- Nonprofit hospital giant CommonSpirit Health reported a better operating performance in its 2021 fiscal year than in 2020, but said in financial results released Friday it expects COVID-19 to continue to pressure its operations in the coming year.
- The Chicago-based Catholic system reported operating income of $998 million for its fiscal year ended June 30, compared to an operating loss of $550 million the year prior.
- However, excluding federal relief funds from the Coronavirus Aid, Relief, and Economic Security Act passed last March and a sale of part of its stake in an unnamed joint venture, the system would be posting an operating loss of $215 million.
It’s CommonSpirit’s second full fiscal year as a a combined organization after the merger of Dignity Health and CHI was completed in February 2019. The marriage resulted in the largest nonprofit system in the U.S., with 140 hospitals and roughly 1,500 sites across 21 states.
However, that scale didn’t protect CommonSpirit from being slammed by the pandemic’s financial effects in 2020, as lower admissions, badly performing investments and higher charity and uncompensated care expenses severely depressed its bottom line.
Though many COVID-19 headwinds continued into its 2021 fiscal year, returning patients, stronger investment performance and cost reduction initiatives helped CommonSpirit to net income of $5.5 billion for the year, compared to its steep loss of $524 million in 2020.
CommonSpirit’s revenues rose more than 12% compared to the 2020 fiscal year, mostly due to recovering patient volume and the addition of new care sites, including Virginia Mason Health System in the Pacific Northwest and Yavapai Regional Medical Center in Arizona, and expanded ambulatory surgical center relationships in several states.
Expenses were also up by 7% year over year mostly due to “significant” pandemic-related expenses, CommonSpirit said in its release on the results.
However, the higher costs were offset by cost management, including more than $400 million in cost reductions in the fiscal year. And, due to stronger financial markets, the system’s balance sheet was also boosted by $3.4 billion in investment income.
But despite the turnaround, CommonSpirit management warned COVID-19 is still likely to dog the system’s performance as it enters its third fiscal year as a combined entity.
The recent surge in patients due to the rise of the highly infectious delta variant caused the system’s COVID-19 inpatient census to jump to almost 2,900 in early September. That’s up from a low of 340 in June, though still significantly lower than CommonSpirit’s previous peak of more than 4,100 COVID-19 inpatients recorded in early January.
Amid the rising cases, the system said it’s emphasizing employee retention as staffing shortages, especially acute among nurses, continue to stress providers nationwide.
CommonSpirit noted it doesn’t expect personal protective equipment or ventilator availability to be a problem, despite increasingly taxed capacity and rising need in the U.S.
Like other providers, the nonprofit operator reported it saw patients begin to return for preventative and delayed care throughout the fiscal year, though that return decelerated in tandem with escalating COVID-19 cases.
Same-facility adjusted admissions dropped 2.7% year over year, while outpatient visits rose 5.1% overall.
Additionally, demand for virtual visits has remained strong even as in-office volumes have recovered. Telehealth use has stabilized at roughly 13% of overall volumes, CommonSpirit said, though that’s down from a high of more than 37% notched in April of last year.
Net patient and premium revenues jumped more than 10% year over year due to higher patient acuity, the YRMC and VMHS affliliations and stable payer mix, CommonSpirit said. Those tailwinds were partly offset by volume shortfalls due to the pandemic.
CommonSpirit, which said it was still on track to achieve the cost-savings goals outlined in CHI and Dignity’s 2019 merger plans, expects to release a new five-year strategic roadmap in the fall.
- A union representing 24,000 Kaiser Permanente clinicians in California has put a pause on its 24-year partnership with management, the group said Friday.
- Leadership of the union voted last week to move forward with a membership vote that would authorize the bargaining team to call a strike.
- The United Nurses Associations of California/Union of Health Care Professionals said in a press release Kaiser Permanente is planning “hefty cuts” to nurse wages and benefits despite the ongoing COVID-19 pandemic and high levels of burnout among nurses.
Union activity at hospitals has been ramping up since the onset of the pandemic, as front-line healthcare workers have been stretched to the brink with full ICUs, worries of infection and sick coworkers.
Now, Kaiser Permanente nurses in California are saying they’re not being appreciated for their efforts.
