With the Federal Trade Commission (FTC) issuing a final rule last month that bans noncompete agreements nationwide, the graphic above is our attempt to categorize the current status of complex state noncompete laws that affect physicians.
Except in the event of a business sale, five states—California, North Dakota, Minnesota, Nebraska, and Oklahoma—ban all noncompete agreements for all employees, and at least 19 states either ban them for physicians or place varying limits on them for physicians.
Examples of these limits include a narrow law in Florida that allows noncompetes to be voided if there is only one employer of a physician specialty in a county, and a Tennessee law that only permits physician noncompetes that bar a physician from practicing at facilities where their former employer provides services.
As a noncompete agreement can restrict a physician’s ability to practice near a former employer for years, bans on physician noncompete agreements have been shown to improve community access to care. One study found that, compared to places that allow them, places that banned noncompetes for physicians saw increased physician employment, the opening of more physician practices, and a lower likelihood of practice closures.
Should the new FTC ban survive the mounting legal challenges it faces, its effect on the physician labor market may be limited, as not-for-profit organizations fall outside the FTC’s traditional enforcement jurisdiction. However, the agency has indicated a willingness to reevaluate an entity’s not-for-profit status and stated that “some portion” of tax-exempt hospitals could fall under the final rule’s purview.
Days cash on hand is one of the most important metrics in hospital credit analysis. The ratio calculates an organization’s unrestricted cash and investments relative to daily operating expenses.
Here’s a computation commonly used to calculate days cash on hand:
Math aside, let’s unpack what days cash on hand really tells us. Days cash on hand gives an indication of a hospital’s flexibility and financial health. Essentially, it tells us how long a hospital could continue to operate if cash flow were to stop. From a ratings perspective, the higher the days cash, the better, to create a cushion or rainy-day fund for unexpected events.
While the sheer abatement of cash flow feels like a doomsday scenario, we don’t have to look far back to see examples. The shutdown in the early days of Covid and the recent Change Healthcare cyberattack are examples of events that can materially impact cash flow. While these may be considered extreme, there are plenty of more common events that can disrupt cash flow, including a delay in supplemental funding, an IT installation, a change in Medicare fiscal intermediary, an escalation in construction costs, or the bankruptcy of a payer.
Size and diversified business enterprises can impact days cash on hand. For example, small hospitals with outsized cash positions relative to operations often report a dizzying level of days cash on hand. Health systems with wholly owned health plans often show lower days cash when compared to like-sized peers without health plans. Analysts will also review a hospital’s cash-to-debt ratio, which is an indication of leverage and compares absolute unrestricted cash to long-term obligations. Cash-to-debt creates a more comparable ratio across the portfolio.
In the years leading up to the pandemic, the days cash on hand median increased steadily as the industry went through a period of stable financial performance and steady equity market returns. Hospitals took advantage of an attractive debt market to fund large capital projects or reimburse for prior capital spending. The median crested over 200 days. As discussed during our March 20, 2024, rating agency webinar, days cash median for 2023 is expected to decline or remain flat at best, not because of an increase in capital spending or deficit operations, but because daily expenses (mainly driven by labor) will grow faster than absolute cash. Expenses will outrun the bear, so to speak.
Days cash on hand will remain a pillar liquidity ratio for the industry, but equally important is the concept of liquidity. Days cash on hand doesn’t tell the whole story regarding liquidity. A hospital may compute that it has, say, 200 days cash on hand, but that calculation is based on total unrestricted cash and investments, which usually includes long-term investment pools. A sizable portion of that 200 days may not be accessible on a daily basis.
Recall that during the 2008 liquidity crisis, many hospitals had large portions of their unrestricted investment pools tied up in illiquid investments. When you needed it the most, you couldn’t get it. 2008 was a watershed moment that starkly showed the difference between wealth and liquidity and the growing importance of the latter. Days cash on hand didn’t necessarily mean “on hand.” Many hospitals scrambled for liquidity, which came in the form of expensive bank lines because liquidating equity investments in a down market would come at a huge cost.
Nearly overnight, daily liquidity became a fundamental part of credit analysis.
While the events were different, Covid and Change Healthcare followed the same fact pattern: crisis occurred, cash flow abated, and hospitals scrambled for liquidity, drawing on lines of credit to fund operating needs. Within a quick minute healthcare went “back to the future,” and undoubtedly, there will be another liquidity crisis ahead.
