After UnitedHealth Group CEO Andrew Witty’s appearances at two congressional committee hearings last week, I had planned to write a story about what the lawmakers had to say. One idea I considered was to publish a compilation of some of the best zingers, and there were plenty, from Democrats and Republicans alike.
I reconsidered that idea because I know from the nearly half-century I have spent on or around Capitol Hill in one capacity or another that those zingers were carefully crafted by staffers who know how to write talking points to make them irresistible to the media. As a young Washington correspondent in the mid-to-late’70s, I included countless talking points in the stories I wrote for Scripps-Howard newspapers. After that, I wrote talking points for a gubernatorial candidate in Tennessee. I would go from there to write scads of them for CEOs and lobbyists to use with politicians and reporters during my 20 years in the health insurance business.
I know the game. And I know that despite all the arrows 40 members of Congress on both sides of the Hill shot at Witty last Wednesday, little if anything that could significantly change how UnitedHealth and the other big insurers do business will be enacted this year.
Money in politics is the elephant in any Congressional hearing room or executive branch office you might find yourself in (and it’s why I coauthored Nation on the Take with Nick Penniman).
You will hear plenty of sound and fury in those rooms but don’t hold your breath waiting for relief from ever-increasing premiums and out-of-pocket requirements and the many other barriers Big Insurance has erected to keep you from getting the care you need.
It is those same barriers doctors and nurses cite when they acknowledge the “moral injury” they incur trying to care for their patients under the tightening constraints imposed on them by profit-obsessed insurers, investors and giant hospital-based systems.
Funny not funny
Cartoonist Stephan Pastis captured the consequences of the corporate takeover of our government, accelerated by the Supreme Court’s 2010 landmark Citizens United vs. Federal Election Commission ruling, in his Pearls Before Swine cartoon strip Sunday.
Rat: Where are you going, Pig?
Pig: To a politician’s rally. I’m taking my magic translation box.
Rat: He doesn’t speak English?
Pig: He speaks politicianish. This translates it into the truth. Come see.
Politician: In conclusion, if you send me to Washington, I’ll clean up this corrupt system and fight for you everyday hard-working Americans. God bless you. God bless the troops. And God bless America.
Magic translation box: I am given millions of dollars by the rich and the powerful to keep this rigged system exactly as it is. Until you change that, none of this will ever change and we’ll keep hoping you’re too distracted to notice.
Politician’s campaign goon: We’re gonna need a word with you.
Magic translation box: This is too much truth for one comic strip. Prepare to be disappeared.
Rat: I don’t know him.
Back to Sir Witty’s time on the hot seat. It attracted a fair amount of media coverage, chock full of politicians’ talking points, including in The New York Times and The Washington Post. (You can read this short Reuters story for free.) Witty, of course, came equipped with his own talking points, and he followed his PR and legal teams’ counsel: to be contrite at every opportunity; to extol the supposed benefits of bigness in health care (UnitedHealth being by far the world’s largest health care corporation) all the while stressing that his company is not really all that big because it doesn’t, you know, own hospitals and pharmaceutical companies [yet]; and to assure us all that the fixes to its hacked claims-handling subsidiary Change Healthcare are all but in.
Congress? Meh. Paying for care? WTF!
Wall Street was relieved and impressed that Witty acquitted himself so well. Investors shrugged off the many barbs aimed at him and his vast international empire. By the end of the day Wednesday, the company’s stock price had actually inched up a few cents, to $484.11. A modest 2.7 million shares of UnitedHealth’s stock were traded that day, considerably fewer than usual.
Instead of punishing UnitedHealth, investors inflicted massive pain on its chief rival, CVS, which owns Aetna. On the same day Witty went to Washington, CVS had to disclose that it missed Wall Street financial analyst’s earnings-per-share expectations for the first quarter of 2024 by several cents. Shareholders’ furor sent CVS’ stock price tumbling from $67.71 to a 15-year low of $54 at one point Wednesday before settling at $56.31 by the time the New York Stock Exchange closed. An astonishing 65.7 million shares of CVS stock were traded that day.
Postscript: I do want to bring to your attention one exchange between Witty and Rep. Buddy Carter (R-Ga.) during the House Energy and Commerce committee hearing. Carter is a pharmacist who has seen firsthand how UnitedHealth’s virtual integration–operating health insurance companies with one hand and racking up physician practices and clinics with the other–and its PBM’s business practices have contributed to the closure of hundreds of independent pharmacies in recent years. He’s also seen patients walk away from the pharmacy counter without their medications because of PBMs’ out-of-pocket demands (often hundreds and thousands of dollars). And he’s seen other patients face life-threatenng delays because of industry prior authorization requirements. Carter was instrumental in persuading the Federal Trade Commission to investigate PBMs’ ownership and business practices. He told Witty:
I’m going to continue to bust this up…This vertical integration in health care in general has got to end.
Prices for non-trauma inpatient admissions were 4.4 percent higher at trauma center hospitals than at hospitals without a trauma designation.
Hospitals designated as trauma centers charged higher prices for non-trauma inpatient admissions and emergency department visits compared to non-trauma center hospitals, a Health Affairs study found.
Hospital prices are the largest driver of rising healthcare spending in the commercial market and are often influenced by the structure of hospital markets. Trauma centers are a critical aspect of the hospital market as they are highly regulated and endowed by regulators with monopoly power over trauma patients in their service areas.
In most states, regulations are designed to encourage the entry of new trauma centers in areas that do not already have one and restrict new entry into areas that already have a trauma center. Additional regulations often require all trauma patients within an area to be transported or transferred to the designated hospital serving the area.
These restrictions create local monopolies for hospitals that are designated as trauma centers. Those in favor of the regulations argue that the monopolies are necessary to ensure each trauma center has sufficient volume to support high-quality and low-cost care. However, this structure could allow hospitals with market power over trauma services to raise prices for non-trauma services.
