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Fitch brightens its view on nonprofit hospitals
https://www.healthcaredive.com/news/fitch-brightens-its-view-on-nonprofit-hospitals/529618/
Dive Brief:
- Fitch Ratings said its “Rating Watch” for U.S. nonprofit hospitals and health systems is over after the organizations showed improved or stable results this year.
- During a six-month review of 125 existing issuers, Fitch affirmed 52% of the graded facilities and upgraded 28%.
- More than 93% of rating changes moved only one to two notches. There were two extreme outliers. Fitch downgraded Lexington Medical Center six notches due to pension liability. Presence Health Network, meanwhile, shot up seven notches.
Dive Insight:
Fitch’s move is a sign of optimism for nonprofits reeling from years of wobbly financial times. The report comes months after Moody’s revised its outlook for the sector from stable to negative. That move followed nonprofit hospitals seeing more credit downgrades in 2017.
Nevertheless, Fitch’s announcement this week shows that hospitals are finding ways to combat tough finances, including lower reimbursements and inpatient admissions. One way acute care hospitals confront those issues is by investing in outpatient services. The strategy helps health systems defend market share.
At the end of 2017, Fitch said investing in outpatient assets is usually favorable for credit profiles, but also leads to “more economic cyclicality and seasonality in patient volumes for hospital companies.”
In its report this week, Fitch said a hospital’s cash and investment portfolio and asset allocation policy play significant roles in its creditworthiness. Balance sheet strength is also an essential piece of ratings — more than operational success or size and scale.
Fitch said size and scale are no longer direct rating factors. However, Fitch may consider if the size and scale enhance or weaken its ability to provide rating stability.
“As borne out by Fitch’s rating actions, it is apparent that providers with strong net leverage are able to withstand potential financial pressures and return to existing rating levels more quickly than credits without strong balance sheet metrics,” the ratings agency said.
Fitch’s review of 125 existing issuers was just under half of its total acute portfolio. Fitch Ratings Senior Director Kevin Holloran said it’s somewhat surprising there were more upgrades than downgrades.
About half of the upgrades were connected to criteria revision, 14% based on credit reasons and 34% because of a combination of credit and criteria reasons. On the other end, about half of downgrades were based on criteria review, 24% on credit reasons and 24% on a combination of credit and criteria factors.
Holloran said upgrades were mostly from “long-time consistent performers that benefited from a ‘new look’ through the lens of our upgraded criteria.” Downgrades were more varied, but balance sheet strength played a pivotal role in predictable credit stability.
Fitch said the future rating trajectory for nonprofit hospitals is “normalcy.” That said, Holloran noted that the sector is dealing with multiple operational challenges this year. Those issues, including external factors, such as regulations and legislation, could drag into 2019.
Humana files suit against 37 drug makers accusing them of price fixing
The conspiracy involving secret meetings resulted in higher prices for insurers, the government and consumers, the lawsuit claims.
Humana has brought a lawsuit against 37 pharmaceutical companies including Novartis, Mylan and Teva, alleging price fixing for numerous generic drugs.
The conspiracy increased the profits of the drug makers and others working with them at the expense of consumers, the government and private payers such as Humana, the lawsuit said.
Humana wants to recover damages it said it incurred from overcharges for certain widely-used generics, according to the lawsuit filed Friday in federal court for the Eastern Division of Pennsylvania.
Humana said the conspiracy is far-reaching among the drug makers to manipulate markets and obstruct generic competition. They agreed to fix, increase, stabilize and/or maintain the price of the drugs specified, along with other drugs, the court document said.
Humana accuses the pharmaceutical companies of secret meetings and communications at public and private events such as trade association meetings held by the Generic Pharmaceutical Association and others.
Humana’s allegations are based on personal knowledge and information made public during ongoing government investigations, the insurer said.
The pricing fixing is also under investigation by federal and state authorities, the lawsuit said.
The Attorneys General of 47 states, Washington, D.C. and Puerto Rico have filed a civil enforcement action against most of the named defendants, alleging agreements to fix 15 drug prices, the lawsuit said.
The Department of Justice has convened a grand jury to investigate a number of the defendants for price increases ranging from 100 percent to 400, 2,600 and 8,000 percent, Humana said.
The price increases are consistent with Medicare Part D price increases found by the Government Accountability Office for many of the subject drugs.
Among the drugs for which GAO identified “extraordinary price increases” — defined as a price increase of 100 percent or more — between the first quarter of 2011 and the first quarter of 2015, are, according to Humana, Amitriptyline, an antidepressant; Baclofen, a muscle relaxant and anti-spastic agent; Benazepril, an ACE inhibitor to treat hypertension; Clobetasol, a steroid and anti-inflammatory agent; Clomipramine, an antidepressant for obsessive compulsive disorder; Digoxin, used to treat heart failure and atrial fibrillation; Divalproex for seizure disorders; Doxycycline (in Hyclate form) an antibiotic; Leflunomide for rheumatoid arthritis; Levothyroxine, a thyroid drug to treat hypothyroidism; Lidocaine, an anesthetic; Nystatin, an antifungal for skin infections; Pravastatin to lower cholesterol; Propranolol, a beta blocker to treat hypertension; Ursodiol, to decrease the amount of cholesterol produced by the liver; and Verapamil, to treat hypertension, angina and certain heart rhythm disorders.