Rating reports now include information on investment allocation and diversification within those investments, and report new ratios such as monthly liquidity to total cash and investments. A hospital with below average days cash on hand or cash-to-debt may receive more attention in the rating report regarding immediately accessible funds.
Irrespective of a high or low cash position or rating category, providing rating analysts with a schedule highlighting where management would turn to when liquidity is needed would be well received. For example, do you draw on lines of credit, hit depository accounts, pause capital, extend payables, or liquidate investments, and in what order? Some health systems are taking this a step further with an in-depth sophisticated analysis to quantify their operating risks and size their liquidity needs accordingly, which we call Strategic Resource Allocation. This analysis would boost an analyst’s confidence in management’s preparedness for the next crisis with the segmenting of true cash “on hand.” It would also help ensure that, when the next crisis arrives, management will know where to turn to maintain liquidity and meet daily cash needs.
Last week, RAND issued its latest assessment of hospital prices concluding…
“In 2022, across all hospital inpatient and outpatient services (including both facility and related professional claims), employers and private insurers paid, on average, 254% of what Medicare would have paid for the same services at the same facilities. State-level median prices have remained stable across the past three study rounds: 254 %of Medicare prices in 2018 (Round 3), 246%in 2020 (Round 4), and 253% in 2022 (Round 5—the current study).”
Like clockwork, the American Hospital Association issued its “Rebuke” of the report:
“In what is becoming an all too familiar pattern, the RAND Corporation’s latest hospital price report oversells and underwhelms. Their analysis — which despite much heralded data expansions — still represents less than 2% of overall hospital spending. This offers a skewed and incomplete picture of hospital spending. In benchmarking against woefully inadequate Medicare payments, RAND makes an apples-to-oranges comparison that presents an inflated impression of what hospitals are actually getting paid for delivering care while facing continued financial and other operational challenges.
In addition to the ongoing flaw of relying on a self-selected sample of data, their analysis is suspiciously silent on the hidden influence of commercial insurers in driving up health care costs for patients….”
It’s the 5th Edition of RAND’s Employer Transparency Report, each featuring slight methodology changes using Sage Transparency Commercial Claims Data developed for the Employer Forum of Indiana.
The debate over hospital prices is not new nor is RAND the only investigator. Since the Trump administration enacted its Executive Order 13877 (Improving Price and Quality Transparency in American Healthcare) June 24, 2019, numerous organizations have introduced price transparency tools to enable hospital price shopping i.e. Turquoise, Milliman, Leapfrog et al. The Biden administration continued the rule increasing its penalties for non-compliance and Congress has passed 3 laws with bipartisan support widening its application.
However, best-case results reflected as articulated by Larry Levitt, senior vice president of the Kaiser Family Foundation, have not been realized:
“App developers will go crazy developing shopping tools for patients, and patients will use those tools to search for the best deals. The public availability of prices will shame high-priced hospitals into lowering their prices because they’ll be so embarrassed.”
My take:
Academic researchers and economists have concluded that hospital price transparency has not led to reduced heath spending overall nor lower hospital prices. Per a recent systematic review: “No evidence was found for impact on the outcomes volume, availability or affordability. The overall lack of evidence on policies promoting price transparency is a clear call for further research… Price-aware patients chose less costly services that led to out-of-pocket cost savings and savings for health insurers; however, these savings did not translate into reductions in aggregate healthcare spending. Disclosure of list prices had no effect, however disclosure of negotiated prices prompted supply-side competition which led to decreases in prices for shoppable services.”
Per Wall Street Journal actuaries, hospital price increases account for 23% of annual health spending increases but vary widely based on factors other than their underlying costs. Determining how hospital prices are set remains beyond the scope of conventional pricing models.
Nonetheless, hospital price transparency is here to stay: public attention is likely to grow and sources– both accurate and misleading– will multiply. It’s safe for elected officials because it’s popular with voters. Per Patient Rights Advocate survey (December 2023), 93% of adults think hospitals should be required to post all prices ahead of scheduled services. It’s clearly seen as foundational to the Federal Trade Commission doctrines of consumer protection and competition. And it’s important to privately insured consumers—the majority of Americans– since 73% of their claims are for “shoppable services” though they trust payers more than hospitals for estimates of their out-of-pocket obligations in these transactions (61% vs. 22%).
