Chief Justice John G. Roberts and Justice Anthony M. Kennedy are seen by many court watchers as the two potential swing votes in the case.
The U.S. Supreme Court on Wednesday heard arguments in a second challenge to the Patient Protection and Affordable Care Act that, if affirmed, could disqualify millions of Americans from receiving billions of dollars in federal subsidies to buy health insurance.
Plaintiffs in King vs. Burwell told the justices that the wording of PPACA prohibits the federal government from offering subsidies for people in 34 states that used a federal healthcare exchange. [View transcript.]
As in 2012's landmark National Federation of Independent Business vs. Sebelius ruling that saw a sharply divided court uphold the constitutionality of the individual mandate on a 5–4 ruling, King is also expected to swing on one vote.
"The only provision in the Act which either authorizes or limits subsidies says, in plain English, that the subsidies are only available through an exchange established by the state," plaintiff's attorney Michael Carvin told justices on Wednesday, the second time in three years that Carvin has argued against PPACA before the high court.
Solicitor General Donald B. Verrilli, who successfully argued for the federal government in NFIB, argued on Wednesday that the intent of the PPACA is clear. Without the subsidies, he argued, health insurance would become unaffordable.
"It is really the only way to make sense of Section 36B and the rest of the act," Verrilli told the court, citing the passage in question. "Textually, [the plaintiff's] reading produces an incoherent statute that doesn't work."
"Our reading is compelled by the act's structure and design. Their reading forces [the Department of Health and Human Services] to establish rump exchanges that are doomed to fail. It makes a mockery of the statute's expressed textual promise of state flexibility."
Chief Justice John G. Roberts, seen by many court watchers as one of two potential swing votes in the case, remained silent for most of the arguments, which he extended for 20 minutes beyond the allotted hour.
Justice Anthony M. Kennedy, however, who is seen as the other potential swing vote, set off a flurry of speculation when he told Carvin that the plaintiff's argument "raises a serious constitutional question."
"Let me say that from the standpoint of the dynamics of Federalism, it does seem to me that there is something very powerful to the point that if your argument is accepted, the states are being told either 'create your own exchanges, or we'll send your insurance market into a death spiral,'" Kennedy said. "We'll have people pay mandated taxes which will not get any credit on the subsidies. The cost of insurance will be sky high, but this is not coercion."
To give a sense of the close scrutiny this case is getting, BloombergBusiness reported that for-profit hospital stocks surged immediately after Kennedy's comments.
Although the arguments were tense and polarized, the day was not without comic relief. When Verrilli warned of the dire consequences of removing the subsidies, he was challenged by Scalia about other remedies.
"What about Congress? You really think Congress is just going to sit there while all of these disastrous consequences ensue," Scalia asked the solicitor general.
"Well, this Congress, your honor, I, I," Verrilli stammered, as the chamber erupted in laughter.
"You know, I mean, of course, theoretically, of course, theoretically they could."
The high court is expected to issue a ruling by late June.
Even as healthcare reform has expanded insurance rolls, high-deductible health plans have rendered care unaffordable for many. The Surgery on Sunday program, created for uninsured patients, is retooling for the underinsured.
For all its problems, the Patient Protection and Affordable Care Act has made health insurance accessible for millions of Americans, and that is a good thing.
Andrew Moore, MD
To make that coverage affordable, however, many bare-bones plans have very high deductibles. A family of four earning $30,000 will likely pay deductibles of several thousand dollars before coverage kicks in. The result has been the creation of a new class of patients that one observer has aptly called the "functionally un-insured."
With that in mind, it would not be unreasonable to suggest that these high-deductible plans are designed more to protect the healthcare sector than patients. If a family of four making $30,000 accrues a $10,000 medical debt, it might as well be $100,000 for them. They'll never pay it off.
These newly underinsured have forced some charity care organizations to change the way they do business.
For the last 10 years, Lexington, KY-based Surgery on Sunday has provided about $10 million worth of free outpatient surgeries for more than 7,500 uninsured people who were too poor to pay for their own care. When the PPACA/Obamacare expanded insurance to thousands of working poor people in Kentucky, they became ineligible for charity care under the SOS criteria, even though their need persisted.
"It's really created a mess for us," says Andrew Moore, MD, a Lexington-based plastic surgeon who is the founder of SOS. "Prior to this, looking back maybe a year and a half or two years ago, we had a waiting list of about 1,500 people. We thought that was dangerous. People were waiting too long. So we expanded the program and got two other hospitals involved so we could do it twice a month instead of once a month so we could whittle down the numbers."
"When Obamacare came on the scene, our criteria for taking care of people was you could not have insurance and you had to be at the poverty level. So, by early last fall we had no or very few people on the waiting list. They all had insurance and didn't meet our criteria."
The backlog of 1,500 patients all but disappeared. Moore says that only about 40 people are on the waiting list. Until recently, SOS was considering expanding to other ambulatory surgery sites and recruiting more volunteers to meet the demand. Now, the program will cut back services to once every other month.