“How do you tell caregivers in one breath you’re our heroes, we’re invested in you, I want to protect you, but in the next say I want to take away your wages and benefits? Even say you’re a drag on our bottom line,” Charmaine Morales, executive vice president of the union, said in a press release. “For the first time in 26 years, we could be facing a strike.”
The most recent bargaining session between the health system and the union was Sept. 10. Another one hasn’t been scheduled, despite most contracts being set to expire at the end of the month, the union said.
The labor management partnership started in the 1990s as an attempt for the union and management to share information and decision-making, the union said.
But they also said company leaders have not been invested in the agreement recently.
“Kaiser Permanente has stepped back from the principles of partnership for some time now, and they have violated the letter of our partnership agreement in the lead up to our present negotiations,” union president Denise Duncan said in the press release. “Despite that, we are here and ready to collaborate again if KP leaders find their way back to the path — where patient care is the true north in our value compass, and everything else falls in line behind that principle. Patient care is Kaiser Permanente’s core business, or at least we thought so.”
The press release cites Kaiser’s profitability, as the system’s net income was nearly $3 billion in the second quarter of this year. However, that was a decrease of more than a third from the prior-year period.
It also noted multiple lawsuits alleging Kaiser tried to game the Medicare Advantage program by submitting inaccurate diagnosis codes. The Department of Justice has joined six of those lawsuits.
Kaiser Permanente did not respond to a request for comment by time of publication.
The pharmaceutical industry is on the verge of defeating a major Democratic proposal that would allow the federal government to negotiate drug prices.
Speaker Nancy Pelosi (D-Calif.) can afford only three defections when the House votes on a sweeping $3.5 trillion spending package, but Reps. Scott Peters (D-Calif.), Kurt Schrader (D-Ore.) and Kathleen Rice (D-N.Y.) last week voted to block the drug pricing bill from advancing out of the Energy and Commerce Committee. Rep. Stephanie Murphy (D-Fla.) voted against advancing the tax portion of the legislation in the House Ways and Means Committee.
All told, the number of House Democrats who have concerns about the drug pricing bill is in the double digits, and several Democrats in the 50-50 Senate would not vote for the measure in its current form, according to industry lobbyists.
The holdouts mark a sharp contrast to just two years ago, when every House Democrat voted for the same drug pricing bill, underscoring the inroads pharmaceutical manufacturers have made with the caucus on a measure that would narrow corporate profit margins.
“The House markups on health care demonstrate there are real concerns with Speaker Pelosi’s extreme drug pricing plan and those concerns are shared by thoughtful lawmakers on both sides of the aisle,” the Pharmaceutical Research and Manufacturers of America (PhRMA), the industry’s top trade group, said in a statement following the committee votes.
The reversal follows the industry’s multimillion-dollar ad campaigns opposing the bill, timely political donations and an extensive lobbying effort stressing drugmakers’ success in swiftly developing lifesaving COVID-19 vaccines.
The bill at the center of the fight, H.R. 3, would allow Medicare to negotiate the price of prescription drugs by tying them to the lower prices paid by other high-income countries. The measure is projected to free up around $700 billion through the money it saves on drug purchases — covering a big chunk of the Democrats’ $3.5 trillion spending plan.
Drugmakers say the measure would reduce innovation, pointing to a Congressional Budget Office estimate that found it would lead to nearly 60 fewer new drugs over the next three decades.
Peters and other Democrats have proposed an alternative bill that would limit price negotiation to a fraction of the prescription drugs included in H.R. 3, focusing instead on drugs like insulin, the diabetes treatment that has seen its price rise dramatically over the last decade. The alternative measure also would set a yearly out-of-pocket spending limit for lower-income Medicare recipients.
The proposal foreshadows a less aggressive drug pricing compromise that uneasy Senate Democrats are more likely to get behind.
“You’re going to see something pass, but it probably won’t be H.R. 3,” said a lobbyist who represents pharmaceutical companies.
Pharmaceutical manufacturers oppose any efforts to control the price of prescription drugs, but the alternative bill is more favorable to the industry than the broader Democratic bill.
“Any kind of artificial price controls will have an impact on both new scientific investment as well as access to medicines,” said Rich Masters, chief public affairs and advocacy officer at the Biotechnology Innovation Organization, a trade group that represents pharmaceutical giants such as Sanofi, Merck and Johnson & Johnson.
