Madera Community Hospital in California's Central Valley, which ceased operations last December and filed for Chapter 11 bankruptcy in March, moved a step closer to reopening Thursday when California's new fund for troubled hospitals said it was prepared to offer the facility up to $52 million in interest-free loans.
The program is offering an additional $240.5 million in no-interest loans to 16 other troubled hospitals, including Beverly Community Hospital in Montebello and Hazel Hawkins Memorial Hospital in Hollister, both of which filed for bankruptcy earlier this year.
Hazel Hawkins will get a loan of $10 million, and Beverly will get a bridge loan of $5 million while it is being purchased out of bankruptcy by Adventist Health's White Memorial in Los Angeles, according to the state's Department of Health Care Access and Information, which unveiled the lending details Thursday.
Adventist Health has also agreed conditionally to manage Madera if it reopens. If all goes well it would take six to nine months to reopen, officials said.
Madera will get a bridge loan of $2 million to cover basic costs while Adventist Health, a large multistate health system with 22 hospitals in California, works on a "comprehensive hospital turnaround plan," the department said. Once such a plan is approved, Madera "can be eligible for an additional $50 million loan" from the distressed hospital program, it said.
For most of last year, Fresno-based St. Agnes Medical Center, part of the large Catholic hospital chain Trinity Health, appeared poised to rescue Madera Community Hospital from financial ruin in a planned acquisition that was approved by California Attorney General Rob Bonta. But Trinity walked away from the deal at the last minute with scant explanation, infuriating Bonta along with multiple other political leaders, community advocates, and health care officials.
Trinity, which had loaned Madera $15.4 million during their merger talks, became its largest creditor in the bankruptcy that ensued. At the time of its bankruptcy filing in March, Madera reported total debts of just over $30 million.
Adventist Health agreed last month to a nonbinding letter of intent to manage Madera. At the time, Kerry Heinrich, Adventist's president and CEO, said that if the shuttered hospital got the requisite financing, Adventist Health would use its expertise in "helping to secure a sustainable future for healthcare" in the county.
Adventist Health spokesperson Japhet De Oliveira said Thursday that his organization remains intent on doing so. Reopening Madera "would be a really good thing, and we will put every effort into making that happen," De Oliveira said. He added: "We will need all parties to be involved in developing the approved plan and negotiating the terms of management services."
Karen Paolinelli, the CEO of Madera Community Hospital, did not respond to emailed questions by publication time.
State political leaders representing the region expressed satisfaction with Thursday's news. "It brings me tremendous relief to know that Madera Community Hospital and Hazel Hawkins Memorial Hospital in San Benito County have received grant awards and will be able to ensure that community members can once again receive services in their own communities," said Sen. Anna Caballero, a Democrat who represents the areas in which those facilities are located.
The Adventist letter of intent for Madera said that in addition to paying off creditors in the bankruptcy, the hospital would need to secure $55 million in the first year to pay for all aspects of reopening, plus an additional $30 million in the second year.
The $52 million the state proposes lending to Madera is significantly short of the $80 million the hospital applied for. Assuming the full $52 million materializes, the total amount loaned to the 17 hospitals would be $292.5 million — nearly the entire $300 million available to the fund for fiscal years 2023 and 2024. The program is scheduled to end after 2031.
With $52 million from the state, Madera Community Hospital would still need to find an additional $33 million. Madera said in a bankruptcy court filing earlier this year that it expects just over $33 million in revenues from "provider fees" and from the Federal Emergency Management Agency.
The law that created the distressed hospital loan fund, AB 112, initially provided for $150 million in lending to help troubled hospitals, mostly rural ones, that faced the risk of closing. Another $150 million was later added to the pot. Small hospitals across the state — and the country — have been buffeted by the ill economic winds of the covid-19 pandemic, which ratcheted up the cost of drugs, supplies, and labor.
Hospital industry officials have also pointed to low payment rates by government programs, especially Medi-Cal, California's Medicaid program, which they say has saddled many hospitals with financial losses.
Madera made the same argument, but state data shows it received enough supplemental payments to earn nearly $15 million from Medi-Cal in 2021, though it lost over $11 million treating Medicare patients.
The hospitals awarded the largest loans by the distressed hospital fund are Tri-City Medical Center in Oceanside, with $33.2 million; Dameron Hospital Association in Stockton, with $29 million; Pioneers Memorial Healthcare District in Imperial County, with $28 million; and El Centro Regional Medical Center, with $28 million.
Sally Nix was furious when her health insurance company refused to pay for the infusions she needs to ease her chronic pain and fatigue.
Nix has struggled with a combination of autoimmune diseases since 2011. Brain and spinal surgeries didn't ease her symptoms. Nothing worked, she said, until she started intravenous immunoglobulin infusions late last year. Commonly called IVIG, the treatment bolsters her compromised immune system with healthy antibodies from other people's blood plasma.
