Category Archives: Uncategorized

CHS beats expectations with cost cuts despite volume slump

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https://www.healthcaredive.com/news/chs-beats-expectations-with-cost-cuts-despite-volume-slump/522579/

Dive Brief:

  • Community Health Systems beat Wall Street expectations Tuesday when it reported a small adjusted net profit during the first quarter, as its cost cutting helped offset weak admissions volume. Its net loss narrowed to $25 million, compared to a net loss of $199 million in the year earlier period.
  • Net operating revenues dropped nearly 18% to $3.69 billion, compared with $4.49 billion for the same period in 2017. The health system continues to struggle with declining admissions, reporting a 2.4% decrease for the quarter.
  • CHS sold off 30 hospitals last year and continues its divestment strategy this year.

Dive Insight:

The Brentwood, Tennessee-based hospital operator is hoping to pare down its outsized debt, much of which was acquired when the company bought the financially-distressed Florida-based system Health Management Associates for $7.6 billion in 2014.

In January, CEO Wayne Smith told investors his goal is to slim down to 100 hospitals in “significantly improved markets.” The company is attempting to make $1.3 billion off of divestitures this year, counting six pending divestitures this year in Florida, Louisiana and Tennessee.

The strategy might be paying off. With 30 fewer hospitals, the company’s inpatient and outpatient revenues for Q1 each increased 0.1% on a same-store basis, and income from operations skyrocketed 198% to $212 million, compared to $71 million in 2017.

Jefferies noted the system offset lower volumes by keeping labor and staffing costs low.

Still, it said future growth “hinge[s] largely on seeing a stabilization in organic volume trends, which has eluded the company for eight consecutive quarters.”

The analysts said new initiatives like an accountable care organization were promising, “though their benefits will likely take a few quarters to materialize.”

Last year, ASL Strategic Value Fund sent a letter to CHS’ board of directors saying “it is time” to replace the CEO. The letter, dated Aug. 8, argued that action is needed immediately as management’s “previous missteps have resulted in billions of dollars of shareholder losses.”

In a comment issued with the earnings report, Smith argued to investors that the company’s turnaround strategy is beginning to work.

“We achieved continued progress across a number of our strategic and operating initiatives,” he said. “During the first few months of the year, we expanded our transfer and access program, launched Accountable Care Organizations, and invested in both outpatient capabilities and service line enhancements across our markets. These efforts helped drive a good financial performance during the first quarter and position the Company for further anticipated improvements during the balance of 2018.”

However, CHS still has a long way to go. The company recently brought in financial advisors to help restructure $13.8 billion in long-term debt.

 

Payer trade groups slam short-term health plan proposal

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https://www.healthcaredive.com/news/payer-trade-groups-slam-short-term-health-plan-proposal/521941/

 

More organizations, including Aetna and the American Medical Association, submitted comments on the proposed rule Monday.

Dive Brief:

  • The Alliance of Community Health Plans (ACHP) and America’s Health Insurance Plans (AHIP) both slammed CMS’ proposal to expand short-term, limited duration (STLD) insurance plans, saying the proposed rule would undermine key consumer protections, lead to higher premiums in the individual market and jeopardize market stability.
  • The proposed rule, pushed by the Trump administration as a way to increase access to cheaper plan alternatives and sidestep the Affordable Care Act, would allow consumers to purchase plans for up to 12 months that do not adhere to federal rules for individual health insurance. STLD plans can charge those with pre-existing conditions more and may not cover ACA essential health benefits such as prescription drug coverage.
  • The insurance lobbies argued that other policy mechanisms would be more effective at improving the individual health insurance market. AHIP pointed to increasing 1332 state waiver flexibility and the adoption of regulations aimed at preventing improper steering of Medicare and Medicaid consumers into the individual market, and ACHP advocated for the creation of a federal reinsurance program as more effective ways to promote affordable coverage.

Dive Insight:

The comments are indicative that many insurers are hesitant to back health plans that lack the consumer protections the ACA put into place due to a fear such plans would destabilize the individual market. Monday is the last day to submit comments on the rule.

A new Kaiser Family Foundation brief notes that many middle-income people not shielded by premium subsidies in the individual market would likely see premium costs increase. Combined with the individual mandate penalty being zeroed out, the effort to increase STLD plans could result in fewer individuals enrolled in the ACA market, adversely impacting its stability.

“Short-term plans were designed for consumers to use as temporary, stop-gap measures when moving between plans – not as long-term replacements for health insurance,” ACHP CEO Ceci Connolly said in a statement. “A broad, stable risk pool is crucial for providing affordable coverage and care. ACHP believes that other policy options, such as reinsurance, would be far more effective at promoting high-quality, affordable coverage and care for all Americans.”

