Tag Archives: Health System

Vanderbilt University Medical Center points to Epic rollout for 60% drop in operating income

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https://www.beckershospitalreview.com/finance/vanderbilt-university-medical-center-points-to-epic-rollout-for-60-drop-in-operating-income.html

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Nashville, Tenn.-based Vanderbilt University Medical Center saw revenues increase in the first nine months of fiscal year 2018, but the hospital ended the period with lower operating income.

Here are four things to know about the hospital’s most recent financial results.

1. VUMC reported revenues of $3.04 billion in the nine months ended March 31, up from revenues of $2.85 billion in the same period of the year prior, according to recently released bondholder documents. The hospital said the financial boost was primarily attributable to higher net patient service revenue, which climbed 5 percent year over year.

2. The hospital’s operating expenses increased 9 percent year over year to nearly $3 billion in the first nine months of the current fiscal year. The hospital’s expenses related to salaries, wages and benefits, as well as drug and supplies costs, increased year over year.

3. “The increase in salaries, wages and benefits is primarily due to increased staffing to meet additional demand associated with higher net patient service revenue, research contracts, and training costs for staff related to our EMR system implementation,” VUMC said. Higher consulting and management fees related to the Epic EMR implementation also caused the hospital’s expenses to rise.

4. VUMC ended the first nine months of fiscal year 2018 with operating income of $44.4 million, down 60 percent from $110 million in the same period a year earlier. The decline was largely attributable to higher expenses related to the rollout of the new EMR system. The hospital said it planned for future operating income reductions due to the implementation.

“We successfully completed our EMR implementation in November and we anticipate the new system will yield future efficiencies,” VUMC said. “However, in the year of implementation, increased operating expenses related to implementation caused a reduction in operating income. The EMR implementation put pressure on clinical volumes in the post-live period. Although we have achieved net patient services revenue in excess of our budget, the implementation has muted volumes.”

 

Providers argue against Medicaid rate cuts without oversight

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States with at least 85% of their Medicaid population in managed care could implement nominal payment cuts without assuring care.

Hospitals, particularly rural providers, would be hurt by a Centers for Medicare and Medicaid Services proposed rule that would force them to take lower Medicaid rates without a review of the impact of the cuts, according to comments made to CMS asking for a reconsideration of the plan.

Provider organizations, hospitals, the Medicaid and CHIP Payment and Access Commission, are among those asking the Centers for Medicare and Medicaid Services to rethink its proposed rule.

Comments were due this week.

CMS proposed the rule in March to allow states that have a comprehensive, risk-based Medicaid managed care enrollment that is above 85 percent of their total Medicaid population to get around network adequacy rules when implementing “nominal” rate changes.

States had raised concern over the administrative burden associated with the current requirements, particularly for states with high rates of Medicaid managed care enrollment.

For states proposing nominal cuts below 4 percent a year or 6 percent over two years, the rule amends the process for them to document whether Medicaid payments in fee-for-service systems are sufficient to enlist providers to assure access to covered care and services.

These states would be exempt from access monitoring requirements and they would not need to seek public input on the rate reductions.

America’s Essential Hospitals said, “Requiring states to ensure, through monitoring, that rate reductions do not diminish access to needed services is particularly important now, as access monitoring reviews are the only vehicle left for providers to challenge state payment rate decisions.”

The Federation of American Hospitals contends that the rule would allow for more than nominal rate changes. If finalized, FAH said, the rule would allow for an estimated 18 states to implement a rate reduction of up to 12 percent over a period of four years or 16 percent over five years, without going through requirements for ongoing monitoring of the impact of the rate changes.

This would disproportionately impact vulnerable Medicaid beneficiaries and subject providers with unsustainable rate reductions, FAH said.

Most states, even those with very high rates of managed care enrollment, often exclude certain categories of particularly vulnerable groups from managed care plans, the organization said. People with physical, mental or intellectual disabilities or who are elderly, largely get services through fee-for-service, FAH told CMS Administrator Seema Verma.

The Medicaid and CHIP Payment and Access Commission said it did not find the states’ argument of administrative burden compelling enough given the federal government’s obligations to oversee state performance and assurances related to access.

“Moreover, exceptions to reporting may introduce gaps in oversight,” MACPAC Chair Penny Thompson said. “In short, the need for states to maintain resources and tools to monitor access as an ongoing element of state program administration and decision making outweighs the limited savings states would achieve as a result of these changes.”

 

National Pension Crisis Coming Storm for Hospitals

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Healthcare organizations are feeling the effects of the national shortfall of $645 billion in pension liabilities and are pursuing the ‘least bad option’ for handling the problem.

The nationwide pension crisis has organizations scrambling to properly fund employee’ retirement packages and represents a self-inflicted dilemma that will have a dramatic impact on the healthcare industry without a clear solution.