"There is no sense in having people open the doors with 80 volunteers to take care of three or four patients," Moore says. "We'll do it every other month until we can get the numbers back up."
Unintended consequences
Shouldn't we celebrate the fact that fewer people need charity care? That's just the problem. The need is still there, but the PPACA made these underinsured people ineligible for charity care, even though they can't afford to meet the deductible. So they go untreated.
"The problem is the insurance they are selling in our state," Moore says. "They are selling policies that are pretty hard to afford even at a discounted rate. These folks are paying $300 a month and they are at poverty level. That is a lot of money. The second thing is they have huge deductibles. The individual deductible will be $6,000 and for a family that is $13,000. That is no insurance. You are never going to use that because you can't meet the deductible."
SOS is adjusting its eligibility criteria to see if that will alleviate the problem.
"When we looked at that, we were doing 200% of poverty so we went to 250%," Moore says. "This is our first attempt. We may adjust it more. Then we said if their deductible was 10% of their income, we would treat them for free. We just started that and we are spreading word across the state that this is the new criteria. We will probably take a look at this in two or three months and see how that's affected it, and if we need to lower that even further to capture people who need our help."
"I hope somebody puts us out of business, but I don't think that Obamacare does it," Moore says. "In our state it has changed from an uninsured population to an underinsured population. I read that by a wide margin most bankruptcies are healthcare-related, either for people who have no insurance or who are underinsured. That tells you it's fairly expensive, and somehow we have to get ahold of the cost to make it more affordable for people."
Societal good and bad
Let's be clear: Expanding health insurance coverage to millions of people is a net positive for society. The PPACA should not be too harshly criticized for creating a new class of underinsured people, because that is still preferable to what we had before.
That doesn't mean that improvements can't be made that will make access to healthcare more affordable to these underinsured. After all, underinsured people, like the uninsured, will delay seeking care until it becomes too critical—and expensive—to ignore. That defeats one of the oft-stated goals of the PPACA and the wellness movement: to treat people early and in the least-expensive, most efficient environment.
Can society respond? Healthcare "really is out of the reach for a lot of our population," Moore says, "and if we can't do this as a nation, we have to do this as individuals to help these people along."
The Association of American Medical Colleges is calling on Congress to immediately fund an additional 3,000 medical residency slots each year in addition to the 27,000 to 29,000 residency slots already in place.
Under a best case scenario, the nation's graying and growing population will contend with a shortage of at least 46,000 physicians within 10 years, Association of American Medical Colleges projections show.
That shortfall could hit 90,000 by 2025 if the healthcare sector fails to aggressively embrace and promote the use of non-physician clinicians, and adopt more efficient care and payment models such as patient-centered medical homes and accountable care organizations, AAMC said.
In addition, AAMC wants Congress to immediately fund an additional 3,000 residency slots each year, in addition to the 27,000 to 29,000 residency slots already in place. Graduate Medical Education has been capped for the past two decades. What was a supposed to be a temporary cap has become permanent.
"What we are suggesting is a modest increase in that cap right now," AAMC Chief Health Officer Janis M. Orlowski, MD, told reporters Tuesday. The estimated cost of the bill is $10 billion over 10 years. "This does not alleviate the physician shortage in any of the different scenarios that we are looking at. We see it as a multipronged approach," she said.
The AAMC projections include a shortfall of 12,500 to 31,100 primary care physicians, and between 28,200 and 63,700 subspecialists.
Orlowski says it's a simple case of supply and demand.
"Although physicians supply in the US is projected to increase modestly between 2013 and 2025 demand will grow more steeply," she says. "Specifically, total demand for physician services is projected to grow as much as 17%."
"The bottom line is that the physician shortage is real; it is significant. It's particularly serious for the kind of medical care our aging population will need, and it must be addressed today, in 2015, if patients are going to be able to get the care they need in 2025. The good news it is not too late to fix this. Congress needs to act now."
Residency training costs about $16 billion nationally, of which Medicare provides about $3 billion. It costs about $152,000 a year to train a physician, of which Medicaid pays $40,000. The average student debt after graduating from medical school is about $176,000 AAMC says.
AAMC President/CEO Darrell G. Kirch, MD, told reporters "the onus is on Congress to lift the artificial cap that has been in place since the 1990s and do its share of contributing to the training."
"A large portion of the funding for residencies is already borne by teaching hospitals. Students already carry massive amounts of debt," Kirch says. "We need to make sure the federal support is aligned with those efforts."
Who Gets the New Residency Slots?
Kirch says AAMC is not in a position to recommend which states receive the new residency slots, or if existing slots should be moved to other states to account for demographic shifts.
"It is not the role of the AAMC to tell which areas that they should start or stop individual residency programs," Kirch says. "That is a local decision that each hospital, each potential training site needs to make. Whether Congress would want to go in that direction is an issue for policy makers. The purpose of this analysis is to show the overall national landscape."
