‘Deny. Defend. Depose’: The Chilling Legacy of Managed Care and the American Health Care Crisis

Posted on by • Posted in ACA, Health Insurance Coverage Adequacy, Health Insurance Denial, Health Insurance Industry, Health Maintenance Organization (HMO), Health Plan, Health Policy, Managed Care, Out of Pocket Expenses, Outcomes, Profit, Profit Motive, Underinsured, Uninsured, Wall Street • Leave a comment
https://healthcareuncovered.substack.com/p/deny-defend-depose-the-chilling-legacy?utm_source=post-email-title&publication_id=255152&post_id=154546433&utm_campaign=email-post-title&isFreemail=true&r=59t65&triedRedirect=true&utm_medium=email

To understand the fatal attack on UnitedHealthcare CEO Brian Thompson and the unexpected reaction on social media, you have to go back to the 1990s when managed care was in its infancy. As a consumer representative, I attended meetings of a group associated with the health care system–doctors, academics, hospital executives, business leaders who bought insurance, and a few consumer representatives like me.

It was the dawn of the age of managed care with its promise to lower the cost and improve the quality of care, at least for those who were insured.

New perils came with that new age of health coverage.

In the quest to save money while ostensibly improving quality, there was always a chance that the managed care entities and the doctors they employed or contracted with – by then called managed care providers – could clamp down too hard and refuse to pay for treatments, leaving some people to suffer medically. Groups associated with the health care industry tried to set standards to guard against that, but as the industry consolidated and competition among the big players in the new managed care system consolidated, such worries grew.

Over the years the squeeze on care got tighter and tighter as the giants like UnitedHealthcare–which grew initially by buying other insurance companies such as Travelers and Golden Rule–and Elevance, which gobbled up previously nonprofit Blue Cross plans in the 1990s, starting with Blue Cross of California, needed to please the gods of the bottom line. Shareholders became all important. Paying less for care meant more profits and return to investors, so it is no wonder that the alleged killer of the UnitedHealthcare chief executive reportedly left the chilling message: 

‘‘DENY. DEFEND. DEPOSE,” words associated with insurance company strategies for denying claims. 

The American health care system was far from perfect even in the days when more employers offered good coverage for their workers and often paid much or all of the cost to attract workers. Not-for-profit Blue Cross Blue Shield plans in many states provided most of the coverage, and by all accounts, they paid claims promptly. In my now very long career of covering insurance, I cannot recall anyone in the old days complaining that their local Blue Cross Blue Shield organization was withholding payment for care.

Today Americans, even those who thought they had “good” coverage, are now finding themselves underinsured, as a 2024 Commonwealth Fund study so clearly shows. Nearly one-quarter of adults in the U.S. are underinsured meaning that although they have health insurance, high deductibles, copayments and coinsurance make it difficult or impossible for them to pay for needed care. As many as one-third of people with chronic conditions such as diabetes said they don’t take their medications or even fill prescriptions because they cost too much.

Before he passed away last year, one of our colleagues, Marshall Allen, had made recommendations to his followers on how to deal with medical bills they could not pay. KFF reporters also investigated the problems families face with super-high bills. In 2022 KFF reporters offered readers a thorough look at medical debt in the U.S. and reported alarming findings.

In 2019, U.S. medical debt totaled $195 billion, a sum larger than the economy of Greece. Half of adults don’t have enough cash to cover an unexpected medical bill while 50 million adults – one in five in the entire country – are paying off bills on an installment plan for their or a family member’s care.

One would think that such grim statistics might prompt political action to help ease the debt burden on American families. But a look at the health proposals from the Republican Study Committee suggest that likely won’t happen. The committee’s proposed budget would cut $4.5 trillion dollars from the Affordable Care Act, Medicaid, and the Children’s Health Insurance Program leaving millions of Americans without health care.

From the Democrats, there appear to be no earth-shaking proposals in their immediate future, either. Late last summer STAT News reported, “With the notable exception of calling to erase medical debt by working with the states, Democrats are largely eyeing marginal extensions or reinstatements of their prior policy achievements.” Goals of the Democratic National Committee were shoring up the Affordable Care Act, reproductive rights, and addressing ambulance surprise bills. 

A few years ago when I was traveling in Berlin, our guide paused by a statue of Otto von Bismarck, Germany’s chancellor in the late 1800s, who is credited with establishing the German health system. The guide explained to his American travelers how and why Bismarck founded the German system, pointing out that Germany got its national health system more than a hundred years before Obamacare. Whether the Americans got the point he was making, I could not tell for no one in the group appeared interested in Germany’s health care system. Today, though, they might pay more attention.

In the coming months, I will write about health systems in Germany and other developed countries that, as The Commonwealth Fund’s research over many years has shown, do a much better job than ours at delivering high quality care – for all of their citizens – and at much lower costs.

UnitedHealth’s Reckoning: Wall Street Isn’t Buying the Blame Game

Posted on by • Posted in Medical Loss Ratio (MLR), Medicare Advantage, Medicare Advantage Overpayments, Net Income, Operating Income, Operating Margin, Operating Margin Drivers, Optum, Optum Health, Optum Rx, OptumRx, Pharmacy Benefits Management, UnitedHealth Group, UnitedHealthcare, Wall Street • Leave a comment
https://healthcareuncovered.substack.com/p/unitedhealths-reckoning-wall-street?utm_source=post-email-title&publication_id=255152&post_id=155033102&utm_campaign=email-post-title&isFreemail=true&r=59t65&triedRedirect=true&utm_medium=email

UnitedHealth executives made a valiant attempt yesterday to persuade investors that they have figured out how to improve customer service and keep Congress and the incoming Trump administration from passing laws that could shrink the company’s profit margins – and maybe even the company itself – but Wall Street wasn’t buying.