"IVIG turned out to be my great hope," she said.
That's why, when Nix's health insurer started denying payment for the treatment, she turned to Facebook and Instagram to vent her outrage.
"I was raising Cain about it," said Nix, 53, of Statesville, North Carolina, who said she was forced to pause treatment because she couldn't afford to pay more than $13,000 out of pocket every four weeks. "There are times when you simply must call out wrongdoings," she wrote on Instagram. "This is one of those times."
Prior authorization is a common cost-cutting tool used by health insurers that requires patients and doctors to secure approval before moving forward with many tests, procedures, and prescription medications. Insurers say the process helps them control costs by preventing medically unnecessary care. But patients say the often time-consuming and frustrating rules create hurdles that delay or deny access to the treatments they need. In some cases, delays and denials equal death, doctors say.
That's why desperate patients like Nix — and even some physicians — say they have turned to publicly shaming insurance companies on social media to get tests, drugs, and treatments approved.
"Unfortunately, this has become a routine practice for us to resort to if we don't get any headway," said Shehzad Saeed, a pediatric gastroenterologist at Dayton's Children's Hospital in Ohio. In March, he tweeted a photo of an oozing skin rash, blaming Anthem for denying the biologic treatment his patient needed to ease her Crohn's disease symptoms.
In July, Eunice Stallman, a psychiatrist based in Idaho, joined X, formerly known as Twitter, for the first time to share how her 9-month-old daughter, Zoey, had been denied prior authorization for a $225 pill she needs to take twice a day to shrink a large brain tumor. "This should not be how it's done," Stallman said.
The federal government has proposed ways to reform prior authorization that would require insurance companies to provide more transparency about denials and to speed up their response times. If finalized, those federal changes would be implemented in 2026. But even then, the rules would apply only to some categories of health insurance, including Medicare, Medicare Advantage, and Medicaid plans, but not employer-sponsored health plans. That means roughly half of all Americans wouldn't benefit from the changes.
The 2010 Patient Protection and Affordable Care Act prohibits health insurance plans from denying or canceling coverage to patients due to their preexisting conditions. AHIP, an industry trade group formerly called America's Health Insurance Plans, did not respond to a request for comment.
But some patient advocates and health policy experts question whether insurers are using prior authorization as "a possible loophole" to this prohibition, as a way of denying care to patients with the highest health care costs, explained Kaye Pestaina, a KFF vice president and the co-director of its Program on Patient and Consumer Protections.
"They take in premiums and don't pay claims. That's how they make money," said Linda Peeno, a health care consultant and retired Kentucky physician who was employed as a medical reviewer by Humana in the 1980s and later became a whistleblower. "They just delay and delay and delay until you die. And you're absolutely helpless as a patient."
"Nobody is saying we should get rid of it entirely," said Todd Askew, senior vice president for advocacy at the American Medical Association, in advance of the group's annual meeting in June. "But it needs to be right-sized, it needs to be simplified, it needs to be less friction between the patient and accessing their benefits."
Customers are increasingly using social media to air their complaints across all industries, and companies are paying attention. Nearly two-thirds of complainants reported receiving some sort of response to their online post, according to the 2023 "National Consumer Rage Survey," conducted by Customer Care Measurement & Consulting in collaboration with Arizona State University.
Some research suggests companies are better off engaging with unhappy customers offline, rather than responding to public social media posts. But many patients and doctors believe venting online is an effective strategy, though it remains unclear how often this tactic works in reversing prior authorization denials.
"It's not even a joke. The fact that that's how we're trying to get these medications is just sad," said Brad Constant, an inflammatory bowel disease specialist who has published research on prior authorization. His work found that prior authorizations are associated with an increased likelihood that children with inflammatory bowel disease will be hospitalized.
Saeed said the day after he posted the picture of the skin rash, the case was marked for a peer-to-peer review, meaning the prior authorization denial would get a closer look by someone at the insurance company with a medical background. Eventually, the biologic medicine Saeed's patient needed was approved.
Stallman, who is insured through her employer, said she and her husband were prepared to pay out of pocket if Blue Cross of Idaho didn't reverse the denial for the drug Zoey needed.
Bret Rumbeck, a spokesperson for the insurer, said Zoey's medication was approved on July 14 after the company consulted an outside specialist and obtained more information from Zoey's doctor.
Stallman posted details about the ordeal online only after the insurer approved the drug, in part, she said, to prevent them from denying the treatment again when it comes up for a 90-day insurance review in October. "The power of the social media has been huge," she said.
Nix had been insured by Blue Cross Blue Shield of Illinois through her husband's employer for almost two decades. Dave Van de Walle, a spokesperson for the company, did not specifically address Nix's case. But in a prepared statement, the company said it provides administrative services for many large employers who design and fund their own health insurance plans.