In July 2018, I wrote:” Arguing price transparency in healthcare is a misguided effort is like arguing against clean air and healthy eating: it’s senseless.” It’s still true. Making the case that price transparency has a long way to go based on current offerings and utilization is legitimate.
The price transparency movement is gaining momentum in healthcare: though it still lacks widespread impact on spending today, it soon will.”
Hospitals are 30% of total U.S. health spending and almost 40% of the population uses at least one hospital service every year. Promoting “whole person care,” while touting quality war while disregarding affordability and price transparency for consumers seems inconsistent. Enabling consumers to easily access accurate prices—not just out-of-pocket estimates– is imperative for hospitals seeking long-term relevance and sustainability. And state and federal lawmakers, along with employers, should structure benefits that reward consumers directly for shopping discipline instead of allowing insurers to benefit alone.
Is the Juice worth the Squeeze for hospital price transparency efforts? To date, proponents say yes, opponents say no, and each side has valid concern about use by consumers. But unless one believes the role of consumers as purchasers and users of the system’s service will diminish in coming years, the safe bet is hospital price transparency will play a bigger role.
More than two-thirds of U.S. physicians have changed their mind about generative AI and now view it as beneficial to healthcare. But as AI grows more powerful and prevalent in medicine, apprehensions remain high among medical professionals.
For the last 18 months, I’ve examined the potential uses and misuses of generative AI in medicine; research that culminated in the new book ChatGPT, MD: How AI-Empowered Patients & Doctors Can Take Back Control of American Medicine. Over that time, I’ve seen the concerns of clinicians evolve—from worries about AI’s reliability and, consequently, patient safety to a new set of fears: Who will be held liable when something goes wrong?
From safety to suits: A new AI fear emerges
Technology experts have grown increasingly certain that next-gen AI technologies will prove vastly safer and more reliable for patients, especially under expert human oversight. As evidence, recall that Google’s first medical AI model, Med-PaLM, achieved a mere “passing score” (>60%) on the U.S. medical licensing exam in late 2022. Five months later, its successor, Med-PaLM 2, scored at an “expert” doctor level (85%).
Since then, numerous studies have shown that generative AI increasingly outperforms medical professionals in various tasks. These include diagnosis, treatment decisions, data analysis and even expressing empathy.
Despite these technological advancements, errors in medicine can and will occur, regardless of whether the expertise comes from human clinicians or advanced AI.
Fault lines: Navigating AI’s legal terrain
Legal experts anticipate that as AI tools become more integrated into healthcare, determining liability will come down to whether errors result from AI decisions, human oversight or a combination of both.
For instance, if doctors use a generative AI tool in their offices for diagnosing or treating a patient and something goes wrong, the physician would likely be held liable, especially if it’s deemed that clinical judgement should have overridden the AI’s recommendations.
But the scenarios get more complex when generative AI is used without direct physician oversight. As an example, who is liable when patients rely on generative AI’s medical advice without ever consulting a doctor? Or what if a clinician encourages a patient to use an at-home AI tool for help interpreting wearable device data, and the AI’s advice leads to a serious health issue?
In a working paper, legal scholars from the universities of Michigan, Penn State and Harvard explored these challenges, noting: “Demonstrating the cause of an injury is already often hard in the medical context, where outcomes are frequently probabilistic rather than deterministic. Adding in AI models that are often nonintuitive and sometimes inscrutable will likely make causation even more challenging to demonstrate.”
That paper, published earlier this year in the New England Journal of Medicine, is based on hundreds of software-related tort cases and offers insights into the murky waters of AI liability, including how the courts might handle AI-related malpractice cases.
However, Mello pointed out that direct case law on any type of AI model remains “very sparse.” And when it comes to liability implications of using generative AI, specifically, there’s no public record of such cases being litigated.
“At the end of the day, it has almost always been the case that the physician is on the hook when things go wrong in patient care,” she noted but also added, “As long as physicians are using this to inform a decision with other information and not acting like a robot, deciding purely based on the output, I suspect they’ll have a fairly strong defense against most of the claims that might relate to their use of GPTs.”
She emphasized that while AI tools can improve patient care by enhancing diagnostics and treatment options, providers must be vigilant about the liability these tools could introduce. To minimize risk, she recommends four steps.
Understand the limits of AI tools: AI should not be seen as a replacement for human judgment. Instead, it should be used as a supportive tool to enhance clinical decisions.