Researchers used claims data from 2011 to 2018 to assess whether hospitals designated as trauma centers use their market power for trauma services to receive above-market rates for non-trauma services. The sample included 2,000 hospitals with more than two million inpatient admissions and ten million emergency department visits over the study period.
The share of hospitals included in the sample serving as trauma centers increased from 21 percent in 2012 to 28 percent in 2018, resulting in a net addition of 138 trauma centers. The share of non-trauma inpatient admissions and emergency department visits at hospitals serving as trauma centers also increased between 2012 and 2018.
Hospitals serving as trauma centers every year from 2012 to 2018 were categorized as an always trauma center. Opened trauma centers were those not serving as a trauma center in 2012 but serving as one by 2018. Hospitals serving as a trauma center in 2012 but not in 2018 were closed trauma centers, and hospitals that did not serve as a trauma center at all during the study period were called “never trauma centers.”
The average price for non-trauma inpatient admissions among all hospitals was $21,112. Always trauma center hospitals had a higher average price of $22,568 per inpatient admission. The average price per admission was $22,097 at opened centers, $20,589 at closed centers, and $19,769 at never centers. Emergency department prices were similar, with always and opened center hospitals having higher prices than closed and never trauma center facilities.
Always trauma center hospitals were generally larger compared to the other hospital types and were more likely to be in more concentrated hospital markets. The average new injury severity score among emergency department visits in never trauma center hospitals was smaller compared to scores at other hospitals. The average MS-DRG weight for always trauma center hospitals was 1.61 compared to 1.54 for opened and never trauma center hospitals.
Holding these patient and hospital characteristics constant, prices for non-trauma inpatient admissions were 4.4 percent higher in hospitals with trauma center designation than at non-trauma center hospitals. Prices for non-trauma emergency department visits were 5.2 percent higher in trauma center hospitals.
“The results presented here provide an example of an important challenge: How to ensure access to specialized services and protect public health while also accounting for and possibly managing the effects of concomitant market failure,” researchers wrote.
“Our findings provide empirical support for the notion that provider market power in one area can be leveraged to affect prices in other areas.”
The No Surprises Act limits the amounts that hospitals can charge to out-of-network patients for emergency services, including trauma services. This may help limit trauma emergency cross-service leverage pricing, researchers said.
The Department of Justice (DOJ) has been investigating UHG for anticompetitive behavior since last October, as first revealed by the Examiner News earlier this week and subsequently confirmed by the Wall Street Journal.
The DOJ is reportedly interested in Optum’s acquisitions of physician groups and how their relationships with UHG’s health plans affects competition.
The probe appears to be wide-ranging, but there are no indications of if or when the DOJ plans to file charges. UHG is no stranger to antitrust attention: the DOJ failed to block its purchase of Change Healthcare in 2022, and its planned acquisition of home healthcare company Amedisys is still subject to a federal probe.
The Gist: The Biden administration has made antitrust scrutiny a key plank of its policy platform, having recently launched high-profile investigations into several large companies including Apple, Amazon, and Google.
Although these probes span major sectors of the US economy, healthcare consolidation has been a particular focus for the White House.
As the nation’s both largest employer of physicians and largest health insurance company,UHG is an unsurprising target within the healthcare industry. Recently finalized federal merger guidelines have changed how the DOJ and Federal Trade Commission (FTC) gather M&A information, but not the laws or legal precedent upon which cases are ruled, so it remains to be seen if regulators’ new approach will translate into stronger enforcement.
Dallas, TX-based US Anesthesia Partners (USAP), one of the nation’s largest providers of anesthesia services, reached a settlement with the Colorado Attorney General’s Office, which had alleged that USAP engaged in anticompetitive behavior in the state.
Although it denies any wrongdoing, USAP agreed to relinquish exclusive contracts with five Colorado hospitals and revise its practice of adding noncompete agreements to its physician contracts.
This settlement is separate from the similar FTC suit against USAP and its creator-turned-minority owner, private-equity (PE) firm Welsh, Carson, Anderson, and Stowe. That suit, filed in federal district court in Texas in September 2023, alleges that USAP monopolized the Texas anesthesiology market in order to drive up prices unlawfully.
The Gist:USAP isn’t the only large anesthesia group in the news this week for allegations of anticompetitive behavior—hospitals in New York and Florida are suing North American Partners in Anesthesia, claiming it stifles competition by forcing its physicians to sign noncompete agreements.
Health systems and regulators are increasingly dissatisfied with the highly concentrated anesthesia provider market, which has become dominated by large, PE-backed groups.
Because the Colorado case was settled out of court, no precedent has been established for antitrust enforcement, but the result of the ongoing FTC suit against USAP may have significant ramifications for other large, PE-backed physician organizations.
Last week, Congress avoided a partial federal shutdown by passing a stop-gap spending bill and now faces March 8 and March 22 deadlines for authorizations including key healthcare programs.
This week, lawmakers’ political antenna will be directed at Super Tuesday GOP Presidential Primary results which prognosticators predict sets the stage for the Biden-Trump re-match in November. And President Biden will deliver his 3rd State of the Union Address Thursday in which he is certain to tout the economy’s post-pandemic strength and recovery.
The common denominator of these activities in Congress is their short-term focus: a longer-term view about the direction of the country, its priorities and its funding is not on its radar anytime soon.
The healthcare system, which is nation’s biggest employer and 17.3% of its GDP, suffers from neglect as a result of chronic near-sightedness by its elected officials. A retrospective about its funding should prompt Congress to prepare otherwise.
U.S. Healthcare Spending 2000-2022
Year-over-year changes in U.S. healthcare spending reflect shifting demand for services and their underlying costs, changes in the healthiness of the population and the regulatory framework in which the U.S. health system operates to receive payments. Fluctuations are apparent year-to-year, but a multiyear retrospective on health spending is necessary to a longer-term view of its future.
The period from 2000 to 2022 (the last year for which U.S. spending data is available) spans two economic downturns (2008–2010 and 2020–2021); four presidencies; shifts in the composition of Congress, the Supreme Court, state legislatures and governors’ offices; and the passage of two major healthcare laws (the Medicare Modernization Act of 2003 and the Affordable Care Act of 2010).