During their first call with investors since the murder of UnitedHealthcare CEO Brian Thompson, the company’s top brass pointed the finger of blame for rising health care costs everywhere but at themselves – primarily at hospitals and pharmaceutical companies – and made statements that simply were not true. Investors clearly did not find their comments reassuring or credible. By the end of the day shares of UnitedHealth’s stock were down more than 6% to $510.59. That marked a continuation of a slide that began after the stock price peaked at $630.73 on November 11 – a decline of almost 20%. 

In a little more than two months, the company has lost an astonishing $110 billion in market capitalization, and shareholders have lost an enormous amount of the money they invested in UnitedHealth. 

Earlier yesterday morning, the company released fourth-quarter and full-year 2024 earnings, which were slightly higher on a per share basis than Wall Street financial analysts had expected: $6.81 per share in the fourth quarter compared to analysts’ consensus estimate of $6.73 for the quarter. But the company posted lower revenue during the last three months of 2024 than analysts had expected. While revenue was up 7% over the same quarter in 2023, to $100.8 billion, analysts had expected revenue to grow to $101.6 billion.

And on a full-year basis, the company’s net profits fell an eye-popping 36%, from $22.4 billion in 2023 to $14.4 billion last year.

Bottom line: the company, which until last year had grown rapidly, actually shrank in some respects, especially in the division that operates the company’s health plans. UnitedHealthcare, which Thompson led, saw its revenue increase slightly but its profits fall. The other big division, Optum, which among other things owns and operates numerous physician practices and clinics and one of the country’s largest pharmacy benefit managers (PBMs), fared much better.

While Optum’s 2024 revenue was lower than UnitedHealthcare’s ($253 billion and $298 respectively), it made far more in profits on an operating basis ($16.7 billion and $15.6 respectively).

Optum’s operating profit margin was 6.6% while UnitedHealthcare’s was 5.2%.

The company’s executives blamed higher health care utilization, especially by people enrolled in its Medicare Advantage plans, for the decline in profits.

Witty and CFO John Rex pointed the finger of blame at hospitals and drug companies for rising medical prices. And they obscured the huge amounts of money the company’s PBM, Optum Rx, extracts from the pharmacy supply chain. While the company chose not to break out exactly how much of Optum’s revenues of $298 billion came from Optum Rx, it appears that more than half of it was contributed by the PBM. The company did note that Optum Rx revenues increased 15% during 2024.

Nevertheless, Witty and Rex blamed drug makers for high prices.

They also said that they would be changing the PBM’s business practices to pass through rebate discounts from drug makers to its customers, claiming that it already passes through 98% of them and will reach 100% by 2028. That clearly was a talking point aimed at Washington, where there is significant bipartisan support for legislation that would require all PBMs to do so. Despite UnitedHealth’s claim, there is no external verification to back up that they are passing 98% of rebates back to customers.

Another claim the executives made that is not true is that the Medicare Advantage program saves taxpayers money. Numerous government reports have shown the opposite, that the federal government spends considerably more on people enrolled in Medicare Advantage plans than those enrolled in the traditional Medicare program.

Reports have estimated that UnitedHealthcare, which is the largest Medicare Advantage company, and other MA plans are overpaid between $80 billion and $140 billion a year.

There is also growing bipartisan support to reform the Medicare Advantage program to reduce both the overpayments and the excessive denials of care at UnitedHealthcare and other MA insurers.

While company executives might be hoping that their fortunes will improve during the second Trump administration, Trump recently joined some Republican members of Congress, like Rep. Buddy Carter of Georgia, who are calling for significant reforms, especially to pharmacy benefit managers. 

At a news conference last month, Trump promised to “knock out” those middlemen in the pharmacy supply chain.  

“We are paying far too much, because we are paying far more than other countries,” he said. “We have laws that make it impossible to reduce [drug costs] and we have a thing called a ‘middleman’ … that makes more money than the drug companies, and they don’t do anything except they’re middlemen. We are going to knock out the middleman.”

Why thousands cheered a tragedy: unpacking America’s healthcare anguish

Posted on by • Posted in Health Policy, Healthcare Reform, Public Good, Public Health, Public Health Crisis, Public Health Strategy, Public Perception, Public Trust, State of the Union • Leave a comment

https://www.linkedin.com/pulse/why-thousands-cheered-tragedy-unpacking-americas-robert-pearl-m-d–apdhc/

The murder of UnitedHealthcare CEO Brian Thompson in December 2024 represented a horrific and indefensible act of violence. As a physician and healthcare leader, I initially declined to comment on the killing. I felt that speculating about the shooter’s intent would only sensationalize a terrible act.

Regardless of the circumstances, vigilante violence has no place in a free and just society.

Now, more than a month later, I feel compelled to address one aspect of the story that has been widely misunderstood: the public’s reaction to the news of Thompson’s murder. Specifically, why tens of thousands of individuals “liked” and “laughed” at a post on Facebook announcing the CEO’s death.

