Tag Archives: Health System

5 Things Every Wannabe CEO Needs to Know

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Hospitals and health system boards are still looking for strong leaders, but what’s changing is the kind of experience you need to elevate to the top job.

So you want to be the CEO of a hospital or a health system.

Here’s the first thing to know: Like it or not, the role of acute care is slowly being relegated.

It’s still important, and it’s still a high-reimbursement area, but specifically because of that, scores of people and companies are trying to figure out how to use it less.

As a result, even in organizations where acute care represents the lion’s share of revenue, the competencies of today’s successful CEO range far from the acute-centric skills many hospital and health system executives and boards once prized.

All of today’s CEO candidates have to understand the critical interactions between the inpatient and outpatient realms, and the fact that delivering value rests on managing those interactions, not from maximizing patient census and inpatient days.

“Running a health system is about trying to provide coordinated care in an environment that’s patient- and family-centric,” says Jim King, senior partner and chief quality officer with Witt/Kieffer, a healthcare executive search firm.

Given the need to reduce reliance on acute care services, leaders who want to be CEOs have to learn skills applicable to the rest of the patient’s healthcare journey.

Moody’s maintains for-profit hospitals’ stable outlook

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http://www.healthcaredive.com/news/moodys-maintains-for-profit-hospitals-stable-outlook/505680/

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Dive Brief:

  • Moody’s Investors Service announced in a recently released report that the outlook for U.S. for-profit hospitals is stable.
  • Outpatient services will drive revenue growth. Moody’s said outpatient service growth will result in EBITDA growth of 2.5-3% for for-profit hospitals over the next 18 months. That growth will be offset somewhat by higher patient costs and more uninsured Americans, which may lead to more bad debt for hospitals.
  • Moody’s warned that recent hurricanes in Florida and Texas, which are the two largest states by revenue among for-profit hospitals, may cause short-term financial issues, but Moody’s expects those hospitals will recover quickly.

Dive Insight:

Payers, both private and public, continue to squeeze hospital margins as they push patients to outpatient services. Moody’s said volumes to lower-cost settings will continue. Revenue growth from outpatient services will rise faster than inpatient services.

Moody’s said patients with high-deductible health plans, who pay more out-of-pocket costs, are going to seek less costly settings than hospitals to save money. Also, the CMS’ proposal to allow several orthopedic procedures on an outpatient basis could cause more financial harm for hospitals. “If finalized, this will further push surgeries out of the inpatient setting.”

For-profit hospitals will capture some of the added outpatient volume through their own outpatient departments and associated ambulatory surgery centers. However, some volume will go to competitors, Moody’s warned.

Moody’s expects payer rates will rise, but lower than usual — 1.5-2% net revenue per adjusted admission over the next 18 months. Some factors that will affect the slower growth include the CMS changing disproportionate share payments and proposing 1.75% rates for hospital outpatient procedures, and private payers implementing cost-controlling policies. These policies include Anthem’s plan to no longer pay for MRIs and CTs scans in hospital outpatient departments. Instead, patients will need to get the services at lower-cost, freestanding imaging centers.

Moody’s also warned that rising bad debt and expenses are pressuring margins.

“Higher patient responsibility and fewer insured patients will lead to lower volumes, but also higher costs of uncompensated care. Even with strong cost controls, given the high fixed costs of operating hospitals, it will be difficult to expand margins in an environment of weak patient volumes and rising bad debt expense. At the same time, nursing shortages and rising fees associated with medical specialists (including outsourced emergency departments) will also pressure margins,” said Moody’s.

However, some for-profit systems may see improved margins in the coming months. Moody’s said Quorum Health and Community Health Systems (CHS) will benefit from shedding less profitable facilities, while LifePoint Health and HCA Healthcare will improve margins over time as they improve efficiencies at recently acquired facilities.