During this span of time, there were notable changes in healthcare spending:
In 2000, national health expenditures were $1.4 trillion (13.3% of gross domestic product); in 2022, they were $4.5 trillion (17.3% of the GDP)—a 4.1% increase overall, a 321% increase in nominal spending and a 30% increase in the relative percentage of the nation’s GDP devoted to healthcare. No other sector in the economy has increased as much.
In the same period, the population increased 17% from 282 million to 333 million, per capita healthcare spending increased 178% from $4,845 to $13,493 due primarily to inflation-impacted higher unit costs for , facilities, technologies and specialty provider costs and increased utilization by consumers due to escalating chronic diseases.
There were notable changes where dollars were spent: Hospitals remained relatively unchanged (from $415 billion/30.4% of total spending to $1.355 trillion/31.4%), physician services shrank (from $288.2 billion/21.1% to $884.8/19.6%) and prescription drugs were unchanged (from $122.3 billion/8.95% to $405.9 billion/9.0%).
And significant changes in funding Out-of-pocket shrank from 14.2% ($193.6 billion in 2020) to (10.5% ($471 billion) in 2020, private insurance shrank from $441 billion/32.3% to $1.289 trillion/29%, Medicare spending grew from $224.8 billion/16.5% to $944.3billion/21%; Medicaid and the Children’s Health Insurance Program spending grew from $203.4 billion/14.9% to $7805.7billion/18%; and Department of Veterans Affairs healthcare spending grew from $19.1 billion/1.4% to $98 billion/2.2%.
Looking ahead (2022-2031), CMS forecasts average National Health Expenditures (NHE) will grow at 5.4% per year outpacing average GDP growth (4.6%) and resulting in an increase in the health spending share of Gross Domestic Product (GDP) from 17.3% in 2021 to 19.6% in 2031.
The agency’s actuaries assume
“The insured share of the population is projected to reach a historic high of 92.3% in 2022… Medicaid enrollment will decline from its 2022 peak of 90.4M to 81.1M by 2025 as states disenroll beneficiaries no longer eligible for coverage. By 2031, the insured share of the population is projected to be 90.5 percent. The Inflation Reduction Act (IRA) is projected to result in lower out-of-pocket spending on prescription drugs for 2024 and beyond as Medicare beneficiaries incur savings associated with several provisions from the legislation including the $2,000 annual out-of-pocket spending cap and lower gross prices resulting from negotiations with manufacturers.”
My take:
The reality is this: no one knows for sure what the U.S. health economy will be in 2025 much less 2035 and beyond. There are too many moving parts, too much invested capital seeking near-term profits, too many compensation packages tied to near-term profits, too many unknowns like the impact of artificial intelligence and court decisions about consolidation and too much political risk for state and federal politicians to change anything.
One trend stands out in the data from 2000-2022: The healthcare economy is increasingly dependent on indirect funding by taxpayers and less dependent on direct payments by users.
In the last 22 years, local, state and federal government programs like Medicare, Medicaid and others have become the major sources of funding to the system while direct payments by consumers and employers, vis-à-vis premium out-of-pocket costs, increased nominally but not at the same rate as government programs. And total spending has increased more than the overall economy (GDP), household wages and costs of living almost every year.
Thus, given the trends, five questions must be addressed in the context of the system’s long-term solvency and effectiveness looking to 2031 and beyond:
Should its total spending and public funding be capped?
Should the allocation of funds be better adapted to innovations in technology and clinical evidence?
Should the financing and delivery of health services be integrated to enhance the effectiveness and efficiency of the system?
Should its structure be a dual public-private system akin to public-private designations in education?
Should consumers play a more direct role in its oversight and funding?
Answers will not be forthcoming in Campaign 2024 despite the growing significance of healthcare in the minds of voters. But they require attention now despite political neglect.
PS: The month of February might be remembered as the month two stalwarts in the industry faced troubles:
United HealthGroup, the biggest health insurer, saw fallout from a cyberattack against its recently acquired (2/22) insurance transaction processor by ALPHV/Blackcat, creating havoc for the 6000 hospitals, 1 million physicians, and 39,000 pharmacies seeking payments and/or authorizations. Then, news circulated about the DOJ’s investigation about its anti-competitive behavior with respect to the 90,000 physicians it employs. Its stock price ended the week at 489.53, down from 507.14 February 1.
And HCA, the biggest hospital operator, faced continued fallout from lawsuits for its handling of Mission Health (Asheville) where last Tuesday, a North Carolina federal court refused to dismiss a lawsuit accusing it of scheming to restrict competition and artificially drive-up costs for health plans. closed at 311.59 last week, down from 314.66 February 1.
With the South Carolina Republican primary results in over the weekend, it seems a Biden-Trump re-match is inevitable. Given the legacies associated with Presidencies of the two and the healthcare platforms espoused by their political parties, the landscape for healthcare politics seems clear:
Healthcare Issue
Biden Policy
Trump Policy
Access to Abortion
‘It’s a basic right for women protected by the Federal Government’
‘It’s up to the states and should be safe and rare. A 16-week ban should be the national standard.’
Ageism
‘President Biden is alert and capable. It’s a non-issue.’
‘President Biden is senile and unlikely to finish a second term is elected. President Trump is active and prepared.’
Access to IVF Treatments
‘It’s a basic right and should be universally accessible in every state and protected’
‘It’s a complex issue that should be considered in every state.’
Affordability
‘The system is unaffordable because it’s dominated by profit-focused corporations. It needs increased regulation including price controls.’
‘The system is unaffordable to some because it’s overly regulated and lacks competition and price transparency.’
Access to Health Insurance Coverage
‘It’s necessary for access to needed services & should be universally accessible and affordable.’
‘It’s a personal choice. Government should play a limited role.’
Public health
‘Underfunded and increasingly important.’