Given that healthcare organizations typically operate in low-interest environments on thin margins, hospitals are slated to struggle as much as any organization under new federal accounting rules.

This year is a turning point for pension plans, as reduced corporate deduction rates from the tax reform bill passed late last year come into effect, as well as new rules set by the Governmental Accounting Standards Board, which establish reporting requirements for governments regarding healthcare liabilities.

As aging baby boomers get closer to receiving pension benefits, healthcare liabilities are projected to rise, culminating in an estimated shortfall of $645 billion, according to Pew Charitable Trusts.

Yuri Nisenzon, ASA, EA, MAAA, FCA, assistant vice president at Lewis & Ellis, based in Allen, Texas, told HealthLeaders Media that the federal government and health systems must work to align pension contributions to post-retirement income.

“A lot of people realize that the retirement situation in our country is not great,” Nisenzon said. “The main vehicle for retirement are defined contribution plans, 401(k) plans, and there’s some easy math to show that people are not going to have enough income at retirement based on the average 401(k) balance and people living longer.”

What can be done?

As hospital CFOs consider redesigning pension packages for the future, healthcare organizations are relatively hamstrung. The new GAAP rules have discontinued the practice of delaying how healthcare liabilities are recorded, instead requiring them to be listed on an organization’s balance sheet.

Brian Argo, chief financial officer at Conway Medical Center(CMC) in Conway, South Carolina, told HealthLeaders Media that health systems with active pension plans are “by far in the minority,” adding that they are “all but extinct” in the southeast. This realization among hospital CFOs has forced them to look for solutions, even if they are imperfect approaches.

“I think if you look at the auto industry and look at all industries, it’s what is the least bad option,” Argo said. “[Active pension plans] are unsustainable, and the least bad option, in many cases, is freezing the plan and making sure that when you do that you have a funding scenario in place where you can get it funded to 100% so you can meet that liability.”

One idea floated within the industry as a potential solution is encouraging older employees to retire while recruiting a younger workforce and enrolling them in a defined contribution plan. However, Argo said hospital executives can’t fully mitigate liabilities by shifting to a younger workforce because of the sizable, immediate cash costs for retiring employees.

Argo said the few hospitals remaining with defined benefits plans have started to reduce benefits as a cost-cutting measure, a move that often significantly impacts employees when hospital leadership reduces cost of living expenses and limits spousal benefits.

Another reason health systems have struggled to adequately address the crisis is the tax reform law passed late last year, which reduced the corporate deduction rate from 39% to 21%. Usually hospitals properly fund pension plans in a strong economy, according to Nisenzon, but since the Great Recession pensions have been critically underfunded.

Now, funding is still difficult because hospital CFOs have other priorities to address with limited funds, according to Argo, such as complying with new regulations promoting value-based care, investments in facility infrastructure, and equipment upgrades.

Why do pensions matter?

Pension plans are critical to talent recruitment for hospitals since physicians need assurance that when they switch systems their benefits will follow them, according to Nisenzon. Another incentive for hospitals to maintain pension plans is to retain their best talent after a merger with another organization.

Defined benefit plans, where organizations calculate employee compensation for retirement based on salary and years of employment, also allow organizations to increase their tax deductions, which has made the plan popular with smaller physician groups, according to Nisenzon.

Competitive compensation packages have a place in hospital recruitment efforts, though clinical personnel are “not favorable” for employers, according to Nisenzon, since they consist of older, highly paid doctors who must be salaried appropriately.

This has created another unintended problem for health systems that employ workers who have paid into defined benefits plans for decades.

Argo said that for employees who have worked at the same system for 30 years, they can essentially “double dip” on their salary and defined benefits pensions, creating a fiscal challenge for the hospital.

Pensions in deep freeze

In conversations with fellow hospital CFOs, Argo said most other health systems have continued to focus on material changes to pension plans, addressing growing liabilities by freezing plans, and moving toward defined contribution plans.

Argo said CMC has begun offering defined contribution plans to new hires, such as 401(k) and 403(b) plans. These allocate 5% of an employee’s annual salary into a money market account, which the hospital is not liable for since it is a private, individual account.

Nisenzon said hospital leadership has increasingly embraced defined contribution plans because they minimize market-based investment risks for the organization and provide participants with transparency regarding the balance of their benefits.

While most systems have frozen defined benefits plans to stem fiscal losses and mitigate further risk, Nisenzon said this move has likely agitated hospital employees who work in highly unionized environments and are opposed to a reduced level of expected income after retirement.

 

 

Are You And Your Primary Care Doc Ready To Talk About Your DNA?

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https://khn.org/news/are-you-and-your-primary-care-doc-ready-to-talk-about-your-dna/

If you have a genetic mutation that increases your risk for a treatable medical condition, would you want to know? For many people the answer is yes. But such information is not commonly part of routine primary care.

