Trump’s Next Phase on Health Care: Everywhere and Nowhere

https://www.bloomberg.com/opinion/articles/2019-07-09/trump-health-care-reform-he-s-everywhere-and-nowhere

A scattershot and at times contradictory approach to fixing the system is impeding progress.

A hodgepodge of news this week is telling the confusing and contradictory story of President Donald Trump’s efforts to change American health care.  

On Monday, a federal judge blocked the administration’s efforts to force drugmakers to disclose the often astronomical list prices of medicines in their TV ads. It was intended to shame pharma into lowering prices, and would have been the first of the Trump administration’s major drug-cost initiatives to actually take effect.

On Tuesday, oral arguments were set for a Department of Justice-backed case that could wipe out the Affordable Care Act. 

Wednesday will reportedly see the president reveal an ambitious set of initiatives intended to rein in spending on kidney costs. 

The kidney initiative is among the administration’s better notions, along with its effort to index some drug costs covered by Medicare to the lower prices available abroad. Yet even when the administration lands on a good idea in health care, it seems to get in its own way. The Trump-backed ACA lawsuit, for example, would directly undermine the kidney initiative and price-indexing plan. And while the president has a variety of other proposals in the works – from an effort to pass drug discounts directly to consumers to a plan to force hospitals to make their pricing transparent – many could be exposed to the kind of legal risks that killed the drug-ad initiative. It’s all part of a scattershot and often incoherent approach that isn’t as effective as it could be.

Take the kidney-care push: this area of treatment is costly in part because the current system incentivizes expensive care at dialysis centers that are largely run by two companies: DaVita Inc. and  Fresenius Medical Care AG. (Peter Grauer, the chairman of Bloomberg LP, is the lead independent director at DaVita.) The Department of Health and Human Services reportedly wants to change that dynamic with new payment models intended to shift patients to more cost-effective treatment at home. At least part of the administration’s ability to implement those models comes from the Center for Medicare and Medicaid Services’ Innovation Center, which was created by the ACA and is threatened by the lawsuit.

The contradictions don’t end there. People with end-stage kidney disease are covered by Medicare, so the lawsuit wouldn’t strip their coverage. However, the administration’s plan reportedly emphasizes intervening before people get to the point where they need dialysis or transplants. Killing the ACA is at direct odds with that goal. It would see millions lose insurance coverage, would eliminate protections for people with pre-existing conditions like chronic kidney disease, and crimp access to preventative care.

Though it is a long shot, the court case demonstrates the administration’s inconsistency in health care. Just about every health initiative would be harmed by the disruption that would result if this lawsuit succeeds, especially considering that the administration doesn’t have a replacement plan. If it were serious about keeping people off of dialysis or curing HIV, it would oppose this suit and stop other ongoing efforts that harm the ACA’s individual market and Medicaid.

The administration hasn’t detailed an ACA alternative because its previous effort to pass one was a political disaster that helped Democrats seize control of the House of Representatives in 2018. Instead, its health-care efforts have largely been confined to executive orders and rule-making. That approach narrows the scope of what the administration can accomplish, and comes with significant risks. If a federal judge thinks that forcing the disclosure of drug prices in ads is an overreach, there’s clearly a chance that the administration’s more ambitious plans will also have issues.

I’m rooting for the kidney effort. It targets a real problem and could have an impact, depending on the details. I’d be more optimistic about the plan’s chances if it were part of a cohesive set of policies that had Congressional backing, rather than the current jumble. 

Why is healthcare such an attractive target for private equity?

https://www.managedhealthcareexecutive.com/articles/why-healthcare-such-attractive-target-private-equity

Image result for private equity healthcare

Thanks to TV shows and movies, we tend to think of
private equity bidding wars as involving fast-growing
Silicon Valley companies. But when Oak Street Health,
a Chicago-based network of seven primary care clinics,
began looking for investors last year, more than a dozen
firms flew to Chicago to court the physicians and most of
them ended up bidding for the group of seven primary care clinics, according to a report in Modern Healthcare.

Oak Street is not alone — almost any independent
physician group of scale these days is likely to be an
attractive target for so-called “smart money,” investors
and their advisers.

Increased regulatory requirements and complexity has led
many independent small groups to “throw up their hands
and decide to sell to or join larger entities,” says Andrew
Kadar, a managing director in L.E.K. Consulting’s healthcare
services practice, which advises private equity groups.
While many such physicians sell to a health system and
become salaried employees, investor-backed practice management groups may have certain advantages, Kadar says. “Each private equity firm has its own approach, but in general they tend to give physicians a continued degree of independence and are willing to invest in new tools and technology.”