‘Fragmented and suboptimal. States should take the lead.’
Drug prices
‘Drug companies take advantage of the system to keep prices high. Price controls are necessary to lower costs.’
‘Drug prices are too high. Allowing importation and increased price transparency are keys to reducing costs.’
Medicare
‘It’s foundational to seniors’ wellbeing & should be protected. But demand is growing requiring modernization (aka the value agenda) and additional revenues (taxes + appropriations).’
‘It’s foundational to senior health & in need of modernization thru privatization. Waste and fraud are problematic to its future.’
Medicaid
‘Medicaid Managed Care is its future with increased enrollment and standardization of eligibility & benefits across states.’
‘Medicaid is a state program allowing modernization & innovation. The federal role should be subordinate to the states.’
Competition
‘The federal government (FTC, DOJ) should enhance protections against vertical and horizontal consolidation that reduce choices and increase prices in every sector of healthcare.’
‘Current anti-trust and consumer protections are adequate to address consolidation in healthcare.’
Price Transparency
‘Necessary and essential to protect consumers. Needs expansion.’
‘Necessary to drive competition in markets. Needs more attention.’
The Affordable Care Act
‘A necessary foundation for health system modernization that appropriately balances public and private responsibilities. Fix and Repair’
‘An unnecessary government takeover of the health system that’s harmful and wasteful. Repeal and Replace.’
Role of federal government
‘The federal government should enable equitable access and affordability. The private sector is focused more on profit than the public good.’
‘Market forces will drive better value. States should play a bigger role’
My take:
Polls indicate Campaign 2024 will be decided based on economic conditions in the fall 2024 as voters zero in on their choice. Per KFF’s latest poll, 74% of adults say an unexpected healthcare bill is their number-one financial concern—above their fears about food, energy and housing. So, if you’re handicapping healthcare in Campaign 2024, bet on its emergence as an economic issue, especially in the swing states (Michigan, Florida, North Carolina, Georgia and Arizona) where there are sharp health policy differences and the healthcare systems in these states are dominated by consolidated hospitals and national insurers.
Three issues will be the primary focus of both campaigns: women’s health and access to abortion, affordability and competition. On women’s health, there are sharp differences; on affordability and competition, the distinctions between the campaigns will be less clear to voters. Both will opine support for policy changes without offering details on what, when and how.
The Affordable Care Act will surface in rhetoric contrasting a ‘government run system’ to a ‘market driven system.’ In reality, both campaigns will favor changes to the ACA rather than repeal.
Both campaigns will voice support for state leadership in resolving abortion, drug pricing and consolidation. State cost containment laws and actions taken by state attorneys general to limit hospital consolidation and private equity ownership will get support from both campaigns.
Neither campaign will propose transformative policy changes: they’re too risky. integrating health & social services, capping total spending, reforms of drug patient laws, restricting tax exemptions for ‘not for profit’ hospitals, federalizing Medicaid, and others will not be on the table. There’s safety in promoting populist themes (price transparency, competition) and steering away from anything more.
As the primary season wears on (in Michigan tomorrow and 23 others on/before March 5), how the health system is positioned in the court of public opinion will come into focus.
Abortion rights will garner votes; affordability, price transparency, Medicare solvency and system consolidation will emerge as wedge issues alongside.
PS: Re: federal budgeting for key healthcare agencies, two deadlines are eminent: March 1 for funding for the FDA and the VA and March 8 for HHS funding.
Last Thursday, Seattle-based Providence Health System announced it is refunding nearly $21 million in medical bills paid by low-income residents of Washington and erasing $137 million more in outstanding debt for others. Other systems are likely to follow as pressure con mounts on large, not-for-profit systems to modify their business practices in sensitive areas like patient debt collection, price transparency, executive compensation, investment activities and others.
Not-for profit systems control the majority of the 2,987 nongovernment not-for-profit community hospitals in the U.S. Some lawmakers think it’s time to revisit to revisit the tax exemption. It has the attention of the American Hospital Association which lists “protecting not-for-profit hospitals’ the tax-exempt status” among its 15 Advocacy Priorities in 2024 (it was not on their list in 2023).
Background: Per a recent monograph in Health Affairs: “The Internal Revenue Service (IRS) uses the Community Benefit Standard (CBS), a set of 10 holistically analyzed metrics, to assess whether nonprofit hospitals benefit community health sufficiently to justify their tax-exempt status. Nonprofit hospitals risk losing their tax exemption if assessed as underinvesting in improving community health. This exemption from federal, state, and local property taxes amounts to roughly $25 billion annually.
However, accumulating evidence shows that many nonprofit hospitals’ investments in community health meet the letter, but not the spirit, of the CBS.
Indeed, a 2021 study showed that for every $100 in total expenses nonprofit hospitals spend just $2.30 on charity care (a key component of community benefit)—substantially less than the $3.80 of every $100 spent by for-profit hospitals. A 2022 study looked at the cost of caring for Medicaid patients that goes unreimbursed and is therefore borne by the hospital (another key component of community benefit); the researchers found that nonprofit hospitals spend no more than for-profit hospitals ($2.50 of every $100 of total expense).”
In its most recent study, the AHA found the value of CBS well-in-excess of the tax exemption by a factor of 9:1. But antagonism toward the big NFP systems has continued to mount and feelings are intense…
Insurers think NFP systems exist to gain leverage in markets & states over insurers in contract negotiations and network design. They’ll garner support from sympathetic employers and lawmakers, federal anti-consolidation and price transparency rulings and in the court of public opinion where frustration with the system is high.
State officials see the mega- NFP systems as monopolies that don’t deserve their tax exemptions while the state’s public health, mental health and social services programs struggle.
Some federal lawmakers think the NFP systems are out of control requiring closer scrutiny and less latitude. They think the tax exemption qualifiers should be re-defined, scrutinized more aggressively and restricted.
Well-publicized investments by NFP systems in private equity backed ventures has lent to criticism among labor unions and special interests that allege systems have abandoned community health for Wall Street shareholders.
