Tag: Ken Perez

The Inflation Reduction Act: The Impact of Medicare Negotiation of Prescription Drug Prices on Hospitals and Health Systems

Ken Perez

By Ken Perez, vice president of healthcare policy and government affairs, Omnicell, Inc.

In August, H.R. 5376, the Inflation Reduction Act of 2022 (IRA), was passed via partisan votes by both chambers of Congress and signed into law by President Joe Biden. Senate Majority Leader Chuck Schumer (D-N.Y.) described the $739 billion climate, tax and health bill “as one of the defining legislative feats of the twenty-first century,” and Biden similarly touted the IRA as “one of the most significant laws in our history.”

While its climate change provisions captured top billing, the IRA is also arguably the most impactful health legislation since the Patient Protection and Affordable Care Act of 2010.

Hospitals and health systems have long advocated for lower prescription drug prices. In March, in a statement to the Senate Finance Committee, the American Hospital Association contended that prescription drug price inflation constituted “an urgent need to lower drug prices in Medicare.” The AHA statement advocated for increased competition and innovation, greater drug pricing transparency, inflation-based rebates for Medicare drugs, and protection of the 340B Drug Pricing Program. However, the hospital association stopped short of advocating for Medicare negotiation of prescription prices.

Details about Medicare negotiation of prescription drug prices

As the centerpiece of the IRA’s various drug pricing reforms, Medicare is allowed to “negotiate” what it will pay for many single-source branded drugs that account for the highest total expenditures for Medicare. In practice, Medicare will be able to dictate those prices. Starting next year, Medicare will negotiate directly with pharmaceutical companies to set the maximum fair price (MFP) for certain prescription drugs, with application of the negotiated prices starting in 2026 for 10 negotiation-eligible drugs from Part D.

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The Supreme Court Ruling On the 340B Program Reimbursement Rate Cut

Ken Perez Archives - Electronic Health Reporter
Ken Perez

By Ken Perez, vice president of healthcare policy and government affairs, Omnicell, Inc.

The 340B Drug Pricing Program was created in 1992 to give safety net providers—those that deliver a significant level of both healthcare and other health-related services to the uninsured, Medicaid, and other vulnerable populations—discounts on outpatient drugs to “stretch scare federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”

In brief, the program requires drug makers participating in Medicaid and Medicare Part B to provide discounts on outpatient drugs to 340B providers, which include various types of hospitals and certain federal grantees, such as federally qualified health centers and comprehensive hemophilia treatment centers.

The change to the reimbursement rate and ensuing debate

On Nov. 1, 2017, the Centers for Medicare and Medicaid Services (CMS) issued its final rule for the calendar year (CY) 2018 Outpatient Prospective Payment System (OPPS), the system through which Medicare decides how much money a hospital or community mental health center will get for outpatient care provided to patients with Medicare. That rule included a 28.5% reimbursement rate cut—from average selling price (ASP) plus 6% to ASP minus 22.5% for the 340B Program. The American Hospital Association estimated that the cut aggregated to $1.6 billion annually for 340B hospitals.

On July 31, 2020, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit), by a 2-1 vote, upheld the U.S. Department of Health and Human Services’ (HHS) decision to allow CMS to implement the 28.5% reimbursement rate cut, ruling against the American Hospital Association (AHA), the Association of American Medical Colleges (AAMC), America’s Essential Hospitals (AEH), and hospital plaintiffs Northern Light Health in Brewer, Maine, Henry Ford Health System in Detroit, Mich., and AdventHealth Hendersonville in Hendersonville, N.C.

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Re-examining National Health Expenditures

Ken Perez

By Ken Perez, vice president of healthcare policy and government affairs, Omnicell, Inc.

Discussions about the cost of healthcare in the United States often take the form of debates, pitting one sector against the other. Classic examples are health insurers (payers) versus hospitals and health systems (providers), and pharmaceutical manufacturers versus providers. Often at stake in these clashes are the relative sizes of the healthcare economic pie received by the different sectors.