What causes someone to ‘like’ murder?

News analysts have attributed the social media response to America’s “simmering anger” and “frustration” with a broken healthcare system, pointing to rising medical costs, insurance red tape and time-consuming prior authorization requirements as justifications.

These are all, indeed, problems and may explain some of public’s reaction. Yet these descriptions grossly understate the lived reality for most of those affected. When I speak with individuals who have lost a child, parent or spouse because of what they perceive as an unresponsive and uncaring system, their pain is raw, intense. What they feel isn’t frustration—it’s agony.

By framing healthcare’s failures in terms of statistical measures and policy snafus, we reduce a deeply personal crisis to an intellectual exercise. And it’s this very detached, cognitive approach that has allowed our nation to disregard the emotional devastation endured by millions of patients and their families.

When journalists, healthcare leaders and policymakers cite eye-popping statistics on healthcare expenditures, highlight exorbitant insurer profits or deride the bloated salaries of executives, they leave out a vital part of the story. They omit the unbearable human suffering behind the numbers. And I fear that until we approach healthcare as a moral crisis—not merely an economic or political puzzle to solve—our nation will never act with the urgency required to relieve people’s profound pain.

A pain beyond reason

In Dante’s Inferno, hell is a place where suffering is eternal and the cries of the damned go unheard. For countless Americans who feel trapped in our healthcare system, that metaphor rings true. Their anguish and pleas for mercy are met with silence.

It is this sense of abandonment and powerlessness, not mere frustration, that fuels both a desperate rage and an anger at a system and its leaders who appear not to care. The response isn’t one of glee—it’s a visceral reaction born of pain and unrelenting remorse.

As a clinician, I’ve seen life-destroying pain in my patients—and even within my own family. When my cousin Alan died in his twenties from a then-incurable cancer, my aunt and uncle were powerless to save him. Their grief was profound, unrelenting and eternal. They never recovered from the loss. But Alan’s death, heartbreaking as it was, stemmed from the limits of science at the time.

What millions of Americans endure today is different. Their loved ones die not because cures don’t exist but because the healthcare system treats them like a number. Bureaucratic inefficiencies, profit-driven delays and systemic indifference produce avoidable tragedies.

To appreciate this depth of pain, imagine standing behind a chain-link fence, watching someone you love being tortured. You scream and plead for help, but no one listens. That is what healthcare feels like for too many Americans. And until all of us acknowledge and feel their pain, little will improve.

Curing America’s indifference

When we focus solely on cold numbers—the millions who’ve lost Medicaid coverage, the hundreds of thousands of avoidable deaths each year, or the life-expectancy gap between the U.S. and other nations—we strip healthcare of its humanity.

But once we stop framing these failures as bureaucratic inefficiencies or frustrations and, instead, focus on the devastation of having to watch a loved one suffer and die needlessly, we are forced to confront a moral imperative. Either we must act with urgency and resolve the problem or admit we simply don’t care.

In the halls of Congress, lawmakers continue to weigh modest reforms to prior authorization requirements and Medicaid spending—baby steps that won’t fix a system in crisis. The truth is that without bold, transformative action, healthcare will remain unaffordable and inaccessible for millions of families whose anguish will grow.

Here are three examples of the scale of transformation required:

  1. Reverse the obesity epidemic with a two-part strategy. Congress will need to tax ultra-processed, sugary foods that drive hundreds of billions of dollars in healthcare costs each year. In parallel, lawmakers should cap the manufacturer-set price of weight-loss medications like Ozempic and Wegovy to be no higher than in peer nations.
  2. Change clinician payments from volume to value. Current fee-for-service payment systems incentivize unnecessary tests, treatments and procedures rather than better health outcomes. Transitioning to pay-for-value would reward healthcare providers, and specifically primary care physicians, who successfully prevent chronic diseases, better manage existing conditions, and reduce complications such as heart attacks, strokes and kidney failure.
  3. Empower patients and save lives with generative AI. Tools like ChatGPT can help reduce the staggering 400,000 annual deaths from misdiagnoses and 250,000 more from preventable medical errors. By integrating AI into healthcare, we can enable at-home care, continuous disease monitoring and personalized treatment, making medical care safer, more accessible and more efficient.

If elected officials, payers and regulators fail to act, they will have chosen to perpetuate the unbearable pain and suffering patients and families endure daily. They need to hear the cries of people. The time for transformative action is now.

Musk’s DOGE could leave millions uninsured

Posted on by • Posted in ACA, Health Insurance Coverage Adequacy, Health Policy, Healthcare Reform, High Deductible Health Plans, Medicaid, Medicaid Block Grants, Medicaid Eligibility, Medicaid Expansion, Medicaid Redeterminations, Medicaid Retroactive Eligibility, Medicaid Section 1115 Waiver, Medicaid Unwinding, Medicaid Work Requirements, Medical Debt, Out of Pocket Expenses, State of the Union, Underinsured, Uninsured, Unnecessary Deaths • Leave a comment

https://www.linkedin.com/pulse/musks-doge-could-leave-millions-uninsured-robert-pearl-m-d–xl8dc/?trackingId=7TewioXWRzScafytDRqrQQ%3D%3D

As Donald Trump begins his second term, America’s healthcare system is in crisis: medical costs are skyrocketing, life expectancy has stagnated, and burnout runs rampant among healthcare workers.