ACHP argued the proposed rule should not be finalized, saying the current status-quo limit of 90 days should be maintained.

AHIP called for any final rule to limit the duration of STLD plans to six months, adding that the plans should be required to have a plain-language disclosure that the plans should not be considered comprehensive health insurance. The group argued that the effective date of any final rule should come no sooner than Jan. 1, 2020.

“As the Departments advance policies to expand access to lower-cost coverage choices for a subgroup of consumers, it is critical to improve the affordability of comprehensive coverage options for all Americans, regardless of health status,” Matthew Eyles, AHIP COO, wrote in the group’s comment.

But major insurer Aetna, which left AHIP in 2016, said in its comment STLD plans “can be a valuable option for many consumers.”

The insurer argued that such plans must be transparent with disclosure language, limit any look-back period for pre-existing conditions to 12 months and define a minimum floor of benefits including inpatient hospital services, physician services, mental health and substance abuse services and one annual physical and annual well-woman visit before the deductible.

A group of Senate Democrats were among those asking for the rule to not be finalized, arguing it “could increase costs and reduce access to quality coverage for millions of Americans, harm people with pre-existing conditions, and force premium increases on older Americans.”

The American Medical Association also echoed the insurance lobby’s concern, saying STLD plans would endanger the coverage gains of the past decade and destabilize the market. AMA argued the administration should withdraw the proposed rule, saying it is “a step in the wrong direction and will lead to a proliferation of inadequate health insurance policies in the market.”

A joint comment of 21 consumer advocates, including March of Dimes and the American Cancer Society Cancer Action Network, also called for withdrawing the proposal.

PhRMA voiced concern in its comment over the lack of prescription drug coverage in STLD plans, citing an analysis that found than 71% of such plans do not cover outpatient prescription drugs. “If consumers can renew these plans for an extended period, it increases the chances that consumers may find themselves diagnosed with a new condition that can be effectively treated by an innovative drug at a time when they are covered by a short-term plan that does not cover prescriptions drugs,” PhRMA wrote.

 

 

Court allows class-action CSR payment lawsuit

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https://www.healthcaredive.com/news/court-allows-class-action-csr-payment-lawsuit/521866/

Dive Brief:

  • In a decision that could ultimately result in billions of dollars in subsidies for insurers, the U.S. Court of Federal Claims gave the OK last week for a class action suit involving Common Ground Healthcare Cooperative. The suit seeks the cost-sharing reduction (CSR) payments that the Trump administration stopped paying in October.
  • In the 18-page opinion and order, the court said Common Ground, a Brookfield, WI-based nonprofit payer that offers coverage to small businesses, nonprofits, individuals and families, “satisfied all of the requirements” to maintain a class action suit. The Department of Justice may appeal the ruling.
  • The decision to stop CSR payments had an effect on marketplace enrollment in 2018, according to a new report from the Robert Wood Johnson Foundation. The share of enrollees in bronze tier plans increased from 23% to 29%, as customers found those plans gave them a better deal.

Dive Insight:

The ACA provided CSR payments to insurers to cover Americans with household incomes between 100% and 250% of the poverty line. The payments were supposed to keep down out-of-pocket costs for lower-income Americans.

However, Trump ended the CSR payments last October with the administration arguing Congress is responsible for them. Efforts on Capitol Hill to grant those payments have since faltered.

Without those CSR payments, insurance companies in the ACA exchanges charged higher premiums for 2018. Middle class and upper middle class members in ACA plans saw their insurance premiums rise this year.

However, stopping CSR payments actually resulted in lower healthcare costs for the poorest people in the ACA marketplace. An ACA provision kicked in that provides premium-reducing subsidies if the premiums increased too much for lower-income members.

Another piece in the CSR discussion is the payer practice of “silver loading,” in which ACA insurers put all the losses associated with no CSR payments onto their silver plans. CSR discounts were only offered for silver plans and they make up more than half of ACA plans. CMS Administrator Seema Verma recently declined to say whether the administration will limit payers’ use of government subsidies, and a Robert Wood Johnson Foundation paper predicted “silver loading is likely to continue next year and will probably expand to more states.”

As the deadline for payers to set 2019 rates narrows, insurers are threatening even higher premiums without CSRs and other market stabilization efforts, such as a reinsurance program.

Alliance of Community Health Plans CEO Ceci Connolly recently told Healthcare Dive, “Losing the individual mandate, losing the cost-sharing reduction subsidies and losing any hint of reinsurance, not to mention the risk corridors that were already gone, you’re just running out of options to manage the cost of this program.”

In a recent report, the Center on Budget and Policy Priorities warned higher premiums may cause healthy members in ACA plans to flee the market and either drop health coverage or choose a low-cost plan, such as a short-term catastrophic plan.