What is private equity up to? What attracts these
titans of capitalism to one of the most bureaucratic,
heavily regulated industries in the United States? And
what does the acquisition spree mean for physicians?

Here are five things to know about private equity and
healthcare in 2019.

1. The feeding frenzy is just ramping up

The driving force behind investors’ interest in healthcare
is the amount of “dry powder” in the industry — the term
market watchers use for funds sitting idle and ready to
invest, which McKinsey estimates at around $1.8 trillion

Investors are hungry for deals, and healthcare providers
are an attractive target for multiple reasons:

• The healthcare industry is growing faster than the
GDP. Healthcare is a relatively recession-proof industry
(demand remains constant even during downturns).

Many providers are currently not professionally
managed, and many specialties remain fragmented.

Investors see an opportunity to create value by
increasing efficiencies and consolidating market power.

Thus, with many independent providers still competing
on their own, there remains ample opportunity to
roll up practices into a single practice-management
organization owned by investors. “A lot of deals are
making the headlines, but when you look closely you’ll
see that most specialties aren’t highly penetrated yet by
investors,” says Bill Frack, a former managing director at
L.E.K. Consulting who is now leading a new healthcare
delivery venture. “We are still at the beginning.”

2. Investors have various strategies for creating value

Far from the leveraged-buyout days of the 1980s, which
relied primarily on financial engineering to generate
returns, almost all private equity deals today require
investors to find ways to add value to organizations over
the course of their holding period (typically around five
to seven years). By and large, in healthcare they follow
two strategies for doing so.

The most prevalent play is to buy high-volume, high margin specialist groups such as anesthesiologists,
dermatologists, and orthopedic surgeons. The PE
group then looks to maximize fee-for-service revenue
in the group by ensuring that the team is correctly
and exhaustively coding patient encounters (via ICD10) and encouraging physicians to see more patients.

Simultaneously, they work to improve revenue-cycle
management and drive efficiencies of scale into sales
and back-office administration.

Private equity firms may also look to vertically integrate
by acquiring providers of services for which their
specialists were previously referring out. For instance, oncologist groups might buy radiation treatment centers;
orthopedic surgeons might acquire rehab centers;
dermatologists might acquire pathology labs to process
biopsies, and so on.

Investors exit either through a sale to a larger PE group or,
for the largest groups, through an initial public offering.
Consolidating fee-for-service providers “is a very mature
strategy, and there’s not a single specialty you could
name where an investor wouldn’t have an incentive to
[form a roll-up],” says Brandon Hull, who serves on the
advisory council of New Mountain Capital, a private
equity firm that is investing in healthcare, and is a longtime board member at athenahealth.

Hull says investors are starting to take another approach
to creating value — which he argues “is more virtuous
and aligned with social goals.” In this strategy, investors buy up general medicine specialists — such as internal
medicine, pediatrics, or ob-gyns — and then negotiate
value-based contracts from payers.

To succeed under these contracts, investor-backed medical
groups identify the most cost-effective proceduralists
and diagnosticians in their network and instruct general
practitioners to refer only to them; and they work hard
to play a larger role in patients’ health and thus keep
healthcare utilization down. Groups that employ this
approach include Privia and Iora Health. In this strategy,
investors typically exit by selling the organization to a
larger PE group, a payer, or a health system.

Interestingly, groups that pursue the first strategy often
transition to the second – for instance, an efficiently run
orthopedic group might start with a focus on growing
revenue by maximizing fee-for-service opportunities,
but then consider pursuing bundled payments for hip
replacements. Or an investor-backed oncology group
confident in its treatment protocols and ability to keep
operational costs down might accept capitated payments
for treating patients recently diagnosed with cancer.

3. Private equity can be a great deal for physicians

How these deals are structured depends on whether a
specialty group is the first group acquired by investors —

what is known in private-equity lingo as “the platform”—
or whether it’s being added to an existing group, what is
known as a “tuck-in.”

Physicians in the platform practice are often offered
substantial equity and can benefit from the group’s
appreciation — while, of course, being exposed to the risk that
their share-value may decrease if the group fails to deliver on
its intended value proposition. Physicians in subsequent tuckin groups tend to have simpler contracts with a salary base
and added incentives tied to productivity and other measures.
L.E.K.’s Frack says both models can be attractive, but
that a more simple employment model is probably best
suited to most physicians. “I would tell docs that if they
have a strong group of doctors, they don’t have much to
lose. Even if the deal falls flat for investors, the doctors
will likely just be acquired by another investor, and they
won’t be left holding the bag.”