Looking at healthcare through a societal lens helps one avoid participating in these debates and instead focus on macro issues. For years, how much the U.S. spends in total on healthcare—across all payers and for all healthcare—has been at the top of the macro issues list.

National health expenditures (NHE) are the universally accepted measure of that. On March 28, the Centers for Medicare and Medicaid Services (CMS) released the 2021-2030 National Health Expenditure report, which was prepared by the CMS Office of the Actuary.

How much did the U.S. in total spend on healthcare last year? In 2021, national health spending totaled $4.3 trillion, equal to 18.8% of the nation’s gross domestic product (GDP) and down from a record 19.7% of GDP in 2020 that reflected the significant spending incurred to respond to COVID-19. Because of the pandemic, NHE grew sharply (9.7%) from 2019 to 2020, and its growth slowed to 4.2% in 2021. Per capita health expenditures were $13,037 in 2021. To put that in perspective, last year, the U.S. spent almost $1,100 per month on healthcare for the average per person.

Comparisons with Other Countries

Since healthcare consumes almost a fifth of the nation’s GDP, one has to ask whether that is good or bad. One basis for answering that question is to compare U.S. healthcare spending with that of similarly advanced industrialized countries. Two measures are commonly used to perform that comparison: 1) healthcare spending as a percentage of GDP; and 2) per capital health expenditures.

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The Significance and Severity of the Healthcare Labor Shortage

Ken Perez

By Ken Perez, vice president of healthcare policy and government affairs, Omnicell.

Originally, the Great Resignation was an idea, proposed by Anthony Klotz, a professor at Texas A&M University, that predicted a large number of people would leave their jobs after the COVID-19 pandemic ends and life returns to “normal.”

The pandemic has by no means ended, as Omicron, the latest COVID-19 variant, has dramatically reminded us. On Jan. 4, the U.S. Centers for Disease Control and Prevention reported that Omicron was the dominant COVID-19 strain in the nation, accounting for 95% of cases, and Anthony Fauci, chief medical advisor to President Joe Biden, has described Omicron as “raging through the world.”

Despite the continuation of the pandemic, a massive number of Americans did not wait to quit their jobs in 2021. According to the U.S. Bureau of Labor Statistics, in April 2021 a record 3.8 million people resigned, followed by a string of more record resignations in subsequent months: 3.9 million in June, 4.2 million in July, 4.3 million in August, and 4.4 million in September. In total, more than 24 million Americans quit their jobs from April to September 2021. One writer described the United States as “a nation of quitters.” And during this period, the number of job openings was generally more than double the number of resignations. For example, there were 10.4 million openings at the end of September 2021.

Of course, the big question was why did this mass, sustained exodus from the workforce occur? Not surprisingly, the top reason was the cumulative stress and burnout caused by the COVID-19 pandemic. This led workers to seek relief and assert their rights, or at least their desires, for better compensation, more flexibility, less stress, and increased job satisfaction.

Resignations have been the most pronounced in the technology and healthcare industries, where workers experienced extreme increases in demand due to the pandemic, resulting in heavier workloads and burnout. From February 2020 to September 2021, healthcare lost an astounding 524,000 workers. The confluence of increased demand for care—driven by increased case volume as well as higher acuity—and an aging workforce that has not been sufficiently replaced by younger generations led to the record numbers of worker departures.

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Turning To Technology To Deal with The Nationwide Shortage of Pharmacy Technicians

Ken Perez

By Ken Perez, vice president of healthcare policy and government affairs, Omnicell, Inc.

Although they are usually the first person patients see when they walk into a pharmacy, the important roles that pharmacy technicians play are not well understood by the public.

How pharmacy technicians support patient care is becoming more evident as the United States is experiencing a widespread shortage of pharmacy technicians. Last month, I met with a dozen chief pharmacy officers from leading hospitals and health systems from across the nation, and a large majority of them said they were struggling to staff enough pharmacy technicians. Similarly, a nationwide survey conducted in late May by the National Community Pharmacists Association (NCPA) found that nearly 90% of the survey’s 278 respondents said they couldn’t find pharmacy technicians.1

What’s causing the shortage? It’s primarily due to externalities. The pharmacy technician shortage is part of the broader problem affecting entry-level hiring across all industries—for various reasons, many people are reluctant to return to work.