These problems are likely to become worse now that Trump has handed the federal budget over to Elon Musk. The world’s richest man now co-heads the Department of Government Efficiency (DOGE), a non-government entity tasked with slashing $500 billion in “wasteful” spending.

The harsh reality is that Musk’s mission can’t succeed without gutting healthcare access and coverage for millions of Americans.

Deleting dollars from American healthcare

Since Trump’s first term, the country’s economic outlook has worsened significantly. In 2016, the national debt was $19 trillion, with $430 billion allocated to annual interest payments. By 2024, the debt had nearly doubled to $36 trillion, requiring $882 billion in debt service—12% of federal spending that is legally untouchable.

Add to that another 50% of government expenditures that Trump has deemed politically off-limits: Social Security ($1.35 trillion), Medicare ($848 billion) and Defense ($1.13 trillion). That leaves just $2.6 trillion—less than 40% of the $6.75 trillion federal budget—available for cuts.

In a recent op-ed, Musk and DOGE co-chair Vivek Ramaswamy proposed eliminating expired or misused funds for programs like Public Broadcasting and Planned Parenthood, but these examples account for less than $3 billion total—not even 1% of their target.

This shortfall will require Musk to cut billions in government healthcare spending. But where will he find it?

With Medicare off limits to DOGE, the options for major reductions are extremely limited. Big-ticket healthcare items like the $300 billion in tax-deductibility for employer-sponsored health insurance and $120 billion in expired health programs for veterans will prove politically untouchable. One will raise taxes for 160 million working families and the latter will leave veterans without essential medical care.

This means DOGE will have to attack Medicaid and the ACA health exchanges. Here’s how 20 million people will likely lose coverage as a result.

1. Reduced ACA exchange funding

Since its enactment in 2010, the Affordable Care Act (ACA) has provided premium subsidies to Americans earning 100% to 400% of the federal poverty level. For lower-income families, the ACA also offers Cost Sharing Reductions, which help offset deductibles and co-payments that fund 30% of total medical costs per enrollee. Without CSRs, a family of four earning $40,000 could face deductibles as high as $5,000 before their insurance benefits apply.

If Congress allows CSR payments to expire in 2026, federal spending would decrease by approximately $35 billion annually. If that happens, the Congressional Budget Office expects 7 million individuals to drop out of the exchanges. Worse, without affordable coverage alternatives, 4 million families would lose their health insurance altogether.

2. Slashing Medicaid coverage and tightening eligibility

Medicaid currently provides healthcare for over 90 million low-income Americans, including children, seniors and individuals with disabilities. To meet DOGE’s $500 billion goal, several cost-cutting strategies appear likely:

  • Reversing Medicaid expansion: The ACA expanded Medicaid eligibility to those earning up to 138% of the federal poverty level, reducing the uninsured rate from 16% to 8%. Undoing this expansion would strip coverage from millions in the 40 states that adopted the program.
  • Imposing work requirements: Proponents argue this could encourage employment, but most Medicaid recipients already work for employers that don’t provide insurance. In reality, work requirements primarily create bureaucratic barriers that disqualify millions of eligible individuals, reducing program costs at the expense of coverage.
  • Switching to block grants: Unlike the current Medicaid system, which adjusts funding based on need, less-expensive block grants would provide states with fixed allocations. This will, however, force them to cut services and reduce enrollment.

Medicaid currently costs $800 billion annually, with the federal government covering 70%. Reducing enrollment by 10% (9 million people) could save over $50 billion annually, while a 20% reduction (18 million people) could save $100 billion.

Either outcome would devastate families by eliminating access to vital services including prenatal care, vaccinations, chronic disease management and nursing home care. As states are forced to absorb the financial burden, they’ll likely cut education budgets and reduce infrastructure investments.

The first 100 days

The numbers don’t lie: Musk and DOGE could slash Medicaid funding and ACA subsidies to achieve much of their $500 billion target. But the human cost of this approach would be staggering.

Fortunately, there are alternative solutions that would reduce spending without sacrificing quality. Shifting provider payments in ways that reward better outcomes rather than higher volumes, capping drug prices at levels comparable to peer nations, and leveraging generative AI to improve chronic disease management could all drive down costs while preserving access to care.

These strategies address the root causes of high medical spending, including chronic diseases that, if better managed, could prevent 30-50% of heart attacks, strokes, cancers, and kidney failures according to CDC estimates.

Yet, in their pursuit of immediate budgetary cuts, Musk and DOGE have omitted these kinds of reform options. As a result, the health of millions of Americans is at major risk.

Senate report slams private equity’s ownership of hospitals

Posted on by • Posted in Bankruptcy, Financial Performance, Financial Stewardship, Financial Viability, Financially Distressed, Health System, Hospital, Hospital Industry, Mergers & Acquisitions, Private Equity, Profit, Profit Motive, Public Interest, Sign of the Times • Leave a comment
https://www.healthcarefinancenews.com/news/senate-report-slams-private-equitys-ownership-hospitals?leadId=1234536&mkt_tok=NDIwLVlOQS0yOTIAAAGX5dZKgjLBathxCQDLHz6aD3H4kLZLqWzQePWFKSc-dJ1Jif2kvx5AgcBeaH8LNPehMioSSucV5Syej2RAxHpF4CiLR5zfJW28bPAFJQpVzAC2

A bipartisan Senate report on private equity ownership of two health systems shows PE investment puts a priority of profit over patient health and hospital finances.