4. Technology underpins it all

A similar private-equity healthcare frenzy in the 1990s failed
spectacularly. One reason for the collapse was that the
technology did not exist for investors to realize back-office
efficiencies and handle the complexity of value-based contracts.

Today, cloud-based EHR and revenue-cycle management
systems harness the power of network effects to help
provider organizations handle complex and unique
payer contracts, improve back-office efficiency through
automation and machine-learning, implement best practices
for care, and quickly onboard the new practices they acquire.

Technology is particularly important for the general
medicine specialist groups looking to win under fee-for-value contracts. “The moment you start to care about
a patient’s entire episode of care, you need a massive
upgrade of your back-end systems, including full
visibility into what’s happening to your patient outside
your office. Now the technology exists to truly achieve
care coordination,” New Mountain Capital’s Hull says.

5. Public perception can be a problem

Even if physicians believe a private equity deal is their
best option, there’s a public relations risk in tying a medical practice to capitalists whose ultimate goal is to earn a return. Most coverage of private equity in mainstream media outlets questions whether investors’ profit motive is bad for patients. Physician associations and medical journals have also raised concerns in a very public way.

Such public skepticism should worry anyone who
remembers the crash of the first private-equity wave in
the 1990s, says New Mountain Capital’s Hull, who ties
that crash to the failure of managed care. “The American
consumer perceived that doctors were getting bonuses
for denying them care; this became the grim punchline
of late-night talk shows, and the whole thing fell apart.”
Frack advises investors and physicians to “monitor
quality data like a hawk, so that the group can counter
anecdotal accounts of bad care.”

Hull adds that savvy investors should take a page from
the many healthcare startups that are laser-focused on building trust with patients, particularly when it comes
to end-of-life decisions and hospice care. “They know
that success in healthcare depends on patients trusting
their doctors to help them make the best medical
decisions,” Hull says.

Positioned to accommodate uncertainty L.E.K.’s Kadar argues out that whatever direction Washington decides to take healthcare, an efficient, professionally managed group practice with advantages
of scale is well-positioned to succeed — and private
equity is one way for physician groups to reach that goal.

“These groups can adapt more quickly than smaller,
independent practices, whether progressives or
conservatives are in power,” he says. As an example,
Kadar imagines a scenario in which Medicare-for-all
comes to pass. “It turns out that most [PE-backed] groups
do very well on Medicare Advantage contracts. If your
group is focused on delivering more efficient, effective care, with strong operations, you’re in a good position no matter what happens.”

 

 

 

 

 

Wonky Supreme Court Ruling on Medicare DSH Formula to Affect More Than Money

https://www.healthleadersmedia.com/strategy/wonky-supreme-court-ruling-medicare-dsh-formula-affect-more-money?spMailingID=15780781&spUserID=MTg2ODM1MDE3NTU1S0&spJobID=1660471453&spReportId=MTY2MDQ3MTQ1MwS2

Moving forward, the government will have to complete notice-and-comment rulemaking for a broader set of its decisions.


KEY TAKEAWAYS

Monday’s decision by the Supreme Court kicks the dispute back to the District Court level. What happens next is unclear.

Beyond the money at stake, this case increases the rulemaking burden on HHS and CMS, though the extent of that burden is disputed.

Hospitals that treat high numbers of low-income patients secured a big win this week at the U.S. Supreme Court.

Seven of the justices agreed that officials in the U.S. Department of Health and Human Services stepped out of line when they rejiggered a Medicare reimbursement formula for disproportionate share hospitals (DSH) five years ago without a formal notice-and-comment process.

The decision carries implications well beyond the money hospitals say they are owed.

“It’s a big deal for the hospitals, obviously,” says Helen R. Pfister, JD, a New York–based partner with Manatt Health.

By the government’s estimates, the dispute implicates $3-4 billion in payments over nine years. That’s how much more the Centers for Medicare & Medicaid Services would have paid in DSH reimbursements, had the formula not been changed, according to court records.

“But I think it’s also a big deal in terms of the fact that the Supreme Court has clearly indicated that, going forward, CMS is going to have to do notice-and-comment rulemaking for a much more expansive set of agency decisions than they thought and argued in this case that they would need to do,” Pfister adds.

