pursued a partial acquisition agreement “in part to avoid antitrust scrutiny,” according to the suit. 

“Preserving competition in healthcare markets is a priority for the Department of Justice because of its important impact on the health and well-being of Americans,” said Makan Delrahim, an assistant attorney general of the Justice Department’s antitrust division. “This agreement between Geisinger and Evangelical threatens to harm patients in central Pennsylvania by reducing competition that has improved the price, quality, and availability of healthcare in the region.”

“We are disappointed by the decision and continue to believe enhancing our relationship with Geisinger is in the best interest of the region and will provide efficient, cost-effective healthcare to the communities we serve,” Kendra Aucker, president and CEO of Evangelical Community Hospital, told PennLive.

 

 

 

 

State of the Union: by Paul Field

Image may contain: text that says 'Whoever Paul Field is he hit the nail on the head. Field PM own opinion, but you post Everyone entitled silly "Welcome Socialism... You Socialism. the wealthiest, geographically advantaged, productive people. about This failure our, "Booming economy," modest challenges. tis the market dissonance stores, farmers/producers and crisis about corporations needing emergency bailout longest history ending interest with being unable equipped provide healthcare, time post profits. crisis response depending antiquated systems nobody remembers operate. But all, politicization the for the benefit of education, science, natural lifestyles, lifestyles, charity, compassion, virtually else for brief gain gutted our society.'

Canceled elective procedures putting pressure on nation’s hospitals

https://www.healthcarefinancenews.com/news/canceled-elective-procedures-putting-pressure-nations-hospitals

U.S. Hospitals Brace for 'Tremendous Strain' from New Virus - JEMS

Even upticks in COVID-19 patients haven’t made up for the revenue losses, since reimbursement for those services is comparatively slim.

Elective procedures are in a strange place at the moment. When the COVID-19 pandemic started to ramp up in the U.S., many of the nation’s hospitals decided to temporarily cancel elective surgeries and procedures, instead dedicating the majority of their resources to treating coronavirus patients. Some hospitals have resumed these surgeries; others resumed them and re-cancelled them; and still others are wondering when they can resume them at all.

In a recent HIMSS20 digital presentation, Reenita Das, a senior vice president and partner at Frost and Sullivan, said that during the pandemic, plastic surgery activity declined by 100%, ENT surgeries declined by 79%, cardiovascular surgeries declined by 53% and neurosurgery surgeries declined by 57%.

It’s hard to overstate the financial impact this is likely to have on hospitals’ bottom lines. Just this week, American Hospital Association President and CEO Rick Pollack, pulling from Kaufman Hall data, said the cancellation of elective surgeries is among the factors contributing to a likely industry-wide loss of $120 billion from July to December alone. When including data from earlier in the pandemic, the losses are expected to be in the vicinity of $323 billion, and half of the nation’s hospitals are expected to be in the red by the end of the year.

Doug Wolfe, cofounder and managing partner of Miami-based law firm Wolfe Pincavage, said this has amounted to a “double-whammy” for hospitals, because on top of elective procedures being cancelled, the money healthcare facilities received from the federal Coronavirus Aid, Relief, and Economic Security Act was an advance on future Medicare payments – which is coming due. While hospitals perform fewer procedures, they will now have to start paying that money back.

All hospitals are hurting, but some are in a more precarious position than others.

“Some hospital systems have had more cash on hand and more liquidity to withstand some of the financial pressure some systems are facing,” said Wolfe. “Traditionally, the smaller hospital systems in the healthcare climate we face today have faced a lot more financial pressure. They’re not able to control costs the same way as a big system. The smaller hospitals and systems were hurting to begin with.”

LOWER REVENUE, HIGHER COSTS

Some hospitals, especially ones in hot spots, are seeing a surge in COVID-19 patients. While this has kept frontline healthcare workers scrambling to care for scores of sick Americans, COVID-19 treatments are not reimbursed at the same level as surgeries. Hospital capacity is being stretched with less lucrative services.

“Some hospitals may be filling up right now, but they’re filling up with lower-reimbursing volume,” said Wolfe. “Inpatient stuff is lower reimbursement. It’s really the perfect storm for hospitals.”

John Haupert, CEO of Grady Health in Atlanta, Georgia, said this week that COVID-19 has had about a $115 million negative impact on Grady’s bottom line. Some $70 million of that is related to the reduction in the number of elective surgeries performed, as well as dips in emergency department and ambulatory visits. 