Consequently, many large corporations are offering new workers unprecedentedly high starting hourly wages. Walmart, the nation’s largest private employer, recently raised its hourly pay for more than 565,000 store workers by at least $1, bringing the chain’s U.S. average hourly wage to $16.40.2 Also, Amazon, the nation’s second-largest private employer, also recently increased its average starting wage to more than $18 an hour, and it announced plans to hire 125,000 warehouse and transportation workers.3 In contrast, the U.S. average hourly wage for pharmacy technicians is approximately $15.

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Biden’s Executive Order On Promoting Competition in the American Economy: Implications for Healthcare

Ken Perez

By Ken Perez, vice president of healthcare policy and government affairs, Omnicell, Inc.

On July 9, President Joe Biden issued a wide-ranging executive order (EO), “Executive Order on Promoting Competition in the American Economy,” that is highly critical of big business and advocates policy and regulatory changes to spur competition in seven areas: labor markets, healthcare, transportation, agriculture, internet services, technology, and banking and consumer finance. The EO has been described as the centerpiece of a new Democratic Party emphasis on restraining the nation’s most powerful companies, bolstering and consolidating the federal government’s power.

Of course, as with all presidential EOs, the EO by itself does not impose new requirements on the business community; rather, federal agency-driven policy changes, formal rulemaking or passage of legislation by Congress are required. Moreover, an EO can be easily overturned by a new president, as Biden has done with several Trump-era EOs.

Healthcare Proposals

The EO tackles four areas in healthcare where the Biden administration contends that lack of competition increases prices and reduces access to quality care: prescription drug prices, hearing aids, hospitals, and health insurance. In accord with the status of the high cost of prescription drugs as the public’s top healthcare-related concern, three-fourths of the EO’s healthcare verbiage is devoted to this area, with only brief paragraphs addressing the other three. Here are the specific proposals in the EO for the four areas.

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A Lesson Learned From COVID-19: The Significance of The Primary Care Physician Shortage

Ken Perez

By Ken Perez, vice president of healthcare policy and government affairs, Omnicell.

The coronavirus pandemic has disproportionately affected racial and ethnic minority groups in the United States due to a variety of factors, including social determinants of health, greater incidence of chronic medical conditions, and less access to healthcare. Though brought into sharp relief by COVID-19, these health and healthcare disparities are not new.

Because of its size and concentration in rural and poverty-stricken urban areas, the longstanding primary care physician (PCP) shortage is a key healthcare disparity as well as contributor to health disparities.

A June 2020 report from the Association of American Medical Colleges (AAMC) found that over 1,200 counties in the United States (39%) had a shortage of PCPs in 2017, and a September 2018 analysis by UnitedHealth Group concluded that 13% of the U.S. population (44 million) lived in counties with a PCP shortage, with 23 million residing in rural areas and 21 million in urban or suburban environments.

Moreover, the future is not bright. Using projected changes in population size and age, Ziaoming Zhang, et al. developed demand and supply models to forecast the physician shortage or surplus for each of the 50 states in the United States. The results of the study were published in Human Resources for Health in February 2020. They projected that the United States will face a shortage of 139,160 physicians by 2030. Two regions will have severe shortages—the South (92,172) and the West (63,589)—while the Midwest will have a smaller shortage, and the Northeast will have a surplus. Three of the most populous states will have the greatest physician shortages: California (32,669), Florida (21,978), and Texas (20,420). More than two-thirds of the states (34) will have significant physician shortages.

Similarly, the AAMC study examined the complexities of physician supply and demand and generated projections from 2018-2033. The analysis included supply and demand scenarios and was updated with information on trends in healthcare delivery and the state of the healthcare workforce, such as data on physician work hours and retirement trends.

