A teacher gave a balloon to every student, who had to inflate it, write their name on it and throw it in the hallway. The teacher then mixed all the balloons. The students were then given 5 minutes to find their own balloon. Despite a hectic search, no one found their balloon.
At that point, the teacher told the students to take the first balloon that they found and hand it to the person whose name was written on it. Within 5 minutes, everyone had their own balloon.
The teacher said to the students: “These balloons are like happiness. We will never find it if everyone is looking for their own. But if we care about other people’s happiness, we’ll find ours too.”
One of the things I’ve always found most fascinating about news coverage and policymaker attention to health insurers is how little focus is placed on what these companies say to their investors.
It’s no secret that each quarter, all public companies update their shareholders and provide guidance for the future. When I was at Cigna, preparing the CEO to speak with reporters and investor analysts was arguably considered the most important role I had every three months.
Mining insights from those earnings reports has been a focus of mine since I became an insurance industry whistleblower. Recently, for example, we’ve highlighted how CVS/Aetna, in particular, has taken a beating on its stock price for reporting increased spending on medical care by seniors in Medicare Advantage plans.
Now, though, CEOs have become even more public and open, beyond their quarterly earnings calls, about the challenges they are having extracting further profit from the Medicaid and Medicare programs. This should be noted, particularly by the bipartisan group of lawmakers in Washington increasingly eyeing regulatory reform on insurer practices like prior authorization, as evidence that insurers are going to become even more aggressive in limiting care to preserve their 2024 profits.
Centene’s CEO saida few days ago that medical claims are increasing in the company’s managed Medicaid business. UnitedHealth and Elevance, which owns several Blue Cross Blue Shield companies that have converted to for-profit status, also recently reported they’re seeing similar results. Combined with increased medical spending on Medicare Advantage claims, one might guess this would begin to worry investors that insurers would lower their profit forecasts.
But none of these companies have so far expressed concern about not meeting their 2024 profit expectations.
So, medical claims in Medicaid and Medicare Advantage plans – now the majority of the business for many of the largest insurers – are rising, but these companies aren’t expecting to disappoint Wall Street with a drop in profits. How is that possible?
Because insurers can deploy the tools to prevent patients from accessing care. And their playbook isn’t secret, or complicated.
By further increasing prior authorization in Medicaid and Medicare Advantage plans, insurers can limit how many seniors and low-income Americans follow through with legitimate care and procedures. (Here’s a recent congressional report on increased hurdles insurers have put in place to prevent children from receiving preventive care in Medicaid plans. And insurers’ increasing use of prior authorization in Medicare Advantage is something we’ve regularly covered.)
Unlike their marketplace and employer-based plans, insurers can’t negotiate reimbursement rates for Medicaid and Medicare Advantage plans that they manage.
But beyond prior authorization, they can put other layers of bureaucracy in place that increase how long it takes a provider to be reimbursed for providing care – and to make it more complicated for doctors to ensure they’re reimbursed fully for the care they provide.
In effect, these tactics can amount to decreasing the already industry-low rate of reimbursement for doctors from the Medicaid and Medicare Advantage programs. Physicians, you should expect to see more hurdles to reimbursement in these programs throughout the balance of 2024 as insurers look to hoard as much cash as they can.
In Medicare Advantage plans, insurers can pursue the industry jargon of a “benefit buydown” to further shift costs onto plan enrollees and off insurers themselves. Because the federal government pays insurers a flat amount per Medicare Advantage enrollee, regardless of how much health care spending each patient has, it is in the insurers’ financial interest to claim that seniors and disabled people enrolled in their plans are sicker than they really are.
Rising out-of-pocket costs that seniors and disabled people in Medicare Advantage plans are facing is a consequence of insurers wanting to squeeze further profits out of the program, and is a way to maintain direct government payments per enrollee within the insurers’ coffers.
On average, supply costs comprise about 10.5% of a hospital’s budget, the American Hospital Association said its May 2 “Cost of Caring” report, citing data from Strata Decision Technology.
Having adequate and up-to-date medical supplies, devices and equipment are necessary for hospitals to deliver high quality care to patients, AHA said, but “most of these items are expensive to acquire and maintain and rely on increasingly volatile global supply chains.”
Here is a look at how supply costs have grown year over year at 20 hospitals for the quarter ended March 31:
Portland-based Oregon Health & Science University told staff June 6 that it plans to lay off at least 500 employees, citing financial issues.