“We appreciate the focus on patient out of pocket costs, which we know is a critical component to any reform efforts and something that BIO and our member companies have long supported,” he added.
Progressive lawmakers, who have long bemoaned rising drug prices, blasted the three House Democrats who voted to block H.R. 3, saying they succumbed to industry donations and lobbying efforts.
“What the pharmaceutical industry has done, year after year, is pour huge amounts of money into lobbying and campaign contributions … the result is that they can raise their prices to any level they want,” Sen. Bernie Sanders (I-Vt.) said in a video message Friday.
The pharmaceutical industry spent $171 million on lobbying through the first half of the year, more than any other industry, to deploy nearly 1,500 lobbyists, according to money-in-politics watchdog OpenSecrets. That’s up from around $160 million at the same point last year, when the industry broke its own lobbying spending record.
Peters announced his opposition to Pelosi’s drug pricing proposal in May and shortly after was showered with donations from pharmaceutical industry executives and lobbyists, STAT News reported.
Peters is the No. 1 House recipient of pharmaceutical industry donations this year, bringing in $88,550 from pharmaceutical executives and PACs, according to OpenSecrets. Over his congressional career, Peters has received in excess of $860,000 from drugmakers, more than any other private industry.
The California Democrat told The Hill last week that accusations of his vote being guided by donations are “flat wrong” and noted that his San Diego congressional district employs roughly 27,000 pharmaceutical industry workers consisting mostly of researchers.
“It’s always going to be the attack because it’s simple and it’s easier than engaging on the merits,” he said.
Schrader received nearly $615,000 from the industry. He inherited a fortune from his grandfather, a former top executive at Pfizer, and had between $50,000 and $100,000 invested in Pfizer, in addition to other pharmaceutical holdings as of last year, according to his most recent annual financial disclosure.
Schrader tweeted last week that he is “committed to lowering prescription drug costs,” while arguing that the House bill would not pass the Senate in its current form.
Rep. Lou Correa (D-Calif.) another supporter of Peters’s more industry friendly bill, received an influx of pharmaceutical donations in recent months, including a $2,000 check from Pfizer’s PAC in mid-August, according to Federal Election Commission filings.
In meetings with lawmakers, lobbyists have argued that now is not the time to go after drugmakers, which developed highly effective COVID-19 vaccines and are developing booster shots and other treatments to fight the virus.
The U.S. Chamber of Commerce, which represents several major pharmaceutical manufacturers, said last month that Democratic drug pricing efforts will leave the U.S. “unprepared for the next public health crisis.”
PhRMA last week launched a seven-figure ad campaign to oppose H.R. 3. That’s after pharmaceutical groups and conservative organizations bankrolled by drugmakers spent $18 million on ads attacking the proposal through late August, according to an analysis from Patients for Affordable Drugs, a group that launched its own ads backing H.R. 3 last week.
The ad buys are meant to sway both lawmakers and the general public. A June Kaiser Family Foundation poll found that 90 percent of Americans approve of the drug pricing measure, but that support dropped to 32 percent when they were told that the proposal “could lead to less research and development of new drugs.”
Pfizer on Monday announced that testing showed that its COVID-19 vaccine was “safe” and “well tolerated” by children ages 5 to 11 and “robust neutralizing antibody responses” were observed.
The pharmaceutical company said that a “favorable safety profile” had been observed in its trial of the vaccine among children under the age of 12. For its trial, the company used doses a third of what is administered to people ages 12 and up.
“Over the past nine months, hundreds of millions of people ages 12 and older from around the world have received our COVID-19 vaccine. We are eager to extend the protection afforded by the vaccine to this younger population, subject to regulatory authorization, especially as we track the spread of the Delta variant and the substantial threat it poses to children,” Pfizer CEO Albert Bourla said.
“Since July, pediatric cases of COVID-19 have risen by about 240 percent in the U.S. – underscoring the public health need for vaccination. These trial results provide a strong foundation for seeking authorization of our vaccine for children 5 to 11 years old, and we plan to submit them to the [Food and Drug Administration (FDA)] and other regulators with urgency,” he added.