Moody’s also warned that Hurricanes Harvey and Irma, which destroyed portions of Texas and Florida, will affect the largest for-profit hospitals: HCA Healthcare, Tenet Healthcare and CHS, which all have “significant presence” in those areas. For those states, Moody’s expects “incremental expenses,” such as cleanup and remediation, staffing and overtime, as well as transporting critically ill patients to other facilities, will play a financial role for those systems in the next two quarters.

Debt Sickened a Hospital Giant. Now the Doctors Are Revolting

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https://www.bloomberg.com/news/articles/2017-09-21/debt-sickened-a-hospital-giant-now-the-doctors-are-revolting?

 

The standoff over Lutheran shows how for-profit chain CHS, once the nation’s largest, allowed its facilities to decay, compromising care and destroying investor value.

Four doctors from Lutheran Hospital in Fort Wayne, Ind., showed up at parent company Community Health Systems Inc. in May with a message for Chief Executive Officer Wayne Smith and his board. Physicians were in widespread revolt, they said. Facilities were cash-strapped and crumbling. Powerful locals wanted CHS to reinvest or leave.

The doctors urged Smith to sell the eight-hospital Lutheran Health Network to their physician group, which already owned a 20 percent stake, and an investor partner, for $2.4 billion—triple CHS’s current market value. The combative 71-year-old CEO denied authorizing cost cuts in Fort Wayne and demanded the names of those who did, say people in the meeting. The board refused the offer, and rather than pursue the budget-cutters, Smith fired Lutheran’s CEO, who’d sided with the doctors.

The standoff over Lutheran provides a window into how CHS, once the largest for-profit hospital chain in the U.S., has allowed facilities to languish, possibly compromising care and destroying investor value in the process. Smith presided over a decade-long acquisition binge that saddled CHS with total debt of almost eight times its earnings and a network of underperforming facilities. The company lost $2 billion in the past six quarters, during which doctors from Key West to Spokane have accused the chain of pinching pennies and regulators have fined it for overcharging Medicare. Says Indiana Republican Representative Jim Banks, who’s sided with the Fort Wayne doctors: “It’s buy, squeeze, and repeat.”

“At some point you reach a dead end, and you can’t cut the expenses anymore”

Smith took CHS public in 2001, just four years after coming to the company from Humana Inc., where he’d been head of hospital operations. The big acquisitions began in 2007, when the chain bought Texas-based Triad Hospitals Inc. for $6.4 billion, more than quadrupling its debt. Smaller deals followed. By the end of 2014, CHS had nearly doubled its debt again to finance its buyout of Health Management Associates LLC (HMA), a Florida-based group of mostly rural facilities that required costly upgrades.

Smith’s plan was to try to increase doctor productivity and slash costs, often replacing experienced doctors with loyal patients for younger ones who were willing to work longer hours. Like most for-profit operators, “they focused on cost control,” says Joshua Nemzoff of Nemzoff & Co., who advises hospitals on sale transactions. “At some point you reach a dead end, and you can’t cut the expenses anymore.”

Along with the rest of the hospital industry, CHS expected the Affordable Care Act to provide a windfall of insurance money from the newly covered. Investor enthusiasm soured when 19 states—including Florida and Texas, two key CHS markets—declined to expand Medicaid eligibility, leaving many low-income people without coverage. At the same time, insurers and other government programs began working to divert patients from hospitals into doctors’ offices, outpatient clinics, and other less expensive venues. The combined effect was particularly hard on rural hospitals, a large share of CHS’s network.

Raising prices while slashing costs has been a hallmark of CHS under Smith. In Fort Wayne, Lutheran charges more than rival Parkview Medical Center Inc. for 8 of 10 common medical procedures. During the first half of this year, patients were placed in beds in Lutheran’s emergency room hallways because the wards they should have been moved to were understaffed, and a leaking air conditioner in the neonatal care unit was dripping water on infants’ beds, according to people familiar with the conditions. While Parkview invested in its cancer and cardiac units, Lutheran doctors said at the board meeting that the CHS hospital was using lower-priced monitors they feared would miss potentially fatal heart rhythms.

