A report from The Lown Institute, a Boston-based think tank, finds that many health systems—227 of the 275 evaluated—spend less on providing “community benefit” than the value of their tax exemptions. The American Hospital Association (AHA) criticized the report’s methodology, claiming it “cherry-picks categories of community investment.” This report builds on previous analyses that have found that, taken together, nonprofit hospitals spend less on charity care than government or for-profit hospitals.
The Gist:Policymakers and academics, prompted by massive capital projects, high executive salaries, and—especially—aggressive pricing and billing strategies, are increasingly questioning whether nonprofit health systems provide sufficient community benefit to retain their tax-exempt status. A recent piece in Health Affairs suggests updating the community benefit standard, which the Internal Revenue Service (IRS) uses to evaluate nonprofit status, to focus on social determinants of health and measurable health outcomes.
We’d expect tougher scrutiny on this topic in the future, especially if state budgets come under pressure from a deterioration in the broader economy.
If the leaked Supreme Court draft opinion overturning Roe v. Wade—which in 1973 established an individual’s constitutional right to an abortion—is finalized, as many as 26 states are either certain or likely to ban abortion. The resulting patchwork of abortion laws across the country could create confusion for providers and hospitals on multiple fronts, including cases related to the Federal Emergency Medical Treatment and Labor Act (EMTALA), as well as for health systems that operate in multiple states. Medical training on the procedure could become much more limited, as about half of the nation’s obstetrics and gynecology residencies are in states likely to ban abortion.
Recognizing the precarious position that abortion bans will put some providers in, the American Medical Association released a statement on Thursday saying that it is “deeply concerned” with the draft opinion, and that it “would lead to government interference in the patient-physician relationship, dangerous intrusion into the practice of medicine, and potentially criminalizing care.”
The Gist: Abortion is just one of a raft of issues where the provision of health services increasingly intersects with charged politics in this country. If Roe is overturned, medication abortion—the use of abortion pills—which already accounts for more than half of all abortions, will increase, although multiple states are already seeking to limit access.
Restricting access to safe abortions will also further exacerbate health disparities, driving up the already distressingly high US maternal mortality rate, especially among Black women. Andoverturning Roe would have implications far beyond access to abortion, especially for patients experiencing miscarriages, ectopic pregnancies, or other life-threatening medical conditions related to pregnancy.
Organizations should prepare themselves for a continuation of quits as a new culture of quitting becomes the norm as the annual quit rate stands to jump up nearly 20 percent from annual pre pandemic levels, according to Gartner.
The pre pandemic average for quits stood at 31.9 million, but that figure could rise to 37.4 million this year, said executive consultancy Gartner in an April 28 news release.
“An individual organization with a turnover rate of 20 percent before the pandemic could face a turnover rate as high as 24 percent in 2022 and the years to come,” Piers Hudson, senior director in the Gartner HR practice said in the news release. “For example, a workforce of 25,000 employees would need to prepare for an additional 1,000 voluntary departures.”
The reason for the likely increase in quits is new flexibility in work arrangements and employees’ higher expectations, according to Gartner. A misalignment between leaders and workers is also contributing to the attrition.
“Organizations must look forward, not backward, and design a post-pandemic employee experience that meets employees’ changing expectations and leverages the advantages of hybrid work,” said Mr. Hudson.
Hospitals’ estimated annual financial losses due to 340B discount restrictions have doubled since December 2021, according to a report from the advocacy group 340B Health.
A growing number of drugmakers have imposed limits on 340B discounts to safety net hospitals for drugs dispensed at community-based pharmacies. Between December and March, six more drugmakers imposed restrictions.
340B Health surveyed more than 500 hospitals from November to December 2021 and again in March to assess how these increasing restrictions are affecting patients and hospitals.
Four findings:
1. The median annual financial effect on disproportionate share hospitals, rural referral centers and standalone community hospitals went from $1 million in December to $2.2 million in March.
2. Among these hospitals, 10 percent of leaders said they expect annual losses of $21 million or more.
3. Leaders from rural critical access hospitals said they also expect the median annual financial effect of 340B discount restrictions to double from $220,000 to $448,000.
4. Eighty percent of hospitals surveyed anticipated having to cut some patient care services if the restrictions become permanent.