According to the analysis, the United States could experience an overall physician shortfall of 54,100 to 139,000 by 2033, including shortages of 21,400 to 55,200 primary care physicians and 33,700 to 86,700 nonprimary care physicians (specialists).

According to the AAMC study, there are three main drivers of the projected physician shortage, two on the demand side and one on the supply side.

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Who Could Drive Bipartisan Health Reforms In The U.S. Senate?

By Ken Perez, vice president of healthcare policy and government affairs, Omnicell, Inc.

Ken Perez

During the 2020 presidential election campaign, the top dozen or so health policies advocated by the Biden-Sanders Unity Task Force Recommendations, the Democratic Party Platform, and the Joe Biden for President Campaign Website fell into two distinct categories: ambitious progressive policies that would probably require a “go-it-alone” approach by the Democrats; and more moderate bipartisan policies that could be passed under the current rules in the Senate as an outcome of traditional political compromise.

Pursuit of the former approach is fashionable, as many Senate Democrats have advocated elimination of the filibuster. In addition, Senate Parliamentarian Elizabeth MacDonough recently determined that Democrats may be able to employ a fast-track process known as budget reconciliation multiple times before next year’s midterm elections, potentially allowing them to pass a bill with a simple majority, assuming that all 50 Democrats fall in line and Vice President Kamala Harris casts the tie-breaking vote as president of the Senate.

Nevertheless, there are key players in the Senate dedicated to pursuing bipartisanship.

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The American Rescue Plan Act of 2021: What’s In It For Hospitals?

Ken Perez

By Ken Perez, vice president of healthcare policy and government affairs, Omnicell, Inc.

On February 27, the U.S. House of Representatives passed H.R. 1319, the American Rescue Plan Act of 2021. One week later, on March 6, the U.S. Senate passed its own version of the bill, on a 50-49 party-line vote, under budget reconciliation which allowed for passage of the bill by a simple majority.

The House took it up on March 9. Notably, the Senate removed a phased-in federal $15 minimum-wage mandate.

In late February, the American Hospital Association had lobbied for $35 billion in targeted emergency funding for hospitals across the nation. However, neither the House nor the Senate version included that level of assistance, though H.R. 1319 does include a number of provisions that either directly or indirectly benefit hospitals:

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The Prospects For Reining In Prescription Drug Costs Under A Biden Administration

By Ken Perez, vice president of healthcare policy, Omnicell, Inc.

Ken Perez

The cost of prescription drugs is one of the top reasons why the U.S. spends much more on healthcare on a per capita basis than economically similar countries. The general public understands this, as polls consistently show that high drug costs are the number one healthcare issue for Americans.

Congress certainly understands this as well, as there have been numerous attempts in recent years—many of which have garnered some bipartisan support—to slow the growth of prescription drug costs. However, the devil has been in the details, precluding passage of substantive legislation.

The inaction by the legislative branch led President Donald Trump to sign on July 24 four executive orders aimed at reducing drug prices and ensuring access to medications.

The first order directed federally qualified health centers to pass along discounts on insulin and epinephrine received from drug makers to medically underserved patients.

The second order allowed states to develop plans for safe importation of certain drugs, authorize the re-importation of insulin products made in the United States, and create a pathway for personal importation through the use of individual waivers to purchase drugs at lower cost from pre-authorized U.S. pharmacies.

The third order required that kickbacks between drug makers and pharmacy benefit managers be passed along to seniors as discounts in Medicare Part D.

The fourth order authorized the Centers for Medicare and Medicaid Services (CMS) to take action to ensure that the Medicare program and seniors pay no more for the most-costly Medicare Part B drugs than any economically comparable OECD country. (This concept was first introduced by the Trump administration as a rule in October 2018.)

Per the fourth order, on Nov. 20 CMS issued an interim final rule for the Most Favored Nation (MFN) Model that would lower prescription drug costs by paying no more for Medicare Part B drugs and biologicals than the lowest price that drug manufacturers receive in 25 other industrialized countries, normalized by GDP per capita.

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