Pfizer’s trial included 2,268 participants between the ages of 5 and 11. According to the company, the doses resulted in side effects comparable to what was observed among the trial for patients ages 16 to 25. It also said that it expects to include its results in an upcoming submission to the FDA for emergency use authorization.
In the U.S., no COVID-19 vaccines have been approved for children under the age of 12, leaving many children and the adults who are in close proximity to them particularly vulnerable during the most recent surge brought on by the delta variant.
National Institute of Health Director Francis Collins on Sunday said he believed parents and teachers should be placed in the same category as health care workers in terms of COVID-19 risk, due to their close contact with children who are ineligible to be vaccinated.
In August, the number of pediatric hospitalizations in the U.S. due to COVID-19 reached a record high of nearly 2,000. While children are generally believed to be less likely to develop severe cases of the coronavirus, new variants continue to pose the potential threat of causing more severe symptoms.
This announcement comes shortly after an advisory panel for the FDA voted last week in favor of recommending a third dose of the Pfizer-BioNTech vaccine for people over 65 and in certain high-risk groups. The panel voted against administering a third dose to all vaccine-eligible people.
According to the Centers for Disease Control and Prevention, nearly 75 percent of the eligible population — ages 12 and up — has received at least one dose of a COVID-19 vaccine. Around 64 percent of those over the age of 12 are fully vaccinated.
Intermountain Healthcare and SCL Health, two nonprofit health systems based in Salt Lake City, Utah and Broomfield, Colorado, respectively, have signed a letter of intent to merge and form a 33-hospital system and insurance provider.
The systems are planning to sign a definitive merger agreement by the end of the year, and pending customary approvals, finalize the deal in early 2022.
If all goes to plan, the combined entity will employ more than 58,000 caregivers, operate 385 clinics across six states and provide health insurance to about 1 million people, the announcement said.
The new system will adopt Intermountain’s name and be headquartered in Salt Lake City, with a regional office in SCL’s Broomfield, Colorado location. As a faith-based organization, SCL’s seven Catholic hospitals will retain their religious branding and continue operating with their current practices.
Dr. Marc Harrison, Intermountain’s president and CEO, will lead the merged organization. Lydia Jumonville of SCL will remain president and CEO of her organization for a two-year integration period until transitioning to a board position for the new system.
WHAT’S THE IMPACT
The two systems are pitching their proposed merger as a model for how faith-based and secular health organizations can come together to extend their missions.
“SCL Health and Intermountain are pursuing our merger from positions of strength,” Jumonville said in a statement. “We are two individually strong health systems that are seeking to increase care quality, accessibility, and affordability. We will advance our missions and better serve the entire region together.”
The merger could be stopped in its tracks, however, considering President Biden’s executive order that cracks down on hospital consolidation. Mergers have left many areas, especially rural communities, without good options for convenient and affordable healthcare service, according to the order.
It encourages the Department of Justice and the Federal Trade Commission to enforce antitrust laws and review and revise their merger guidelines to ensure patients are not harmed by such mergers.
The FTC did just that last month after undergoing a “tidal wave of merger filings.” The watchdog group announced it was adjusting its review process and that companies who complete their deals before formal approval from the FTC risk having them unwound down the road.
THE LARGER TREND
Hospital advocacy groups, including the Federation of American Hospitals and the American Hospital Association, pushed back on Biden’s executive order, saying integration and scale can be beneficial in responding to community needs, particularly during a pandemic.
Even with the regulatory shake-up, hospital mergers and acquisitions have been on the rise recently, with 13 announced deals in Q1 2021, compared to 29 in 2020. The trend is expected to continue throughout the year, according to Moody’s Investors Service.
Earlier this year, the FTC began an investigation to look into how past mergers impacted competition with hopes to use its findings to revamp its merger retrospective program.
Amid rising COVID-19 cases and hospitalizations, Intermountain shared this week it’s postponing all non-urgent surgeries and procedures requiring hospital admission in its trauma and community hospitals.
ON THE RECORD
“We’re excited to merge with SCL Health to usher in a new frontier for the health of communities throughout the Intermountain West and beyond,” Harrison said in a statement. “American healthcare needs to accelerate the evolution toward population health and value, and this merger will swiftly advance that cause across a broader geography. We’ll bring together the best practices of both organizations to do even more to enhance clinical excellence, transform the patient experience, and support healthy lives.”