“Our expenses, including supplies and labor costs, continue to outpace increases in revenue,” top leaders told staff in a message shared with Becker’s. “Despite our efforts to increase our revenue, our financial position requires difficult choices about internal structures, workforce and programs to ensure that we achieve our state-mandated missions and thrive over the long term.”
Willamette Week was first to report the news, which follows Oregon Health & Science University and Portland-based Legacy Health signing a binding, definitive agreement to come together as one health system under OHSU Health. OHSU Health would comprise 12 hospitals and, more than 32,000 employees and will be one of the largest providers of services to Medicaid members in Oregon.
An Oregon Health & Science University spokesperson told Becker’s more information about the layoffs will be provided in the coming weeks.
In the June 6 message, leaders told staff that “while we work to address short-term financial challenges, we must also plan for an impactful and successful future. We understand that last week’s announcement regarding the Legacy Health definitive agreement, while exciting and potentially transformational, raises questions about how we can afford the required investment in light of our financial situation.”
They added that a capital investment in Legacy “represents a strategic expansion designed to enhance our capacity,” and will be funded by borrowing with 30-year bonds.
“These capital dollars cannot be used to close gaps in our fiscal year 2025 OHSU budget or to pay our members. The OHSU Strategic Alignment and budgetary work would be necessary with or without the Legacy Health integration,” leaders said.
OHSU has planned a town hall next week to further discuss the combination with Legacy.
Leaders said discussions between managers and members about workforce reductions will begin after the annual review and contract renewal process, with additional reductions occurring over the next few months.
The global economy is in better shape than it was at the start of the year, thanks largely to the performance of the United States, the World Bank said in its latest forecast Tuesday. But the sunnier outlook could cloud over if major central banks — including the Federal Reserve — keep interest rates at elevated levels.
Global growth is expected to reach an annual rate of 2.6 percent this year, up from a January forecast of 2.4 percent, the bank said. The global economy is drawing closer to a “soft landing” after recent price spikes, with average inflation dropping to a three-year low amid continuing growth, bank economists said.
While Americans’ unhappiness with high prices remains a key vulnerability for President Biden’s reelection bid, the World Bank now expects the U.S. economy to grow at an annual rate of 2.5 percent, nearly a full percentage point higher than it predicted in January.
The United States is the only advanced economy growing significantly faster than the bank anticipated at the start of the year.
“Globally, overall things are better today than they were just four or five months ago,” said Indermit Gill, the World Bank’s chief economist. “A big part of this has to do with the resilience of the U.S. economy.”
The bank credited “U.S. dynamism” with helping stabilize the global economy, despite the highest interest rates in years and wars in Ukraine and the Middle East. Employers added 272,000 jobs in May, topping analysts’ estimates, the Labor Department reported last week.
Expected global growth this year and next, however, will remain below the pre-pandemic average of 3.1 percent. Three out of four developing countries are now expected to grow more slowly than the bank forecast in January, leaving them little hope of narrowing the income gap with richer nations.
Despite their mostly upbeat tone, bank officials warned that central banks including the Fed are likely to move slowly to begin reversing the past two years of interest rate increases. That means global interest rates will remain high, averaging around 4 percent over the next two years, roughly twice the average recorded during the two decades before the pandemic.
Global inflation should ease to 3.5 percent this year, before dropping to 2.9 percent next year. But the decline is proving more gradual than the bank anticipated. And any deterioration that causes monetary authorities to delay cuts in borrowing costs could strip 0.3 percentage points from the forecast growth rates.
“This is a major risk confronting the global economy — interest rates remaining higher for longer and an already weak growth outlook becoming weaker,” Gill said.
Bank officials also flagged global trade — which is on course this year to complete its weakest half-decade since the 1990s — as a concern. Trading nations in 2024 have implemented more than 700 restrictions on merchandise trade and nearly 160 barriers to services trade.
“Trade restrictive measures have skyrocketed. They have more than doubled since the pre-pandemic period,” Gill said.
Rising protectionism risks becoming a drag on the global economy’s already modest pace of growth. Popular support in many countries for tariffs on imported goods and industrial subsidies that favor domestic production could further constrict trade flows that are already under pressure from the U.S.-China rivalry and other geopolitical risks.
“The world might become stuck in the slow lane,” said Ayhan Kose, the bank’s deputy chief economist.
Among those likely to suffer if key interest rates stay higher for longer are the 40 percent of developing countries at risk of a debt crisis. Many borrowed heavily to fund pandemic-related health care and subsequently to cover food and fertilizer bills that soared following the war in Ukraine.
