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Fate of Bay Area hospitals in doubt as hedge fund deal to save them sours

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Fate of Bay Area hospitals in doubt as hedge fund deal to save them sours

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Santa Clara County interested in buying O’Connor and St. Louise

Santa Clara County is hoping to buy a pair of struggling hospitals that have long served as a safety net for the poor, less than three years after they were sold to a New York hedge fund in a state-approved deal to ensure they remained open.

County Executive Jeff Smith said the county sees a renewed opportunity to acquire O’Connor Hospital in San Jose and St. Louise Regional Hospital in Gilroy as public hospitals to extend its reach and help relieve overcrowding at the county-run Santa Clara Valley Medical Center in San Jose.

“We’re watching carefully,” Smith said. “We’ve told them that we’re interested and asked them to let us know what their process is going to be.”

The county’s interest comes after Verity Health System, the Redwood City-based secular nonprofit that now runs the hospitals, announced the “potential sale of some or all” of the hospitals among options “to alleviate financial and operational pressures.”

It was less than three years ago that the Catholic Daughters of Charity, which provided medical care for California’s poor since the Gold Rush, announced the largest nonprofit hospital transaction in state history with the $260 million sale of six hospitals to a hedge fund.

The deal, blessed by a state attorney general under conditions that included facility improvements and no cuts to charity care, jobs or pay, was welcomed with guarded optimism: As hospitals struggle nationwide, a half dozen in the Bay Area and Los Angeles would stay open.

But already, the deal has soured. Verity saw operating losses of $55.8 million in the nine months that ended March 31.

The hospitals in San Jose, Gilroy, Daly City, Half Moon Bay and Los Angeles provide 1,650 inpatient beds, emergency rooms, a trauma center and a host of medical specialties, and employ 7,000.

But insurers are pushing to cut hospital stays to keep a lid on costs and premiums, shrinking hospital business. At the same time, demand for housing and commercial space has soared with California’s surging economy, raising the possibility that some of the hospitals could be turned into homes or offices.

Who would buy the hospitals, and what other alternatives are under consideration, is unclear. No hospital chains have announced interest.

“I don’t know of a system in California that would pick them up,” said Wanda J. Jones, a veteran health system planner and writer in San Francisco who has followed the deal.

San Mateo County officials could not say what might happen to Seton Medical Center in Daly City and Seton Coastside in Moss Beach, near Half Moon Bay.

“The potential closure of the hospitals and the impact on the residents they serve is very important to the county,” said Michelle Durand, spokeswoman for the San Mateo County county manager’s office. “However, we currently have made no decisions and also cannot speculate as to the potential interest of private hospital operators.”

But Santa Clara County officials have been vocal about their interest.

Daughters of Charity Health System had declined to sell the two hospitals to Santa Clara County because it wanted to sell all the hospitals as a package. After for-profit Prime Healthcare Services walked away from a potential $843 million deal to buy the six hospitals in 2015, calling then-Attorney General Kamala Harris’ conditions too burdensome, Daughters sold them to hedge fund BlueMountain Capital Management under similar terms.

A year ago, a Culver City company owned by billionaire doctor and entrepreneur Patrick Soon-Shiong, who also owns the Los Angeles Times and San Diego Union-Tribune, bought the hedge fund’s Integrity Healthcare division that owns Verity.

Smith said that in the current landscape for hospitals, O’Connor and St. Louise would always be money-losers for a private owner, but could pencil out as public hospitals. That’s because public hospitals get reimbursed by Medi-Cal, the state’s coverage for the poor, at higher rates than private hospitals, which rely on a mix of insured patients to cover charity care costs. O’Connor and St. Louise, he said, are in areas where they won’t attract enough insured patients.

For the county, acquiring O’Connor and St. Louise would make sense, Smith said. The county’s Santa Clara Valley Medical Center in San Jose is “filled to the brim with patients, and we have great need for services,” said René G. Santiago, deputy county executive and director of the Santa Clara Valley Health and Hospital System.

Some of the money to buy the hospitals could come from funds set aside for VMC renovation, Smith said.

But the six hospitals share debt and employee retirement obligations, which is what made Daughters of Charity unwilling to sell them piecemeal, Smith said.

There’s also the possibility that potential buyers may see greater use for some of the hospital properties for housing or offices. Smith said that while that wouldn’t satisfy the attorney general’s approval conditions, a seller could argue those terms were unworkable and seek a new deal.

Jones said the attorney general’s conditions made it impossible for the hospitals to survive in today’s environment, calling terms like no job cuts “insane.”