Company spokeswoman Tomi Galin said in an email that many other hospitals use the same monitors. Nevertheless, CHS plans to spend $500 million on improvements and will recruit new doctors at Lutheran, she wrote, adding that employee retention there is rising.

Other critics of Smith have taken their complaints to court. After Gregg Becker quit his job as chief financial officer of CHS’s Rockwood Clinic in Spokane, Wash., in 2012, he filed a whistleblower claim with the U.S. Department of Labor, saying his superiors told him to reduce the facility’s forecast loss from $12.8 million to $4 million and threatened to fire him if he didn’t. Becker was awarded a settlement of almost $1.9 million by an administrative law judge, according to court documents. CHS has appealed the case to the Washington Supreme Court and the federal Arbitration and Review Board. (CHS sold Rockwood earlier this year.)

In 2014, CHS agreed to pay $98.15 million to the Department of Justice to settle lawsuits in five different districts accusing the company of charging for higher-cost inpatient services at hospitals, including Lutheran, when less expensive outpatient services would have been sufficient. CHS didn’t admit wrongdoing. But the DOJ in a statement said the company had “engaged in a deliberate corporate-driven scheme to increase inpatient admissions of Medicare, Medicaid, and the Department of Defense’s Tricare program.”

With losses mounting and the stock down more than 80 percent from its peak in June 2015, Smith has resorted to selling hospitals to pay off debt. One result: CHS will soon be about the same size it was before it attempted to digest HMA. Hedge fund ASL Strategic Value, a CHS shareholder, sent a letter to the board on Aug. 8 asking directors to replace Smith. Tom Kelley, a Fort Wayne car dealer whose employees rely on Lutheran for care, quit the Lutheran board in July and says he’s reviewing his employee medical plan. He tried and failed to broker a peace deal between the doctors and Smith.

“He’s a street fighter,” Kelley says of Smith. “He has survived government actions against him. He has survived lawsuits. He has survived all of this by being a tough SOB.”

BOTTOM LINE – Community Health Systems used acquisitions to become a major for-profit hospital operator. But the added heft wasn’t matched by profitability gains.

 

5 Ways the Graham-Cassidy Proposal Puts Medicaid Coverage At Risk

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5 Ways the Graham-Cassidy Proposal Puts Medicaid Coverage At Risk