Nix said an "escalation specialist" from the insurance company reached out after she posted her complaints on social media, but the specialist couldn't help.
Then, in July, after KFF Health News contacted Blue Cross Blue Shield of Illinois, Nix logged in to the insurer's online portal and found that $36,000 of her outstanding claims had been marked "paid." No one from the company had contacted her to explain why or what had changed. She also said she was informed by her hospital that the insurer will no longer require her to obtain prior authorization before her infusions, which she restarted in late July.
"I'm thrilled," she said. But "it just should never have happened this way."
Do you have an experience with prior authorization you'd like to share? Click here to tell your story.
CARROLLTON, Ala. — Annie Jackson can't know whether her sister Grena Prude might have survived had an ambulance been more readily available when she went into cardiac arrest on May 10. But Jackson is convinced her sister would have at least had a chance.
Prude, 55, died at the steps of Carrollton City Hall, less than a half-mile from her county's only ambulance station. When someone called 911 to get her help, two ambulances were on duty: One was transporting a patient to Tuscaloosa, Alabama, 45 minutes away, and the other a patient to Columbus, Mississippi, a 30-minute drive.
"It was a horrible situation," said Vicky McCrory, supervisor of the nonprofit Pickens County Ambulance Service, but not an isolated one. There have been multiple similar tragedies.
That single ambulance station in Carrollton serves all of Pickens County, dispatching one and sometimes two ambulances to serve just under 20,000 residents spread across 900 square miles. The farthest reaches of the county line are 25 to 30 miles away on two-lane country roads.
In rural areas where hospitals have shuttered, like Pickens County, the nearest surviving facilities are long drives away, ambulance coverage is sparse, and residents in the throes of medical emergencies often find their situations even more precarious.
In May, the rural health research and policy centers released the results of an effort by the Maine Rural Health Research Center to document coverage gaps in the availability of ambulance services across the country — what the researchers refer to as "ambulance deserts." They define those deserts as places where people live more than 25 minutes from the nearest station.
The study found that in the 41 states for which data was available, 4.5 million people lived in an ambulance desert. Six in 10 lived in the South. Alabama had 315,000 people living at such a distance, ranking second highest behind North Carolina.
But a closer look into emergency services in Pickens County reveals a grimmer situation. In March 2020, the 56-bed Pickens County Medical Center shut its doors, with administrators citing an unsustainable financial situation and a declining patient volume.
Those living along the periphery of Pickens County must wait nearly a half-hour for an ambulance to arrive. Patients must then ride up to an hour to reach a hospital, in either Tuscaloosa or Columbus.
State Route 86 runs through downtown Carrollton, past the courthouse and City Hall. To the north are the tapering hills of Appalachia; to the south, the Black Belt region.
"Everybody here knows everybody," said Terrence Windham, mayor of Aliceville, a town roughly 10 miles south of Carrollton. And, seemingly, everyone has heard of the death of Grena Prude.
Julia Boothe is a longtime family physician in the town of Reform, situated about 10 miles north of Carrollton, and a recent president of the state medical association.
Boothe said it's not uncommon for people to decide there's no point in calling 911. Some instead show up in her office in a condition well beyond what "a family medicine practice in a rural area of 1,500 people" is equipped to handle.
"People don't understand the severity of what's going on" in these rural areas, she said.
At one time, the county had the resources to deploy three ambulances.
"Now," McCrory said, "we're lucky to have one unit." The closure of the hospital, she said, has meant a loss of some $250,000 a year in revenue for the ambulance service.
Further, Boothe said, "the stress and strain" of working in the county make it difficult to recruit emergency medical crews — not to mention health care providers of any specialty.
This critical shortage of services reflects what's happened to so many rural communities across the U.S. after decades of dwindling resources.
In 1979, when Bill Curry returned home to Pickens County to practice medicine, funeral homes provided the only ambulance service.
"A hearse, literally, would come to the scene of an auto accident or to somebody's house or wherever there was a need for somebody to get transported to a hospital," recalled Curry, now a professor emeritus of medicine at the University of Alabama-Birmingham. "The training was pretty minimal, and the interventions were almost none. It was just pick up and go."
"When we developed the hospital, we said, ‘Well, we really need a modern ambulance service, and so that's how we came up with what they have today," Curry said.
James Parker grew up in Pickens County; his dad ran a feed-and-seed store and raised cattle. Parker had mentors growing up, including Curry, who were prominent in the community and pillars of the hospital. They allowed him to shadow them and nudged him into medicine. He returned home after graduating from medical school in 2000 and has been practicing there since. He laments the loss of the hospital.
"You know, folks love to call a little hospital a band-aid station, but that's a big band-aid that worked," Parker said. "So many success stories of our little hospital."
But with advances in medical technology — allowing more procedures to be performed on an outpatient basis — and an unfavorable payer mix, the old model was deemed no longer feasible.