“Kamala Harris was so overboard in her requirement for what she wanted to happen,” Jones said. “You don’t put a condition like that on a buyer.”

The office of the attorney general, now under Democrat Xavier Becerra, had no comment.

Sean Wherley, a spokesman for SEIU-United Healthcare Workers West, which represents the hospitals workers, said when the possible sale was announced earlier this month that they were “disappointed.”

He said the union expects “Verity and any new buyer to be held accountable to keep hospitals open, maintain vital services, fund pension obligations, protect jobs and honor our collective bargaining agreements.”

 

Walmart drug program cheaper for many Medicare patients

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https://www.nbcnews.com/health/health-news/walmart-drug-program-cheaper-many-medicare-patients-n893811

Grand Opening At A New Wal-Mart Store

Walmart’s $4 generic prescription drug program ends up being cheaper for some Medicare patients than their own health insurance, according to a new study released Monday.

It’s more evidence that patients cannot always rely on their health insurance to get them the lowest prices for their prescription drugs, said Dr. Joseph Ross of the Yale School of Medicine, who led the study.

“Patients were paying more out of pocket when they were using their insurance than when they went to Walmart,” Ross told NBC News.

The study, published in the Annals of Internal Medicine, documents that Walmart provides a better deal than the government’s health insurance plan for people over 65. And that is bad news for Medicare, because if people don’t take their drugs, whether for cost or for other reasons, they tend to get sicker and then end up costing even more to treat.

“Everyone’s talking about pharmacy costs these days,” Ross said. “We did this study in part because of all the discussion about pharmacy gag rules.”

Pharmacy gag rules prevent pharmacists from telling patients that they could save money on drugs, for instance by not using their health insurance.

Pharmacy benefit managers are the middlemen between drug companies and pharmacies, and some of those companies have agreements forbidding talk of discounts. But some states have also banned pharmacists from giving this information to customers.

According to the National Conference of State Legislatures, at least 22 states have some kind of gag rule legislation.

One way patients can get around this is to ask, but few people think to do so.

Ross and colleagues decided to see what would happen if Medicare patients just took advantage of Walmart’s program offering $4 generic prescription drugs.

They looked at Walmart’s generic list for drugs commonly used to treat heart conditions, including high blood pressure and high cholesterol.

“Next, we used Medicare prescription drug plan data from June 2017 to determine beneficiary out-of-pocket costs for the lowest-priced dose of each drug in each plan,” they wrote. They got data on more than 2,000 Medicare prescription drug plans, including Medicare Advantage plans.

Overall, 21 percent of the plans asked patients to pay more out of pocket for the drugs than they would pay if they just got them for $4 at Walmart, the team reported.

Medicare Advantage plans were the most expensive for patients, Ross said. And the higher-tier programs were the worst, he found.

“Twenty percent of the time, at least, we should go to Walmart,” Ross said.

It doesn’t help that Medicare is very complicated. Patients can choose from dozens of different plans, depending on where they live, and it can take a great deal of research to find out which plan is most likely to cover a particular person’s health conditions for the least amount of money.

“Each Medicare drug plan has its own list of covered drugs (called a formulary),” the Center for Medicare and Medicaid Services says on its website.

“Many Medicare drug plans place drugs into different ‘tiers’ on their formularies. Drugs in each tier have a different cost. A drug in a lower tier will generally cost you less than a drug in a higher tier.”

Ross said it is time-consuming to compare one Medicare plan to another. But understanding one of the many plans tells people very little about what the others might offer.

“If you have read through the details and material for one plan, you have read through the details and materials for one plan. It’s very hard to compare,” he said.

In addition, any given plan may change the drugs that it covers and their prices throughout the year.

Ross said he studied Walmart because its $4 price for a 30-day supply of a generic drug seemed like the least expensive option, but other retailers also have inexpensive drug plans. Some grocery-based pharmacies even offer free drugs, such as antibiotics.

These offers get customers into the store, and the hope is that they’ll buy something else while they are there.

Ross said no patient should decide on a Medicare plan based solely on whether Walmart offers a better deal on prescriptions.

Switching plans might not be the best idea, because different plans provide different levels of coverage for doctor visits, medical procedures and other health needs.

“What we are showing is there may be some ways to save some money on some drugs by going to Walmart,” Ross said.

According to the Kaiser Family Foundation, about 90 percent of prescriptions filled in the U.S. are for generic drugs. Most people get health insurance through an employer, and the typical co-pay for a generic drug for a patient covered by employer-provided health insurance is $11, Kaiser found. For a brand-name drug, the average co-pay is $33.