A former vice president of Janesville, Wis.-based Mercyhealth was sentenced to 3 ½ years in prison May 4 for wire fraud and tax evasion in relation to a $3.1 million kickback scheme, according to the U.S Justice Department.
Barbara Bortner, 57, Mercyhealth’s former vice president of marketing and public relations, pleaded guilty to the scheme in October 2021.
Ms. Bortner was charged in September 2021. She admitted getting kickbacks from Ryan Weckerly, owner of a marketing agency hired by the health system, from 2015 to 2020.
Prosecutors said Ms. Bortner and Mr. Weckerly created a scheme in which Mr. Weckerly’s marketing agency, Morningstar Media Group, inflated invoices sent to Ms. Bortner for marketing work he did for Mercyhealth. In exchange, Ms. Bortner receive kickbacks from the funds received.
Prosecutors also said Ms. Bortner agreed to maintain Morningstar Media as its primary marketing group in exchange for the kickbacks.
Mr. Weckerly pleaded guilty in November 2021 and will be sentenced May 17.
Mercyhealth fired Ms. Bortner in August 2021, weeks before the charges were filed against her. Mercyhealth said the fraud didn’t affect patient care.
For the quarter ending March 31, 2022, Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals, and their respective subsidiaries (KFHP/H) reported total operating revenues of $24.2 billion and total operating expenses of $24.3 billion compared to total operating revenues of $23.2 billion and total operating expenses of $22.2 billion in the same period of the prior year. There was an operating loss of $0.07 billion, or (0.3%) of total operating revenues, for the first quarter of the year compared to operating income of $1.0 billion, or 4.4%, in the first quarter of 2021.
During the first quarter of 2022, a surge in COVID-19 cases — the steepest since the start of the pandemic — led to a substantial increase in the demand for related care and testing. COVID-19 expenses drove an additional $1.4 billion in expenses. Those expenses, along with the costs of providing care to our members that was deferred earlier in the pandemic, were the primary drivers of additional expenses. In the first quarter of 2022, Kaiser Permanente cared for more than 688,000 patients with COVID-19, including more than 26,000 hospitalized patients, performed 2.5 million COVID-19 diagnostic tests, supplied 1.3 million COVID-19 home tests, and administered 1.4 million vaccine doses. In addition, like the rest of the industry, Kaiser Permanente experienced significant increases in labor costs during the first quarter of 2022, compared to the same period last year and when compared to year-end 2021.
“I am incredibly proud of the extraordinary people of Kaiser Permanente, who have stepped up time and time again to provide high-quality care and service to our members and communities during unparalleled challenges,” said chair and chief executive officer Greg A. Adams. “While in the first quarter, the ongoing effects of the pandemic strained our workforce, communities, and operations, our operating model, which provides both care and coverage, enabled us to continue providing that care even in the face of an unprecedented omicron surge and industrywide labor shortage. Our underlying operating performance remains solid and aligned with expectations.”
In the category of other income and expense, the quarterly loss totaled $889 million, driven largely by investment losses, compared to $1.0 billion in income in the same period of the prior year. For the quarter, there was a net loss of $961 million compared to net income of $2.0 billion in 2021.
Capital spending
Capital spending in the first quarter totaled $872 million compared to $906 million in the same period of the prior year. During the first 3 months of 2022, Kaiser Permanente opened a new, 220,000-square-foot medical facility in Timonium, Maryland, that features 24-hour advanced urgent care and a 24-hour pharmacy, along with an ambulatory surgery center.
“While the increase in pandemic-related expenses, overall rising costs, and investment market losses impacted our finances this quarter, Kaiser Permanente navigated this challenging time providing high-quality care and continued investing in our integrated model including ongoing capital investments to best serve our members. We controlled discretionary spending, optimized COVID-19 testing, addressed surgical backlogs, and managed outside medical expenses,” said executive vice president and chief financial officer Kathy Lancaster. “As we face the ongoing uncertainty and prolonged effects the pandemic is having on the health care industry, we are well positioned to continue delivering high-quality, affordable care and remain vigilant stewards of resources entrusted to us in this dynamic environment.”
Membership
Membership as of March 31, 2022, was 12.6 million, reflecting a growth of more than 88,000 members since December 31, 2021. Medicaid enrollees accounted for almost 33,000 of Kaiser Permanente’s new members.
