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Moody’s affirms ‘Aa3’ on Yale New Haven Health

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https://www.beckershospitalreview.com/finance/moody-s-affirms-aa3-on-yale-new-haven-health.html

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Moody’s Investors Service affirmed its “Aa3” rating on Yale New Haven (Conn.) Health, affecting $1.1 billion of outstanding debt.

The affirmation is a result of the health system’s strong market position, favorable operating margins, moderate capital spending, solid liquidity, manageable leverage and affiliation with New Haven-based Yale University. Moody’s also acknowledged the health system’s sizable pension, large operating lease obligations and reimbursement pressures coming from Medicaid an state hospital tax funding.

The outlook is stable, reflecting Moody’s expectation that Yale New Haven Health will maintain its healthy operating performance to offset any reimbursement pressures.

Trinity Health races to sell $889M in bonds ahead of tax changes

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https://www.beckershospitalreview.com/finance/trinity-health-races-to-sell-889m-in-bonds-ahead-of-tax-changes.html

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The possibility that Congress could eliminate federal tax breaks for a large portion of the municipal market has hospitals and other debt issuers hurrying to issue tax-free bonds before borrowing costs rise, according to Reuters.

Nonprofit hospitals and health systems issue tax-exempt bonds to finance capital projects. Under House Republicans’ tax plan, interest on newly issued private activity bonds would no longer be tax-exempt. This change would reduce financing options for some healthcare organizations by raising the cost of capital, according to S&P Global Ratings.

“From a credit perspective, higher borrowing rates can lead to budget imbalances, a challenge for all, and a hallmark of struggling credits,” said S&P.

In response to the tax bill passed by the House in November, Livonia, Mich.-based Trinity Health moved up the sale of about $889 million of new and refunding revenue bonds to this week from January 2018.

“I look at it as kind of a risk mitigation. We were able to accelerate and mitigate any risk of where these proposals may eventually land,” Dina Richard, senior vice president of treasury and chief investment officer of Trinity Health, told Reuters.

The move to eliminate tax exemptions for new private activity bonds is not included in a bill passed by Senate Republicans on Saturday, according to Reuters.

 

CVS Health to acquire Aetna for $69B: 5 things to know

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https://www.beckershospitalreview.com/payer-issues/cvs-health-to-acquire-aetna-for-69b-5-things-to-know.html

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CVS Health inked a definitive merger agreement to acquire all outstanding shares of Aetna for roughly $69 billion in cash and stock.

Here are five things to know.

1. The deal, unanimously approved by the boards of directors of each firm Dec. 3, is one of the largest transactions this year. It values Aetna at about $207 per share, higher than previous estimates of $200 to $205 per share. When including the assumption of Aetna’s debt, the transaction totals $77 billion.

2. Upon closing, Aetna’s Chairman and CEO Mark Bertolini will join CVS Health’s board of directors, along with two other Aetna leaders. Aetna will operate as a standalone business unit under the CVS Health umbrella, and the insurer’s management team will helm the subsidiary.

3. The companies said the deal will provide localized, community-based care across CVS Health’s 9,700-plus pharmacies and 1,100 clinics. Sources familiar with the deal told Reuters CVS Health plans to significantly extend health services at its pharmacies under the merger.

4. The transaction is slated to close in the second half of 2018. It is subject to regulatory approvals.

5. Rita Numerof, PhD, president of Numerof & Associates, said in an emailed statement to Becker’s Hospital Review, “Having the combined market clout puts Aetna more in a position akin to UnitedHealthcare in its ability to leverage an integrated PBM in negotiating prices and establishing preferred tiers with manufacturers.” She added, “With CVS’s large and growing clinical services footprint, Aetna can steer patients to CVS pharmacies and clinics — in many cases avoiding the costs of higher ER or other outpatient services. The merger can make expanded CVS services in-network and others out-of-network, putting additional pressure on conventional health systems to lower the costs of their outpatient services.”

The central questions behind the CVS-Aetna deal

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https://www.axios.com/questions-behind-cvs-aetna-deal-2502001650.html

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CVS Health’s proposed $66 billion buyout of Aetna, scooped by the Wall Street Journal, would create a sprawling health care empire with roughly $240 billion of annual revenue. Only Walmart would be larger, in terms of annual revenue among U.S. companies.

Looking ahead: Health insurance, prescription drug coverage, quick clinic visits and behind-the-scenes negotiating on drug prices would all be under one umbrella. But a slew of questions surround any potential deal, and the companies aren’t commenting on “rumors or speculation.”

The proposed transaction highlights the desire within the health care industry to consolidate more. Acquiring Aetna would give CVS even more patient data, as well as more leverage to get lower drug prices from pharmaceutical companies. But it’s not a slam dunk the deal would reach the finish line.

The biggest potential obstacles:

  • Antitrust: CVS and Aetna don’t have a lot of overlapping businesses, making it appear the deal would have better odds of passing antitrust muster than Aetna’s failed deal for Humana. The companies do, however, have sizable footprints in Medicare Part D prescription drug plans. They have 7.6 million combined Part D members, according to the latest federal data, which equates to about 17% of Medicare’s Part D enrollment.
  • Savings: The companies would presumably tout savings (i.e., money saved from layoffs and consolidating vendor contracts). But would the combined CVS-Aetna undoubtedly lead to lower health insurance premiums and better deals for drugs at the pharmacy counter? This is arguably the most central question.
  • Other relationships: CVS just signed a deal with Anthem, a major insurance competitor to Aetna, to run some of the operations of Anthem’s new pharmacy benefit manager. The Aetna buyout would complicate CVS’ new Anthem agreement.
  • The Trump wild card: Trump made it clear in his latest executive order that his administration will “focus on promoting competition in health care markets and limiting excessive consolidation.” The CVS-Aetna deal is a direct challenge to that order.
  • What’s old is new again: Health insurers used to own pharmacy benefit managers but sold them off several years ago. Now they are integrating back together. Will they eventually splinter off again if Wall Street demands it?

​Let’s see what the ACA’s subsidies can do

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It sure looks like Congress is about to repeal the Affordable Care Act’s individual mandate, which will put a lot of pressure on the law’s premium subsidies. What was once a “three-legged stool” — consumer protections, the mandate and premium subsidies — is down to two legs, and subsidies are the only remaining tool to try to attract the people who weren’t already inclined to seek health insurance.

What’s happening: When President Trump cut off federal payments for the ACA’s cost-sharing subsidies, insurers responded by increasing their premiums in a way that also bumped up the law’s premium subsidies — a bit of gamesmanship that few experts had fully anticipated, and which leveraged the structure of the premium subsidies to make up for the effects of political chaos.

The big question: Would something like that work again? Can subsidies make up the difference if the mandate goes away?

The answer: Probably not, policy analysts told my colleague Caitlin Owens and me.

  • “Mandate repeal could quite likely be the last straw for some insurers, and we are likely to see more bare counties for 2019, possibly bare states, as well as higher premiums as remaining insurers take advantage of their market power to raise premiums,” says Washington & Lee University professor Tim Jost, a vocal ACA supporter.

The bottom line: As premiums go up, subsidies go up. So subsidies would help shield the lowest-income consumers from the cost increases caused by the loss of the individual mandate.

Yes, but: The people who don’t receive subsidies will just have to bear the brunt of those costs. And it won’t be easy to concentrate premium hikes onto a specific set of plans, with the goal of increasing subsidies as much as possible, the way insurers did when Trump cut off cost-sharing payments.

  • “I don’t think there’s the same opportunity to play arithmetic games. Insurers will have to raise premiums across the board,” Kaiser Family Foundation’s Larry Levitt says.

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