During one week in March, Grady saw a 50% reduction in surgeries and a 38% reduction in ER visits. The system is almost back to even in terms of elective and essential surgeries, but due to a COVID-19 surge currently taking place in Georgia, it has had to suspend those services once again. ER visits have only come back about halfway from that initial 38% dip, and the system is currently operating at 105% occupancy.

“Part of what we’re seeing there is reluctance from patients to come to hospitals or seek services,” said Haupert. “Many have significantly exacerbated chronic disease conditions.”

Patient hesitation has been an ongoing problem, as has the associated cost of treating coronavirus patients, said Wolfe.

“When they were ramping up to resume the elective stuff, there was a problem getting patients comfortable,” he said. “And the other thing was that the cost of treating patients in this environment has gone up. They’ve put up plexiglass everywhere, they have more wiping-down procedures, and all of these things add cost and time. They need to add more time between procedures so they can clean everything … so they’re able to do less, and it costs more to do less. Even when elective procedures do resume, it’s not going back to the way it was.”

Most hospitals have adjusted their costs to mitigate some of the financial hit. Even some larger systems, such as 92-hospital nonprofit Trinity Health in Michigan, have taken to measures such as laying off and furloughing workers and scaling back working hours for some of its staff. At the top of the month, Trinity announced another round of layoffs and furloughs – in addition to the 2,500 furloughs it announced in April – citing a projected $2 billion in revenue losses in fiscal year 2021, which began on June 1.

Hospitals are at the mercy of the market at the moment, and Wolfe anticipates there could be an uptick in mergers and consolidation as organizations look to partner with less cash-strapped entities. 

“Whether reorganization will work remains to be seen, but there will definitely be a fallout from this,” he said.

 

 

 

 

California AG conditionally approves $350M sale of nonprofit to Prime Healthcare

https://www.healthcarefinancenews.com/news/california-ag-conditionally-approves-350m-sale-st-francis-medical-center-prime-healthcare

Prime Healthcare, CEO Prem Reddy settle false-claims suit for $65M

Prime will acquire St. Francis for a net of $350 million, with a $200 million base cash price and $60 million for accounts receivable.

California Attorney General Xavier Becerra has conditionally approved Verity Health’s application to transfer ownership of St. Francis Medical Center to Prime Healthcare. The Attorney General’s decision follows an earlier decision by the U.S. Bankruptcy Court of the Central District of California granting Verity’s request to reject the existing collective bargaining agreements which impose legacy cost structures that it said contributed to bankruptcy.

Becerra noted that his approval of the sale of St. Francis to Prime Healthcare “protect(s) access to care for the Los Angeles communities served” by St. Francis.

“The COVID-19 public health crisis has brought home the importance of having access to lifesaving hospital care nearby in our communities,” he said. “St. Francis Medical Center is not just an asset, it is an indispensable neighbor, it is the workers who serve the patients, and the doctors who save lives. We conditionally approve this sale to keep it that way.”

Prime Healthcare has built a reputation for saving financially distressed hospitals across the U.S., touting improved clinical quality. Healthgrades said Prime had hospitals named among the nation’s 100 best 53 times, and has been the recipient of several Patient Safety Excellence Awards.

The Attorney General’s office conducted an exhaustive review of the transaction for the past several months and carefully considered public input on the proposed transaction. The Attorney General’s approval includes conditions for the sale which Prime is currently reviewing. Pending a final ruling by the Bankruptcy Court, the transaction is expected to be completed this summer.

THE LARGER TREND

In early April, the U.S. Bankruptcy Court approved the Asset Purchase Agreement for the sale of St. Francis Medical Center to Prime. Under the agreement, Prime will acquire St. Francis for a net consideration of over $350 million, including a $200 million base cash price and $60 million for accounts receivable. In addition, Prime has committed to invest $47 million in capital improvements and extend offers of employment to nearly all staff.

The court also recently granted Verity’s request to reject the existing collective bargaining agreements with two unions that represent associates at St. Francis Medical Center, SEIU and UNAC. The court noted that Prime Healthcare was the only party to submit a qualifying bid for St. Francis and that without rejecting the existing CBAs, “St. Francis would not continue to operate as a going concern, and all of the UNAC (and SEIU) represented employees would lose their jobs.”

The court also noted that Prime and Verity had made multiple efforts to negotiate in good faith with the unions, and the parties devoted “hundreds of hours to negotiations,” but ultimately were unable to agree on new CBAs. Further, the court determined that one of the reasons for the hospital’s bankruptcy was the “legacy cost structure imposed by the existing CBAs.”