For patients at Geisinger Health System, that could soon change. Starting in the next month or so, the Pennsylvania-based system will offer DNA sequencing to 1,000 patients, with the goal to eventually extend the offer to all 3 million Geisinger patients.

The test will look for mutations in at least 77 genes that are associated with dozens of medical conditions ranging from heart disease to cancer, as well as variability in how people respond to pharmaceuticals based on heredity.

“We’re giving more precision to the very important decisions that people need to make,” said Dr. David Feinberg, Geisinger’s president and CEO. In the same way that primary care providers currently suggest checking someone’s cholesterol, “we would have that discussion with patients,” he said. “‘It looks like we haven’t done your genome. Why don’t we do that?’”

Some physicians and health policy analysts question whether such genetic information is necessary to provide good primary care — or feasible for many primary care physicians.

The new clinical program builds on a research biobank and genome-sequencing initiative called MyCode that Geisinger started in 2007 to collect and analyze its patients’ DNA. That effort has enrolled more than 200,000 people.

Like MyCode, the new clinical program is based on whole “exome” sequencing,analyzing the roughly 1 percent of the genome that provides instructions for making proteins, where most known disease-causing mutations occur.

Using this analysis, clinicians might be able to tell Geisinger patients that they have a genetic variant associated with Lynch syndrome, for example, which leads to increased risk of colon and other cancers, or familial hypercholesterolemia, which can result in high cholesterol levels and heart disease at a young age. Some people might learn they have increased susceptibility to  malignant hyperthermia, a hereditary mutation that can be fatal since it causes a severe reaction to certain medications used during anesthesia.

Samples of a patient’s blood or spit are used to provide a DNA sample. After analysis, the results are sent to the patient’s primary care doctor.

Before speaking with the patient, the doctor takes a 30-minute online continuing education tutorial to review details about genetic testing and the disorder. Then the patient is informed and invited to meet with the primary care provider, along with a genetic counselor if desired. At that point, doctor and patient can discuss treatment and prevention options, including lifestyle changes like diet and exercise that can reduce the risk of disease.

About 3.5 percent of the people who’ve been tested through Geisinger’s research program had a genetic variant that could result in a medical problem for which clinicians can recommend steps to influence their health, Feinberg said. Only actionable mutations are communicated to patients. Geisinger won’t inform them if they have a variant of the APOE gene that increases their risk for Alzheimer’s disease, for example, because there’s no clinical treatment. (Geisinger is working toward developing a policy for how to handle these results if patients ask for them.)

Wendy Wilson, a Geisinger spokeswoman, said that what they’re doing is very different from direct-to-consumer services like 23andMe, which tests customers’ saliva to determine their genetic risk for several diseases and traits and makes the results available in an online report.

“Geisinger is prescribing DNA sequencing to patients and putting DNA results in electronic health records and actually creating an action plan to prevent that predisposition from occurring. We are preventing disease from happening,” she said.

Geisinger will absorb the estimated $300 to $500 cost of the sequencing test. Insurance companies typically don’t cover DNA sequencing and limit coverage for adult genetic tests for specific mutations, such as those related to the breast cancer susceptibility genes BRCA1 or BRCA2, unless the patient has a family history of the condition or other indications they’re at high risk.

“Most of the medical spending in America is done after people have gotten sick,” said Feinberg. “We think this will decrease spending on a lot of care.”

Some clinicians aren’t so sure. Dr. H. Gilbert Welch is a professor at the Dartmouth Institute for Health Policy and Clinical Practice who has authored books about overdiagnosis and overscreening, including “Less Medicine, More Health.”

He credited Geisinger with carefully targeting the genes in which it looks for actionable mutations instead of taking an all-encompassing approach. He acknowledged that for some conditions, like Lynch syndrome, people with genetic mutations would benefit from being followed closely. But he questioned the value of DNA sequencing to identify other conditions, such as some related to heart disease.

“What are we really going to do differently for those patients?” he asked. “We should all be concerned about heart disease. We should all exercise, we should eat real food.”

Welch said he was also concerned about the cascading effect of expensive and potentially harmful medical treatment when a genetic risk is identified.

“Doctors will feel the pressure to do something: start a medication, order a test, make a referral. You have to be careful. Bad things happen,” he said.

Other clinicians question primary care physicians’ comfort with and time for incorporating DNA sequencing into their practices.

A survey of nearly 500 primary care providers in the New York City area published in Health Affairs this month found that only a third of them had ordered a genetic test, given patients a genetic test result or referred one for genetic counseling in the past year.

Only a quarter of survey respondents said they felt prepared to work with patients who had genetic testing for common diseases or were at high risk for genetic conditions. Just 14 percent reported they were confident they could interpret genetic test results.

