By Ken Perez, vice president of healthcare policy, Omnicell, Inc.
Ken Perez
“If you like your healthcareplan, you can keep it,” President Barack Obama famously said—many times—of his landmark Patient Protection and Affordable Care Act.
But the promise was impossible to keep.
In the fall of 2013, when cancellation letters—notices of cancelled plans—went out to approximately four million Americans, the public realized Obama’s assurances were wrong. As a result, PolitiFact named “If you like your healthcare plan, you can keep it” the “Lie of the Year” for 2013. Readers in a separate online poll overwhelmingly agreed with the choice.
The ambitious Medicare-for-All plan of Sen. Elizabeth Warren (D-MA), by explicitly abolishing private health insurance, obviously doesn’t promise that you’ll be able to keep your health plan, but many tenuous assumptions about it are being made, without much scrutiny. To be fair, some of these assumptions are of the wishful thinking variety, residing just in the minds of the public.
To date, the vast majority of the media coverage and, therefore, the public’s general understanding of the Warren plan have focused on its economics—the societal cost, i.e., what the nation as a whole will spend on healthcare over 10 years, from 2020 thru 2029, and the plan’s federal cost, i.e., the increase to the federal government’s spending over the same period of time and how that will be funded.
Warren promises that with her plan “Americans [will] have access to all of the coverage they need … including vision, dental, coverage for mental health and addiction services, physical therapy, and long-term care …”
But will they really have access? Canada, with a single-payer healthcare system, scored last of 11 high-income nations in terms of wait times for elective surgery and specialty consultations according to studies by the Commonwealth Fund. In Canada, according to Michael McKee—a Canadian surgeon who worked for more than 30 years under that country’s single-payer system—hospital resources, operating room time, implant budgets and other revenues are tightly and strictly rationed.
And what will happen to the quality of care when Americans manage to see a physician under Medicare-for-All? Based on a study of 67 countries published in the British Medical Journal in July 2017, the United States ranked second in average physician consultation time, at slightly above 21 minutes. Only in Sweden do physicians spend more time meeting with patients.
By Ken Perez, vice president of healthcare policy, Omnicell, Inc.
Ken Perez
Transparency has been a popular concept for many years. While some would call it a buzzword, the Trump administration has made it a repeated theme of several of its pronouncements regarding healthcare reform.
Executive Order (EO) 13813, “Promoting Healthcare Choice and Competition Across the United States,” issued by President Donald Trump on Oct. 12, 2017, promoted transparency by aiming to “improve access to and the quality of information that Americans need to make informed healthcare decisions, including data about healthcare prices and outcomes.”
Five months later, at HIMSS18, Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma promised “to put patients at the center of the healthcare delivery system and empower them with the data they need to make the best decisions for themselves and their families.”
And on June 24, President Trump issued an almost 1,600-word EO, “Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First,” that has as its purpose “… to enhance the ability of patients to choose the healthcare that is best for them” by providing them with access to useful price and quality information, which enables them to find and choose low-cost, high-quality care. Patients will be able to compare prices across hospitals. Posting of standard charge information will apply to all services, supplies, or fees billed by the hospital, and hospitals will be required to regularly update the posted information.
Moreover, this EO mandates that the Departments of Health and Human Services, Treasury and Labor produce a proposal to require healthcare providers, health insurance issuers, and self-insured group health plans to provide or facilitate access to information about expected out-of-pocket costs for items.
The Trump administration is thus taking a consumer-driven approach to try to reduce healthcare costs. As former Rep. Ernest Istook (R-Okla.), president of Americans for Less Regulation, said, “Everything is based upon the theory that consumers would wade through the data to decide whether to seek care from different hospitals or doctors and would pay less.”
But would they? Gallup surveys have shown that Americans are increasingly feeling overwhelmed with the abundance of information. Consequently, consumers take shortcuts to ease the burden. For years, newspapers have lamented that nobody reads their stories, with most readers simply looking at the headlines and skimming a few articles. CNBC reports that about half of the visitors to its website quit after reading the first three paragraphs of a story.
By Ken Perez, vice president of healthcare policy, Omnicell, Inc.
Ken Perez
On June 24, President Donald Trump
issued an almost 1,600-word executive order (EO), “Executive Order on Improving Price and
Quality Transparency in American Healthcare to Put Patients First.”
The EO’s overall purpose is
“… to enhance the ability of patients to choose the healthcare that is best for
them” by providing them with access to useful price and quality information,
which enables them to find and choose low-cost, high-quality care.