A yearlong investigation found that patient care deteriorated at both systems, while private equity owners received millions, according to the Senate Budget Committee’s bipartisan staff report, “Profits Over Patients: The Harmful Effects of Private Equity on the U.S. Health Care System.”

The investigation was led by Senate Budget Committee Chairman Sheldon Whitehouse, D-R.I., and Ranking Member Charles E. Grassley, R-Iowa.

WHY THIS MATTERS

The report centered on the hospital Ottumwa Regional Health Center in Iowa and its operating company, Lifepoint Health in Tennessee.

Private equity company Apollo Global Management owns Lifepoint Health.

The investigation expanded to include other entities, including PE firm Leonard Green & Partners and hospital operator Prospect Medical Holdings, in which Leonard Green & Partners held a majority stake. Leonard Green & Partners (LGP) is a private equity firm in Los Angeles that owns hospitals under Prospect Medical Holdings (PMH).

“LGP and PMH’s primary focus was on financial goals rather than quality of care at their hospitals, leading to multiple health and safety violations as well as understaffing and the closure of several hospitals,” the report said.

The investigation originated from questions over the role, if any, private equity played in a series of patient sexual assaults by a nurse practitioner at the Iowa hospital. In 2022, a nurse practitioner fatally overdosed on drugs acquired at the hospital. Police discovered the nurse had sexually assaulted nine incapacitated female patients over a two-year period, the report said.

Prospect Medical Holdings owns and operates hospitals in urban and suburban areas, primarily on the East and West Coasts, including Connecticut, Rhode Island, Pennsylvania and California.

It is a previously public traded company that went private in 2010 when LGP acquired a 61% majority stake. During the course of LGP’s majority ownership, Prospect Medical Holdings acquired 16 hospitals over a span of four years. PMH has operated a total of 21 unique hospitals, the report said.

Apollo has a 97% ownership stake in Lifepoint Health, a company that owns and operates acute care hospitals in predominantly rural areas. This includes Ottumwa Regional Health Center. Apollo owns around 220 hospitals nationwide, making it the single largest private equity owner of hospitals in the United States, the report said.

Ottumwa has been under PE ownership since 2010, when it was acquired by the PE-owned hospital operator RegionalCare, which was later acquired by Apollo.

KEY FINDINGS

The report’s key findings show that LGP controlled the Prospect Medical Holding board of directors, which incentivized management to satisfy financial goals regardless of patient outcomes.

“According to documents obtained by the committee, discussion amongst PMH and LGP leadership during board meetings centered around profits, costs, acquisitions, managing labor expenses and increasing patient volume – with little or no discussion of patient outcomes or quality of care.”

Current PMH leadership has overseen the closure of eight hospitals, with three-fourths coming during or directly after LGP’s majority ownership, including four in Texas and two in Pennsylvania.

Several hospitals suffered from labor cuts, decreased patient capacity, unsafe building maintenance and financial distress, the report said.

Despite this, LGP took home $424 million of the $645 million that PMH paid out in dividends and preferred stock redemption, in addition to over $13 million in fees, leaving PMH in severe financial distress.

In order to pay investors dividend distributions, PMH was forced to take on hundreds of millions of dollars in debt, running out of cash and defaulting on its loans, the report said.

ORHC’s PE owned companies, including Lifepoint Health, have failed to fulfill at least seven promises, including legally binding ones made to Ottumwa, including those related to growth, physician recruitment, routine capital expenditures, charity care, patient satisfaction and continuation of services.

Patient volumes have decreased, likely due to long wait times in the ER, outgoing transfers, insufficient staffing and a lack of specialists, the report said. This has also resulted from having a poor reputation in the community.

Because of financial harm, OTHC is dependent on Lifepoint Health to pay its expenses.

However, Lifepoint pays Apollo $9.2 million annually in management fees, as well as a 1% transaction fee each time Lifepoint completes an acquisition, which included a $55 million fee in relation to the acquisition of Lifepoint Health in 2018.

THE LARGER TREND

PE and other private funds had less than $1 trillion in managed assets in 2004, but now manage more than $13 trillion globally. PE firms create affiliated funds with money raised from investors, such as pension funds, foundations and insurance companies. The intention is generating returns for their investors within a short period of time.

PE has grown in healthcare. In the 2010s investors spent more than $1 trillion. By 2021 PE investment had reached an all-time high of 515 deals valued at $151 billion.

ON THE RECORD

“Recent peer reviewed studies have generally found negative consequences for general acute care hospitals during the first three years of PE ownership as compared to non-PE owned hospitals, including lower quality of care, increased transfers to other hospitals, decreased staffing and higher prices,” the report said.

Broken Promises: How Employer Health Plans Are Leaving Millions Underinsured and in Debt

Posted on by • Posted in Affordability, Health Insurance Coverage Adequacy, Health Insurance Denial, Health Insurance Industry, Health Policy, Healthcare Reform, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Out of Pocket Expenses, Out-of-Network, Profit, Profit Motive, State of the Union, Underinsured, Uninsured • Leave a comment
https://healthcareuncovered.substack.com/p/broken-promises-how-employer-health?utm_source=post-email-title&publication_id=255152&post_id=153032192&utm_campaign=email-post-title&isFreemail=true&r=59t65&triedRedirect=true&utm_medium=email

A few weeks ago The Commonwealth Fund, a philanthropic organization in New York City, which keeps tabs on health care trends, released an ominous study signaling that the bedrock of the U.S. health system is in trouble.