CMS allows Medicare Advantage plans to negotiate Part B drug prices, implement step therapy
The Centers for Medicare & Medicaid Services (CMS) is giving Medicare Advantage (MA) plans more power in how they pay for Part B drugs.
The agency will allow MA plans to negotiate Part B drug prices with manufacturers, as well as to implement step therapy for Part B drugs. Plans will be required to pass half of the savings generated through negotiation to patients.
Negotiating Part B drug prices will foster competition and allow MA plans to get a better deal for their enrollees, according to CMS. These negotiations may also lead to price decreases in traditional Medicare.
The move represents perhaps the most significant step in the administration’s push to reduce drug prices, offering a new lever to combat ever-increasing costs.
Step therapy is a form of prior authorization that requires patients to try a “preferred” drug—that is, a less-expensive biosimilar— before the plan will cover a different, more expensive one. CMS says this will reduce costs for plans and beneficiaries alike.
Under the Affordable Care Act, at least 85% of plans’ savings must go toward healthcare services and quality improvement activities.
Further, the new policy requires “more than half of the savings required to be passed on directly to patients,” CMS said in a press release. A memo (PDF) from the agency says the savings may come in the form of “gift cards or other items of value.”
It is “unique that Medicare Advantage has not done this,” said CMS administrator Seema Verma in a press call on Tuesday evening, noting that traditional Medicare and private insurance plans have long been allowed to implement a step therapy policy.
MA plans will not be required to implement step therapy. Those that decide to do so must inform beneficiaries before the next enrollment period in October.
Verma added that patients and doctors can appeal the step therapy requirement through the existing appeals process.
The Pharmaceutical Care Management Association (PCMA), a trade association representing pharmacy benefit managers (PBMs), called the move “an important step toward reducing costs for the program and beneficiaries,” adding that “some of the highest priced drugs are found in Medicare Part B.”
Opponents of step therapy, who sometimes call it “fail first,” say limiting medication options can have negative consequences for consumers.
Step therapy policies “dangerously intrude on patient safety” and “weaken the doctor/patient relationship by negating the healthcare plan that they created together,” according to patient advocacy organization Fail First Hurts.
Part B drugs are either generally administered by a physician, administered via durable medical equipment, or otherwise specified by statute.
CMS Reevaluates Stark Law in Response to Value-Based Care Initiatives
On June 20, 2018, CMS and HHS issued a “request for information” (RFI) seeking input on strategies to reduce the burden of the federal physician self-referral law or “Stark Law,” including the law’s impact on the transition to value-based care.
In the RFI, CMS solicits information on the ways in which the Stark Law creates challenges for coordinated, value-based care, and the transition to alternative payment and delivery models; it also seeks ideas and input on how the Stark Law may be changed to facilitate these models.
What’s driving the RFI
The RFI is launched as part of the agency’s “Regulatory Sprint to Coordinated Care” led by HHS Deputy Secretary Eric Hargan, which is directed at addressing regulatory barriers to coordinated care. As such, the Regulatory Sprint and the RFI represent the administration’s efforts to reduce regulatory burden, while also demonstrating a commitment to the transition to more value-based, coordinated care and risk-based payment. In public statements, HHS and CMS officials have suggested that the Regulatory Sprint may support similar flexibility in other laws, including the Anti-Kickback Statute.
Although the agency does not commit to any specific regulatory changes in this document, it is notable that HHS issued a similar RFI in 2010 just before it issued sweeping waivers of the Stark Law and Anti-Kickback Statute for the Medicare Shared Savings Program. While many of the questions focus on “Alternative Payment Models” under the Quality Payment Program, the RFI is not limited to these programs. Instead, the RFI invites the public to propose new exceptions and revised interpretations of the statute to advance the goals of coordinated care.
What CMS wants to know
In the RFI, CMS poses twenty specific questions related to the Stark Law, Alternative Payment Arrangements, and delivery system innovation strategies. The topics and questions range from:
- Requests for details on Alternative Payment Models and innovations considered or engaged in by healthcare delivery system participants, including details on the financial and operational details of the arrangements, such as financial risk;
- Solicitation of ideas and input on additional and/or new exceptions to the Stark Law that would facilitate existing and innovative arrangements;
- Thoughts on changes to existing provisions of the final rule implementing the Stark Law, such as definitions of “commercial reasonableness” and “fair market value,” and thoughts on other potential definitions and terms such as “Alternative Payment Model,” clinical and financial integration and others;
- Comments on key concepts in the existing law including compensation formulas that do and do not take into account the volume or value of referrals or other business within the meaning of the Stark Law and other novel financial arrangements; an
- Requests for information on the Stark Law’s compliance cost, the potential role of increased transparency to promote compliance and how CMS should assess the Stark Law’s effectiveness in achieving its underling policy goals related to improper financial incentives.