Community leaders believed they had a viable plan to revitalize the hospital. "I thought it was an excellent option," Boothe said. They requested $10 million from the state legislature — which then became $8 million — to reopen the emergency room and operate an adolescent mental health facility that would serve kids from across the state.
Here, it seemed, was the answer to a need for Pickens County and beyond. Boothe has had young patients who "sat in emergency rooms for over seven days waiting on an admission to an adolescent bed." Some ultimately had to be transferred out of the state.
The $8 million was still in the state budget when it passed the House in April, but, in the eleventh hour, the Senate scuttled the cash infusion.
The issues related to the need for rural emergency care highlight another concern. The authors of the May report on ambulance deserts wrote that the "declining numbers of rural hospitals and ambulance services imply that remaining ambulance services are being tasked to play a greater role in delivering more sophisticated emergency services."
"Ambulance services were never intended to take the place of emergency departments," McCrory said. "I just feel like health care all the way around is failing here, and in other rural areas, too."
The researchers also noted the fragmented nature of ambulance services, particularly in rural areas.
Boothe talks of a potential solution whereby three ambulance stations would be spaced across Pickens County and Lamar County, on its northern border. But that's not an easy maneuver.
"Of all the poorly designed aspects of our health care system," said Alan Morgan, CEO of the National Rural Health Association, "EMS is tops."
On a sweltering day in late July, several dozen Pickens County residents and officials traveled 2½ hours to the Alabama Statehouse in Montgomery. They stood on the steps to protest lawmakers' decision not to fund their hospital.
Aliceville Mayor Windham was among them. There's a sense in Pickens County that rural communities such as his don't show up on the radar in Montgomery, he said. He and his neighbors' ongoing mission "is to let the Alabama Legislature know that we are real, live human beings — and we are really suffering."
Morgan, of the rural health association, has witnessed the ripple effects of the loss of essential rural health care services — the consequences for a community's health and the health of its economy. "Rural health care," he said, "is like a tundra. You trample on it, it's really tough to get it to come back."
Annie Jackson joined her neighbors on the steps of the state Capitol that July morning. After traveling hours away from home, she stepped off a chartered bus in downtown Carrollton, less than a hundred yards from where her sister Grena died. She paused and pointed up the road toward the nearby West Alabama Animal Hospital.
"We have our animal hospital up here," Jackson said. "The animals have a hospital. But we do not. What does that say for us?"
Federal officials are trying to clamp down on private arrangements among some hospitals to pay themselves back for the Medicaid taxes they’ve paid. State health officials and the influential hospital industry argue that regulators have no jurisdiction over the agreements.
by Samantha Young
The Biden administration wants to crack down on private arrangements among some hospitals to reimburse themselves for taxes that help fund coverage for low-income people. It contends the practice violates federal law.
Federal regulators say these arrangements “appear designed to” redirect Medicaid dollars away from facilities that treat the poorest patients to those that “provide fewer, or even no, Medicaid-covered services,” according to a proposed enforcement plan released May 3 by the Centers for Medicare & Medicaid Services.
The practice is typically orchestrated by the lobbying groups that represent hospitals in state capitals — and is often kept secret. Not even federal regulators know how widespread it is, although programs operate in at least a few states, including California and Missouri. It’s also the subject of a Texas lawsuit that could block the federal government’s proposal.
“It does seem like these associations are finding a way to distribute the money in a really weird way,” said Joshua Gordon, the director of health policy for the Committee for a Responsible Federal Budget in Washington, D.C. “But without the transparency, we don’t exactly know what’s going on.”
Previous efforts to block these payback arrangements have gone nowhere in the face of opposition from the powerful health care industry and state health officials who fear that clamping down could result in less money for Medicaid, the joint state-federal health insurance program for low-income people. Several Medicaid experts predicted the latest proposal could meet the same fate, or face immediate court challenges if adopted.
The federal government’s sweeping and contentious proposal would require states to police hospitals, nursing homes, and other health care providers to ensure they made no private agreements to redistribute Medicaid dollars.
Public and private hospitals argue CMS has no jurisdiction to regulate private transactions and has overstepped its legal authority. Together with state health officials from around the country, they warn the move could strip billions of federal dollars from Medicaid and threaten safety-net coverage for 94 million low-income people. Texas alone could lose $6 billion a year, according to Texas Health and Human Services.
KFF Health News attempted to interview state health leaders and hospital association officials around the country, but they declined to comment or did not respond to repeated calls and emails.
The federal government’s proposal is part of a broader Medicaid financing package, and it resurrects a long-standing effort by administrations of both parties over the years to rein in Medicaid spending — which ballooned to $734 billion in 2021.
In this case, regulators are targeting what are known as provider taxes, which states are increasingly imposing on hospitals, nursing homes, and other health care providers to help states pay for their share of the Medicaid program. The more provider taxes states levy, the more money they can also get in federal funding.