The study found that the employer insurance market, where millions of Americans have received good, affordable coverage since the end of World War II, could be in jeopardy. The continuing rise in the costs of medical care, and the insurance premiums to pay for it, may well cause employers to make cutbacks, leaving millions of workers uninsured or underinsured, often with no way to pay for their care and the prospect of debt for the rest of their lives. 

Indeed the Fund revealed that 23% of adults in the U.S. are underinsured, meaning that though they were covered by health insurance, high deductibles and coinsurance made it difficult or impossible to pay for the care they needed.

“They have health plans that don’t provide affordable access to care,” said Sara Collins, senior adviser and vice president at the Fund. “They have out-of-pocket costs and deductibles that are high relative to their income.”

This predicament has forced many to assume medical debt or skip needed care. The Fund found that as many as one-third of people with chronic conditions like heart failure and diabetes reported they don’t take their medication or fill prescriptions because they cost too much.

Others did not go to a doctor when they were sick, skipping a recommended follow-up visit or test, and did not see a specialist when one was recommended. Nearly half of the respondents reported they did not get care for an ongoing condition because of the cost. Two out of five working-age adults who reported a delay or skipped care told researchers their health problem had gotten worse. Those findings belie the narrative, deployed when changes to the system are discussed, that America has the best health care in the world, and we dare not change it.

The seeds of today’s underinsurance predicament were planted in the 1990s when the system’s players decided remedies were needed to curb Americans’ appetite for medical interventions. 

They devised managed care, with its HMOs, PPOs, insurance company approvals, and other restrictions that are with us today. But health care is far more expensive than it was in the ’90s, leaving patients to struggle to pay the higher prices, or, as the study shows, go without needed care. 

Perhaps one of the study’s most striking findings is that a vast majority of underinsured workers had employer insurance plans, which over the decades had provided good coverage. Researchers concluded that recent cost containment measures were simply shifting more costs to workers through higher deductibles and coinsurance.

I checked in with Richard Master, the CEO of MCS Industries in Easton, Pennsylvania. We’ve talked over the years about the rising cost of health insurance for his 91 workers who make picture frames and wall decorations. This year, he was expecting a 5 to 6% increase in insurance rates.

A family plan now costs more than $39,000, he said, adding that “29% of people with employee plans are underinsured and have high out-of-pocket costs.”

To help reduce his own costs, he told me he has put in place a high-deductible plan and was setting up health saving accounts that allow him to give a sum of money to each worker to use for their medical expenses.

As health insurance premiums continue to rise, more employers will likely heap more of those rising costs onto workers, many of whom will inevitably have a tough time paying for them.

Every time there has been a hint in the air that maybe, just maybe, America might embrace a universal system like peer nations across the globe that offer health care to all their citizens, the special interests—doctors, hospitals, insurers, employers, and others that benefit financially from the current system have snuffed out any possibility that might happen, worried that such a system could affect their profits.

For as long as I can remember, the public has been told America has the best health care system in the world. Major holes in our system exposed by The Commonwealth Fund belie that assumption.

How UnitedHealth’s Diagnosis Game Rakes in Billions from Medicare

Posted on by • Posted in Health Insurance Industry, Health Policy, Healthcare Reform, Incentive, Incentive Pay, Medicare Advantage, Profit, Profit Margin, Profit Motive, UnitedHealth Group, UnitedHealthcare • Leave a comment
https://healthcareuncovered.substack.com/p/wsj-how-unitedhealths-diagnosis-game?utm_source=post-email-title&publication_id=255152&post_id=154338845&utm_campaign=email-post-title&isFreemail=true&r=59t65&triedRedirect=true&utm_medium=email

An investigative piece in the Wall Street Journal, written by Mark Maremont, Danny Dougherty, and Anna Wilde Mathews, gives an eye-popping look at how UnitedHealth Group is turning diagnosis-driven billing into a high-stakes game in the conglomerate’s Medicare Advantage business. 

As The Journal reported, UnitedHealth has taken a unique approach to Medicare Advantage:

directly employing thousands of doctors and arming them with software that generates diagnosis checklists before they even see patients. Former UnitedHealth physicians described how these suggested diagnoses — often obscure or irrelevant — weren’t optional. To move on to their next patient, doctors were forced to confirm, deny, or defer each proposed diagnosis.

One Oregon physician, Dr. Nicholas Jones, said UnitedHealth frequently pushed conditions so rare – like secondary hyperaldosteronism – he had to Google them. And this wasn’t limited to minor conditions.

Sickness scores for UnitedHealth’s Medicare Advantage patients jumped an average of 55% in their first year of enrollment in one of the company’s health plans compared to a mere 7% rise for patients who stayed in traditional Medicare. As the Journal noted, that’s the kind of jump you’d expect if everyone suddenly developed HIV and breast cancer.

The implications? More diagnoses mean higher “sickness scores,” which translate to billions in extra payments from Medicare. The Journal found that UnitedHealth’s practices generated an additional $4.6 billion from 2019 to 2022 compared to what it would have received if those scores had matched industry averages.

Citing fewer hospitalizations, UnitedHealth insists these practices improve patient outcomes and disease management, but the incentives to inflate diagnoses raise serious questions.