The RFI may represent an important opportunity for the healthcare industry to educate CMS on current experiences and challenges, and to shape the content of future rules implementing changes to the Stark Law, particularly in a time of industry integration across the continuum of care. The RFI also offers tangible evidence of the administration’s commitment to continue a migration to value-based care, and potentially reflects an enhanced commitment and desire to migrate away from fee-for-service payment to arrangements involving financial risk.
Six Things Health Execs Should Know about Association Health Plans
Association Health Plans (AHPs) permit small businesses to band together and buy health insurance. “By allowing them to join together in associations, small companies can have the same buying power as a large employer,” says Diane Wolfenden, director, Sales and Client Services, East Region, Priority Health, Michigan’s second largest health plan.
In June, when the final rule governing AHPs was released, the Trump Administration emphasized that AHPs will provide small businesses with more choices, access, and coverage options.
Here are six things MCOs should know about AHPs.
1. Critics say AHPs may undermine ACA plans. The most commonly cited concern with new AHP regulations is that they may undermine the ACA marketplace because association plans aren’t required to comply with all ACA regulations. “The fear is that AHPs will siphon off younger, healthier individuals, and leave those with greater health risks and pre-existing conditions in ACA risk pools,” Wolfenden says. “Critics have stated that allowing AHPs will weaken some of the ACA’s protections for consumers and make coverage on the exchanges and through ACA markets more expensive.”
2. The regulation seeks to prevent the forming of associations solely to provide health benefits. Under the new regulations finalized by the Department of Labor, an association must have a substantial purpose for existing in addition to offering health benefits. “Offering health benefits may be the primary reason for forming an association, but the secondary reason must be substantive enough that even without offering health benefits the association could continue to exist,” Wolfenden says.
Businesses can form AHPs in a specific city, county, state, or multi-state metropolitan area. “Therefore, chambers of commerce, trade groups, or businesses in the same geographic area can form or join an AHP,” says Sally C. Pipes, president, CEO, and Thomas W. Smith Fellow in Healthcare Policy, Pacific Research Institute, a free-market think tank. “Alternatively, cross-border AHPs can form for businesses or sole proprietors that occupy the same industry.”
The association needs to have an organized structure with a governing body and policies and procedures in place indicating governance, as well as legalization behind it, says Bryan Komornik, director of West Monroe’s healthcare practice, a business technology consulting firm. Like the ACA, individuals can’t be discriminated against if they have pre-existing conditions.
In addition, association members must be able to demonstrate the income they derive from their business is sufficient to cover the cost of their premium or that they work at least 80 hours per month at the business, Wolfenden says.
3. They could expand the number of insured patients. AHPs will not only give small employers more options for their employees, but they could also encourage some individuals to buy insurance when they may have gone without it otherwise. The Congressional Budget Office (CBO) estimates that 4 million current ACA enrollees in the individual and small group markets could shift their coverage to these new policies, Wolfenden says. Further, the CBO stated that about 10% of those 4 million people buying plans in 2023 and beyond would have been uninsured otherwise.
Individuals who join a coalition can obtain health insurance coverage for themselves, their spouse, and their children, or they can opt to only get coverage for themselves, Komornik says. If an individual’s spouse has an employer-sponsored health plan, the individual can still get coverage through the association if they qualify otherwise.
4. They might offer fewer benefits. AHPs are likely to offer lower premiums through skinnier plan design, sacrificing benefits for lower costs. “This means that consumers will need to have a better understanding of what will, and will not, be covered by their AHP policy,” Wolfenden says. Because AHP policies aren’t required to comply with ACA regulations, they may not cover prescription drugs or certain types of surgeries.
5. They could lead to more uncompensated care. Because AHP plans may offer leaner benefits, some patient advocacy groups are concerned that patients will end up with healthcare expenses that their insurance company won’t cover and the patient can’t pay. “These bills may end up going unpaid, leading to an increase in uncompensated care,” Wolfenden says. Uncompensated care has fallen in nearly every state since the ACA’s implementation based on the expanded coverage. “Increases in uncompensated care make it harder for providers to invest in new technologies and equipment and maintain enough capacity to care for patients. Transparency will become even more critical as providers will need to work closely with patients to ensure they understand what their insurance policy covers and what their share of the costs will be upfront.”
6. The new rule will have a staggered implementation schedule. The new rule will be phased in in three stages. It will first take effect for associations with fully-insured AHPs on September 1, 2018. It will become applicable for associations with existing self-insured AHPs on January 1, 2019. Finally, the rule will take effect for new self-insured AHPs on April 1, 2019, Pipes says.
Cartoon – Today’s Schedule
HENRY KOTULA 