An AAMC study from 2013 shows that Northeastern states such as Massachusetts, New York, Connecticut and Pennsylvania have the highest ratios of residency slots per 100,000 population. These states also have the highest ratios of physicians per 100,000 population. For example, Massachusetts had 421 active physicians and 87 residency slots per 100,000 in 2011, while Florida had no more than 265 active physicians and fewer than 20 residency slots per 100,000.
Last month, safety net hospitals and teaching hospitals in Florida projected a shortfall of 7,000 physicians and called for a shift in residency slot allotments, which they say unfairly rewards the physician-rich Northeast.
"We just passed New York as the third most-populous state," Jim Burkhart, president and CEO of Tampa General Hospital, and vice-chair of the Teaching Hospital Council of Florida, said in a recent interview.
"The number I heard today was that Florida is growing at the rate of 800 new residents per day. But we are 42nd in the number of residency slots we have per capita. That is a formula for disaster."
Kirch said Tuesday that "where a residency spot exists does not determine where a physician actually ends up practicing. So, there is no guarantee that putting residency spots in different locations is going to move physicians to that location. We live in a country where people are given free choices and after their training residents can choose where to practice."
Instead of shuffling residency slots, Kirch says states, local areas and health systems may be better served by recruiting new physicians with job perks such as debt forgiveness.
"About 6% to 7% of physicians consider locum tenens to be their fulltime occupation and we anticipate that will grow to 11% of the workforce within the next 18 months," says the head of a healthcare temporary staffing firm.
More new physicians entering the workforce are opting for jobs as locum tenens in hospitals, physician practices, and other provider sites, an industry survey shows.
Staff Care, a healthcare temporary staffing firm based in Irving, TX, polled 2,087 locum tenens physicians and found that 21% began temp work immediately after finishing their medical training. That's up from 16% in 2013 and 14% in 2012. A separate survey by The Physicians Foundation found that 46% of doctors will change their practice styles within three years, and 9% plan to work locum tenens.
Staff Care President Sean Ebner says a growing number of physicians are gravitating toward nontraditional work models, including employment by a hospital or a large practice, part-time practice, concierge medicine, and administrative-only practice.
"The physician workforce is evolving. About 6% to 7% of physicians consider locum tenens to be their fulltime occupation and we anticipate that will grow to 11% of the workforce within the next 18 months," Ebner says.
"A lot of physicians that did locum tenens had sold their practice, they were in quasi-retirement and came back as locums. That demographic is changing significantly, where new physicians and mid-career physicians are making the choice for flexibility, working in different environments, being able to focus on the practice of medicine and not the politics of the organization, the reimbursement facilities and all of the bureaucracy around the business of medicine."
Staff Care also found that 91% of the 259 healthcare facility managers who responded to the survey said they had used a locum tenens physician at least once in the past year, and 42% said they are looking for one or more locum tenens physicians. Primary care physicians are in the most demand as locum tenens, followed by psychiatrists and other behavioral health specialists, and hospitalists.
"From a healthcare system perspective there is a recognition of leveraging physicians in a temporary contingent format to deal with peaks and valley of census and demand rather than committing to fixed costs and having to staff to a certain threshold for the whole year irrespective of the demands for those services," Ebner says. "It puts a big tax on those systems. Sometimes they have to overstaff and sometimes they stretch their community too far."
About 44,000 physicians nationwide practice as locum tenens, up from 26,000 12 years ago, Ebner says, adding that there's no timeline on when, if ever, locum tenens workers will pursue a more permanent setting. "Physicians do come in and out of locum tenens for a number of reasons," he says.
"Some physicians want to earn an income if they switch specialties from what they first signed up for out of medical school and there is a lag in between fellowship programs. More importantly it gives physicians the flexibility to kick the tires in a number of different settings, geographies and delivery systems before settling down."
The survey suggests that demand also is growing for temporary non-physician clinicians such as nurse practitioners and physician assistants.
In 2012, 4.8% of healthcare facility managers surveyed by Staff Care said they had used locum tenens NPs in the previous 12 months. In 2014, that number rose to 17.4%. The number of PAs rose from 4.7% in 2012 to 7.6% in 2013. The survey findings are consistent with those from a benchmark survey released last summer by the National Commission on Certification of Physician Assistants.
The ruling has far-ranging implications for state regulatory boards overseeing professional activities, including those of physicians, hospitals, and health systems.
The U.S. Supreme Court this week upheld an appeals court ruling that states must actively supervise private market participants sitting on state regulatory boards.
The justices were asked to decide if a state regulatory board is exempt from federal antitrust laws under the state action doctrine if its members are "market participants" elected by other market participants.
The eight-member North Carolina dental board, which includes six dentists elected by other dentists, had been the subject of a complaint by the FTC in 2010 for violations of the FTC Act after the board banned non-dentists operating in mall kiosks from performing discount teeth-whitening procedures.
A federal district court rejected the board's initial complaint. Last spring, the U.S. Court of Appeals for the Fourth Circuitsided with the FTC and noted that the dental examiners board was composed of dentists who stood to gain financially by restricting the practice.