In the piece, you’ll meet Chris Henretta, a UnitedHealth Medicare Advantage “member” who lives in Florida. His doctor diagnosed him as morbidly obese, even though he’s a lifelong weightlifter and doesn’t meet the BMI threshold. “I began to suspect my doctor may have a financial incentive to portray people as higher risk,” Henretta said. The article pointed out that such a diagnosis can trigger an extra $2,400 in Medicare payments annually.

UnitedHealth’s system isn’t just about inflating diagnoses — it’s about turning them into profit centers.

The Journal reported that internal documents revealed that doctors could earn bonuses of up to $30,000 annually for engaging with the diagnosis system. Nurses tasked with “finding” new diagnoses were paid $250 per patient visit.

UnitedHealth has countered by saying these practices reflect its commitment to diagnosing and treating diseases early. But the Journal said many doctors felt pressure to play along.

Dr. Emilie Scott, a former UnitedHealth physician, called the system a money machine: “It’s not about taking care of the patient. It’s about how you get the money to flow.”

For patients and taxpayers, this system poses tough questions. Traditional Medicare patients treated by UnitedHealth doctors didn’t see the same inflation in sickness scores, which underscores how Medicare Advantage’s payment system incentivizes diagnose gaming.

What’s clear is that Medicare Advantage — and UnitedHealth’s dominant role in it — needs much closer scrutiny.

As The Journal reporters wrote, the Centers for Medicare and Medicaid Services is studying these relationships. But real change will require policymakers and the public to confront the deeper flaws in how Medicare Advantage is structured.

Be sure to dive into the original Wall Street Journal article for the full story. The fantastic graphs and photography alone are worth your time, and the detailed reporting provides invaluable insights into how one company’s profit strategies impact us all.

Changing American Demographics Make Hospital Operations Harder

Posted on by • Posted in Chronic Conditions, Consumer Segmentation, Culture, Demographics, Family, Medication Management, Mental Health, Public Health, Social Determinants of Health, Social Isolation, Social Support & Isolation, Solo Living • Leave a comment

https://www.kaufmanhall.com/insights/thoughts-ken-kaufman/changing-american-demographics-make-hospital-operations-harder

Regular readers know I’ve long been curious about the forces driving one essential question in healthcare today:

Why is it so hard to run a hospital now? One area worth exploring is the interplay between the healthcare system and our nation’s changing demographics.

Baby Boomers have been displaced as the largest generation of adults in America. Millennials now hold that position, and Gen Z will likely outnumber Baby Boomers in the workplace sometime this year. Our nation is rapidly diversifying, as more than two-fifths of Americans identify as people of color.

It’s not just a matter of who we are as a nation that’s changing; how we live is evolving, too. The number of 40-year-olds who’ve never been married reached record highs in 2022, according to the Pew Research Center, dovetailing with a steadily growing trend since 1970 toward single living.

The U.S. Census published a report earlier this year showing that nearly 29% of American households include only one person. Further, the U.S. fertility rate is at an all-time low — and, according to a Pew survey, may not recover, given that 47% of those under 50 said they were unlikely to have children. That’s an increase of 10 percentage points since 2018.

The effects of this are starting to shape our broader culture. Solo living has been cited as a contributing factor to the housing crisis, and we’re starting to hear more about how people are grappling with the practical implications of retiring while living alone. This column in The New York Times is just one example. 

As for the potential health effects of living alone, in 2023, U.S. Surgeon General Vivek Murthy raised an alarm with a report documenting the negative effects of social isolation on individual and public health. Murthy outlined a host of risks, including cardiovascular disease, hypertension, diabetes and increased susceptibility to infectious disease. Mental health is a major concern. A 2024 study published in National Health Statistics Reports found that people who live alone were more likely to be depressed, particularly if they lacked social or emotional support. 

All of this adds up to an increasing burden on the U.S. healthcare system.

As providers who care for the socially isolated already know, it’s impossible to operate as usual if a patient lacks family support. Hospitals and the traditional American family structure are fundamentally intertwined. When family support is not available for a medical emergency, then the entire hospital episode becomes more fragile. Patient discharge procedures assume someone is available at home to help with care, assist in transporting patients for follow-up visits, and engage with the business office around billing and insurance.

Without this family safety net, the potential for readmission rises, harming patient outcomes, increasing costs and putting quality ratings at risk. The rise in younger people living alone also raises further financial implications, given that about 45% of Americans access health insurance through employer-sponsored programs. If someone living alone becomes too sick to work, patients may be less able to pay for care when they need it most.

This is just another in a long list of challenging hospital operational dilemmas. How best to respond to such profound change in the American demographic landscape? The right strategy may be to re-think consumer segmentation.

Consumer segmentation has become very popular at the clinical product level, but perhaps the next level of service segmentation is not among disease types but based on demographic characteristics. 

As an increasing portion of the American population has less family support to navigate a hospital stay or chronic illness, it will become more important to identify these patients and determine which new and enhanced services need to be provided to them by the hospital. Social work programs will need to be more robust, and health systems should invest in community partnerships to help bridge the resource gap. But the wide-ranging nature of patients’ practical needs will likely require healthcare leaders to think creatively. 