Investor-owned multi-hospital operators believe the tax exemption is an unfair advantage to NFPs while touting studies showing their own charity care equivalent or higher.
Other key NFP and public sector hospital cohorts cry foul: Independent hospitals, academic medical centers, safety-net (aka ‘essential’) hospitals, rural health clinics & hospitals, children’s hospitals, rural health providers, public health providers et al think they get less because the big NFPs get more.
And the physicians, nurses and workforces employed by Big NFP systems are increasingly concerned by systemization that limits their wages, cuts their clinical autonomy and compromises their patients’ health.
My take:
The big picture is this: the growth and prominence of multi-hospital systems mirrors the corporatization in most sectors of the economy: retail, technology, banking, transportation and even public utilities. The trifecta of community stability—schools, churches and hospitals—held out against corporatization, standardization and franchising that overtook the rest. But modernization required capital, the public’s expectations changed as social media uprooted news coverage and regulators left doors open for “new and better” that ceded local control to distant corporate boards.
Along the way, investor-owned hospitals became alternatives to not-for-profits, and loose networks of hospitals that shared purchasing and perhaps religious values gave way to bigger multi-state ownership and obligated groups.
The attention given large NFP hospital systems like Providence and others is not surprising. These brands are ubiquitous. Their deals with private equity and Big Tech are widely chronicled in industry journalism and passed along in unfiltered social media. And their collective financial position seems strong: Moody’s, Fitch, Kaufman Hall and others say utilization has recovered, pandemic recovery is near-complete and, despite lingering concerns about workforce issues, growth in their core businesses plus diversification in new businesses are their foci. (See Hospital Section below).
I believe not-for-profit hospital systems are engines for modernizing health delivery in communities and a lightening rod for critics who think their efforts more self-serving than for the public good.
Most consumers (55%) think they earn their tax exemption but 34% have mixed feelings and 10% disagree. (Keckley Poll November 20, 2023). That’s less than a convincing defense.
That’s why the threat to the tax exemption risk is real, and why every organization must be prepared. Equally important, it’s why AHA, its state associations and allies should advance fresh thinking about ways re-define CBS and hardwire the distinction between organizations that exist for the primary purpose of benefiting their shareholders and those that benefit health and wellbeing in their communities.
PS: Must reading for industry watchers is a new report from by Health Management Associates (HMA) and Leavitt Partners, an HMA company, with support from Arnold Ventures. The 70-page report provides a framework for comparing the increasingly crowned field of 120 entities categorized in 3 groups: Hybrids (6.9 million), Delivery (5.8 million) and Enablers 17.5 million
“At the start of the movement, value-based arrangements primarily involved traditional providers and payers engaging in relatively straight-forward and limited contractual arrangements. In recent years, the industry has expanded organically to include a broader ecosystem of risk-bearing care delivery organizations and provider enablement entities with capabilities and business models aligned with the functions and aims of accountable care…Inclusion criteria for the 120 VBD entities included in this analysis were:
1-Serve traditional Medicare, MA, and/or Medicaid populations. Entities that are focused solely on commercial populations were excluded
2-Operate in population-based, total cost of care APMs—not only bundled payment models.
3- Focus on primary care and/or select specialties that are relevant to total cost of care models (i.e., nephrology, oncology, behavioral health, cardiology, palliative care). Those exclusively focused on specialty areas geared toward episodic models (e.g., MSK) were excluded. –
4-Share accountability for cost and quality outcomes. Business models must be aligned with provider performance in total cost of care arrangements. Vendors that support VBP but do not share accountability for outcomes were excluded.
The lawsuit filed in federal court seeks to represent thousands of other UPMC employees.
Dive Brief:
A nurse is suing the University of Pittsburgh Medical Center for allegedly leveraging its monopoly control over the employment market in Pennsylvania to keep wages down and prevent workers from leaving for competitors, all while increasing their workload.
The lawsuit, filed late last week in a federal court, seeks class action status to represent other staff at the nonprofit health system. Plaintiff Victoria Ross, who worked as a nurse at UPMC Hamot in Erie, Pennsylvania, seeks damages and is asking the judge to enjoin UPMC from continuing its unfair business practices.
If granted class action status, the lawsuit could represent thousands of current and former UPMC workers, including registered nurses, medical assistants and orderlies. UPMC has denied the allegations in statements to other outlets but did not respond to a request for comment by time of publication.
Dive Insight:
UPMC has grown steadily over the past few decades into the largest private employer in Pennsylvania, employing 95,000 workers overall.
From 1996 to 2018, the system acquired 28 competing healthcare providers, greatly expanding its market power, according to the lawsuit. The acquisitions also shrunk the availability of healthcare services. Over the same period, UPMC closed four hospitals and downsized operations in three other facilities, eliminating 1,800 full- and part-time jobs, the lawsuit said.
UPMC relied on “draconian” mobility restrictions and labor law violations to lock employees into lower pay and subcompetitive working conditions, according to the 44-page complaint.
Specifically, the system enacted restraints like noncompete clauses and “do-not-rehire blacklists” to stop workers from leaving. Meanwhile, UPMC allegedly suppressed workers’ labor law rights to prevent them from unionizing.
“Each of these restraints alone is anticompetitive, but combined, their effects are magnified.UPMC wielded these restraints together as a systemic strategy to suppress worker bargaining power and wages,” the lawsuit said. “As a result, UPMC’s skilled healthcare workers were required to do more while earning less — while they were also subjected to increasingly unfair and coercive workplace conditions.”
According to the complaint, UPMC has faced 133 unfair labor practice charges since 2012, and 159 separate allegations. Roughly 74% of the violations were related to workers’ efforts to unionize, the lawsuit said.
Meanwhile, UPMC workers’ wages have fallen at a rate of 30 to 57 cents per hour on average compared to other hospital workers for every 10% increase in UPMC’s market share, said the lawsuit, citing a consultant’s economic analysis.