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The Graham-Cassidy proposal to repeal and replace the Affordable Care Act (ACA) is reviving the federal health reform debate and could come up for a vote in the Senate in the next two weeks before the budget reconciliation authority expires on September 30. The Graham-Cassidy proposal goes beyond the American Health Care Act (AHCA) passed by the House in May and the Better Care Reconciliation Act (BCRA) that failed in the Senate in July. The Graham-Cassidy proposal revamps and cuts Medicaid, redistributes federal funds across states, and eliminates coverage for millions of poor Americans as described below:
  1. Ends federal funding for current ACA coverage and partially replaces that funding with a block grant that expires after 2026. The proposal ends both the authority to cover childless adults and funding for the ACA Medicaid expansion that covers 15 million adults. Under Graham-Cassidy, a new block grant, the “Market-Based Health Care Grant Program,” combines federal funds for the ACA Medicaid expansion, premium and cost sharing subsidies in the Marketplace, and states’ Basic Health Plans for 2020-2026. Capped nationally, the block grant would be lower than ACA spending under current law and would end after 2026. States would need to replace federal dollars or roll back coverage. Neither the AHCA nor the BCRA included expiration dates for ACA-related federal funds or eliminated the ability for states to cover childless adults through Medicaid.
  2. Massively redistributes federal funding from Medicaid expansion states to non-expansion states through the block grant program penalizing states that broadened coverage. In 2020, block grant funds would be distributed based on federal spending in states for ACA Medicaid and Marketplace coverage. By 2026, funding would go to states according to the states’ portion of the population with incomes between 50% and 138% of poverty; the new allocation is phased in over the 2021-2025 period. The Secretary has the authority to make other adjustments to the allocation. This allocation would result in a large redistribution of ACA funding by 2026, away from states that adopted the Medicaid expansion and redirecting funding to states that did not. No funding is provided beyond 2026.
  3. Prohibits Medicaid coverage for childless adults and allows states to use limited block grant funds to purchase private coverage for traditional Medicaid populations. States can use funds under the block grant to provide tax credits and/or cost-sharing reductions for individual market coverage, make direct payments to providers, or provide coverage for traditional Medicaid populations through private insurance. The proposal limits the amount of block grant funds that a state could use for traditional Medicaid populations to 15% of its allotment (or 20% under a special waiver). These limits would shift coverage and funds for many low-income adults from Medicaid to individual market coverage. Under current law, 60% of federal ACA coverage funding is currently for the Medicaid expansion (covering parents and childless adults). Medicaid coverage is typically more comprehensive, less expensive and has more financial protections compared to private insurance. The proposal also allows states to roll back individual market protections related to premium pricing, including allowing premium rating based on health status, and benefits currently in the ACA.
  4. Caps and redistributes federal funds to states for the traditional Medicaid program for more than 60 million low-income children, parents, people with disabilities and the elderly. Similar to the BCRA and AHCA, the proposal establishes a Medicaid per enrollee cap as the default for federal financing based on a complicated formula tied to different inflation rates. As a result, federal Medicaid financing would grow more slowly than estimates under current law. In addition to overall spending limits, similar to the BCRA, the proposal would give the HHS Secretary discretion to further redistribute capped federal funds across states by making adjustments to states with high or low per enrollee spending.
  5. Eliminates federal funding for states to cover Medicaid family planning at Planned Parenthood clinics for one year. Additional funding restrictions include limits on states’ ability to use provider tax revenue to finance Medicaid as well as the termination of the enhanced match for the Community First Choice attendant care program for seniors and people with disabilities. Enrollment barriers include the option for states to condition Medicaid eligibility on a work requirement and to conduct more frequent redeterminations.
Much is at stake for low-income Americans and states in the Graham-Cassidy proposal. The recent debate over the AHCA and the BCRA has shown the difficulty of making major changes that affect coverage for over 70 million Americans and reduce federal funding for Medicaid. Medicaid has broad support and majorities across political parties say Medicaid is working well. More than half of the states have a strong stake in continuing the ACA Medicaid expansion as it has provided coverage to millions of low-income residents, reduced the uninsured and produced net fiscal benefits to states. Graham-Cassidy prohibits states from using Medicaid to provide coverage to childless adults. With regard to Medicaid financing changes, caps on federal funding could shift costs to states and result in less fiscal flexibility for states. States with challenging demographics (like an aging population), high health care needs (like those hardest hit by the opioid epidemic), high cost markets or states that operate efficient programs may have the hardest time responding to federal caps on Medicaid spending. Faced with substantially reduced federal funding, states would face difficult choices: raise revenue, reduce spending in other areas, or cut Medicaid provider payments, optional benefits, and/or optional coverage groups.

Last-Ditch Effort By Republicans To Replace ACA: What You Need To Know

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Republican efforts in Congress to “repeal and replace” the federal Affordable Care Act are back from the dead. Again.

While the chances for this last-ditch measure appear iffy, many GOP senators are rallying around a proposal by Sens. Lindsey Graham (R-S.C.) and Bill Cassidy (R-La.), along with Sens. Dean Heller (R-Nev.) and Ron Johnson (R-Wis.)

They are racing the clock to round up the needed 50 votes — and there are 52 Senate Republicans.

An earlier attempt to replace the ACA this summer fell just one vote short when Sens. Susan Collins (R-Maine), Lisa Murkowski (R-Alaska) and John McCain (R-Ariz.) voted against it. The latest push is setting off a massive guessing game on Capitol Hill about where the GOP can pick up the needed vote.

After Sept. 30, the end of the current fiscal year, Republicans would need 60 votes ­— which means eight Democrats — to pass any such legislation because special budget rules allowing approval with a simple majority will expire.