Consider the scope:

  • Care coordinators: Particularly for patients with complex conditions, it may be beneficial to designate a care coordinator to oversee healthcare planning.
  • Home health care: Without family members to help with day-to-day care, more nurses and aides will be needed to provide healthcare at home as well as help with day-to-day living. For patients with less demanding healthcare needs, adult day care may be useful.
  • Medication management: Patients need to understand how to take their medications, watch for potential side effects and interactions, and develop a system to make sure they take them on time. Further, they may need help navigating the pharmacy, either in getting prescriptions filled or with financial assistance programs.
  • Meal delivery: Nutrition is vital to a patient’s recovery, and ensuring patients have access to healthy options can help to reduce the likelihood of readmission.
  • Personal emergency response systems: Patients may need devices to call for help during an emergency as well as medical bracelets or other methods for communicating important information to first responders.
  • Housekeeping assistance: Hospitals may need to help connect patients with resources to maintain clean, safe homes. 
  • Volunteer companions: While volunteer companions usually help elderly patients with social interaction and basic needs, it may be necessary to develop programs that target a wider range of ages.
  • Transportation services: Patients need help getting to and from follow-up visits.
  • Telehealth: Remote care will become increasingly important. Clinical services should consider whether care plans could be adjusted to reduce the number of in-person visits.

Beyond targeting resources, consumer segmentation also offers an opportunity to communicate with patients in a more effective and personalized way. This sort of engagement fosters trust and increases loyalty that’s particularly important, given the intimate nature of healthcare.

It’s long been true that the stronger the family system, the better off hospitals are. But as the concept of the American family shifts, and in this case, unwinds, healthcare leaders need to be attuned to new demands—and nimble enough to meet them. This requires making the most of the information you have today to plan for tomorrow.

Rating Agencies Upgrade Not-for-Profit Hospital Outlook

Posted on by • Posted in Balance Sheet, Cash, Cash Flow, Cash Management, Cash Reserves, Challenge, Credit Quality, Credit Ratings, Health System, Hospital, Hospital Industry, Key Metrics, Key Performance Indicators, Key Ratios, Market Outlook, Net Income, Net Patient Service Revenue, Non-Profit Healthcare Industry, Nonoperating Income, Operating Expense Reduction, Operating Expenses, Operating Income, Operating Margin, Operating Margin Drivers, Operating Metrics, Operating Performance, Operating Revenue • Leave a comment

https://www.kaufmanhall.com/insights/infographic/rating-agencies-upgrade-not-profit-hospital-outlook

In late 2023, S&P Global and Fitch Ratings viewed the not-for-profit (NFP) hospital sector as negative or deteriorating, reflecting the difficult financial position many were in following the pandemic.

In recent weeks, S&P and Fitch upgraded their 2025 sector outlook for NFP hospitals to stable and neutral respectively, joining Moody’s Ratings, which held stable from last year.

This week’s graphic illustrates the rating agencies’ latest views on NFP hospitals, which point to a promising but uneven recovery for the industry.

Overall, the reports detail that stronger balance sheets, solid revenues, and improved demand have reduced the likelihood of covenant violations and strengthened NFP hospitals’ positions. 

However, challenges persist that could impede further progress. The labor market, payer environment, antitrust enforcement, and a new administration all present complications for the continued recovery of NFP hospitals. Nonetheless, the reports indicate significant improvement for the industry since the post-pandemic ratings downturn.

Fitch’s report noted that the share of NFP hospitals with a stable outlook has reached a three-year high. Meanwhile, S&P reported that there are now almost twice as many NFP hospitals with favorable outlooks compared to unfavorable ones, a dramatic flip from 2023, which had a 3.1:1 ratio of unfavorable to favorable outlooks. 

These ratings changes reflect the hard work put in by NFP hospitals across the country to improve their financial performance and find new ways to serve their communities sustainably. 

However, the recovery remains “shaky” and incomplete, and hospitals still face a long road ahead as they reconfigure to a new normal.

Assessing the Results of Medicaid Unwinding

Posted on by • Posted in Children's Health Insurance Program (CHIP), Medicaid, Medicaid Unwinding • Leave a comment

https://www.kaufmanhall.com/insights/infographic/assessing-results-medicaid-unwinding

With the onset of the pandemic in March 2020, states were required to provide continuous enrollment for Medicaid and Children’s Health Insurance Program (CHIP) beneficiaries in exchange for enhanced federal funding. This led to immense growth in Medicaid rolls that states could not begin to unwind until April 2023.

This week’s graphic illustrates the outcomes of Medicaid redeterminations—a process which most states completed by August 2024—and provides a comprehensive coverage update.

As this undertaking nears completion, most beneficiaries have had their Medicaid coverage renewed during redeterminations. Around 30% of recipients, or about 25M beneficiaries, lost Medicaid coverage. Nearly 70% of these cuts were made for procedural reasons, such as state agencies not processing beneficiaries’ documents before their cases closed or beneficiaries never receiving the renewal notices. 

Despite significant nationwide reductions, 8M more people were enrolled in Medicaid and CHIP in August 2024 than just before continuous enrollment began in February 2020. 

Throughout continuous enrollment, an elevated share in Medicaid and a lower uninsured rate were the most notable differences to a coverage landscape that has otherwise remained largely stable. 

Somewhat surprisingly, initial evidence suggests that the net effect of continuous enrollment and subsequent Medicaid redeterminations equaled out, and many former recipients have gained coverage elsewhere. 

While the national uninsured rate increased to 8.2% in Q1 2024 following a record low in 2023, the uninsured rate remains lower than it was in 2019.