The lawsuit also noted that UPMC’s staffing ratios have been decreasing, even as staffing ratios on average have increased at other Pennsylvania hospitals.
The alleged labor abuses and UPMC’s market power are linked, according to the complaint.
“Had UPMC been subject to competitive market forces, it would have had to raise wages to attract more workers and provide higher staffing levels in order to avoid degrading the care it provided to its patients, and in order to prevent losing patients to competitors who could provide better quality care,” the lawsuit said.
UPMC is facing similar labor allegations. In May, two unions filed a complaint asking the Department of Justice to investigate labor abuses at the nonprofit.
Hospitals were plagued by staffing shortages during the COVID-19 pandemic. Many facilities still bemoan the difficulty of hiring and retaining full-time workers, and point to shortages (of nurses in particular) as the reason for overworked employees and poor staffing ratios.
Yet some studies suggest that’s not the case. One recent analysis of Bureau of Labor Statistics data found employment in hospitals — including registered nurses — is now slightly higher than it was at the start of the pandemic.
Despite the controversy, UPMC — which now operates 40 hospitals with annual revenue of $26 billion — continues to try and expand its market share. Late last year, the system signed a definitive agreement to acquire Washington Health Care Services, a Pennsylvania system with more than 2,000 employees and two hospitals. The deal faces pushback from local unions.
In much of the country, a single hospital system now accounts for most hospital admissions.
Some illnesses and injuries — say, a broken ankle — can send you to numerous health care providers. You might start at urgent care but end up in the emergency room. Referred to an orthopedist, you might eventually land in an outpatient surgery center.
Four different stops on your road to recovery. But as supersized health care systems gobble up smaller hospitals and clinics, it’s increasingly likely that all those facilities will be owned by the same corporation.
Hospital trade groups say mergers can save failing hospitals, especially rural ones. But research shows that a lack of competition often leads to fewer services at higher costs. In recent years, federal regulators have been taking a harder look at health care consolidation.
Yet some states, notably those in the South, are paving the way for more mergers.
Mississippi passed a law this year that exempts hospital acquisitions from state antitrust laws, while North Carolina considered legislation to do the same for the University of North Carolina’s health system. Louisiana officials approved a $150 million hospital acquisition late last year that has ignited a legal battle with the Federal Trade Commission over whether they allowed a monopoly.
States including South Carolina, Tennessee, Texas and Virginia have certificate of public advantage (COPA) laws that let state agencies determine whether hospitals can merge, circumventing federal antitrust laws. And large hospital systems wield significant political power in many state capitals.
‘A tool in the tool belt’
Nearly half of Mississippi’s rural hospitals are at risk of closing, according to a report from the Center for Healthcare Quality & Payment Reform, a nonprofit policy research center.
Mississippi leaders hope easing restrictions on hospital mergers could be a solution. A new law exempts all hospital acquisitions and mergers from state antitrust laws and classifies community hospitals as government entities, making them immune from antitrust enforcement.
We saw primary care offices get shut down. We’ve seen our specialists leave for out of state. Several of the outlying hospitals saw services cut even though they were told it wouldn’t happen.
– Kerri Wilson, a registered nurse in North Carolina
Mississippi, one of the poorest states in the nation, is also one of the least healthy, with high rates of chronic conditions like heart disease and diabetes. It is one of 10 states that haven’t expanded Medicaid under the Affordable Care Act, and has one of the nation’s highest percentages of people without health insurance.
“Like many states in a similar socioeconomic status, Mississippi has difficulties with patients that are either not insured or underinsured,” said Ryan Kelly, executive director of the nonprofit Mississippi Rural Health Association. Food insecurity and lack of reliable transportation mean rural residents tend to be sicker and more expensive to treat.
That’s part of the reason why so many Mississippi hospitals operate in the red. The largest hospital in the Mississippi Delta region, Greenwood Leflore, is at immediate risk of closure even after hospital leaders shuttered unit after unit — including labor and delivery, and intensive care — in an effort to remain solvent.
A deal for the University of Mississippi Medical Center to purchase Greenwood Leflore fell through last year. Now, with the new law in effect, the hospital’s owners — the city and county — are soliciting new bidders and offering them the option to buy the hospital outright.
Kelly said he expects to see more Mississippi hospitals consolidate over the coming decade. Some have already had conversations around merger possibilities after the new law went into effect, though talks are in early days.
“It’s a tool in the tool belt,” he said of the new law. “I think it could be a saving grace for some of our hospitals that are perennially struggling but still serve with good purpose. They could be part of a larger system that could help offset their costs so they’re able to be a little leaner but still provide services in their community.”
Leaders in some states think consolidation could solve their health care woes, but studies indicate it has a negative impact.
“There’s a large body of research showing that health care consolidation leads to increases in prices without clear evidence it improves quality,” said Zachary Levinson, a project director at KFF, a nonprofit health care policy research organization, who analyzes the business practices of hospitals and other providers and their impact on costs.
When researchers studied how affiliation with a larger health system affected the number of services a rural hospital offered, they found most of the losses in service occurred in hospitals that joined larger systems, according to a 2023 study from the Rural Policy Research Institute at the University of Iowa.
Even when an acquisition by a larger health system helps a struggling hospital keep its doors open, “there can be potential tradeoffs,” Levinson said.
“There’s some concern that, for example, when a larger health system buys up a smaller independent hospital in a different region, that hospital will become less attentive to the specific needs of the community it serves,” and may cut services the community wants because they’re not deemed profitable enough, he said.
Most research suggests hospital consolidation does lead to higher prices, according to a sweeping 2020 report from MedPAC, an independent congressional agency that advises Congress on issues affecting Medicare. The report found that patients with private insurance pay higher prices for care and for insurance in markets that are dominated by one health care system. And when hospitals acquire physician practices, taxpayer and patient costs can double for some services provided in a physician’s office, the report found.