“Even though they had training, they felt unprepared to incorporate genomics into their practice,” said Dr. Carol Horowitz, a professor at the Icahn School of Medicine at Mount Sinai in New York, who co-authored the study.

Speaking as a busy primary care practitioner, she questioned the feasibility of adding genomic medicine to regular visits.

“Geisinger is a very well-resourced health system and they’ve made a decision to incorporate that into their practices,” she said. In Harlem, where Horowitz works as an internist, it could be a daunting challenge. “Our plates are already overflowing, and now you’re going to dump a lot more on our plate.”

 

 

Prime Healthcare Services unlawfully stopped nurses’ anniversary raises, court rules

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https://www.beckershospitalreview.com/legal-regulatory-issues/prime-healthcare-unlawfully-stopped-nurses-anniversary-raises-court-rules.html

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A federal appeals court ruled that Ontario, Calif.-based Prime Healthcare Services violated the National Labor Relations Act when it canceled anniversary raises for unionized nurses, according to a Reuters report.

Here are six things to know about the issue.

1. The U.S. Court of Appeals for the D.C. Circuit made the ruling May 18, affirming a previous ruling by the National Labor Relations Board.

2. The NLRB found Prime “violated both the unilateral change doctrine and the duty to provide relevant information during negotiations with its employees’ bargaining representatives, Service Employees International Union Local 121RN and SEIU United Healthcare Workers-West,” according to the May 18 ruling. The NLRB specifically found Prime canceled anniversary step increases for nurses after the expiration of its labor deals with the two SEIU bargaining units, and determined the private for-profit hospital operator failed to provide information about employee healthcare programs as requested by the units. The NLRB ordered Prime to resume the raises, take care of any owed back pay due to the discontinuation of the raises and provide the requested information.

3. Both sides reached a settlement regarding complaints related to UHW’ unfair labor practice charges in the matter, and the unfair labor practice charges filed by 121RN remained at issue, according to the ruling. Prime’s agreements with 121RN, as well as UHW, were effective from Jan. 1, 2007, through March 31, 2011. The 121RN bargaining unit represents registered nurses at Prime’s Encino (Calif.) Hospital Medical Center, while UHW represents service and technical employees at Encino and Prime’s Garden Grove (Calif.) Hospital Medical Center.

4. Prime argued, among other things, that the anniversary step increases were terminated when the labor deal with 121RN expired in 2011 because they were tied to annual pay increases in the expired contract, according to the ruling.

5. The appeals court found “no merit in these challenges, however. Accordingly, we deny the petition for review and grant the [NLRB] board’s cross-application for enforcement of its order.”

6. In response to the ruling, Jamie Konn, outside counsel for Prime, told Becker’s Hospital Review: “This is an old matter that is now behind us. Encino and 121RN entered into a collective bargaining agreement in November 2014. The parties will continue to work together, and this matter should be resolved soon.”

 

Beth Israel Deaconess Medical Center will file certificate of need on new $534 million inpatient building

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Credit: Beth Israel Deaconess Medical Center

 

The new building, which will house 345,000 square feet of space, is their first new building in 20 years, the system says.

Beth Israel Deaconess Medical Center will spend $534 million to build a new inpatient tower at their Longwood Medical Center Campus, the system announced.

The new 10-story, 345,000 square foot building will be BIDMC’s first in 20 years and will be located on their West Campus.

It will house single-bedd, family-friendly patient rooms, including up to 128 medical-surgical patient rooms, some of which will replace double-bedded rooms elsewhere on BIDMC’s West Campus. It will also hold 30 intensive care unit rooms ideal for privacy and complex medical care.

Large surgical suites and diagnostic and procedural suites to handle acute care patients as well as a medical helicopter landing pad to support the level 1 trauma center will also be part of the new building.

To benefit patients, caregivers and families and continue environmental stewardship efforts, an accessible rooftop green space and healing garden will be available as well.

The announcement that the system will file a certificate of need this month comes as BIDMC’s parent company CareGroup moves ahead with a major merger that will yield a new system that also includes Lahey Health facilities and a stand-alone hospital in Newburyport. The system would be the second largest in the region following Partners Healthcare.

Last month, the Massachusetts Department of Health officially greenlighted the proposed merger, with the Public Health Council voting unanimously in favor of the deal. The Health Policy Commission and leaders in the proposed new system are working on a cost and market impact report, which would gauge the impact of the merger. That report is expected in mid-June.

 

CMS Administrator Seema Verma promotes cuts to 340B drug payments

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Senate committee is taking a closer look at the drug discount program.

The Centers for Medicare and Medicaid Services’ focus on lowering drug prices now includes the contentious 340B drug pricing program.

On Wednesday, CMS Administrator Seema Verma told the Pharmacy Quality Alliance that the agency’s change in the 340B payment rate to qualifying hospitals would save Medicare beneficiaries $320 million this year.