It then staid that the proposals were rejected “without good cause” by the unions. Prime said it negotiated in good faith and proposed increasingly generous offers to UNAC and SEIU with wages far above its existing agreements at its Los Angeles-area hospitals. Prime’s latest offer to SEIU maintained existing wages for roughly 90% of SEIU members, and increased wages for some of them. Prime said these wages would be substantially higher than those recently voted by SEIU members at three of Prime’s Los Angeles hospitals.

ON THE RECORD

“Receiving conditional approval is an important step in ensuring Prime is able to preserve the St. Francis mission for the benefit of associates, members of the medical staff and most importantly the patients and Southeast Los Angeles community that has relied on St. Francis for 75 years,” said Rich Adcock, CEO of Verity Health.

“We are honored to be selected to continue the St. Francis legacy and are working to review the conditions and finalize the sale as quickly as possible,” said Dr. Sunny Bhatia, CEO, Region I and chief medical officer of Prime Healthcare. “St. Francis’ mission is especially critical during this pandemic and we honor the service of all caregivers. Prime has already started investments at St. Francis that will enhance patient care as we commit to continue every service line, community benefit program, charity care and expand new services to the community.”

 

 

 

619-bed California hospital to join Cedars-Sinai

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/619-bed-california-hospital-to-join-cedars-sinai.html?utm_medium=email

Cedars-Sinai Medical Center halts use of heart compressor device ...Contact Huntington Hospital | Huntington Hospital

 

Huntington Hospital in Pasadena, Calif., has entered into a definitive agreement to join Los Angeles-based Cedars-Sinai Health System, roughly four months after the organizations signed a letter of intent to explore an affiliation. 

The agreement calls for investments in 619-bed Huntington Hospital’s information technology, ambulatory services and physician development. Under the agreement, Huntington Hospital would be governed by a local board and its philanthropy and volunteer support would be locally controlled, the organizations said.

“On behalf of everyone at Huntington Hospital, we are all very pleased to have reached this important milestone,” said Jaynie Studenmund, chair of the Huntington Hospital board of directors, in a news release. “We pledge to work cooperatively with all the relevant parties and believe that this proposed affiliation is in the best interest of all of our stakeholders and the greater San Gabriel Valley community.”

The definitive agreement will now be submitted for regulatory review and approval. The review process is expected to take several months.

 

 

12-hospital CHI Franciscan-Virginia Mason system would be part of CommonSpirit under new deal

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/12-hospital-chi-franciscan-virginia-mason-system-would-be-part-of-commonspirit-under-new-deal.html?utm_medium=email

CHI Franciscan and Virginia Mason moving toward merger | Tacoma ...

Washington health systems CHI Franciscan and Virginia Mason agreed to explore a combination through a joint operating company that would be part of CommonSpirit Health, the organizations said July 16. 

The proposed 12-hospital system would include more than 250 care sites and nearly 5,000 employed and affiliated providers. Combining the two systems would allow Tacoma-based CHI Franciscan and Seattle-based Virginia Mason to “shape healthcare nationally,” according to Virginia Mason CEO Gary Kaplan, MD. He told Becker’s Hospital Review in an interview that the organizations “envision creating a health system of the future.”

Ketul Patel, the CEO of CHI Franciscan and president of the Pacific Northwest division at parent system CommonSpirit Health, said in the same interview that, “Together, we’re going to not only be able to boast that we have the largest access point in the state, but we are going to be the largest and best-quality [system] in the state of Washington. We’re in a unique place to scaling and being a showcase for the entire country.” 

Dr. Kaplan and Mr. Patel would serve as co-CEOs of the organization, and the health system’s board would have equal representation from both organizations.

Quality and innovation are major focuses of the proposed deal. Virginia Mason is one of only 32 hospitals in the U.S. and the only hospital in Washington to receive an A grade in quality and patient safety from The Leapfrog Group every spring and fall since the organization started publishing grades. All but two of CHI Franciscan’s hospitals received A rankings from Leapfrog this spring, Dr. Kaplan said. Outside of that, Virginia Mason and CHI Franciscan draw patients nationally for cardiology and complex spine programs, Mr. Patel said.

Dr. Kaplan said details of the deal will be hammered out as the organizations move toward a final agreement, with hopes to finalize the process by the end of the year. The joint operating company would be in addition to the organizations’ prior relationships, which include partnerships in obstetrics and women’s health, as well as radiation oncology.

No financial information about the proposal was disclosed. Virginia Mason reported total revenues of $1.2 billion in fiscal year 2019, while Chicago-based CommonSpirit’s totaled nearly $21 billion.