Each of the six major national payers exceeded Wall Street’s expectations for profit in the first quarter, with UnitedHealth Group out in front as the most profitable company.
The health insurance giant continues its streak of profitability in the first quarter, earning $5 billion in profit. The next-highest company, CVS Health, earned $2.3 billion in profit.
UnitedHealth executives said that the company saw double-digit growth at both UnitedHealthcare, its health plan arm, and Optum. Optum, in particular, has been a bright spot for growth over the past several quarters.
UHG also beat the Street for revenue, bringing in $80.1 billion. That’s a hike of nearly $10 billion compared to the first quarter of 2021, where the company brought in $70.2 billion.
CVS came in second on profit and also on revenue, bringing in $76.8 billion. That’s a double-digit revenue increase from its first-quarter 2021 haul of $69.1 billion.
Revenues were up across its business lines, including a 9% increase at CVS Pharmacy despite a downturn in COVID-19 vaccinations and testing volume in the quarter. Revenues at Aetna, the company’s health plan wing, were up by 12.8%.
Anthem slots in at third place for profitability, earning $1.8 billion in the quarter. That’s up from $1.7 billion in the prior-year quarter. The insurer also had the fourth-highest revenue in the quarter, earning $38.1 billion.
Cigna lands in fourth place for profit and third place for revenue in the quarter, according to its report released Friday. It earned $1.18 billion in profit for the quarter, up from $1.16 billion a year before.
Revenues at Cigna hit $44 billion, up from $41 billion in the first quarter of 2021.
Humanaearned $930 million in profit for the quarter for the fifth-highest earnings among the six companies. Its profits increased from $828 million in the first quarter of 2021. The insurer does land last on the list in revenue, with $24 billion for the quarter.
Centene is in sixth for profitability, earning $849 million for the quarter. That’s up from $699 million in the first quarter of 2021. Centene earned $37.2 billion in revenue for first quarter of 2022, up from $30 billion in the prior-year quarter.
A group of emergency room physicians filed a lawsuit in March alleging representatives for their employer, American Physician Partners, discouraged them from testing for COVID-19 and pressured them to work while ill, according to the Houston Chronicle.
Brentwood, Tenn.-based American Physician Partners staffs and manages ER physicians at more than 15 Houston Methodist facilities, including hospitals and emergency care centers. The lawsuit, which does not involve Houston Methodist employees, centers on a dispute between eight physicians and APP.
The physicians allege APP is underpaying them and engaging in “unethical practices,” such as urging physicians with COVID-19 to work, as a way to boost revenue.
APP’s protocol, “discourages testing and disregards physician, staff, and patient safety when a doctor does test positive for COVID-19,” the lawsuit alleges. The physicians claim APP is putting “profit over patient.”
APP denied its involvement in the alleged financial damages in a response to the physicians’ complaint filed April 25. The company told the Houston Chronicle that it has been in discussions with the physicians since they raised concerns four months ago.
“We advised them at that time that their concerns do not reflect the facts known to APP and otherwise appear to be based on misinformation,” APP said in a statement to the Chronicle. “Thus we are disappointed these physicians — who represent a very small minority of the physicians APP partners with in the Houston area — have decided to move forward with this litigation. We remain open to continuing our dialogue with these physicians outside of the litigation, which, again, APP believes is without merit.”
Houston Methodist, which isn’t involved in or named in the lawsuit, said it cannot comment on the specific allegations, according to the Chronicle. “We are unaware of any ER doctor who came to work after testing positive for COVID-19,” a hospital spokesperson told Becker’s.
Across industries, 4.54 million Americans quit or changed jobs in March, the highest level since December 2000, according to seasonally adjusted data released May 3 by the Bureau of Labor Statistics.
The count is up from 4.38 million in February. In the healthcare and social assistance sector, 542,000 Americans left their jobs in March, compared to 561,000 the previous month, according to the bureau.
The number of job openings in the U.S. also hit a record high of 11.55 million in March, up from 11.34 million in February, according to the bureau. Job openings in the healthcare and social assistance sector remained similar in February and March, at around 2 million.
During the pandemic, hospital CEOs are among those who have joined the list of workers quitting. Additionally, older, tenured employees in America are part of the trend.
Although there continues to be churn in the labor market, Fitch Ratings projects the U.S. labor market will recover jobs lost during the pandemic by the end of August.
HENRY KOTULA 