Walmart is moving aggressively to get a big share of the U.S. health care market. Besides having large pharmacies, stores offer free health screenings and the company has said it intends to expand its locations of retail walk-in health clinics.

Walmart is also negotiating a closer partnership with health insurer Humana, including the possibility of buying it outright, according to CNBC.

The discount retailer’s $4 generic prescriptions beat Medicare’s co-pays 21 percent of the time, a study found.

 

 

 

68% of CEOs say they were not prepared for job

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https://www.beckershospitalreview.com/hospital-management-administration/68-of-ceos-say-they-were-not-prepared-for-job.html

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Confidence is one of the defining characteristics of successful executives, but few CEOs felt prepared for their responsibilities, according to a survey in the Harvard Business Review.

Leadership advisory firm Egon Zehnder surveyed 402 CEOs from 11 countries between January and November 2017 and asked them questions regarding the challenges of stepping into a leadership position.

Four things to know:

1. There is no role that matches the demands of a CEO, and 68 percent of respondents said that, in hindsight, they weren’t fully prepared to take on the job.

2. Every CEO wants to drive culture change, but 50 percent of respondents said the task was more difficult than they expected.

3. Most CEOs know that they are only as effective as the people they surround themselves with, but 47 percent said that developing their senior leadership team was surprisingly challenging.

4. Forty-eight percent said that finding the time for self-reflection was harder than they anticipated.

 

 

Some Drugmakers Are Canceling Price Hikes – but Not Because of Trump

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http://www.thefiscaltimes.com/2018/07/11/Some-Drugmakers-Are-Canceling-Price-Hikes-Not-Because-Trump

Pfizer may have decided to roll back drug price hikes after being criticized by President Trump, but Bloomberg reports that several other large drugmakers are canceling or reducing planned price increases, perhaps in part because of a new California drug pricing transparency law that requires them to provide at least 60 days’ notice of price increases greater than 16 percent during a two-year period.

“In the past three weeks, Novartis AG, Gilead Sciences Inc., Roche Holding AG and Novo Nordisk A/S sent notices to California health plans rescinding or reducing previously announced price hikes on at least 10 drugs,” Bloomberg’s Ben Elgin, Cynthia Koons and Robert Langreth write.

The law is being challenged in court by the industry, but manufacturers have been complying while the case plays out.

Still, one industry analyst tells Bloomberg that the California law won’t actually slow the rate of price hikes. “If what you are trying to do is limit price inflation, this is not the way to go about it,” said Richard Evans, an analyst at investment research firm SSR. “This is not going to change mainstream list price behavior at all.”

Evans says that the drugmakers involved are probably just “throwing up a smokescreen” to hide the details of their price increases from competitors and patients.

Why it matters: These early results from California’s law might look encouraging, but it’s still a far cry from structural reforms that will keep prices in check.

 

 

Association Health Care Plans Not Gaining Traction

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http://www.thefiscaltimes.com/2018/07/19/Association-Health-Care-Plans-Not-Gaining-Traction

The influential National Federation of Independent Business long supported the expansion of association health care plans, which allow small businesses and trade groups to join together to offer health insurance. At NFIB’s 75th anniversary party in June, President Trump announced new rules that make it easier to offer such plans, promising a new option for “low-cost, great health care” for business owners and employees around the country. But it looks like few groups are taking advantage of the new system, Politico reports, and even the NFIB has abandoned long-held intentions to offer a plan for its hundreds of thousands of members.

Although association plans can’t be sold until September 1 — despite Trump’s recent claim that millions of people are already signing up — several nationwide trade groups told Politico that it’s not clear how the new system will work, if it will work at all. For example, the National Association of Realtors, which had long favored the expansion of association health plans, said it was still working on understanding the new rules and has no plans to offer insurance anytime soon.

While the Trump administration’s new rules removed some restrictions on the operation of association health care plans, such as the ability to cross states lines, other limits remain. Groups can join together only if they are in the same industry; if not, small businesses still must be in the same state in order to join together. The remaining restrictions may inhibit the widespread adoption of the plans, Politico says, although NFIB is looking into workarounds such as offering insurance to small businesses at the state level.

 

 

Trump Administration Seeks a Big Change in How Medicare Pays Doctors

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http://www.thefiscaltimes.com/2018/07/23/Trump-Administration-Seeks-Big-Change-How-Medicare-Pays-Doctors

The Trump administration wants to change the way Medicare pays doctors for office visits by creating a flat payment of about $135 for all appointments. The change is intended to reduce paperwork significantly but is meeting resistance from specialists who say they will be underpaid for their services, which could result in more doctors refusing to see Medicare patients.