These taxes are a critical source of revenue that all states except Alaska rely on for their Medicaid programs — and to get federal matching Medicaid dollars. They account for 17% of state Medicaid funding in 2018, according to a 2020 report by the Government Accountability Office, which called for more transparency in how the money is collected and spent.
In California, hospitals have redistributed provider tax funds since 2009. Here’s how it works: Hospitals with a significant share of low-income patients get more Medicaid funding back than they pay in the tax, so they donate a small portion of their Medicaid funding to a charity run by the leadership of the California Hospital Association, a statewide lobbying organization. The charity awards grants to the hospitals that treat a smaller share of low-income patients and don’t receive as much funding back as they paid in taxes.
For instance, Cedars-Sinai in Los Angeles, one of the country’s richest hospitals, paid nearly $172 million in provider taxes in 2022, eclipsing the $151 million it got back in Medicaid dollars. Then, it received nearly $28 million from the hospital association’s charity — earning about $6.9 million from the program, the hospital’s audited financial statements show.
Meanwhile, faith-based Adventist Health, which serves a larger share of poor people and operates roughly two dozen hospitals in California, Oregon, and Hawaii, paid $148 million in taxes in 2022 and reaped $401 million in Medicaid dollars through the program, according to its independently audited financial statements. It then contributed $3 million of that Medicaid money to the charity.
Federal law sets stringent rules for provider taxes: They must be broad-based and apply to all providers within a certain category, like hospitals; providers within a state must be taxed at the same rate; and taxes can’t be returned directly or indirectly to providers as part of a “hold harmless” agreement.
It’s that last clause that has spurred the feds to act.
Regulators say some health care providers, to gain the needed support within their ranks for the tax, are moving the tax money — and the federal revenue it draws to states — among themselves.
“We believe providers with relatively higher Medicaid volume agree to redistribute some of their Medicaid payments to ensure broad support for the tax program,” they wrote in their proposal.
These agreements “undermine the fiscal integrity” of the Medicaid program, they wrote.
It’s unclear how widespread such agreements are because hospitals don’t make them public. CMS said it has identified “instances” of Medicaid redistribution payments, but spokesperson Greg Myers declined to elaborate.
Jonathan Williams, vice president of government affairs at Sutter Health, which operates about 20 hospitals across Northern California, argued in a June 30 letter to the federal agency that these arrangements help hospitals expand “care networks and afford necessary incentives to ensure that providers can continue caring for Medicaid beneficiaries with unique and specific care needs.”
Missouri’s hospital association also runs a “pooling arrangement,” in which hospitals that get more Medicaid money than they paid in taxes can donate funds to the hospitals that didn’t.
“Missouri providers have had various private agreements to redistribute funds among themselves for decades, with the full knowledge and approval of CMS,” according to an unsigned and undated letter to the agency from the MO HealthNet Division, which runs the state’s Medicaid program.
In 2002, Missouri got federal approval for its redistribution program by pledging to use the funds for Medicaid services, whereas California has not received approval.
The federal government’s plan would require states to get health care providers to attest that they don’t participate in any arrangement that violates federal law. State officials described the proposal as an impractical administrative burden that could dissuade hospitals, nursing homes, and other providers from participating in Medicaid altogether. “Imposing additional requirements on providers that participate in Medicaid managed care networks would only serve to further dissuade network participation, which will have a negative impact on member access to care,” Mike Levine, the assistant secretary for MassHealth, Massachusetts’ Medicaid program, wrote to CMS on July 3.
Texas, which has long tangled with the federal agency over how it funds its Medicaid program, sued in federal court earlier this year after the agency declared in a separate letter to states that these types of arrangements aren’t allowed and must be reported. The letter was sent in February, before the agency issued its formal proposal.
In June, a federal judge handed Texas and its health care industry a victory, temporarily delaying the reporting requirement that regulators had outlined in their February letter. The judge agreed with Texas that the agency had exceeded its legal authority and couldn’t regulate private agreements.
State health officials and hospital leaders are pointing to the Texas court case as evidence that the agency’s May proposal to crack down on the redistribution of Medicaid funds is a “widely controversial interpretation” of the law, as the Tennessee Hospital Association put it in a July 3 letter to CMS.
Federal regulators have not said if or when they will implement their plan. The last time the agency issued a sweeping Medicaid financing proposal, it withdrew it almost a year later.
Mark McClellan, who served as head of the Centers for Medicare & Medicaid Services for two years during the George W. Bush administration, predicted states and Congress would push back hard if the new proposal moved forward.
“Medicaid is a huge component of state spending and keeps getting bigger,” McClellan said. “So, sudden CMS changes or clamping down is going to be disruptive for state coverage.”