Kelly said he’s not as concerned with consolidation raising costs for Mississippi’s rural residents because so many qualify for subsidized care, but he does think mergers could eliminate some jobs in the health care sector.
“It’s hard to say for sure,” he said. “It is a risk, no question. But I still think it’s a net positive.”
A ‘hospital cartel’
When HCA Healthcare purchased a North Carolina hospital system in 2019, registered nurse Kerri Wilson wasn’t prepared for how much would change — and how quickly — at her hospital in Asheville.
“Once the sale was final in 2019, that’s when it was like the ball dropped and we started seeing staffing cuts,” said Wilson, an Asheville native who has worked in the cardiology stepdown unit at Mission Hospital since 2016.
“We saw our nurse-patient ratios change,” Wilson said. “We saw primary care offices get shut down. We’ve seen our specialists leave for out of state. Several of the outlying hospitals saw services cut even though they were told it wouldn’t happen.”
In the four years since HCA Healthcare bought Mission Health, North Carolinians have hit the nation’s largest health system with multiple antitrust lawsuits, including one that asserts HCA operates an unlawful health care monopoly through Mission Health, and another filed by city and county governments that says HCA’s corporate practices have decimated local health care options and raised costs.
HCA Healthcare did not immediately respond to a request for comment. However, when the second lawsuit was filed, HCA/Mission Health spokesperson Nancy Lindell called it “meritless.”
“Mission Health has been caring for Western North Carolina for more than 130 years and our dedication to providing excellent health care to our community will not waiver [sic] as we vigorously defend against this meritless litigation,” Lindell said in a statement to the Mountain Xpress newspaper. “We are disappointed in this action and we continue to be proud of the heroic work our team does daily.”
Mission’s nurses voted in 2020 to join National Nurses Organizing Committee, an affiliate of National Nurses United, the nation’s largest nursing union, to advocate for higher pay and safer working conditions.
Meanwhile, North Carolina leaders such as Republican State Treasurer Dale Folwell and Democratic Attorney General Josh Stein have spoken out against HCA’s practices. Folwell likened the merger to a “hospital cartel” and both officials filed amicus briefs supporting the plaintiffs in the antitrust lawsuits.
“We have a situation with the cartel-ization of health care in North Carolina where people have to drive miles just to get basic services, and this is unacceptable,” Folwell told Stateline. He said many North Carolinians, particularly those with low incomes, fear seeking medical help because of sky-high medical bills that he said are a result of massive health care systems with little state oversight.
Folwell has publicly criticized the power that the North Carolina Health Care Association, the state’s hospital trade group, wields in the legislature. He calls the group the “leader of the [hospital] cartel.”
Industry groups spent more than $141 million nationwide lobbying state officials on health issues in 2021. And out of that $141 million, the hospital and nursing home industry spent the most, accounting for nearly 1 out of every 4 dollars spent on lobbying state lawmakers over health issues.
“This is not a Republican or Democrat issue,” said Folwell, who has lent his support to a bipartisan bill that would limit the power of large hospitals to charge interest rates and rein in medical debt collection tactics. “It’s a moral issue.”
North Carolina Democratic state Sen. Julie Mayfield, who was on the Asheville City Council when HCA acquired Mission Health, sponsored a bill earlier this year that would have curbed hospital consolidations.
In a social media post introducing the bill, Mayfield said she hoped it would “prevent other communities from suffering what we have suffered in the wake of the Mission sale — loss of nursing and other staff, loss of physicians, closure of facilities, and the resulting lower quality of care many people have experienced in Mission hospitals over the last four years.”
Even the Federal Trade Commission jumped in, urging legislators to “reconsider” a bill that would have greenlighted UNC Health’s expansion, saying it could “lead to patient harm in the form of higher health care costs, lower quality, reduced innovation and reduced access to care.” That bill ultimately failed in the state House, as sentiment among some North Carolina leaders had already soured on hospital mergers.
In most U.S. markets, a single hospital system now accounts for more than half of hospital inpatient admissions. Federal regulators have been scrutinizing health care mergers more carefully in recent years, said KFF’s Levinson. The FTC has both sued and been sued by health care systems in Louisiana this year, and recently released a draft version of new guidelines on anti-competitive practices.
“People have viewed those guidelines as indicating the FTC and [the U.S. Department of Justice] will be more interested in aggressively challenging anti-competitive practices than in the past,” Levinson said.
Both the Trump and Biden administrations issued executive orders directing federal agencies to focus on promoting competition in health care markets. President Joe Biden’s order noted that “hospital consolidation has left many areas, particularly rural communities, with inadequate or more expensive healthcare options.”
In Mississippi, the hospital mergers law received widespread support from most of the state’s GOP leaders. But the state’s far-right Freedom Caucus came out against it, with Republican state Rep. Dana Criswell, the chair of the caucus, calling it “an attempt at a complete government takeover” of Mississippi’s hospitals.
Criswell said allowing the University of Mississippi Medical Center to buy smaller hospitals “will create a huge government protected monopoly, driving out competition and ultimately putting private hospitals out of business.”
‘Trying something different’
Wilson, the Asheville nurse, said she used to have three or four patients per shift before the merger; now she typically has five. That gives her an average of 10 minutes per patient per hour. It’s not enough time, she said, to give patients their medication, answer questions and perform other tasks that she said nurses often take on because other departments are short-staffed.
Sometimes, she said, those tasks include helping patients go to the bathroom because there aren’t enough nursing assistants or taking out the trash because of a shortage of cleaning staff. Meanwhile, the waiting rooms are overflowing.
Wilson joined the new Mission Hospital nurses union, which was able to negotiate raises for its members. The union continues to protest working conditions, including staff-patient ratios.
But Kelly, of the Mississippi Rural Health Association, said that in his state, mergers are an opportunity for positive change.
“It’s not like health care in Mississippi is at the top of the list for good things,” he said. “I think this is an example of trying something different and seeing if it works.”