Unlike previous GOP repeal-and-replace packages that passed the House and nearly passed the Senate, the Graham-Cassidy proposal would leave in place most of the ACA taxes that generated funding to expand coverage for millions of Americans. The plan would simply give those funds as lump sums to each state. States could do almost whatever they please with them. And the Congressional Budget Office has yet to weigh in on the potential impact of the bill, although earlier estimates of similar provisions suggest premiums would go up and coverage down.

“If you believe repealing and replacing Obamacare is a good idea, this is your best and only chance to make it happen, because everything else has failed,” said Graham in unveiling the bill last week.

Here are five things to know about the latest GOP bill: 

1. It would repeal most of the structure of the ACA.

The Graham-Cassidy proposal would eliminate the federal insurance exchange, healthcare.gov, along with the subsidies and tax credits that help people with low and moderate incomes — and small businesses — pay for health insurance and associated health costs. It would eliminate penalties for individuals who fail to obtain health insurance and employers who fail to provide it.

It would eliminate the tax on medical devices. 

2. It would eliminate many of the popular insurance protections, including those for people with preexisting conditions, in the health law.

Under the proposal, states could “waive” rules in the law requiring insurers to provide a list of specific “essential health benefits” and mandating that premiums be the same for people regardless of their health status. That would once again expose people with preexisting health conditions to unaffordable or unavailable coverage. Republicans have consistently said they wanted to maintain these protections, which polls have shown to be popular among voters.

3. It would fundamentally restructure the Medicaid program.

Medicaid, the joint-federal health program for low-income people, currently covers more than 70 million Americans. The Graham-Cassidy proposal would end the program’s expansion under the ACA and cap funding overall, and it would redistribute the funds that had provided coverage for millions of new Medicaid enrollees. It seeks to equalize payments among states. States that did not expand Medicaid and were getting fewer federal dollars for the program would receive more money and states that did expand would see large cuts, according to the bill’s own sponsors. For example, Oklahoma would see an 88 percent increase from 2020 to 2026, while Massachusetts would see a 10 percent cut.

The proposal would also bar Planned Parenthood from getting any Medicaid funding for family planning and other reproductive health services for one year, the maximum allowed under budget rules governing this bill. 

4. It’s getting mixed reviews from the states.

Sponsors of the proposal hoped for significant support from the nation’s governors as a way to help push the bill through. But, so far, the governors who are publicly supporting the measure, including Scott Walker (R-Wis.) and Doug Ducey (R-Ariz.), are being offset by opponents including Chris Sununu (R-N.H.), John Kasich (R-Ohio) and Bill Walker (I-Alaska).

On Tuesday 10 governors — five Democrats, four Republicans and Walker — sent a letterto Senate leaders urging them to pursue a more bipartisan approach. “Only open, bipartisan approaches can achieve true, lasting reforms,” said the letter.

Bill sponsor Cassidy was even taken to task publicly by his own state’s health secretary. Dr. Rebekah Gee, who was appointed by Louisiana’s Democratic governor, wrote that the bill “uniquely and disproportionately hurts Louisiana due to our recent [Medicaid] expansion and high burden of extreme poverty.”

5. The measure would come to the Senate floor with the most truncated process imaginable.

The Senate is working on its Republican-only plans under a process called “budget reconciliation,” which limits floor debate to 20 hours and prohibits a filibuster. In fact, all the time for floor debate was used up in July, when Republicans failed to advance any of several proposed overhaul plans. Senate Majority Leader Mitch McConnell (R-Ky.) could bring the bill back up anytime, but senators would immediately proceed to votes. Specifically, the next order of business would be a process called “vote-a-rama,” where votes on the bill and amendments can continue, in theory, as long as senators can stay awake to call for them.

Several senators, most notably John McCain, who cast the deciding vote to stop the process in July, have called for “regular order,” in which the bill would first be considered in the relevant committee before coming to the floor. The Senate Finance Committee, which Democrats used to write most of the ACA, has scheduled a hearing for next week. But there is not enough time for full committee consideration and a vote before the end of next week.