Negotiate terms of use: Mello urges healthcare professionals to negotiate terms of service with AI developers like Nvidia, OpenAI, Google and others. This includes pushing back on today’s “incredibly broad” and “irresponsible” disclaimers that deny any liability for medical harm.
Apply risk assessment tools: Mello’s team developed a framework that helps providers assess the liability risks associated with AI. It considers factors like the likelihood of errors, the potential severity of harm caused and whether human oversight can effectively mitigate these risks.
Stay informed and prepared: “Over time, as AI use penetrates more deeply into clinical practice, customs will start to change,” Mello noted. Clinicians need to stay informed as the legal landscape shifts.
The high cost of hesitation: AI and patient safety
While concerns about the use of generative AI in healthcare are understandable, it’s critical to weigh these fears against the existing flaws in medical practice.
Each year, misdiagnoses lead to 371,000 American deaths while another 424,000 patients suffer permanent disabilities. Meanwhile, more than 250,000 deaths occur due to avoidable medical errors in the United States. Half a million people die annually from poorly managed chronic diseases, leading to preventable heart attacks, strokes, cancers, kidney failures and amputations.
Our nation’s healthcare professionals don’t have the time in their daily practice to address the totality of patient needs. That’s because the demand for medical services is higher than ever at a time when health insurers—with their restrictive policies and bureaucratic requirements—make it harder than ever to provide excellent care. Generative AI can help.
But it is imperative for policymakers, legal experts and healthcare professionals to collaborate on a framework that promotes the safe and effective use of this technology. As part of their work, they’ll need to address concerns over liability. Ultimately, they must recognize that the risks of not using generative AI to improve care will far outweigh the dangers posed by the technology itself. Only then can our nation reduce the enormous human toll resulting from our current medical failures.
More than 20% of Medicare Advantage patients could be affected by the rule, report finds.
The Centers for Medicare and Medicaid Services’ January expansion of the two-midnight rule to include Medicare Advantage plans has contributed to higher inpatient volumes and revenue growth in the first quarter of the year, according to a Strata Decision Technology report.
This is because inpatient services have higher reimbursement levels compared to outpatient services and the two-midnight rule concerns inpatient care.
CMS published the final rule in April 2023, which for the first time expanded the rule to include Medicare Advantage plans. The rule requires patients to be admitted as an inpatient if the treating clinician determines they require hospital care that extends beyond two midnights, rather than being held under observation status as an outpatient.
The expansion now includes more than 30 million people enrolled in Medicare Advantage managed care plans. Prior to the final rule, the two-midnight rule only explicitly applied to traditional Medicare.
More than 20% of Medicare Advantage patients could be affected by the rule, the report found. An analysis of Medicare Advantage encounters from 2023 – before the rule was expanded to those patients – found that 22.3% were held in observation status for two days or more. By comparison, 8.7% of Medicare patients and 11.3% of patients covered by commercial plans had observation lengths of stay of two days or more in 2023.
WHAT’S THE IMPACT?
Looking at trends in hospital gross revenues, year-over-year growth in inpatient revenue surpassed outpatient revenue in March for the first time in more than two years. Inpatient revenue rose 3.7% versus March 2023, while outpatient revenue was up 2.4% year-over-year. Overall gross operating revenue increased 3.1% and 2.2% over the same periods, respectively.
March marked the 11th consecutive month of year-over-year increases for all three metrics, which contributed to stronger margins in recent months, data showed.
Revenue growth varied widely for hospitals in different regions. For example, hospitals in the Northeast and Mid-Atlantic areas saw inpatient revenue jump 5.4% year-over-year in March, while outpatient revenue was nearly flat, down just 0.1%.
Adjusted revenues increased year-over-year, but were down month-over-month. Net patient service revenue per adjusted discharge increased 2.5% year-over-year, and decreased 1.7% versus the previous month, while NPSR per adjusted patient day rose 4.9% from March 2023 to March 2024, and was down 0.5% from February to March 2024.
Hospital operating margins showed strong performance throughout the first quarter. The median year-to-date operating margin was 4.7% for the month, down slightly from a peak of 5.2% in January, but up significantly compared to margins of less than 1% in early 2023.
While actual operating margin increased overall, the median change in the metric was nearly flat both year-over-year and month-over-month when looking at the national data. The median change in operating margin decreased 0.1 percentage point from March 2023 to March 2024, and was down 0.3 percentage point compared to February 2024. The median change in operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin decreased 0.4% year-over-year and 0.5% versus the prior month.