Last year's Inflation Reduction Act included what on its face seems a modest proposal: The federal government would for the first time be empowered to negotiate prices Medicare pays for drugs — but only for 10 very expensive medicines beginning in 2026 (an additional 15 in 2027 and 2028, with more added in later years). Another provision would require manufacturers to pay rebates to Medicare for drug prices that increased faster than inflation.
Those provisions alone could reduce the federal deficit by $237 billion over 10 years, the Congressional Budget Office has calculated. That enormous savings would come from tamping down drug prices, which are costing an average of 3.44 times — sometimes 10 times — what the same brand-name drugs cost in other developed countries, where governments already negotiate prices.
These small steps were an attempt to rein in the only significant type of Medicare health spending — the cost of prescription drugs — that has not been controlled or limited by the government. But they were a call to arms for the pharmaceutical industry in a battle it assumed it had won: When Congress passed the Medicare prescription drug coverage benefit (Part D) in 2003, intense industry lobbying resulted in a last-minute insertion prohibiting Medicare from negotiating those prices.
Without any guardrails, prices for some existing drugs have soared, even as they have fallen sharply in other countries. New drugs — some with minimal benefit — have enormous price tags, buttressed by lobbying and marketing.
AZT, the first drug to successfully treat HIV/AIDS, was labeled "the most expensive drug in history" in the late 1980s. Its $8,000-a-year cost was derided as "inhuman" in a New York Times op-ed. Now, scores of drugs, many with much less benefit, cost more than $50,000 a year. Ten drugs, mostly used to treat rare diseases, cost over $700,000 annually.
Pharmaceutical manufacturers say high U.S. prices support research and development and point out that Americans tend to get new treatments first. But recent research has shown that the price of a drug is related neither to the amount of research and development required to bring it to market nor its therapeutic value.
And selling drugs first in the U.S. is a good business strategy. By introducing a drug in a developed country with limited scrutiny on price, manufacturers can set the bar high for negotiating with other nations.
Here are just a few of the many examples of drug pricing practices that have driven consumers to demand change.
Exhibit A is Humira, the best-selling drug in history, earning AbbVie $200 billion over two decades. Effective in the treatment of various autoimmune diseases, its core patent — the one on the biologic itself — expired in 2016. But for business purposes, the "controlling patent," the last to expire, is far more important since it allows an ongoing monopoly.
AbbVie blanketed Humira with 165 peripheral patents, covering things like a manufacturing step or slightly new formulation, creating a so-called patent thicket, making it challenging for generics makers to make lower-cost copycats. (When they threatened to do so, AbbVie often offered them valuable deals not to enter the market.) Meanwhile, it continued to raise the price of the drug, most recently to $88,000 a year. This year, Humira-like generics (called biosimilars for its type of molecule) are entering the U.S. market; they have been available for a fraction of the price in Europe for five years.
Or take Revlimid, a drug by Celgene (now part of Bristol Myers Squibb), which treats multiple myeloma. It won FDA approval to treat that previously deadly disease in 2006 at about $4,500 a month; today it retails at triple that. Why? The company's CEO explained price hikes were simply a "legitimate opportunity" to improve financial "performance."
Since it must be taken for life to keep that cancer in check, patients who want to live (or their insurers) have had no choice but to pay. Though Revlimid's patent protection ran out in 2022, Celgene avoided meaningful price-cutting competition by offering generic competitors "volume-limited licenses" to its patents so long as they agreed to initially produce a small share of the drug's $12 billion monopoly market.
Par Pharmaceutical, another drugmaker, maneuvered to create a blockbuster market out of a centuries-old drug, isoproterenol, through a well-meaning FDA program that gave companies a three-year monopoly in exchange for performing formal testing on drugs in use before the agency was formed.
During those three years, Par wrapped its branded product, Vasostrict, used to maintain blood pressure in critically ill patients, with patents — including one on the compound's pH level — extending its monopoly eight additional years. Par raised the price by 5,400% between 2010 and 2020. When the covid-19 pandemic filled intensive care units with severely ill patients, that hike cost Americans $600 million to $900 million in the first year.
And then there is AZT and its successors, which offer a full life to HIV-positive people. Pills today contain a combination of two or three medicines, the vast majority including one similar to AZT, tenofovir, made by Gilead Sciences. The individual medicines are old, off-patent. Why then do these combination pills, taken for life, sometimes cost $4,000 monthly?
It's partly because many manufacturers of the combination pills have agreements with Gilead that they will use its expensive branded version of tenofovir in exchange for various business favors. Peter Staley, an activist with HIV, has been spearheading a class-action suit against Gilead, alleging "collusion." The negotiated price for these pills is hundreds of dollars a month in the United Kingdom, not the thousands charged in the U.S.