Meanwhile, the Congressional Budget Office said in a statement Tuesday that it could come up with an analysis by next week that would determine whether the proposal meets the requirements to be considered under the reconciliation process. But it said that more complicated questions like how many people would lose insurance under the proposal or what would happen to insurance premiums could not be answered “for at least several weeks.”

That has outraged Democrats, who are united in opposition to the measure.

“I don’t know how any senator could go home to their constituents and explain why they voted for a major bill with major consequences to so many of their people without having specific answers about how it would impact their state,” said Senate Minority Leader Chuck Schumer (D-N.Y.) on the Senate floor Tuesday.

CHI posts $585M operating loss in FY17

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Click to access CHI%20Annual%20Report%20Period%20Ending%20June%2030%202017.pdf

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Dive Brief:

  • Catholic Health Initiatives reported a $585.2 million operating loss for fiscal year 2017, ended June 30, up from $371.4 million in 2016.
  • Non-operating income was strong, however, reaching $713.6 million, versus a $204.2 million loss the previous year. The performance benefited from investments of nearly $640 million, according to CHI’s 2017 annual report.
  • Overall, CHI saw a net surplus of $128.4 million — a welcome result after last year’s net loss of $575.7 million. Total operating revenue for 2017 totaled $15.5 billion.

Dive Insight:

CHI has made strides toward getting back on sound financial ground, officials said in a statement, but challenges remain, particularly in some markets.

During the year, CHI divested its KentuckyOne facilities, a move expected to bring in $534.9 million. The system also transitioned operations, management and control of University of Louisville Medical Center back to the university and sold nearly all of its Louisville area acute care operations.

The company said it has also found a buyer for Medicare Advantage plans, but added that uncertainty around the future of the Affordable Care Act has delayed the sale of its QualChoice Health commercial insurance segment.

The Denver-based system is in talks with Dignity Health about a possible merger of their organizations. The non-for-profit hospital systems signed a nonbinding letter of intent to explore an affiliation in September 2016. San Francisco Business Times reported in June that the two organizations were in “final stages” of merger discussions.

Kaufman Hall: 1 in 4 hospitals have no cost reduction goals for the next 5 years

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http://www.beckershospitalreview.com/finance/kaufman-hall-1-in-4-hospitals-have-no-cost-reduction-goals-for-the-next-5-years.html

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Approximately 25 percent of hospital and health system executives have no cost reduction goals for their organizations over the next five years, despite 96 percent of executives noting that transforming costs is a “significant” or “very significant” need for their organization, according to survey findings published by Kaufman Hall.

As hospitals and health systems face a myriad of pressures, including regulatory challenges, the rise of narrow networks and consumer demands, healthcare organizations need to reach a cost position that is equal or lower to competitors. For the majority of hospitals and health systems, achieving such a position will require a 25 percent to 30 percent reduction of costs over the next five years, according to Kaufman Hall.

The report, titled “2017 State of Cost Transformation in U.S. Hospitals: An Urgent Call to Accelerate Action,” presents the results of an online survey of more than 150 senior executives from U.S. hospitals and health systems to determine where the industry stands with transforming the cost of care.

Here are six insights from the report.

1. While almost all (96 percent) of executives identified cost reduction as a “significant” of “very significant” need, more than half (51 percent) of respondents said they have no cost reduction goal or a goal of only 1 percent to 5 percent in the next five years.

2. Only 5 percent of hospitals or health systems have a cost reduction goal of more than 20 percent over the next five years.

3. Seventy-five percent of executives indicated that their cost transformation success is average or below average.

4. Nearly 70 percent of executives acknowledged that they must close the discrepancy between their current operating performance and financial plan.

5. Almost 80 percent of respondents noted that they must proactively revise their cost structure with the industry switch to value-based care.

6. According to the report, a lack of accurate data, along with a lack of insight into costs and savings opportunities, may be the reason for limited cost reduction measures.