This EO aligns with previous pronouncements by the Trump administration, including Executive Order 13813 of October 12, 2017, (Promoting Healthcare Choice and Competition Across the United States) and Centers for Medicare and Medicaid Services Administrator Seema Verma’s promise, announced at HIMSS18, “to put patients at the center of the healthcare delivery system and empower them with the data they need to make the best decisions for themselves and their families.”
Central to this latest EO is the
assumption that valid price comparisons can be made for “shoppable” services,
defined as common services offered by multiple providers through the market,
which patients can research and compare before making informed choices based on
price and quality.
Shoppable services are significant. Per
a study cited by the Council of Economic Advisers in its 2019 Annual Report, of
the categories of medical cases requiring inpatient care, 73 percent of the 100
highest-spending categories were shoppable, and among the categories of medical
cases requiring outpatient care, 90 percent of the 300 highest-spending
categories were shoppable.
In addition, improved price transparency
could help protect patients from surprise billing, which occurs when patients
receive unexpected bills at highly inflated prices from out-of-network
providers they had no opportunity to select in advance. Other benefits of
improved transparency included competition, innovation, and value in the
healthcare system.
The EO specifies that within 60 days
of the date of this order, the U.S. Department of Health and Human Services
(HHS) shall propose a regulation to require hospitals to publicly post standard
charge information, including charges and information based on negotiated rates
and for common or shoppable items and services, in an easy-to-understand,
consumer-friendly, and machine-readable format using consensus-based data
standards that will meaningfully inform patients’ decision making and allow
patients to compare prices across hospitals. Posting of standard charge
information will apply to all services, supplies, or fees billed by the
hospital, and hospitals will be required to regularly update the posted
information. HHS will establish a monitoring mechanism to ensure compliance.
The EO also specifies that within 90
days, there will be rulemaking (by HHS, the Department of the Treasury, and the
Department of Labor) on a proposal to require healthcare providers, health
insurance issuers, and self-insured group health plans to provide or facilitate
access to information about expected out-of-pocket costs for items.
In addition, the EO specifies that within
180 days, HHS shall issue a report describing how the federal government or the
private sector are impeding healthcare price and quality transparency for
patients, and providing recommendations for eliminating these impediments
in a way that promotes competition.
The
EO also included mandates regarding the establishment of a Health Quality
Roadmap and standardization of quality measures, as well as HHS providing the
private sector with increased access to de-identified claims data from taxpayer-funded
healthcare programs.
The Trump administration is choosing
a consumer-driven approach to try to reduce healthcare costs. As former Rep.
Ernest Istook (R-Okla.), president of Americans for Less Regulation, said,
“Everything is based upon the theory that consumers would wade through the data
to decide whether to seek care from different hospitals or doctors and would
pay less.”
Because of its breadth—spanning
pricing and out-of-pocket costs for all services, supplies and fees—in striking
contrast to the Trump administration’s previous railing against the burden
imposed on the healthcare industry by the prior administration and the
Affordable Care Act, this EO would also impose a heavy regulatory burden on
hospitals, physicians, and health insurance companies. Not surprisingly, the
price and quality transparency provisions are opposed by the American Hospital
Association (AHA), the Federation of American Hospitals (FAH), and America’s
Health Insurance Plans (AHIP). The provisions could prove to benefit companies
such as Castlight Health, ClearCost Health, and Healthcare Bluebook that
aggregate and present price and quality information for use by the public and
employers.
Because of this opposition by nonprofit
and for-profit hospitals, as well as health plans, the rulemaking processes for
the price and quality transparency initiatives will surely be contentious and potentially
lengthy, possibly resulting in a narrowing of the breadth of services subject
to the transparency requirements, rollout across multiple stages, an extended
phase-in period, etc. Conceivably, the hospital and health plan groups could
ask for offsetting relief from other regulatory requirements.
To that end, the Health Quality
Roadmap and standardization of quality measures would be well received by the
healthcare industry, and the increasing access to data could be a boon to
healthcare providers, healthcare IT vendors, healthcare consulting firms, and
health plans—especially in support of improved population health management,
given the vast amounts of Medicare and Medicaid claims data.
By Ken Perez, vice president of healthcare policy, Omnicell, Inc.