THE LARGER TREND
CMS initially implemented the two-midnight Rule for Medicare in 2013 to help remove barriers to patients receiving medically necessary care.
Medicare’s two-midnight rule states that inpatient services are generally payable under Medicare Part A if a physician expects a patient to require medically necessary hospital care that spans at least two midnights.
CVS has fared better because of its ability to scale and coordinate its other business model resources, Aetna and Signify, analyst says.
The disruption promised by the retailization of healthcare hasn’t materialized as planned.
Walmart and Walgreens recently announced the closing of retail clinics.
“The news is a significant setback for retail health players, some of whom are now realizing that delivering retail-driven primary care may not be economically viable and certainly isn’t causing the disruption in local healthcare markets that many predicted,” said Emarketer senior analyst for digital health Rajiv Leventhal.
Reimbursement for primary care is a major challenge, as are labor shortages and higher costs. Retailers that are not able to scale their clinics through synergies with other parts of their business models, as CVS has done, will find costs rising above their ability to make money.
Walmart is closing all 51 of its health centers across five states, saying the business model was unsustainable.
“Healthcare is very difficult and very challenging,” said Innocent Clement, cofounder and CEO of Ciba Health and a physician by training. “Walmart (was) very disappointing news. I expected a lot. It’s embedded in all of our communities.”
Retail clinics help make healthcare affordable and the convenience of pharmacies creates access for vulnerable populations, Clement said.
Retail based clinics and urgent care clinics play a role in controlling healthcare costs by diverting approximately 30% of cases from much higher-cost emergency rooms.
“Walmart Health’s decision to shut down its health centers and telehealth services is a sudden pivot from its recent plans to expand but not surprising given retailers’ overall struggles in the care delivery space,” Leventhal said.
“It’s not Walmart’s first failed attempt at operating medical clinics, but it will likely be its last crack at it considering how badly it went – going from signing off on a plan in 2018 to build 4,000 primary care clinics to shutting down in 2024 after opening just 51. The latest effort was littered with red flags throughout, from struggling with basic billing and payment functions to leadership changes and other operational obstacles.”
Walgreens suffered a $6 billion loss in its second quarter due to its struggles to make VillageMD profitable. It announced it was closing 60 VillageMD clinics and that number is expected to rise.
Walgreens invested $1 billion in VillageMD and then dumped in $5.2 billion more, Leventhal said. The plan was to keep expanding and co-locating VillageMD clinics with a Walgreens pharmacy. As of last year, Walgreens had 680 clinics with an estimated 200 co-located with a drugstore. Now 140 are already closed with 20 more to close, many of those are co-located with a Walgreens drugstore.
“They’re still leaning into VillageMD investments where they’re succeeding,” Leventhal said. However, “the investment just has not paid off at all. That led to a significant jaw dropping loss.”
Walgreens’ $1 billion cost-cutting strategy should put it in a better position going forward, Leventhal said.
“What many people don’t realize is that urgent care clinics are experiencing a level of extreme financial pressure that endangers their availability, range of services, and continued existence,” said longtime healthcare executive Web Golinkin, a former CEO of RediClinic and FastMed Urgent Care. He recently published a book about his experiences in “Here Be Dragons: One Man’s Quest to Make Healthcare More Accessible and Affordable.”
Reimbursements from third-party payers on services at clinics have been relatively flat over the past recent memory, Golinkin said. This includes both commercial and government payers, Medicare and Medicaid. At the same time, operating costs have increased dramatically.
“It’s difficult for providers to have leverage in a retail health setting. It’s harder than it looks,” Golinkin said. “The reason we were disruptive, we were open seven days a week for extended hours and co-located with a pharmacy.”
But supply and labor costs increased during the pandemic and have not reset, he said. There’s already a shortage of primary care physicians.
RediClinic began inside retail clinics such as Walmart and Walgreens before being sold to Rite Aid in 2014, Golinkin said. FastMed was sold off piecemeal to HCA Healthcare, HonorHealth in Arizona and others.
The bigger picture is the lack of access in this country to primary care, Golinkin said. CMS needs to shift dollars to primary care, he said, a statement backed by the American Medical Association, which has been banging the drum for greater physician reimbursement.
Healthcare has narrow margins to begin with, Golinkin said, but may be able to offset losses in one area with profits from another.
Retail clinics may be able to offset losses through pharmacy sales, with the clinics acting somewhat as a loss leader to getting customers in the store, Leventhal said.