Faced with such tactics, 8 in 10 Americans now support drug price negotiation, giving Congress and the Biden administration the impetus to act and to resist Big Pharma's legal challenges, which many legal experts view as a desperate attempt to stave off the inevitable.
"I don't think they have a good legal case," said Aaron Kesselheim, who studies drug pricing at Harvard Medical School. "But it can delay things if they can find a judge to issue an injunction." And even a year's delay could translate into big money.
Yes, American patients are lucky to have first access to innovative drugs. And, sadly, patients in countries that refuse to pay up once in a while go without the latest treatment. But more sadly, polling shows, large numbers of Americans are forgoing prescribed medicines because they can't afford them.
PUEBLO, Colo. — As 41% of American adults face medical debt, residents of this southern Colorado city contend their local nonprofit hospitals aren't providing enough charity care to justify the millions in tax breaks they receive.
The two hospitals in Pueblo, Parkview Medical Center and Centura St. Mary-Corwin, do not pay most federal or state taxes. In exchange for the tax break, they are required to spend money to improve the health of their communities, including providing free care to those who can't afford their medical bills. Although the hospitals report tens of millions in annual community benefit spending, the vast majority of that is not spent on the types of things advocates and researchers contend actually create community benefits, such as charity care.
And this month, four U.S. senators called on the Treasury's inspector general for tax administration and the Internal Revenue Service to evaluate nonprofit hospitals' compliance with tax-exempt requirements and provide information on oversight efforts.
The average hospital in the U.S. spends 1.9% of its operating expenses on charity care, according to an analysis of 2021 data by Johns Hopkins University health policy professor Ge Bai. Last year, Parkview provided 0.75% of its operating expenses, about $4.2 million, in free care.
Centura Health, a chain of 20 tax-exempt hospitals, reports its community benefit spending to the federal government in aggregate and does not break out specific numbers for individual hospitals. But St. Mary-Corwin reported $2.3 million in charity care in fiscal year 2022, according to its state filing. The filing does not specify the hospital's operating expenses.
The low levels of charity care have translated into more debt for low-income residents. About 15% of people in Pueblo County have medical debt in collections, compared with 11% statewide and 13% nationwide, according to 2022 data from the Urban Institute. Those Puebloans have median medical debt of $975, about 40% higher than in Colorado and the U.S. as a whole. And all of those numbers are worse for people of color.
"How far into debt do people have to go to get any kind of relief?" said Theresa Trujillo, co-executive director at the Center for Health Progress' Pueblo office. "Once you understand that there are tens of millions of dollars every single year that hospitals are extracting from our communities that are meant to be reinvested in our communities, you can't go back from that without saying, ‘Oh my gosh, that is a thread we need to pull on.'"
Trujillo is organizing a group of fed-up residents to engage both hospitals on their community benefit spending. The group of at least a dozen residents believe the hospitals are ignoring the needs identified by the community — things like housing, addiction treatment, behavioral health care, and youth activities — and instead spending those dollars on things that mainly benefit the hospitals and their staffs.
For the fiscal year ending June 2022, with total revenue of $593 million, Parkview reported $100 million in community benefit spending. But most of that — more than $77 million — represented the difference between the hospital's cost of providing care and what Medicaid paid for it.
IRS guidelines allow hospitals to claim Medicaid shortfall as a community benefit, but many academics and health policy experts argue such balance sheet shifts aren't the same as providing charity care to patients.
Parkview also reported $4.7 million for educating its medical staff and $143,000 in incentives to recruit health professionals as community benefit. The hospital spent only $44,000 on community health improvement projects, which appear to have consisted mainly of launching a new mobile app to streamline appointments and referrals.
Meanwhile, the hospital recently spent $58 million on a new orthopedic facility and $43 million on a new cancer center. Parkview also wrote off $39 million in bad debt in fiscal 2022, although that is different from charity care. The bad debt is money the hospitals tried to collect from patients and ultimately decided they'd never get. But by that time, those patients would likely have been sent to collections and potentially had their credit damaged. And outstanding debt often keeps patients from seeking other needed care.
There is a disconnect between what the community said its biggest health needs were and where Parkview directed its spending. The hospital's community needs assessment pegged access to care as the top concern, and the hospital said it launched the phone app in response.
The second-largest perceived health need was addressing alcohol and drug use. Yet, the only initiative Parkview cited in response was posting preventive health videos online, including some on alcohol and drug use. Meanwhile, the hospital shut down its inpatient psychiatric unit.
Parkview declined to answer questions about its charity care spending, but hospital spokesperson Todd Seip emailed a statement saying the hospital system "has been committed to providing extensive charity care to our community."
Seip noted that 80% of Parkview's patients are covered by Medicare or Medicaid, which pay lower rates than commercial insurance. The hospital posted a net loss of $6.7 million in the 2022 fiscal year, although its charity care wasn't appreciably higher in previous years in which it posted a net gain.