Writing for the majority, Justice Anthony Kennedy said the Sherman Antitrust Act protects competition and respect federalism. "It does not authorize the states to abandon markets to the unsupervised control of active market participants, whether trade association or hybrid agencies. If a state wants to rely on active market participants as regulators, it must provide active supervision if state-action immunity under Parker is to be invoked."
The high court's three most-conservative judges sided with the dental board. Writing in dissent, Justice Samuel Alito noted that the majority's ruling "will create practice problems and is likely to have far-reaching effects on the states' regulation of professions."
"As a result of today's decision, states may find it necessary to change the composition of medical, dental, and other boards, but it is not clear what sort of changes are needed to satisfy the test that the Court now adopts," Alito wrote.
Alito was joined in dissent by Justices Antonin Scalia and Clarence Thomas.
Reaction
Reaction to the ruling was mixed.
Bobby D. White, COO for the North Carolina Board of Dental Examiners, said in an email exchange with HealthLeaders Media that the court ruling "fundamentally misconstrues the purpose of state-action doctrine."
"The point of the doctrine is to respect federalism, in that there's no indication in the Sherman Act that Congress intended to displace state regulatory activity. That's especially true in this context: professional regulatory boards have always been structured this way, and yet no one until this case ever argued that the Sherman Act subjected them to liability for this reason. That's the elephant in the room that Alito's dissent emphasized and that Kennedy's majority ignored."
As a result of the ruling, White says virtually every professional regulatory board in the nation will have to change its structure and supervision or the activities it performs.
"And since all of those changes will take time (and often legislative activity), the opinion threatens to massively disrupt professional regulation," White said.
The American Medical Association had filed an amicus brief supporting the dental board's antitrust immunity. Citing Alito's dissent, AMA President Robert M. Wah, MD, in a statement this week said the ruling "'will spawn confusion' by creating far reaching-effects on the jurisdiction of states to regulate medicine and protect patient safety. The AMA will work with other physician groups to secure policy changes to reinforce long held antitrust protections for activities conducted under state authority to protect patients."
Federal Trade Commission Chairwoman Edith Ramirez applauded the ruling.
"We are pleased with the Supreme Court's recognition that the antitrust laws limit the ability of market incumbents to suppress competition through state professional boards," Ramirez said in prepared remarks. "We will remain vigilant through our enforcement initiatives and advocacy to safeguard competition and ensure that American consumers benefit from entrepreneurial initiative."
The Practical Effects
Three antitrust experts reached for comment about the practical effects of the ruling all said that states should take note of the ruling, but none said the ruling would create regulatory chaos, nor was it was particularly burdensome.
Deborah Gersh, the Chicago-based co-chair of Ropes & Gray's health care practice, says the ruling has prompted an unfounded and "alarmist mindset with respect to the implications to boards and how no doctors, dentist or lawyers will almost ever serve on a board again."
"On this board, you had independent dentists in a majority making the decision. It's a little bit like the foxes guarding the henhouse from a competitive standpoint. That is the basis for the ruling," Gersh says.
"As a practical matter, the opinion is really focusing on individuals who are sitting on a board where there is no active state supervision. The state really isn't telling them what the parameters are, or their roles and responsibilities. So there is the risk with competitors monitoring other competitors, individuals monitoring their competitors, and what they are saying is we are not going to give you immunity if this is how the state chooses to have this board set up."
"There are certainly alternatives that the state can do. They can impose more guidelines and supervisory requirements so that there are limitations on where the state provides them with specific thing they are to regulate."
Jay L. Levine, a Washington, D.C.-based partner at Porter Wright Morris & Arthur LLP, says states may likely have to examine how they establish and supervise boards, but they're supposed to do that anyway.
"All it says is that a state board that is comprised of private actors who are competitors, even when they act under the cover of state law, need active state supervision," Levine says.
"The legislature, when they create the paradigm for enforcing their policy, need to include some mechanisms to actively supervise people acting under their legislative guidance. Obviously that requires a little bit more of an infrastructure than if that wasn't required, but at the same time, it's not as if states don't know how to do that and can't do that if they are so inclined."
Levine says the ruling likely will not prompt widespread litigation in other states.
"If it is not a board composed of private actors who are competitors, I don't know that you are going to have the same kind of arguments they did in North Carolina," he says. "There are probably boards across the country that are similar in composition, but I don't think that they are so ubiquitous that we need to fear that the floodgates are open and the courts are going to be inundated with antitrust lawsuits against state boards."
Michael L. Sibarium, a Washington, DC-based litigator and partner with Pillsbury, says the ruling should prompt introspection.
"If you're sitting on one of these boards the first question you should ask is 'how is our board structured under legislative authority and who is on it?' The next question is 'if you are structured in a way as to require active supervision to get to state action immunity do you have it?' Those are the questions you should be asking," Sibarium says.
The question left unanswered in the dental board ruling, Sibarium says, is whether or not individual members of these regulatory boards can be held liable for their decisions.
"They point out a number of options where states can grant immunity," he says, "but they leave that question for another day, whether people would have individual liability."