Ken Perez
It was such a beautiful, logical vision: The creation of “an electronic circulatory system for health information that nourishes the practice of medicine, research, and public health, making health care professionals better at what they do and the American people healthier,” as David Blumenthal, the National Coordinator for Health Information Technology from 2009 to 2011, wrote in an article on the potential of the HITECH Act’s subsidization of the adoption of EHRs by hospitals and physician practices that appeared in the Dec. 30, 2009, issue of the New England Journal of Medicine.
The HITECH Act was combined with the American Recovery and Reinvestment Act of 2009 (ARRA), an economic stimulus bill created to help the U.S. economy recover from an economic downturn that began in late 2007. The passage of the bill spawned an ambitious vision of an elaborate national health information infrastructure that would enable frictionless, collaborative data sharing primarily through a National Health Information Network (NHIN) that would connect an interlocking web of regional health information organizations (RHIOs) and health information exchanges (HIEs).
It must be emphasized that the NHIN vision was a federal government vision—not one generally shared by the private sector. It was never realized, and the adoption of EHRs by healthcare providers has been described as “a digital revolution gone wrong” and “a bridge to nowhere,” in the 15-page cover article of Fortune magazine’s April issue, entitled “Death by a Thousand Clicks,” by Erika Fry of the magazine and Fred Schulte of Kaiser Health News.
For their report—which has the feel of an exposé — Fry and Schulte interviewed more than 100 physicians, patients, IT experts, administrators, health policy leaders, attorneys, government officials, and representatives from several leading EHR vendors. They employ a combination of poignant vignettes of patients who were harmed by EHR shortcomings — including the experiences of former Vice President Joe Biden’s son Beau and the husband of CMS Administrator Seema Verma — as well as ample facts and figures.
Per Fry and Schulte, the federal government has spent $36 billion to date to subsidize the adoption of EHRs by healthcare providers, and today, 96 percent of non-federal acute care hospitals and 86 percent of physician offices have EHRs.
Despite the significant amount of federal funding and broad adoption of EHRs, they have not fulfilled their potential, as Blumenthal has admitted. The expected “digital dividend” from EHRs has not materialized, or at least its magnitude is much smaller than hoped for. According to Fry and Schulte, EHRs’ general demerits include poor, tedious usability—which adds work and is cited as a major contributing factor to physician burnout — rampant errors that lead to patient safety risks, “upcoding” (bill inflation), lack of interoperability, widespread data blocking, and patients’ inability to access their EHRs. Data silos clearly exist between the 700 federally certified EHRs of widely varying functionality, as well as between provider organizations and other players in the healthcare system. In short, idealism has run into the reality of commercialization.
Fry and Schulte provide no optimistic, Hollywood ending to the article. Industry attempts to promote interoperability are described as fledgling, and their sobering conclusion is that the state of EHRs in the United States is “an unholy mess.”
By Ken Perez, vice president of healthcare policy, Omnicell.
Ken Perez
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.
For years, the 340B program has been fraught with controversy, with concerns raised about the program’s lack of accountability and oversight, and findings of widespread diversion of benefits (discounted drugs) to ineligible patients.
The nonpartisan Medicare Payment Advisory Committee (MedPAC) found that hospitals in the 340B program receive a minimum discount of 22.5 percent of Average Sales Price (ASP) for drugs paid under the Medicare Hospital Outpatient Prospective Payment System (OPPS). The Office of the Inspector General of the U.S. Department of Health and Human Services (HHS) found that the average 340B discount was 34 percent of ASP, and at least two organizations with 340B members estimated that 340B discounts could be as high as 50 percent of ASP.
Based in part on these findings, in 2017 HHS proposed and finalized a rule implementing a sharp reduction in 340B reimbursement of hospitals by the Centers for Medicare and Medicaid Services from ASP plus 6 percent to ASP minus 22.5 percent, along with an offsetting payment rate increase for non-drug items and services. It was estimated that 85 percent of 340B hospitals would see overall net payment increases in 2018 as a result of these changes, and that 340B hospitals would continue to benefit financially from the program.
Nevertheless, the American Hospital Association (AHA), America’s Essential Hospitals, and the Association of American Medical Colleges—all non-profit hospital associations—filed suits against HHS to block the change.
On Dec. 27, 2018, Washington, D.C. federal district court judge Rudolph Contreras (a Democrat nominated by President Barack Obama), issued a 36-page ruling in favor of the AHA, et al. and struck down the 340B payment reduction, contending that HHS Secretary Alex Azar exceeded his statutory authority by issuing a policy that would “fundamentally rework the statutory scheme.”