Under 340B, hospitals that serve a large number of vulnerable patients are able to buy drugs from manufacturers at discounted prices. However, Verma said Wednesday, “these discounts were not being passed on to our beneficiaries. So, CMS reduced the amount that beneficiaries and the federal government will pay hospitals for drugs that they acquire through this program.”

Medicare beneficiaries will save a total of $320 million in drug spending this year from the change, Verma said.

Last November, several hospital groups including the American Hospital Association, sued CMS for the $1.6 billion in cuts, representing a 28 percent decrease.

On Tuesday, a Senate health committee got involved when members questioned why a rule that would set ceiling prices on drugs in the program has been delayed five times.

The final rule would impose monetary penalties for manufacturers that charge more than the ceiling price for an outpatient drug and imposes other restrictions.

340B hospitals want to see the rule enforced.

The Government Accountability Office will be looking into the issue and the work of the Health Resource and Services Administration, the agency which manages the program and is responsible for the latest delay in implementation of the final rule until July 2019.

The problem is that states and providers do not know the ceiling prices. Confidentiality rules prevent the HRSA from sharing ceiling prices with states or 340B providers.

Because of this, 340B hospitals don’t know what they ought to be paying for discounted drugs, according to Ann Maxwell, assistant inspector general for evaluation and inspections for the Office of the Inspector General, speaking before the Senate Committee on Health, Education, Labor and Pensions.

This lack of transparency prevents ensuring that 340B providers are not overpaying pharmaceutical manufacturers and that state Medicaid programs are not overpaying 340B providers, Maxwell said.

The 340B drug pricing program debate pits the hospitals that benefit from the discounted prices of the program against organizations that contend these providers are taking advantage of the financial incentive.

The 340B program, established in 1992, generates savings for certain safety-net providers by allowing them to purchase outpatient drugs at discounted prices.

Opponents of 340B say seniors get none of the benefit and pay full price and that the disproportionate share hospitals that get the discount take advantage of the financial incentive by buying larger quantities of drugs and more expensive drugs.

HRSA reported that total 340B sales in 2016 amounted to approximately $16 billion, or about 3.6 percent of the U.S. drug market.

The Alliance for Integrity and Reform of 340B, or AIR340B released a new report with analytics by the Berkeley Research Group on Medicare Part B hospital outpatient reimbursements that found in 2016, 340B hospitals accounted for nearly two-thirds of Medicare Part B reimbursements – while only representing slightly more than half of all Medicare hospital outpatient revenue.

“Medicare patients treated in 340B hospitals have disproportionately high outpatient drug spend as compared to patients treated at non-340B hospitals,” AIR340B said

PhRMA said it was encouraged to see the Senate HELP Committee continuing to take a closer look at issues within the 340B program.

The New England Journal of Medicine concluded that financial gains for 340B hospitals have not been associated with clear evidence of expanded care or lower mortality among low-income patients, PhRMA said.

340B also drives a shift of treatment to more expensive hospital settings for physician-administered medicines, PhRMA said.

Hospitals and proponents say the 340B drug pricing program is one of the few federal programs to curb drug costs that is working.

“Sadly, the administration’s policy proposals would erode that progress and just put more money into the pockets of pharmaceutical companies,” 340B Heath said. “The administration’s proposals are based on a faulty understanding of the 340B program and the pharmaceutical market. The notion that 340B discounts are raising drug prices is simply false. Drug companies set the prices for their products and they, alone, decide how high those prices go.”

Hospitals participating in the 340B program account for 60 percent of all uncompensated care in the U.S. and serve a high proportion of low-income patients on Medicaid, 340B Health said.

“There is a clear history of manufacturers overcharging 340B providers. Delaying enforcement of this rule will have a tremendous adverse impact on hospitals, clinics and health systems caring for low-income and rural patients,” said Maureen Testoni, interim president and CEO of 340B Health.

America’s Essential Hospitals said federal scrutiny of manufacturer pricing practices has found overcharges in the 340B drug pricing program.

“These overcharges undermine the program’s ability to make drugs affordable for vulnerable patients and increase costs for their hospitals, which already operate with thin margins,” the group said.

 

CHI’s operating loss widens in Q3, but finances improve over longer term

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https://www.beckershospitalreview.com/finance/chi-s-operating-loss-widens-in-q3-but-finances-improve-over-longer-term.html

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Englewood, Colo.-based Catholic Health Initiatives saw its operating loss widen in the third quarter of fiscal year 2018, but the health system’s financial picture improved over the first nine months of the fiscal year.

CHI’s operating revenues declined from $3.8 billion in the third quarter of fiscal year 2017 to $3.7 billion in the third quarter of fiscal 2018. However, the health system’s expenses before restructuring also declined about 1.7 percent year over year to $3.7 billion in the third quarter of the current fiscal year.