 

 

 

 

8 health systems with strong finances

https://www.beckershospitalreview.com/finance/8-health-systems-with-strong-finances-0713.html?utm_medium=email

Here are eight health systems with strong operational metrics and solid financial positions, according to reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.

1. Baylor Scott & White Health has an “AA-” rating and stable outlook with S&P. The health system has an expansive and growing market position in Texas, healthy operating performance and robust cash flow, S&P said. The health system’s financial cushion positions it well for its COVID-19 response, according to the credit rating agency.

2. South Bend, Ind.-based Beacon Health System has an “AA-” rating and stable outlook with Fitch. Beacon is the acute care leader in its northern Indiana service area and has a track record of strong operating margins, Fitch said. The credit rating agency expects Beacon to return to strong operating margins and sustain strong liquidity, despite pressure from the COVID-19 pandemic.

3. Boston Children’s Hospital has an “Aa2” rating and stable outlook with Moody’s. The hospital has a preeminent reputation as the top children’s hospital in the U.S., robust cash reserves and strong fundraising capabilities, Moody’s said. The credit rating agency expects the hospital’s exceptional market position and robust liquidity to help it return to pre-COVID-19 levels to support proposed increases in leverage and capital investments.

4. Carle Foundation, a three-hospital system based in Urbana, Ill., has an “AA-” rating and stable outlook with Fitch. The health system has a very strong financial profile, and Fitch expects it to sustain profitable operating margins after managing through the pandemic.

5. Salt Lake City-based Intermountain Healthcare has an “AA+” rating and stable outlook with Fitch and an “Aa1” rating and stable outlook with Moody’s. The health system has a leading market position, low debt levels and strong absolute and relative cash levels, Moody’s said. The credit rating agency expects Intermountain will be able to substantially return to and sustain pre-COVID-19 volume levels and margins.

6. Oakland, Calif.-based Kaiser Permanente has an “AA-” rating and stable outlook with Fitch. The rating agency said Kaiser has a leading market share in California and other key markets, and its operational profile is arguably the most emulated model of healthcare delivery in the nation.

7. New York City-based Memorial Sloan Kettering Cancer Center has an “AA-” rating and stable outlook with S&P. The hospital has robust fundraising capabilities, an advantageous payer mix and has expanded its ambulatory footprint, providing additional revenue diversity, S&P said.

8. Tacoma, Wash.-based MultiCare Health System has an “Aa3” rating and stable outlook with Moody’s and an “AA-” rating and stable outlook with Fitch.. The 10-hospital system has an extensive footprint, a track record of successfully executing on multiple projects and strategic ventures concurrently and good financial management, Moody’s said. The credit rating agency expects MultiCare to return to stronger operating results after recovering from disruptions related to the COVID-19 pandemic.

 

 

American patients can’t shop their way to a low cost healthcare system

American patients can’t shop their way to a low cost healthcare system

Hospital price transparency is a distraction from policies that could reduce costs without burdening patients, say Jamie Daw and Adam Sacarny.

 

The prices that hospitals charge privately insured patients in the US have long been shrouded in secrecy. These prices—which are negotiated between hospitals and private insurers—vary widely: the price for the same blood test could vary 39-fold within Tampa, Florida and the cost of a cesarean delivery varies by up to $24 000 in San Francisco, California.

A recent federal court decision stands to shine a light on opaque hospital pricing in the US. In a lawsuit brought forward by the American Hospital Association, a federal judge upheld a regulation issued by the Trump administration that will soon require hospitals to post a wealth of information on payment rates online.

This policy seems intuitive: in other sectors of the economy, consumers usually know the price of a service or product before they purchase it. By comparing prices, consumers can shop around and save money. In turn, sellers anticipate that behavior and are incentivized to keep prices low. Who wouldn’t want a virtuous circle like that in healthcare? 

The Trump administration argues that hospital price transparency will encourage value in healthcare by helping patients and employers find lower prices, while pressuring hospitals to cut them further. However, the potential effects—and who stands to benefit—are not so straightforward.

 

Firstly, giving consumers information on prices doesn’t necessarily mean that they will respond by seeking lower cost services. Studies have consistently found that patients tend not to use price transparency tools, and their effects on healthcare spending are small or nonexistent. Why? Shopping for healthcare services is often complicated or impossible. 

 

Many of the most expensive services are for emergencies where there is little scope for patients to shop.

Even when a patient has time to compare prices for non-urgent procedures or tests, the complexity of healthcare payment systems and insurance products makes it next to impossible for a patient to preemptively calculate what they would personally pay for an encounter. Establishing that amount requires patients to know the cost-sharing parameters of their insurance plan, the set of services they will use during the encounter, and how aggressively the hospital will bill for those services.

