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.
Several hospitals are trimming their workforces due to financial and operational challenges, and some are offering affected workers new positions.
1. MetroWest Medical Center in Framingham, Mass., eliminated live interpretation services in April and laid off an undisclosed number of employees, the MetroWest Daily News reported. Hospital leaders said a “minimal number of positions” were eliminated when the hospital ended the services. Workers affected by the layoffs can apply for open positions at the hospital, according to the Daily News.
2. Watsonville (Calif.) Community Hospital is preparing to lay off 658 workers, according to a notice filed with the state and shared with Becker’s Hospital Review. The hospital, which filed for Chapter 11 bankruptcy in December, expects the layoffs to occur between May 16 and May 23. Healthcare group Pajaro Valley Health Care District was approved by a bankruptcy judge to purchase the hospital in February after no other qualified bids were submitted. The group needs to gather at least $20 million by July to purchase the hospital, Santa Cruz Sentinel reported April 4.
3. Memorial Hospital at Gulfport (Miss.)laid off its chief medical officer and vice president of system development in April. Regarding the layoffs, Memorial Hospital at Gulfport CEO Kent Nicaud said the hospital is facing financial challenges, such as increased labor costs, and is aiming to return to an organizational structure it had three or four years ago.
4. Toledo, Ohio-based ProMedica’s health plan, Paramount, is laying off about 200 employees in July after losing a Medicaid contract. Anthem acquired Paramount’s Medicaid contract, and ProMedica and Anthem have been working to identify open roles for employees affected by the layoffs.
5. MarinHealth Medical Centerlaid off 104 revenue cycle and supply chain employees in April after entering into a contract with Optum to provide those services, according to a notice filed with state regulators in February. Greenbrae, Calif.-based MarinHealth said that as a result of the contract with Optum, all non-contractual revenue cycle and supply chain employees were terminated from employment with the hospital on April 9. Optum offered jobs to most workers affected by the layoffs. Employees who accepted an offer began employment with Optum on the first work day following separation from MarinHealth, a spokesperson for the hospital told Becker’s Hospital Review.
6. St. Mary’s Medical Center in West Palm Beach, Fla., laid off 49 employees, including 21 registered nurses, when it stopped providing mental health services in April, according to a notice filed with state regulators.
7. NYC Test & Trace Corps, the city’s initiative for COVID-19 testing and contact tracing, ended universal contact tracing in April. NYC Health + Hospitals, which led the program in collaboration with the city’s department of health and other agencies, is planning to lay off 874 workers as a result of the program scaling back, according to a notice filed with state regulators March 4. The health system said affected temporary employees would be laid off at the end of April. Managerial employees affected by the layoffs will have their employment terminated between May 13 and May 27, according to the notice.
Resident and fellow physicians at Palo Alto, Calif.-based Stanford Health Care have voted in favor of representation by the Committee of Interns and Residents, according to a May 3 news release.
Of the nearly 1,050 ballots counted, 835 were in favor of representation, the National Labor Relations Board website showed.
The vote comes after resident physicians led a protest in December 2020 against Stanford’s COVID-19 vaccination plan that excluded house staff from the initial round of shots. The health system immediately revised the plan to prioritize resident physicians.
In February, physicians also demanded the health system voluntarily recognize the Committee of Interns and Residents as their exclusive representative for collective bargaining.
Now the union said its members are looking forward to negotiations.
“Our doctors are united by our desire to provide the best possible patient care and strong worker protections,” said Ben Solomon, MD, a pediatric resident physician, said in the release. “One thing the pandemic has made abundantly clear, in addition to the widespread equity issues in our healthcare system, is that our needs as physicians cannot be separated from those of our patients.”
The National Labor Relations Board must certify the election results before they are final. Stanford does not plan to challenge the results, the health system said in a statement shared with Becker’s on May 3.
“As we begin the collective bargaining process, our goal remains unchanged: providing our residents and fellows with a world-class training experience,” Stanford said. “We will bring this same focus to negotiations as we strive to support their development as physician leaders.”
The Committee of Interns and Residents is a local chapter of the Service Employees International Union. The union represents more than 20,000 resident physicians and fellows, including University of Massachusetts physicians in training, who unionized in March 2021.
HENRY KOTULA 