Research suggests that fears about what would happen to healthcare access with the addition of millions of people to the insurance rolls may have been overblown or at least unfounded.
One concern about the Patient Protection and Affordable Care Act has been the anticipated longer wait times for physician visits with the addition of millions of newly insured people who would gain coverage through Medicaid expansion or the health insurance markets.
We've heard the doomsday scenarios about clogged emergency departments full of people who can't find a primary care physician, are forced to use the most expensive care access point for non-emergency care, thus defeating the very purpose of the reforms.
It's a topic we've covered a lot here, and this concern over wait times carries a simple and compelling reasoning: If there aren't enough physicians now, and the shortage is expected to worsen as more physicians retire and the nation grows older, what will happen to healthcare access when millions more people are added to the insurance rolls?
A study out today from The Commonwealth Fund suggests that those fears—to this point—may have been misplaced and overblown or at least unfounded.
Examining state-level estimates for increased demand for physician and hospital services, the study projects that the 11 million newly insured lives translates into 1.34 primary care office visits per week, an increase of 3.8% nationally, and 1.2 to 11 additional hospital outpatient visits per week, an increase of 2.6% nationally. [The methodology is detailed in the report. I didn't delve into it for the sake of expediency. If you think the methodology is flawed, please explain why in our comments section below. I'd also be interested in hearing from providers about their experiences with patient volumes and wait times over the past year since the ACA has gone into effect.]
"Increases of the magnitude likely to be generated by the Affordable Care Act will have modest effects on the demand for health services, and the existing supply of providers should be sufficient to accommodate this increased demand," the study concludes.
No Surprise
Sherry Glied, a coauthor of the study, and a dean at New York University's Robert F. Wagner School of Public Service, told me that her findings are not surprising.
"There are a couple of things you want to think about as you work through what the effects might be on medical utilization," she says. "One important one is that the people who use the most services in the U.S. now are on Medicare, seniors, and people who are disabled and on Medicaid and these groups are already covered. So, most of the people who are gaining health insurance because of the ACA are people who are relatively healthy. They don't use a lot of visits a year because they are relatively healthy people."
These relatively healthy people are buying insurance for protection against the unlikely event that they'll need it.
"In most cases they are not going to use a lot of visits, so the base number of visits that we are already producing are the bulk of visits that will ever be produced," Glied says. "Those seniors are already getting their visits and those disabled are already getting their visits and we are adding just incrementally these newly insured people. Even when they were uninsured, they still went to the doctor, just not very often. So it's only the increment over that."
Geographic Variations
What surprised Glied in her research was the astonishing state-to-state disparity in physician wait times that has little to do with the physician-to-patient ratios.
"This is what struck us in writing the paper," Glied says. "There is not a clean mapping between the number of doctors in practice in an area and the number of visits they produce or the timing of those visits. In fact, it is almost perverse. Some of the places in the country that have the most doctors per person actually have the longest waits for visits."
In other words, care access is uncoordinated.
"So, there is lots of potential to accommodate those additional patients since they aren't a huge number to begin with in terms of the new visits, using the supply of doctors we have now in most places," Glied says.
Her point is well taken.
Accounting for the disorganization of healthcare access damages the claim that the PPACA will create the mother of all physician wait times, because such a claim relies upon the laughable assumption that our healthcare delivery system is operating at peak or near-peak efficiency with little room for improvement.
"What we see across the country is that practice patterns are so different that there has just got to be space for adaptation," Glied says. "There are places in the country where doctors are managing many more patients and the waits for appointments are quite short. Maybe some places are going to have to think about how to organize practices more effectively."
Exhibit A is Massachusetts, a state with 132 primary care physicians per 100,000 people – the highest such ratio in the nation. Massachusetts also had the longest physician wait times in the nation before Gov. Mitt Romney in 2006 pushed through universal healthcare. After RomneyCare took effect, Massachusetts still had the longest physician wait times in the nation.
"What happened after insurance expanded in Massachusetts? The data suggests nothing," Glied says.
"The change in utilizations and waiting times, there was a blip one year and then it went down. It's been steady before and after, but for not very good reasons that have more to do with the way medical practices are organized in Massachusetts, because there are loads of doctors in Massachusetts." (A separate study conducted by Harvard researchers in 2013 for Health Affairs came to a similar conclusion.)
Claiming that expanding the insurance rolls will increase patient wait times also fails to take into account the ability within the nearly $3 trillion healthcare sector to adapt and adjust. With so much money at stake, providers will find a way to improve access. If they can't, nontraditional entrants into the market will.
"We are already seeing changes in the way healthcare is delivered," Glied says, "There is more use of non-physician professionals such as nurse practitioners and physician assistants to supplement physicians. There is more use of retail medicine options, more email and other encounters for accessing the medical system. We are seeing change over time. So, we shouldn't imagine that medicine is any less prone to organizational and systemic change than many of the other things that we have seen change around us."
Instead of fixating on inevitably longer wait times, Glied says providers need to re-examine how they do business.