Insurance also obscures patients’ incentives to shop by insulating them from healthcare prices.

While patients can be given strong incentives to shop—and an increasing number of American workers are enrolled in high deductible health plans with this aim—these incentives are created by hoisting financial risk on patients. This financially burdens American families and can result in patients forgoing appropriate care.

 

Beyond the challenges posed by patient shopping, the empirical evidence supporting price transparency is weak.

It could even backfire. Economists have pointed out that in sectors with low competition, price transparency can facilitate collusion and lead to higher prices. This fear was borne out in Denmark when authorities began publishing the prices of ready-mixed cement. Prices proceeded to converge and rise, and the authorities eventually abandoned the idea. The most hopeful evidence in the US healthcare system comes from New Hampshire, where prices for medical imaging fell by 3% after the state established a price transparency website. But even effects of this magnitude, while beneficial, would only make a tiny dent in lowering US healthcare costs. 

 

Price transparency efforts reflect a broad trend for American policy makers to turn to consumer-driven strategies to reduce healthcare costs.

These strategies are built on the assumption that patients ought to be responsible for navigating their way to high quality, low cost healthcare. However, the challenges faced by patients in assessing the complex cost-quality tradeoffs in healthcare limit the potential for price transparency to have the impact that the administration advertises.

Perhaps more troubling is that these efforts could distract policy makers from addressing the main drivers of US healthcare prices, such as rapid and ongoing consolidation. Concentrated hospital markets are becoming the norm in the US and are strongly associated with higher prices. Antitrust actions, such as preventing hospital mergers, could reduce and reverse consolidation, likely leading to lower prices.

Another option for policy makers is to assume a greater regulatory role over healthcare prices, including introducing price caps and an all-payer rate setting. A Supreme Court decision made it much more difficult for state governments to collect the data that would undergird these efforts. As a result, the information released under the transparency rule may end up being more useful for states considering new price regulations than for patients shopping for healthcare services.

 

If we want to reduce prices without burdening patients with financial risk, then policy makers need to address the emerging causes of rising healthcare costs directly. Efforts to control costs are most likely to succeed when policy makers tackle the structural drivers behind the most expensive health system in the world.

 

 

 

 

Sutter loses bid to delay $575M antitrust settlement approval

https://www.healthcaredive.com/news/sutter-loses-bid-to-delay-575m-antitrust-settlement-approval/581393/

Dive Brief:

  • A San Francisco Superior Court judge on Thursday denied Sutter Health’s request to delay preliminary approval of a $575 million antitrust settlement with California amid the uncertainty and financial upheaval of the COVID-19 pandemic.
  • The approval process and settlement agreement are flexible enough to continue as scheduled and the needs of the plaintiffs — a union that operates a trust for employee healthcare benefits and California Attorney General Xavier Becerra — to see the health system’s behavior change are pressing, Judge Anne-Christine Massullo wrote in her order.
  • In a statement Thursday, Becerra applauded the court’s decision. “Sutter’s practices harmed California’s healthcare market by charging higher prices unrelated to quality or cost of care,” he said. “They did that long before the COVID-19 pandemic. There is no period of time that medical providers, like Sutter, should be able to carry out such destructive market practices.”

Dive Insight:

Sutter, like health systems throughout the country, has taken a significant hit to its bottom line as the pandemic forced lucrative elective procedures to be put off for weeks earlier this year. The company posted a net loss of more than $1 billion in the first quarter of this year.

It said the financial losses from the COVID-19 crisis could force it to close or divest hospitals. In its June argument to delay the settlement approval, Sutter said the agreement’s cap or chargemaster prices could be too low “to cover the unprecedented and unforeseeable increases in expenditures to respond to COVID-19 particularly given declining revenue.”

But the judge did not agree, saying the court is “not persuaded that the proposed injunction will interfere with Sutter’s ability, or the broader healthcare system’s ability, to provide patient care during the COVID-19 pandemic.”

Massullo continued: “To the extent that a provision of the proposed injunction poses a threat to patient care or the public interest during the COVID-19 pandemic, or as a result of some other presently unforeseen circumstance, any party may seek a modification of the offending provision if and when such a modification becomes appropriate.”

The preliminary approval hearing is now set for Aug. 12 and Aug. 13, according to multiple news reports.

Sutter avoided a jury trial late last year by agreeing to the settlement, which in addition to the $575 million payout includes stipulations like ceasing contracts that require all of its facilities be in an insurer’s network or none of them. The system, however, did not admit guilt as part of the agreement.