But what’s really needed is the ability to scale and a business model that brings consumers from retail pharmacy sales and the clinic to drug purchases and other care needs, as CVS has done.
The struggles for Walmart and Walgreens are a cautionary tale for other retailers, Leventhal said.
“It’s difficult to operate a primary care startup,” he said.
There are nearly 14,000 urgent care clinics in the United States, Golinkin said, adding that most are under sole ownership and all are under the same financial pressure that caused Walmart to shut down.
“This is not just about Walmart. It’s an access issue,” Golinkin said. “What happened to Walmart is symptomatic.”
The answer may lie in partnerships between providers and retailers.
There are many examples of partnerships between retail medical providers and health systems. Prominent health systems such as Advocate Health Care, Providence, Kaiser Permanente and Cleveland Clinic either provide care in retail pharmacies or are clinically affiliated with one, according to Golinkin.
Walgreens has a partnership with Advocate Health Care.
It makes a lot of sense from a continuity of care perspective, Golinkin said. If someone goes into a clinic in a retail space and sees a clinician associated with a hospital or physician practice, and that doctor or PA or nurse says the consumer needs further care, that person goes to the provider.
Most clinics and urgent care centers are tied now to an EHR for a clinically integrated network.
“This approach will boost referrals for health systems while saving them the costs of maintaining their own outpatient practices,” he said. “That’s the model we’re really going to see going forward, more collaboration.”
WHY THIS MATTERS
CVS Health has created the scale to make its clinics successful, according to Leventhal.
Amazon is also lurking as a potential competitor through its expansion with primary care startup One Medical. Amazon bought One Medical for $3.9 billion last year.
CVS took a hit to its bottom line as well, but that was mostly due to high MA utilization through its insurer, Aetna.
CVS is in a much better position strategically, because it has an insurer, a pharmacy benefit manager and also Signify Health, said Leventhal.
CVS’s Aetna business makes it the most imposing retail health disruptor, he said. This combination of a payer and provider has substantial power in local markets and can influence patient decisions on where to get care.
The company’s acquisition of Oak Street Health and Signify Health gives it a full circle strategy. CVS is leaning into opening more Oak Street clinics within CVS drugstores, Leventhal said.
For example, over 650,000 Medicare beneficiaries (not all of them Aetna members) visit CVS stores in Oak Street geographies each week, CVS data said.
There are over 300,000 Signify Home visits annually in Oak Street geographies. Approximately one in six CVS customers end up scheduling a visit at an Oak Street clinic. CVS promotes this by setting up tables within their drugstores that have material on Oak Street.
Ten percent of Aetna seniors educated by Signify about Oak Street as a primary care option scheduled a Welcome Visit, the presentation said.
CVS was in a competitive battle to acquire Signify Health last year for $8 billion. Signify does risk assessments that are billed to the insurer, which connects them with services, specifically with Oak Street Health.
Even CVS would acknowledge delivering primary care through a retail entity is challenging due to low margins, Leventhal said.
In theory, clinics appeared to be the perfect one-stop shop model. In reality, they faced a bunch of challenges, especially during and after COVID-19, Golinkin said.
THE LARGER TREND
Pharmacies, particularly independents, are also dealing with the cost pressures of reimbursement.
Pharmacies are paid by pharmacy benefit managers a reimbursement fee for dispensing drugs, and over the course of the last 10 years those fees have materially declined, squeezing pharmacy margins, according to Seeking Alpha.
This squeeze is in part why Walgreens Boots Alliance’s cash flows have declined so precipitously and why rivals such as Rite Aid have been forced into bankruptcy, the report said.
The newest model for pharmacies is the cost-plus drug model. CVS, Walmart and Walgreens all have offerings and Walgreens is soon expected to roll out its own cost-plus drug model to create a more sustainable model for pharmacies to be reimbursed.
Walgreens CEO Tim Wentworth, who came aboard in October 2023, recently said that the company is ready to adopt a cost plus drug model, which is similar to the one used by Mark Cuban’s online pharmacy, Cost Plus Drugs.
Cost Plus Drugs, which launched in 2022, works directly with drug manufacturers to avoid PBM middlemen. It lowers prices on medications by basing costs on the manufacturing fee, plus a 15% markup, a $3 pharmacy handling fee and a $5 shipping fee. Cost Plus also transparently displays what it pays for its medicines.
HENRY KOTULA 