"It is not right for us to say that we are being overwhelmed by patients. That is not what the data show," she says. "What the data show is this is in the hands of the medical profession to make access to care work from a patient's perspective. There are opportunities to do better."
The deal is expected to clear regulatory hurdles, but one observer says "a possible snare going forward is that insurers start to look at Ascension as less of a provider partner and more of an insurer competitor."
Together Health Network is a clinically integrated network that was formed in July 2014 as a collaboration of Ascension Health Michigan, Trinity Health, and physician groups across the state.
USHL, based in Sterling Heights, MI, operates in 20 states and specializes in providing insurance products for small employers. The company is authorized to sell plans under the Patient Protection and Affordable Care Act.
Requests for comment on the deal from St. Louis, MO-based Ascension were not immediately returned.
Allan Baumgarten, a healthcare analyst working in Michigan and throughout the Midwest, says the acquisition is not a surprise.
"There were reports last year that Ascension would acquire an insurer, but the focus then was on large players like WellCare and Centene," Baumgarten said by email.
"US Health and Life is a very small player—$67.6 million in 2013 revenues, 18,600 insured enrollees in 2014. The $50 million cash purchase price seems high, but maybe this is an acquisition where the value of the insurer is in its license in MI, WI, OH, IL and some other states where Ascension has major hospital holdings and is looking to offer its providers to self-funded employer groups or maybe get into commercial business."
Baumgarten says Ascension's joint network with Trinity Health in Michigan has an ACO-like arrangement with Blue Care Network in Michigan for its Michigan Medicare Advantage plans.
While the deal likely will clear regulatory hurdles, Baumgarten says "a possible snare going forward is that insurers start to look at Ascension as less of a provider partner and more of an insurer competitor."
CHC to Operate Jellico (TN) Community Hospital
Jellico Community Hospital, a 54-bed acute-care hospital in Jellico, TN, and its CarePlus Center, in Williamsburg, KY, on May 1 will enter into a new management relationship with Community Hospital Corporation, according to a joint media release.
Financial terms were not disclosed.
"We share JCH's compassion and mission 'to provide more than quality healthcare'," Mike Williams, CHC president/CEO said in prepared remarks. "Throughout our due diligence process, we've been very impressed with the quality of JCH physicians and employees and their commitment to providing excellent healthcare to this community."
With the JCH deal, CHC owns, manages, and consults with 21 community hospitals nationwide.
On May 1, 2014, Adventist Health System gave JCH one year's notice that it would end its lease with the City of Jellico. The JCH board examined several potential partners for strategic affiliation but last autumn voted unanimously to hold discussions only with CHC.
"We have been proud to serve the community of Jellico for 40 years, but the financial pressures and hardship of managing a small community hospital without the partnership and resources of a larger system within the region are no longer sustainable," Jimm Bunch, chairman of the JCH board said in prepared remarks. We are pleased that CHC will embrace and further our mission in this community."
CHC has also entered into a clinical affiliation agreement with Baptist Health, headquartered in Louisville, KY. CHC and Baptist Health already collaborate for long-term acute care through ContinueCARE Hospital at Baptist Health Corbin (KY), 30 miles north of Jellico.
"Increasingly, we are looking for relationships that can demonstrate the value and benefits of the Baptist Health network working in collaboration with local healthcare providers to deliver quality care close to home to better serve their communities," Baptist Health CEO Stephen Hanson said in the media release.
HealthLeaders Media Council members discuss implications for physician compensation in a value-based purchasing environment.
This article first appeared in the March 2015 issue of HealthLeaders magazine.
Scott D. Hayworth, MD
President and CEO
Mount Kisco (NY) Medical Group
We will have to do a major change in the next two or three years. We are waiting for the carriers to move toward value in our region. At that point we will have to redo our compensation system. For primary care, without a doubt, there will be some money for panel size, some money for seeing the patients or RVUs, some part for quality, value, some part for customer service, and then we reward citizenship as an organization. For the specialists, that is tougher. There will definitely be an RVU component and a value or cost component, citizenship, and customer service. The proportion of all of that will be determined as we get closer and we have a better view of what the world looks like.
We are a physician-owned multi-specialty group of 450 doctors. We prefer not to put people on straight salary. There has to be a substantial component for the right behavior. If it is only a small component, you will not get the behavior you want. Whatever you design with a compensation system, half the people are winners and half are losers. Because of that you have to have multiple meetings, lots of communication, and give people time to absorb it.
Thomas G. Lundquist, MD
Senior Vice President and Chief Medical Officer
Optima Health (Division of Sentara Healthcare)
Virginia Beach, VA
Physician compensation expectations aren't a problem, per se. Rather, physicians in large want to protect how they get paid based on what they know today. So we, as a health system–owned health plan, have to establish trust with providers as we think about paying them. It's not just the health plans supplying cost data and utilization data, but it's sharing that and having the physicians build disease registries and work within their electronic health records and share back with us so that we are having a bidirectional conversation and we are validating each other's data and making each other better.