After factoring in restructuring, impairment and other one-time costs, the system ended the third quarter of fiscal year 2018 with an operating loss of $35.3 million, compared to an operating loss of $17.2 million in the same period a year earlier. CHI said its operating EBIDA improved by nearly $80 million during the third quarter of fiscal year 2018 after adjusting for transactional gains and other items.

CHI launched a turnaround plan about three years ago, and the improvements the system has achieved under that plan are clear when looking at financial results for the first nine months of the current fiscal year. For the nine months ended March 31, CHI reported an operating loss of $114.7 million, which was a significant improvement from the nearly $344 million loss the system recorded in the same period of the year prior.

“We continue to see strong momentum that has played out in the current fiscal year,” said Dean Swindle, president of enterprise business lines and CFO of CHI, in an earnings release. “We have established a strong foundation through a performance-improvement plan stretching back nearly three years, and we expect that these positive results will continue throughout the rest of this fiscal year and well beyond as we become a truly high-performing health system.”

The three major rating agencies — Moody’s Investors Service, Fitch Ratings and S&P Global Ratings — have all recognized CHI’s progress in recent months with positive adjustment in their outlooks for the health system.

 

 

Americans’ Confidence in Their Ability to Pay for Health Care Is Falling

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http://www.commonwealthfund.org/publications/blog/2018/may/americans-confidence-paying-health-care-falling?omnicid=CFC1404232&mid=henrykotula@yahoo.com

President Trump is expected to soon address the nation about the rising cost of prescription drugs. But Americans are worried about more than drug prices. New findings from the Commonwealth Fund Affordable Care Act Tracking Survey show that consumers’ confidence in their ability to afford all their needed health care continues to decline.

Last week, we reported that the survey indicated a small but significant increase in the uninsured rate among working-age adults since 2016. In this post, we look at people’s views of the affordability of their health care. The Affordable Care Act Tracking Survey is a nationally representative telephone survey conducted by SSRS that tracks coverage rates among 19-to-64-year-olds, and has focused in particular on the experiences of adults who have gained coverage through the marketplaces and Medicaid. The latest wave of the survey was conducted between February and March 2018.1

Findings

Confidence in Ability to Afford Health Care Continues to Decline

In each wave of the survey, we’ve asked respondents whether they have confidence in their ability to afford health care if they were to become seriously ill. In 2018, 62.4 percent of adults said they were very or somewhat confident they could afford their health care, down from a high of nearly 70 percent in 2015 (Table 1). Only about half of people with incomes less than 250 percent of poverty ($30,150 for an individual) were confident they could afford care if they were to become very sick, down from 60 percent in 2015 and about 20 percentage points lower than the rate for adults with higher incomes. There were also significant declines in confidence among young adults, those ages 50 to 64, women, and people with health problems. Declines were significant among both Democrats and Republicans.

People in Employer Plans Have the Greatest Confidence in Their Insurance

We asked people with health insurance how confident they were that their current insurance will help them afford the health care they need this year. Majorities of adults were somewhat or very confident in their coverage; those with employer coverage were the most confident. More than half (55%) of adults insured through an employer were very confident their coverage would help them afford their care compared to 31 percent of adults with individual market coverage and 41 percent of people with Medicaid (Table 2). The least confident were adults enrolled in Medicare. Working-age adults enrolled in Medicare were the sickest among insured adults and the second-poorest after those covered by Medicaid (data not shown).2

One-Quarter of Adults Said Health Care Became Harder to Afford

We asked people whether, over the past year, their health care, including prescription drugs, had become harder for them to afford, easier to afford, or if there had been no change. The majority (66%) said there had been no change, one-quarter (24%) said it had become harder to afford, and 8 percent said it had become easier (Table 3). People with individual market coverage were significantly more likely than those with employer coverage or Medicaid to say health care had become harder to afford. About one-third of adults with deductibles of $1,000 or more said health care had become harder to afford, twice the share of those who had no deductible. About one-third of those enrolled in Medicare and 41 percent who were uninsured also reported that their health care had become harder to afford.

Only About Half of Americans Would Have Money to Pay for an Unexpected Medical Bill

Accidents and other medical emergencies can leave both uninsured and insured people with unexpected medical bills, which usually require prompt payment. We asked people if they would have the money to pay a $1,000 medical bill within 30 days in the case of an unexpected medical event. Nearly half (46%) said they would not have the money to cover such a bill in that time frame (Table 4). Women, people of color, people who are uninsured, those covered by Medicaid or Medicare, and those with incomes under 250 percent of poverty were among the most likely to say they couldn’t pay the bill.