They have little immediate prospect of securing debt relief and now risk losing out on trade gains as larger economies turn inward, Gill said.
Companies demand employees come into the office for many legitimate reasons. But in some cases, it appears to be a tactic to force employees out.
Companies, large and small, are asking employees to return to the office at least a few days a week. But in some cases, these return-to-office (RTO) policies appear to be a passive-aggressive approach to eliminate roles, rather than doing layoffs.
Case in point: AT&T recently said it would require thousands of managers from across the country to work in person at just nine locations. One manager referred to the move as “a layoff wolf in return-to-office sheep’s clothing.”
While there are several reasons companies could be using RTO to avoid actively laying people off, Maurice Cayer, lecturer and coordinator of the master of science human resources program at the University of New Haven, said it could backfire.
“It’s a blunt instrument,” he said of the tactic.
A Disconnect Between Employers and Employees
Research from the University of Pittsburgh found companies use RTO mandates at times for “power grabbing and blaming employees for poor performance,” yet the results harm employee satisfaction and fail to improve performance.
Employees’ feelings about in-office work are clear. So why are companies choosing to enforce such an unpopular — and ineffective — tactic?
One reason is that some organizations, especially tech companies, overstaffed as they rebounded from the pandemic and now have too many employees, Cayer said. The introduction of new technology, like artificial intelligence, also might be behind a reduction in staff.
Others may be using RTO as a test. The mandate in those cases screens employees to determine “who’s the most committed to the organization” and open to a more traditional work model, said Colleen Flaherty Manchester, a professor in the Work and Organizations department at the University of Minnesota.
The tactic highlights the disconnect between employers’ perceptions of flexible work and employees’ desires to work remotely for personal or productivity reasons, she said.
Requiring employees to return to work in person may have some advantages, such as improved communication and more opportunities for mentorship, but organizations typically haven’t experienced extensive productivity issues with remote work, said Carrie Urrutia, a labor and employment attorney at Eastman & Smith in Toledo, Ohio.
“Many companies simply want things to revert to the way they were before COVID,” she said.
The Consequences of Using RTO to Trim Staff
Companies risk losing their best people with RTO policies, said Cayer.
“Organizations are placing bets, and they’re willing to live with the consequences of losing some highly desirable people in the process,” he explained. “But, maybe they’ll make up for it by having people who are engaged at work.”
Quietly laying off workers under the RTO guise could anger employees and damage an organization’s reputation, which might impact future hiring and meeting business goals, Urrutia added.
Yet the approach is attractive to companies. “It could be a less-costly way to achieve a goal of reducing the workforce without a formal reduction in force,” said Urrutia.
Employees who quit as a result of RTO mandates wouldn’t be eligible for unemployment compensation and typically wouldn’t receive a severance package as opposed to those who were laid off, she explained. “Generally speaking, employees who voluntarily resign are not entitled to those benefits.”
However companies would be better served implementing hiring freezes or enabling more flexibility, she argued. Urrutia said organizations should examine their current remote or hybird work arrangements and assess what’s working for them and employees. If RTO is mandated, they should clearly articulate the business reasons why it’s necessary and why remote work isn’t working.
“Aim to find a sweet spot that achieves the manager’s goals of in-person connection for innovation and group productivity, yet also meets some of the needs of employees,” Manchester said.
Are Quiet Layoffs Legal?
As a rule, employees don’t have a legal right to work from home, so employers are free to require in-person work as a condition of employment, Urrutia said. Workers therefore typically don’t have legal recourse if they feel a RTO mandate is designed to make them quit.
One exception is if an employee had a contract that specifically stipulated they’re allowed to work remotely, Urrutia explained. Another is unionized employees, where RTO could be a subject of collective bargaining.
Organizations also must ensure their RTO decisions aren’t discriminatory or unfairly impact groups protected under the Civil Rights Act,Cayer said. The law prohibits employment discrimination based on race, color, sex, national origin, age, disability and medical history.
Employers are also required to provide reasonable accommodation under the Americans with Disabilities Act or Pregnant Workers Fairness Act, and that might include allowing remote work, Urrutia added.
“Employees who work from home are not a protected classification, but many employees who work from home are in protected classifications,” she said.
Still, employees could file a lawsuit if they feel they RTO policies unfairly led them to quit, Cayer added. Organizations can choose to protest the suit. “A lot of times that leads into some settlement,” he said.
HENRY KOTULA 