A big thing we are focusing on is increasing the power of our analytics so we can move the ability to model these new global budgets or capitated population payments so that physicians can see them alongside a fee-for-service model they work under and then eventually pay them the better of the two models and eventually flip it over to the
full population.
As a payer we have to build the trust, show them the data, and then build a transparent payment model where they can see how they are going to win under it. Most important, we as a payer must help them win under these new payment mechanisms—not repeat the 1990s, but rather change the game going forward.
Lewis Marshall, MD
President, Medical Executive Committee
Brookdale Hospital Medical Center
Brooklyn, NY
On building the compensation criteria: The incentive payment will be based upon productivity (relative value units), citizenship, compliance with core measures, and Physician Quality Reporting System measures. The provider who is at 90% on the quality measures will get all of their incentive calculation and based upon RVU times citizenship as some percentage. As the quality measure compliance goes down, you get less and less incentives.
On the balance of volume and value: Value has to be part of the equation. We've been such a volume-driven hospital, both inpatient and outpatient, so it is going to take a little bit of work to get rid of it. We can't just cut it off tomorrow and say, “On January 1 we are no longer going to calculate on volume.” We will come up with some sort of volume calculation because we don't want to see volume drop.
On tailoring compensation: We are looking at tailoring the quality measures to the provider specialty. One issue we identified with volume-based incentives is that pediatricians can see a lot of low-acuity patients and can get a higher incentive if you're just doing a volume-based incentive as opposed to the internist who is spending more time with the more complex patients and having fewer visits. Using the quality measures, the citizenship, and the work RVUs we think will even the playing field so we are not having to make adjustments for particular specialties.
John E. Keelan
CEO
Brodstone Memorial Hospital
Superior, NE
As we grow into this value-based purchasing, with none of us all the way into it yet, we are already ahead of the game because of the way we are arranged now. In 2002 we bought the physician clinic in our little town. We thought at that time that the best way to bring the most comprehensive care to the people we serve at the most reasonable cost was by coming together, and them being able to recruit additional providers as the need arose to have them on hand.
We are still fee-for-service, but it goes into one pot. They get paid for it and we take ours. As we get into value-based purchasing, it will blend in easily for us. It's evolving, but we aren't there yet. I am still looking to see how it's all going to fall into place.
We focus on providing quality care and doing the best we can for our people. But it's going to be hard because the more you force people into value-based care, the more rural hospitals are going to close because they don't have the facilities or the providers to even do what we do now. So you are going to drive providers out of small areas, and I just don't see it working.
The fracas between advocates for rural hospitals and the drug industry over orphan drug pricing affects a small number of rural and freestanding cancer hospitals. It centers on whether Congress intended to exclude safety nets from discounted pricing.
Advocates for rural and safety net hospitals have stepped into the latest fray over the 340B drug pricing program.
Safety Net Hospitals for Pharmaceutical Access, America's Essential Hospitals, and the National Rural Health Association, have filed a joint amicus brief with the U.S. District Court in Washington, D.C., asking the court to toss a lawsuit brought forward by the drug industry that would block some rural hospitals and cancer hospitals from discounted prices on "orphan drugs" that are used to treat common conditions beyond their orphan designation.
Pharmaceutical Research and Manufacturers of America brought the suit against the Department of Health and Human Services, claiming that HHS incorrectly interpreted "the clear direction of Congress."
"At issue is the Health Resources and Services Administration's interpretation of the 340B orphan drug exemption, enacted as part of the Affordable Care Act," PhRMA General Counsel, Mit Spears said when the suit was filed.
"The ACA significantly expanded the type of entities that can access 340B discounts for prescription drugs," Speaks said. "To preserve incentives to invest in research and development of new treatments for rare diseases, the ACA expressly exempts manufacturers from having to provide these discounts on orphan drugs to newly eligible providers."
HHS has asked the court to dismiss the suit. PhRMA's response to the call for dismissal is due by the end of this month.
The rural and safety net advocates have challenged PhRMA's argument and claim that HRSA's guidance "must be upheld because the plain language of the statute limits the orphan drug exclusion only to orphan uses and does not sweep in the many non-orphan uses for which medications may be administered."
The case isn't getting much attention beyond the immediate players, in part because the legislation affects a small number of rural and freestanding cancer hospitals that were added to the 340B program in 2010.
For those hospitals, however, the stakes are high. Advocates say the court's ruling could determine if many of those hospitals remain open. They cite a recent survey that found that 63% of the affected hospitals reported using Herceptin at least half the time to treat the non-orphan conditions of breast and stomach cancer.
There is a history here. In 2013 the district court sided with PhRMA and vacated HRSA's legislative regulation of 340B after the court determined that Congress didn't grant that explicit authority. Undeterred, HRSA in July 2014 issued the same ruling but labeled it "interpretive" rather than legislative.
PhRMA cried foul and went back to the court.
"While we value the hard work and efforts of all agencies, it is important [that] federal agencies recognize and work within the bounds set by Congress," Spears said.