Health Care Is Among People’s Top Four Greatest Personal Financial Concerns

Fourteen percent of adults said that health care was their biggest personal financial concern, after mortgage or rent (23%), student loans (17%), and retirement (17%) (Table 5). Those most likely to cite health care as their greatest financial concern were people who could potentially face high out-of-pocket costs because they were uninsured or had high-deductible health plans.

Policy Implications

Uninsured adults are the least confident in their ability to pay medical bills. But the risk of high out-of-pocket health care costs doesn’t end when someone enrolls in a health plan. The proliferation and growth of high-deductible health plans in both the individual and employer insurance markets is leaving people with unaffordable health care costs. Many adults enrolled in Medicare for reasons of disability or serious illness also report unease about their health care costs. An estimated 41 million insured adults have such high out-of-pocket costs and deductibles relative to their incomes that they are effectively underinsured. As this survey indicates, the nation’s health care cost burden is felt disproportionately by people with low and moderate incomes, people of color, and women.

The ACA’s reforms to the individual insurance market have doubled the number of people who now get insurance on that market to an estimated 17 million, with approximately half receiving subsidies through the ACA marketplaces. The ACA also has made it possible for people who were regularly denied coverage by insurers — older Americans and those with health problems — to get insurance. They are now entitled by law to an offer should they want to buy a plan.

But as this survey suggests, the ACA’s reforms did not fully resolve the individual market’s relatively higher costs for all those enrolled, compared to employer coverage or Medicaid. Moreover, recent actions by Congress and the Trump administration, including the repeal of the individual mandate penalty and loosened restrictions on plans that don’t comply with the ACA, are expected to exacerbate those costs for many. In the survey, people with individual market coverage are more likely than those with employer coverage or Medicaid to say that their health care, including prescription drugs, has become harder to afford in the past year. They express less confidence than those with employer coverage that their insurance will help them afford their care this year. As explained in the first post, there are a number of policy options that Congress can pursue that would improve individual market insurance’s affordability and cost protection. In the absence of bipartisan Congressional agreement on legislation, several states are currently pursuing their own solutions. But if current trends continue, the federal government will likely confront growing pressure to provide a national solution to America’s incipient health care affordability crisis.

 

 

 

 

 

California Hospital Giant Sutter Health Faces Heavy Backlash On Prices

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The state’s top cop is suing Sutter, accusing one of the nation’s biggest health systems of systematically overcharging patients and illegally driving out competition.

Cooking dinner one night in March, Mark Frizzell sliced his pinkie finger while peeling a butternut squash and couldn’t stop the bleeding.

The 51-year-old businessman headed to the emergency room at Sutter Health’s California Pacific Medical Center in San Francisco. Sutter charged $1,555 for the 10 minutes it treated him, including $55 for a gel bandage and $487 for a tetanus shot.

“It was ridiculous,” he said. “Health insurance costs are through the roof because of things like this.”

California Attorney General Xavier Becerra couldn’t agree more. The state’s top cop is suing Sutter, accusing one of the nation’s biggest health systems of systematically overcharging patients and illegally driving out competition in Northern California.

For years, economists and researchers have warned of the dangers posed by large health systems across the country that are gobbling up hospitals, surgery centers and physicians’ offices — enabling them to limit competition and hike prices.

Becerra’s suit amounts to a giant test case with the potential for national repercussions. If California prevails and is able to tame prices at Northern California’s most powerful, dominant health system, regulators and politicians in other states are likely to follow.

“A major court ruling in California could be a deterrent to other hospital systems,” said Ge Bai, an assistant professor at Johns Hopkins University who has researched hospital prices nationwide. “We’re getting to a tipping point where the nation cannot afford these out-of-control prices.”

Reflecting that sense of public desperation, Sutter faces two other major suits — from employers and consumers — which are wending their way through the courts, both alleging anticompetitive conduct and inflated pricing. Meanwhile, California lawmakers are considering a bill that would ban some contracting practices used by large health systems to corner markets.

Sutter, a nonprofit chain, is pushing back hard, denying anticompetitive behavior and accusing Becerra in court papers of a “sweeping and unprecedented effort to intrude into private contracting.” Recognizing the broader implications of the suit, both the American Hospital Association and its California counterpart asked to file amicus briefs in support of Sutter.

In his 49-page complaint, Becerra cited a recent study finding that, on average, an inpatient procedure in Northern California costs 70 percent more than one in Southern California. He said there was no justification for that difference and stopped just short of dropping an expletive to make his point.

“This is a big ‘F’ deal,” Becerra declared at his March 30 news conference to unveil the lawsuit. In an interview last week, he said, “We don’t believe it’s fair to allow consolidation to end up artificially driving up prices. … This anticompetitive behavior is not only bad for consumers, it’s bad for the state and for businesses.”