Last week, six notable associations representing health insurers and large employers announced Better Solutions for Healthcare (BSH):“An advocacy organization dedicated to bringing together employers, consumers, and taxpayers to educate lawmakers on the rising cost of healthcare and provide ideas on how we can work together to find better solutions that lower healthcare costs for ALL Americans.”
BSH, which represents 492 large employers, 34 Blue Cross plans, 139 insurers and 42 business coalitions, blames hospitals asserting that “over the last ten years alone, the cost of providing employee coverage has increased 47% with hospitals serving as the number one driver of healthcare costs.”
Its members, AHIP, the Blue Cross Blue Shield Association, the Business Group on Health, Public Sector Health Care Roundtable, National Alliance of Healthcare Purchaser Coalitions and the American Benefits Council, pledge to…
Promote hospital competition
Enforce Federal Price Transparency Laws for Hospital Charges
Rein in Hospital Price Mark-ups
Insure Honest Billing Practices
And, of particular significance, BSH calls out “the growing practice of corporate hospitals establishing local monopolies and leveraging their market dominance to charge patients more…With hospital consolidation driving down competition, there’s no pressure for hospitals to bring costs back within reach for employees, retirees and their families…prices at monopoly hospitals are 12% higher than in markets with four or more competitors.”
The BSH leadership team is led by DC-based healthcare policy veterans with notable lobbying chops: Adam “Buck” Buckalew, a former Sen. Lamar Alexander (R-TN) staffer who worked on the Health Education, Labor and Pensions (HELP) committee and is credited with successfully spearheading the No Surprises Act legislation that took effect in January 2022, and Kathryn Spangler, another former HELP staffer under former Sen. Mike Enzi (R-WY) who most recently served as Senior Policy Advisor at the American Benefits Council.
It’s a line in the sand for hospitals, especially large not-for-profit systems that are on the defensive due to mounting criticism.
Examples from last week: Atrium and Caremont were singled in NC by the state Treasurer for their debt collection practices based on a Duke study that got wide media coverage. Allina’s dispute with 550 of its primary care providers seeking union representation based on their concerns about patient safety. Jefferson Health was called out for missteps under its prior administration’s “growth at all costs” agenda and the $35 million 2021 compensation for Common Spirit’s CEO received notice in industry coverage.
My take:
BSH represents an important alignment of health insurers with large employers who have shouldered a disproportionate share of health costs for years through the prices imposed for the hospitals, prescriptions and services their employees and dependents use.
Though it’s too early to predict how BSH vs. Corporate Hospitals will play out, especially in a divided Congress and with 2024 elections in 14 months, it’s important to inject a fair and balanced context for this contest as the article of war are unsealed:
Health insurers and hospitals share the blame for high health costs along with prescription drug manufacturers and others. The U.S. system feasts on opaque pricing, regulated monopolies and supply-induced demand. Studies show unit costs for hospitals along with prescription drug costs bear primary responsibility for two-thirds of health cost increases in recent years—the result of increased demand and medical inflation. But insurers are complicit: benefits design strategies that pre-empt preventive health and add administrative costs are parts of the problem.
Corporatization of the U.S. system cuts across every sector: Healthcare’s version of Moneyball is decidedly tilted toward bigger is better: in healthcare, that’s no exception. 3 of the top 10 in the Fortune 100 are healthcare (CVS-Aetna, United, McKesson)) and HCA (#66) is the only provider on the list. The U.S. healthcare industry is the largest private employer in the U.S. economy: how BSH addresses healthcare’s biggest employers which include its hospitals will be worth watching. And Big Pharma companies pose an immediate challenge: just last week, HHS called out the U.S. Chamber of Commerce for siding with Big Pharma against implementation of drug price controls in the Inflation Reduction Act—popular with voters but not so much in Big Pharma Board rooms.
The focus will be on Federal health policies. BSH represents insurers and employers that operate across state lines–so do the majority of major health systems. Thus, federal rules, regulations, administrative actions, executive orders, and court decisions will be center-stage in the BSH v. corporate hospitals war. Revised national policies around Medicare and federal programs including military and Veterans’ health, pricing, equitable access, affordability, consolidation, monopolies, data ownership, ERISA and tax exemptions, patent protections and more might emerge from the conflict. As consolidation gets attention, the differing definitions of “markets” will require attention: technology has enabled insurers and providers to operate outside traditional geographic constraints, so what’s next? And, complicating matters, federalization of healthcare will immediately impact states as referenda tackle price controls, drug pricing, Medicaid coverage and abortion rights—hot buttons for voters and state officials.
Boards of directors in each healthcare organization will be exposed to greater scrutiny for their actions: CEO compensation, growth strategies, M&A deals, member/enrollee/patient experience oversight, culture and more are under the direct oversight of Boards but most deflect accountability for major decisions that pose harm. Balancing shareholder interests against the greater good is no small feat, especially in a private health system which depends on private capital for its innovations.
8.6% of the U.S. population is uninsured, 41% of Americans have outstanding medical debt, and the majority believe health costs are excessive and the U.S. system is heading in the wrong direction.
Compared to other modern systems in the world, ours is the most expensive for its health services, least invested in social determinants that directly impact 70% of its costs and worst for the % of our population that recently skipped needed medical care (39.0% (vs. next closest Australia 21.2%), skipped dental care (36.2% vs. next closest Australia 31.7%) and had serious problems/ were unable to pay medical bills (22.4% next closest France 10.1%). Thus, it’s a system in which costs, prices and affordability appear afterthoughts.
Who will win BSH vs. Corporate Hospitals? It might appear a winner-take all showdown between lobbyists for BSH and hospital hired guns but that’s shortsighted. Both will pull out the stops to win favor with elected officials but both face growing pushback in Congress and state legislatures where “corporatization” seems more about a blame game than long-term solution.
Each side will use heavy artillery to advance their positions discredit the other. And unless the special interests that bolster efforts by payers are hospitals are subordinated to the needs of the population and greater good, it’s not the war to end all healthcare wars. That war is on the horizon.
HENRY KOTULA 