Safety net and rural advocates argue in their amicus brief that HHS is acting properly by issuing an "'interpretive rule' that is required by the statutory language that it interprets and, even if it were not compelled by the language of the statute, is a persuasive interpretation of that statute."
"HHS's interpretation promotes the two central goals embodied in this statutory scheme—lowering costs for hospitals while incentivizing the production of drugs to treat rare diseases or conditions," the amicus states.
"PhRMA would have this Court eliminate much of the program's benefit to these hospitals, turning a program intended to lower drug costs for hospitals into one that freezes the high cost of many of the most expensive, commonly used medications."
SNHPA Chief Counsel Maureen Testoni believes the federal government will prevail when the district court issues its ruling, which should occur sometime in the first half of this year.
"HHS is saying you don't get 340B if you are using an orphan drug for orphan purposes and the only reason Congress put that in there was to ensure that there isn't any hit on the orphan drug industry," she says. "You still protect when it is used for an orphan purpose, but not for a non-orphan purpose. It is completely consistent to read it the way HRSA has interpreted it."
From the perspective of this unaccredited bus bench attorney, HHS and the advocates have a strong argument with respect to the validity of the interpretive rule. If we are to agree with PhRMA, then we would have to ask what Congress intended if it specifically excluded this tiny subset of rural and cancer hospitals from the narrowly drawn parameters of the 340B program.
The answer, in my opinion, is that Congress did not intent to exclude them.
A projected 7% shortfall of primary care physicians by 2025 and a 19% shortfall of specialists is the result of a "misallocation" of places where graduate medical residency slots should be, says a Florida hospital CEO and executive at the Teaching Hospital Council of Florida.
Florida teaching and safety net hospitals are warning of a looming shortage of 7,000 physicians in the coming decade unless more medical residency programs are created, a new report shows.
While there is a general sense that Florida, and just about every other state, faces a physician shortage, the study commissioned by the Teaching Hospital Council of Florida and the Safety Net Hospital Alliance of Florida details a gloomy forecast for the Sunshine State.
The projections in the report conducted by IHS Global include a 7% shortfall of primary care physicians by 2025 under the current scenario. The estimate jumps to a 19% shortfall of physician specialists in 19 specialties, with the largest areas of need in psychiatry, general surgery, rheumatology, and thoracic surgery.
"In Florida, the shortage is caused by a combination of things," says Jim Burkhart, president and CEO of Tampa General Hospital, and vice-chair of the Teaching Hospital Council of Florida.
"We just passed New York as the third most-populous state. The number I heard today was that Florida is growing at the rate of 800 new residents per day. But we are 42nd in the number of residency slots we have per capita. That is a formula for disaster."
"The population is aging for all of us," says Burkhart, "so we are going to need more physicians in general. That means the physicians are aging, so many of them are going to age out and leave, so we have to replace them. So, add all that up and you can see why there is an exponential effect on the shortage of physicians in the State of Florida."
The Teaching Hospital/Safety Net Hospital study estimates that Florida would need to create and fill 13,568 residency positions to fully resolve the physician shortage by 2025. That would be about 1,360 new residency slots a year for the next decade.
The study also shows that Florida will face a 19% shortfall of physician specialists needed in 2025, compared with an overall 7% shortage of physicians. Shortfalls will exist to varying degrees across all regions, with the Panhandle and Southwest Florida having the most severe shortages of doctors in endocrinology, rheumatology, hematology, and other non-primary care areas.
The state's physician shortage has the attention of Gov. Rick Scott (R), a former healthcare executive, who proposed $80 million in 2013 to fund new Medicaid residency programs. In his latest budget, the governor has proposed increasing the funding by another $7.5 million.
"At some point in time, the federal government is going to need to address the misallocation that occurs with the existing formulas that are in place for where there graduate medical residency slots should be," he says.
"These residencies are disproportionately in the Northeast. People are leaving the Northeast. We just passed New York as the third most-populous state. New York gets $2 billion for graduate medical education. We get $200-and-something-million for graduate medical education. It's a problem and that misallocation needs to be addressed."
While much of the rhetoric around the physician shortage on the national stage has concentrated on the need for more primary care physicians to coordinate population health, Burkhart says policymakers should not ignore the need for specialists.
"It's not either/or. We are proposing that we do both," he says. "The primary care shortage is a little easier to address simply because you can train primary care physicians in a much broader number of facilities than specialists. You have to have highly specialized places to train thoracic surgeons or rheumatologists."
In addition, Burkhart says, the effect of the primary care shortage is more-easily mitigated with the use of physician assistants and nurse practitioners, and the growing popularity of retail-based urgent care and primary care medical services.
Tim Dall, a managing director at HIS and the author of the study, says the scope of practice of primary care physicians has to be weighed against the needs of the population.
"At the end of the day, if the patient has cancer or some other chronic condition, there is only so much a primary care physician can do," he says. "A primary care physician can help manage a disease, but you need a specialist to be involved. When the patient needs surgery there has to be a surgeon."