Study: Hospitals on doctor-buying spree raise legal questions

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Bigger and fewer doctor practices drive up prices for patients, employers and taxpayers, several studies confirm.

Hospitals have gone on a doctor-buying spree in recent years, in many areas acquiring so many independent practices they’ve created near-monopolies on physicians.

Research published Tuesday throws new light on the trend, showing that large doctor practices, many owned by hospitals, exceed federal guidelines for market concentration in more than a fifth of the areas studied.

But it goes further, helping answer some of health policy’s frequently asked questions: How could this happen? Where are the regulators charged with blocking mergers that have been repeatedly shown to drive up the price of health care?

The answer, in many cases, is that they’re out of the game.

Doctor deals are typically far too small to trigger official notice to federal antitrust authorities or even attract public attention, finds a paper published in the journal Health Affairs.

When it comes to most hospital-doctor mergers, antitrust cops operate blind.

“You have a local hospital system and they’re going in and buying one doctor at a time. It’s onesies and twosies,” said Christopher Ody, a Northwestern University economist and one of the study’s authors. “Occasionally they’re buying a group of five. But it’s this really small scale” that adds up to big results, he said.

The paper, drawing from insurance data in states covering about an eighth of the population, found that 22 percent of markets for primary care doctors, surgeons, cardiologists and other specialties were “highly concentrated” in 2013. That means that, under Federal Trade Commission guidelines, a lack of competitors substantially increased those doctors’ ability to raise prices without losing customers.

The research didn’t sort physician groups by ownership. But other studies show that large, predominant practices are increasingly owned by hospitals, which see control of doctors as a way to both coordinate care and ensure patient referralsand revenue.

According to one study, hospitals owned 26 percent of physician practices in 2015, nearly double the portion from 2012. They employed 38 percent of all physicians in 2015, up from 26 percent three years earlier.

In the study by Ody and colleagues, only 15 percent of the growth by the largest physician groups from 2007 to 2013 came from acquisitions of 11 doctors or more.

About half the growth of the big practices involved acquisitions of 10 or fewer doctors at a time. About a third of the growth came not from mergers but from hiring doctors out of medical school or other sources.

Federal regulations require notification to anti-monopoly authorities only for mergers worth some $80 million or more — far larger than any acquisition involving a handful of doctors.

Very few of the mergers that drove concentration over the market-power red line — or even further — in the studied areas would have surpassed that mark or a second standard that identifies “presumably anti-competitive” combinations.

But the little deals add up. In 2013, 43 percent of the physician markets examined by the researchers were highly or moderately concentrated according to federal guidelines that gauge monopoly power by market share and number of competitors.

(A market with three practices in a particular specialty, each with a third of the business, would be at the lower end of what’s considered highly concentrated. A market with one doctor group doing at least 50 percent of the business would be highly concentrated no matter how many rivals it had.)

Bigger and fewer doctor practices, fueled largely by hospital acquisitions, do drive up prices for patients, employers and taxpayers, several studies confirm.

Part of the increase results from a reimbursement quirk. Medicare and other insurers pay hospital-based doctors more than independent ones. But another part comes from the lock on business held by large practices with few rivals, Ody said.

“It’s a problem,” said Martin Gaynor, a health care economist at Carnegie Mellon University and former head of the FTC’s Bureau of Economics. “All the evidence that we have so far … indicates that these acquisitions tend to drive up prices, and there’s other evidence that seems to indicate it doesn’t do anything in terms of enhancing quality.”

The American Hospital Association, a trade association, declined to comment on the study since officials hadn’t seen it. But the AHA often argues that “hospital deals are different” and that doctor acquisitions keep patients from falling through the cracks between inpatient and outpatient care.

The FTC has moved to block or undo a few sizable doctor mergers, including an orthopedics deal in Pennsylvania and an attempt by an Idaho hospital system to buy a medical practice with dozens of doctors.

But the agency largely lacks the tools to challenge numerous smaller transactions that add up to the same result, said Ody.

An FTC spokeswoman declined to comment on the study’s findings.