Contreras issued a permanent injunction of the new reimbursement policy, but he did not grant the plaintiff’s request for retroactive OPPS payments based on the original reimbursement formula. (HHS is unable to come up with the monies to pay back the hospitals, as they have already been spent.) Contreras ruled that the plaintiffs “are entitled to some relief,” but, recognizing “the potentially drastic impact of …[his] decision on Medicare’s complex administration,” he ordered a supplemental briefing to come to a “proper remedy.”
By Ken Perez, vice president of healthcare policy, Omnicell, Inc.
Ken Perez
As widely reported, based on exit polls, healthcare—not the economy—was the top issue on voters’ minds in the 2018 midterm elections. This was due in part to the nation’s sustained economic recovery of the past two years, resulting in the current healthy state of the economy in general. In addition, Democratic Party political advertising emphasized healthcare—61 percent of pro-Democratic House ads from Sept. 18 to Oct. 15 mentioned healthcare, compared with just 10 percent of all Democratic ads in 2016.
According to several analysts, the Democrats’ success in taking back the House was largely due to their riding the “train of healthcare,” with a large proportion of Democrats in Congress supporting the idea of single-payer healthcare as embodied in Independent Vermont Sen. Bernie Sanders’s “Medicare for All” bill that he introduced in Sept. 2017.
Many of the most likely Democratic candidates for president in 2020 have publicly expressed their support of Medicare for All. Five of the seven most likely Democratic candidates from the Senate cosponsored the Medicare for All bill: Cory Booker of New Jersey, Kirsten Gillibrand of New York, Kamala Harris of California, Jeff Merkley of Oregon and Elizabeth Warren of Massachusetts. Some of the possible Democratic candidates from the House (e.g., Rep. Beto O’Rourke of Texas) and current and former Democratic governors (e.g., former Massachusetts Gov. Deval Patrick) are also Medicare for All backers.
At this point, what is the plausibility of Medicare for All becoming law after the 2020 elections?
It would obviously require the election as president of Sanders or a Democratic candidate who supports a single-payer system. In addition, the Democrats would need to retain their new majority in the House, and they would also need to attain a 60-seat majority in the Senate to overcome a possible minority party filibuster by the Republicans, assuming their united opposition. Note that the Patient Protection and Affordable Care Act passed in the Senate by a 60-39 vote, with not a single Republican senator voting for the bill.
A 60-seat Senate majority for the Democrats is not very likely to happen in 2020. Evidently, the Democrats will have 47 seats in the Senate once the 2018 midterm election results are finalized. The most aggressive current projection from a Democratic perspective regarding their Senate prospects in 2020 is a flipping of five seats presently held by Republicans (in Arizona, Colorado, Iowa, Maine, and North Carolina), resulting in a 52-seat majority. However, even that outcome would be eight seats short of the 60 needed. Thus, it appears that it would take some combination of executive branch meltdown (e.g., impeachment proceedings) and retirements by multiple Republican senators during the next two years in order for voters to flip an additional seven seats in the Senate to the Democrats in 2020.
By Ken Perez, VP of healthcare policy, Omnicell, Inc.
Ken Perez
Decreasing inpatient admission volumes, shifts in the re-imbursement mix from higher-margin commercial payers to lower-margin public payers, and pressures resulting from value-based care have been solid trends during the past several years. Thus, it was not surprising that a Moody’s Investors Service report released in August portrayed the current condition of finances for not-for-profit hospitals as troubling.
According to Moody’s, the median annual expense growth rate slowed from 7.1 percent in 2016 to 5.7 percent in 2017 because of hospitals’ continued control of labor and supply costs. But annual revenue growth fell faster, from 6.1 percent in 2016 to 4.6 percent in 2017, the second straight year that expense growth exceeded revenue growth, a trend that is expected to continue through 2019. Moody’s concluded that not-for-profit hospitals are on an “unsustainable path.”
Consequently, median operating margins dropped to an all-time low of 1.6 percent in 2017. More than 28 percent of hospitals posted operating losses last year, up from 16.5 percent in 2016. Of course, operating losses cannot be sustained forever. If they are sustained for multiple years, closure of the hospital frequently results. Earlier this year, Morgan Stanley concluded that 18 percent of U.S. hospitals are at risk of closure or are weak financially, with approximately 8 percent of hospitals (roughly 450 facilities) presently at risk of closing. To put that figure in perspective, during the past five years, only 2.5 percent (150 hospitals) have closed. Also, Morgan Stanley found that 10 percent of hospitals suffer from weak finances.