To lessen Sutter’s market power, the state’s lawsuit seeks to force Sutter to negotiate reimbursements separately for each of its hospitals — precluding an “all or nothing” approach — and to bar Sutter employees from sharing the details of those negotiations across its facilities. Becerra said Sutter has required insurers and employers to contract with its facilities systemwide or face “excessively high out-of-network rates.”

Heft In The Marketplace

Overall, Sutter has 24 hospitals, 36 surgery centers and more than 5,500 physicians in its network. The system boasts more than $12 billion in annual revenue and posted net income of $958 million last year.

The company’s heft in the marketplace is one reason why Northern California is the most expensive place in the country to have a baby, according to a 2016 report. A cesarean delivery in Sacramento, where Sutter is based, cost $27,067, nearly double what it costs in Los Angeles and New York City.

For years, doctors and consumers have also accused Sutter of cutting hospital beds and critical services in rural communities to maximize revenue. “Patients are the ones getting hurt,” said Dr. Greg Duncan, an orthopedic surgeon and former board member at Sutter Coast Hospital in Crescent City, Calif.

Sutter says patients across Northern California have plenty of providers to choose from and that it has held its average rate increases to health plans to less than 3 percent annually since 2012. It also says it does not require all facilities to be included in every contract — that insurers have excluded parts of its system from their networks.

As for emergency room patients like Frizzell, Sutter says its charges reflect the cost of maintaining services round-the-clock and that for some patients urgent-care centers are a less costly option.

“The California Attorney General’s lawsuit gets the facts wrong,” Sutter said in a statement. “Our integrated network of high-quality doctors and care centers aims to provide better, more efficient care — and has proven to help lower costs.”

Regulators in other states also have sought to block deals they view as potentially harmful.

In North Carolina, for instance, the state’s attorney general and treasurer both expressed concerns about a proposed merger between the University of North Carolina Health Care system and Charlotte-based Atrium Health. The two dropped their bid in March. The combined system would have had roughly $14 billion in revenue and more than 50 hospitals.

Last year, in Illinois, state and federal officials persuaded a judge to block the merger between Advocate Health Care and NorthShore University HealthSystem. The Federal Trade Commission said the new entity would have had 60 percent market share in Chicago’s northern suburbs. Still, Advocate won approval for a new deal with Wisconsin’s Aurora Health Care last month, creating a system with $11 billion in annual revenue.

Antitrust experts say states can deliver a meaningful counterpunch to health care monopolies, but they warn that these cases aren’t easy to win and it could be too little, too late in some markets.

“How do you unscramble the egg?” said Zack Cooper, an assistant professor of economics and health policy at Yale University. “There aren’t a lot of great solutions.”

A Seven-Year Investigation

California authorities took their time sounding the alarm over Sutter — a fact Sutter is now using against the state in court.

The state attorney general’s office, under the leadership of Democrat Kamala Harris, now a U.S. senator, started investigating Sutter seven years ago with a 2011 subpoena, court documents show. Sutter said the investigation appeared to go dormant in March 2015, just as Harris began ramping up her Senate campaign.

Becerra, a Democrat and former member of Congress, was appointed to replace Harris last year, took over the investigation and sued Sutter on March 29. His aggressive action comes as he prepares for a June 5 primary against three opponents.

Sutter faces a separate class-action suit in San Francisco state court, spearheaded by a health plan covering unionized grocery workers and representing more than 2,000 employer-funded health plans. The plaintiffs are seeking to recoup $700 million for alleged overcharges plus damages of $1.4 billion if Sutter is found liable for antitrust violations. Sutter also has been sued in federal court by five consumers who blame the health system for inflating their insurance premiums and copays. The plaintiffs are seeking class-action status.

San Francisco County Superior Court Judge Curtis E.A. Karnow granted Becerra’s request to consolidate his case with the grocery workers’ suit, which is slated for trial in June 2019.

The judge sanctioned Sutter in November after finding that Sutter was “grossly reckless” in intentionally destroying 192 boxes of evidence that were relevant to antitrust issues. As a result, Karnow said, he will consider issuing jury instructions that are adverse to Sutter.

In a note to employees, Sutter chief executive Sarah Krevans said she deeply regretted the situation but “mistakes do happen.”

In an April 27 court filing, Sutter’s lawyers criticized the state for piggybacking onto the grocery workers’ case. “The government sat on its hands for seven years, exposing the public to the alleged anticompetitive conduct. … Rather than driving the agenda, the Attorney General seeks to ride coattails.”

Outside court, California legislators are taking aim at “all or nothing” contracting terms used by Sutter and other hospital chains. The proposed law stalled last year amid opposition from the hospital industry. But consumer and labor groups are seeking to revive it this year.

In the meantime, Frizzell said he will probably wind up at one of Sutter’s hospitals again despite his disgust over his ER bill. “Most of the hospitals here are Sutter,” he said. “It’s difficult to avoid them.”