Ody urged state attorneys general and insurance commissioners to look more closely at doctor combos. Sometimes state officials can question mergers overlooked by federal authorities. Or they can block anti-competitive practices, such as when hospitals seek to exclude competitor physicians from insurance networks.

Beyond that, “I hope that people notice this [research], and I hope people think creatively about what kinds of solutions might be appropriate for this,” he said. “I don’t know what they are.”

Investigations about safety issues result in few meaningful consequences for hospitals

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quality

Investigations into hospital safety issues rarely result in consequences that spark meaningful improvements, according to USA Today. That can leave patients in the dark and vulnerable to unnecessary infections.

An article in USA Today outlines a system stacked against public admissions of safety issues and potential risks of infection. A recent investigative report on sewage leaking down the walls and floor of an operating room in MedStar Washington Hospital Center represented the first public glimpse of a health department investigation into the matter.

In a statement, the president of MedStar Washington Hospital noted the hospital had corrected its plumbing issues, but Lisa McGiffert, director of the Safe Patient Project run by Consumer Reports, says the system as it stands does little to demonstrate public accountability. She suggests that hospitals must be forced to undertake internal and external audits following safety lapses.

Larry Muscarella, author of the Discussions in Infection Control blog, told the newspaper that penalties or fines issued in such cases rarely provide enough incentive for substantive change. In some cases, he says, hospitals face “little or no consequence” from citations by state agencies.

That leaves patients without information that could be crucial when it comes to deciding where they want to go to seek treatment. This compounds a related issue where, despite a general trend toward increased transparency intended to give patients information to make informed choices about their care, some hospitals have dragged their feet on releasing quality data.

Concentrating on short-term financial incentives that lead hospitals away from more substantive quality improvements actually could end up hurting the bottom line in the long run, according to trauma and emergency surgeon David Kashmer, M.D. He points out that hospitals that implement error-prevention programs see a median savings of $250,000.

“We have advanced quality tools available, but unfortunately we see some centers where, because of the culture or the situation, [they] don’t use them,” he says.

Arbitrator awards fired Swedish Health whistleblower surgeon $17.5M

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Legal cases

A substantial payout for a fired whistleblower has Swedish Health crying foul. The organization will now challenge the arbitrator’s award in court.

David Newell, M.D., blew the whistle on a high-profile case involving neurosurgeons who double-booked patients for surgeries at a Swedish Health hospital in Seattle. The fallout from that case was sufficiently brutal for the CEO of Providence St. Joseph, which acquired Swedish, to take out a full-page ad in The Seattle Times apologizing to the organization’s employees and patients.

Now, The Seattle Times reports, an arbitrator has agreed with Newell’s claim that Swedish fired him in retaliation for his whistleblowing activities, and awarded him $17.5 million. The award reportedly includes $15.5 million in lost earnings and another $1 million for emotional distress.

Swedish Health contends it fired Newell after he failed to immediately disclose he had been arrested in a prostitution sting, as required by his employment agreement. The organization also protested the amount of lost earnings requested, noting that the figure represented nearly 10 times his annual compensation in 2014, and that he would have needed to perform more than 3,000 complex brain-aneurysm procedures in a year to reach such an amount.

Guy Hudson, M.D., the CEO of Swedish, blasted the ruling in a statement (PDF). “For this arbitrator to award Dr. Newell $17.5 million—at a time when many people cannot afford healthcare or fear losing their insurance, and when there is an epidemic of sex trafficking and exploitation of women—is unconscionable and outrageous,” he said.

But the newspaper reports that in a recent court filing, Newell’s attorney maintained that evidence presented showed Swedish Health’s actions “were part of a pattern of targeting and interfering with established neurosurgeons’ practices, retaliatory behavior, and a disregard for patient safety.”

In a similar case, a court recently ruled in favor of a Boston-based surgeon who lost his job at an upstate New York hospital after speaking out about concurrent surgeries performed there by another doctor. Lost wages in that case totaled $88,277.