Various factors account for not-for-profit hospitals’ financial difficulties.
Because the vast majority of net patient revenue came from fee-for-service based payment models—such as DRG payment, fee schedule, percentage of the chargemaster, or list price—overall reduced payment rates adversely impacted revenue in 2017. To be clear, nominal payment rates did not decline—e.g., Medicare’s Inpatient Prospective Payment System and Outpatient Prospective Payment System both incorporated nominal year-to-year increases in 2017—but the revenue mix for hospitals did shift from higher-margin commercial payers to lower-margin public payers. Median Medicare and Medicaid payments as a percentage of gross revenue rose to 45.6 percent and 15.5 percent, respectively, in 2017. Furthermore, continuing a five-year trend, public payers’ share of hospital revenue is projected to increase for the foreseeable future, as more of the baby boomers—an obviously large demographic group—reach retirement age and an increasing number of them incur the sizable costs of the last year of life.
In addition, hospital finances were adversely impacted by the continued shift from inpatient to outpatient care, a trend driven by greater competition from ambulatory facilities, such as physician offices and ambulatory surgery centers. Moody’s reported that median outpatient growth rates exceeded inpatient growth rates for the fifth straight year. In her July 25 address to the Commonwealth Club, Seema Verma, administrator of the Centers for Medicare & Medicaid Services, supported the inpatient-to-outpatient shift, stating that Medicare is seeking to avoid “downstream” expenses, such as emergency department (ED) visits and hospital admissions.
Faced with these financial challenges, not-for-profit hospitals have pursued a number of approaches.
Most commonly, they have tried to improve their management of labor and supply costs. However, this strategy—while certainly logical—may be reaching a point of diminishing returns. Lyndean Brick, president and CEO of the Advis Group, a healthcare consulting firm, has concluded: “This is no longer solely about expense reduction. If not-for-profits just focus on that, they will be out of business in the next few years” (Modern Healthcare, Aug. 29, 2018).
Another strategic response has been consolidation—in which small hospitals join a larger health system—to gain more leverage with payers, to accomplish greater economies of scale, to get access to lower-cost capital, and to enhance access to talent.
By Ken Perez, vice president of healthcare policy, Omnicell, Inc.
Ken Perez
“If at first you don’t succeed, try, try again.”
During the first half of 2017, two mergers, each pairing national health plans—Aetna with Humana and Anthem with Cigna, respectively—were blocked by two federal judges, both of whom concluded that the mergers would reduce competition in the health insurance market and, therefore, raise prices.
Departing from the horizontal merger approach, three national health insurers are now involved in proposed or possible vertical mergers. CVS Health announced its intent to acquire Aetna in December 2017; Cigna announced its plan to acquire pharmacy benefits manager Express Scripts in March 2018; and Walmart is reportedly in acquisition talks with Humana. Because of their size, the interesting value delivery chains they would create, and potential synergies, these corporate combinations have been described as disruptive and industry game-changers.
From a health policy standpoint, what has contributed to these mega-mergers?
First, the specter of a single-payer healthcare system—as most ardently promoted by Sen. Bernie Sanders (I-Vt.)—has been greatly diminished by the election of Republican Donald Trump as president in 2016, continued Republican majorities in both the House of Representatives and the Senate, and perhaps most saliently, the passage of the Tax Cuts and Jobs Act of 2017 (TCJA) in December 2017.
It is a truism in Washington, D.C. that taking back something that has been given to the public is hard, if not impossible. Since a single-payer healthcare system would clearly entail a major expansion of the federal government that would require not only the repeal of the TCJA’s tax breaks for individuals and corporations, but also the imposition of additional tax increases, it would appear to be a political impossibility for at least until 2021.
Second, Medicare Advantage (MA), Medicare’s managed care program, increasingly is where the action is for health plans. Congressional Republicans strongly support MA, and the program is gaining in popularity with Medicare beneficiaries. The Centers for Medicare and Medicaid Services projects that 20.4 million people will enroll in MA for 2018, an increase of 9 percent over 2017, about three times faster than the growth of the total Medicare enrollee population. More than a third (34 percent) of Medicare beneficiaries are enrolled in MA.
The proposed mega-mergers involving Aetna, Cigna and Humana secure control of significant shares of the Medicare population, including sizable shares of the MA enrollee pie.