Currently, there are five levels of Medicare office visits, each with its own payment amount, ranging from a short visit with a nurse (level 1) to an in-depth evaluation from a specialist (level 5). Visits with doctors typically start at level 2, with a current billing rate for new patients of $76, and move up in complexity to level 5, with a billing rate of $211.

Not all doctors would lose out, since less complex visits would be billed at a higher rate under the proposal, but the specialists currently billing at the top level would see a reduction in fees. “This proposal is likely to penalize physicians who treat sicker patients, even though they spend more time and effort and more resources managing those patients,” Deborah J. Grider, an expert on the subject, told The New York Times.

On the other hand, the proposal would reduce the time-intensive requirement to document the different levels of services, particularly at the upper end. “The differences between Levels 2 to 5 are often really difficult to discern and time-consuming to document,” Dr. Kate Goodrich, Medicare’s chief medical officer, toldthe Times.

One thing the proposed billing system won’t change is the overall cost of spending on physician services under Medicare. While the proposal would redirect some of the fees from one set of doctors to another, spending would remain at roughly $70 billion a year.

 

 

491-bed Ohio hospital closes: 5 things to know

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https://www.beckershospitalreview.com/patient-flow/491-bed-ohio-hospital-closes-5-things-to-know.html

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Good Samaritan Hospital, a 491-bed facility in Dayton, Ohio, closed July 23.

Here are five things to know:

1. Dayton-based Premier Health, which owns Good Samaritan Hospital, first announced plans in January to close the facility. Premier said operating two hospitals — Good Samaritan and Miami Valley Hospital in Dayton — within 5 miles of each other had become unsustainable.

2. In June, Premier announced it would close Good Samaritan July 23.

3. One week before Good Samaritan was schedule to shut down, HHS launched an investigation into whether closing the hospital would have a disproportionate effect on African-American residents. Dayton Mayor Nan Whaley publicly called on Premier Health July 17 to not demolish the hospital until after the agency completes its investigation.

4. Premier Health moved forward with the closure of Good Samaritan as scheduled. The hospital shut down its emergency room July 19, and the facility completely closed at 12:01 a.m. on July 23.

5. The closure of Good Samaritan’s ER did not have a significant effect on wait times at local hospitals, according to the Dayton Daily News. Wait times at Miami Valley Hospital and Grandview Hospital in Dayton were 23 minutes and 19 minutes, respectively, on July 22.

 

 

 

Trump Administration Preparing Fix for Obamacare Risk Payments

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https://www.bloomberg.com/news/articles/2018-07-19/obamacare-potential-fix-is-prepared-after-halt-in-risk-payments

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The Trump administration is preparing a regulation that would allow the resumption of billions of dollars in payments to health insurers in Obamacare.

The Office of Management and Budget was sent a rule on Wednesday from the Centers for Medicare and Medicaid Services tied to the risk-adjustment program, which transfers money to insurers who take on sicker customers.

An administration official said the rule is an option being considered to resolve the legal dispute that has held up the payments.

The rule is labeled as an interim final rule, a status that would allow it to go into effect immediately. It’s titled “Ratification and Reissuance of the Methodology for the HHS-operated Permanent Risk Adjustment Program under the Patient Protection and Affordable Care Act.”

The administration official asked not to be identified, because the rule hasn’t been made public. Details of government rules aren’t released to the public until they’re reviewed by the budget office.

Health-insurance industry groups had pushed the Trump administration to issue an interim final rule for the risk-adjustment program to resolve a legal dispute that had threatened to halt payments under the program. The risk-adjustment payments, worth $10.4 billion for 2017, are part of a program in the Affordable Care Act meant to help balance the insurance markets when some insurers inevitably got stuck with costlier patients.

Insurers had warned they might have to raise Obamacare premiums for 2019 if the dispute wasn’t resolved quickly. The program moves money among insurers, transferring funds from insurers with healthier customers to those with sicker ones. Among publicly traded insurers, Centene Corp. and Molina Healthcare Inc. owe money to other insurers under the program, while Anthem Inc. is set to receive funds.

The Blue Cross Blue Shield Association, an industry trade group whose members include Anthem, said it approves of the effort, though it will need to examine the details of the rule carefully once it’s available.

“This regulation needs to be put in place quickly and effectively in order to avoid disruption for consumers and small businesses who will be purchasing coverage this fall,” Kris Haltmeyer, vice president for legislative and regulatory policy at the association, said by email.