Precisely how much of the routine work completed by HHS and CMS will be affected by this broader take on notice-and-comment rulemaking remains to be seen. While some stakeholders have raised concerns the added burden could stifle the government’s work, others contend any inconvenience imposed will be both manageable and beneficial.

In any case, the impact of Monday’s decision will flow along two distinct paths, affecting not only hospital finances but also, for better or worse, the way HHS and CMS operate.

What’s Next, Procedurally?

In 2016, nine hospitals led by Allina Health Services lost their case against HHS at the U.S. District Court in D.C., where a judge ruled that notice-and-comment rulemaking wasn’t required. In 2017, however, three judges at the D.C. Circuit Court of Appeals reversed the lower court’s decision and sent the dispute back for further proceedings.

In 2018, attorneys for HHS asked the Supreme Court to review the appellate decision. Now that the justices have affirmed the Circuit Court’s decision, the parties have up to seven days to file a status report at the District Court level on where the case stands, according to court records. That filing, expected by early next week, could shed light on where things are headed procedurally.

Pfister says she doesn’t think anyone knows for the time being whether the government will automatically revise DSH payments for the affected fiscal years, pursue another round of notice-and-comment rulemaking, or take some other course of action in response to the Supreme Court ruling.

And the parties themselves aren’t saying much. When asked about the agency’s plans, a CMS spokesperson told HealthLeaders on Wednesday that the agency is still reviewing the decision. Allina referred questions to its law firm, which declined to comment.

Beyond the nine plaintiff hospitals involved in this week’s Supreme Court decision, there are hundreds of plaintiffs suing HHS on similar grounds. Dozens of follow-on lawsuits have been consolidated into a single docket pending before U.S. District Judge Amy Berman Jackson. Parties to that proceeding have up to 14 days to file a status report in light of the Supreme Court’s decision, according to court records.

An Overly Burdensome Decision?

The government’s attorneys had issued dire warnings about the potential consequences of the decision the Supreme Court ultimately reached.

The notion that CMS must go through a notice-and-comment process for the sort of routine process at issue in this case could “substantially undermine effective administration of the Medicare program” because it would apply not just to DSH formula calculations but to “nearly every instruction” the agency gives to its contractors as well, U.S. Solicitor General Noel J. Francisco argued on HHS’ behalf.

Pfister largely rejects the government’s dire take on the decision’s impact.

“I think that might have been a little bit hyperbolic,” she says.

But other stakeholders outside the government have taken the Supreme Court’s ruling as a troubling sign of uncertainty to come.

“This is a frightening decision, that throws a lot of doubt on the validity of thousands of pages of Medicare sub-regulatory guidance,” Adam Finkelstein, JD, MPH, counsel with Manatt Health and a former health insurance specialist with the CMS Innovation Center, wrote in a tweet.

Stephanie A. Kennan, senior vice president of federal public affairs for McGuire Woods Consulting in Washington, D.C., tells HealthLeaders that she thinks the government’s argument “is somewhat overblown.” Officials should be able to manage any added burden from this ruling, even if it slows them down a bit, she says.

“I think it may mean they cannot move as quickly on some policies as they would like to,” Kennan says.

A Boon to Public Input?

The benefits of a more-transparent process justify any added hassle that may stem from having to go through a mandatory comment process more often as a result of this decision, Kennan says.

“In this case, they have to do 60-day comment periods, which can seem like an eternity if you want to keep the process moving, regardless of whether you’re the agency or a stakeholder,” she says. “The transparency is probably worth the 60 days.”

But others reject the notion that this decision should be seen as balancing effective governance with transparency.

“Allina isn’t a vindication of the importance of public participation in agency decision-making. It’s a testimonial to the heedlessness of lawyers who impose silly procedural rules on an administrative state they only dimly understand,” Nicholas Bagley, JD, a law professor at the University of Michigan who teaches on administrative law and health law, wrote in a series of tweets.

“Bear in mind,” he added, “that CMS is a tiny, beleaguered agency … To further encumber it will make Medicare more capricious, not less, as staffers tend to senseless procedures instead of doing their jobs.”

Moving forward, HHS and CMS will continue to have discretion to determine whether to go through notice-and-comment with a given action, Pfister says. The difference now, she says, is that there’s a stronger incentive for government officials to cover themselves; otherwise, another case like Allina’s could pull them into another round of prolonged litigation.