Centura St. Mary-Corwin reported $16 million in Medicaid shortfall and $2 million in medical staff education in 2022, according to its state filing. The hospital spent about $38,000 for its community health improvement projects, primarily on emergency medical services outreach programs in rural areas. The hospital provided another $96,000 in services, mainly to promote covid-19 vaccination.
Centura also declined to answer questions about its charity care spending. Hospital spokesperson Lindsay Radford emailed a statement saying St. Mary-Corwin was aligning its community health needs assessment process with the Pueblo Department of Public Health and Environment "to develop shared implementation strategies for our community benefit funds, ensuring the resources are targeting the highest needs."
Trujillo questioned how the hospital has conducted its community health assessments, relying on a social media poll to identify needs. After community members identified 12 concerns, she said, hospital leaders chose their priorities from the list.
"They talk about a community garden like they're feeding the whole south side of the community," Trujillo said. The hospital established a community garden in 2021, with 20 beds that could be adopted by residents to grow vegetables. Trujillo did praise the hospital for converting part of its building into dorms for a community college nursing program.
Trujillo's group has spent much of the summer researching hospital charity spending and showing up at public meetings to have their views heard. They are working to gain seats on hospital and other state boards that influence how community benefit dollars are spent, and are urging hospitals to reconfigure their boards to better represent the demographics of their communities.
"We've made folks now aware that we want to be a part of those processes," Trujillo said. "We're willing to help them reach deeper into the community."
Tax-exempt hospitals have been under increased state scrutiny for their charitable spending, especially after the Affordable Care Act and Medicaid expansion drove down the uninsured rate. That in turn cut the amount of care hospitals had to provide without being paid, potentially freeing up money to help more people without insurance or with high-deductible plans.
In Colorado, hospitals' charity care spending and bad debt write-offs dropped from an average of $680 million a year in the five years prior to the ACA being fully implemented in 2014 to an average of $337 million in the years after, according to the Colorado Healthcare Affordability and Sustainability Enterprise Board, a state advisory group.
In states like Colorado, which used federal funding to expand the number of people covered by Medicaid, hospitals shifted more of their community benefit spending to cover Medicaid reimbursement shortfalls.
A January report from Colorado's Department of Health Care Policy & Financing concluded that payments from public and private health plans help the state's hospitals make more than enough money to offset lower Medicaid rates and still turn a profit while providing more true charity care.
Colorado has enacted two bills in the past five years to increase the transparency of hospitals' charitable efforts with new reporting requirements.
"I think overall, we're pleased with the amount of money that hospitals are reporting they spent," said Kim Bimestefer, the executive director of the Department of Health Care Policy & Financing. "Is that money being expended in meaningful ways, ways that improve health and well-being of the community? Our reports right now can't determine that."
TULSA, Okla. — When Lou Ellen Horwitz first learned that a gas station company was going to open a chain of urgent care clinics, she was skeptical.
As CEO of the Urgent Care Association, Horwitz knows the industry is booming. Its market size has doubled in 10 years, as patients, particularly younger ones, are drawn to the convenience of the same-day appointments and extended hours offered by the walk-in clinics.
"Urgent care is harder than it looks," Horwitz recalled thinking when the Tulsa-based gas station and convenience store company QuikTrip announced an urgent care venture called MedWise in late 2020. "And that's a whole different ballgame than selling Funyuns."
But Horwitz said the more she thought about it, the more she saw an overlap between the business models of QuikTrip and of successful urgent care clinics: setting up in easy-to-find locations, catering to walk-ins, and accepting multiple payment methods, for example. QuikTrip opening health clinics might just make sense, she thought, provided they could deliver quality medical care.
In fact, QuikTrip had been providing primary care services to its own employees for years, through third parties and eventually at its own clinics. Five years ago, longtime "QuikTripper" Brice Habeck was tasked with leading a team to figure out how the company could offer such medical services to the general public, too. His team quickly realized that urgent care had a lot in common with their retail spaces.
"It's about access. It's about convenience," said Habeck, who started his career as a clerk at a QT, as the stores are often branded, and is now the executive director of MedWise.
MedWise has opened 12 clinics so far, all in the Tulsa area, and now belongs to Horwitz's trade group. The company is owned by QuikTrip, but the two businesses don't share buildings or a name. As much as people love the gas station, Habeck said, company leaders didn't want patients to think the person checking their vitals had just wiped down a gas pump.
QuikTrip is not the first company to see potential in the urgent care industry. Private equity firms have been investing in urgent care's consumer-friendly niche for over a decade. And nearly half of urgent cares are affiliated with hospital systems — which often see urgent care as a front door for bringing in new patients while also taking some burden off their busy emergency rooms.
Other retailers have also seen opportunities in expanding into patient care. Walmart, Target, CVS, and Walgreens have all opened what are called "retail clinics" in recent years, often in their existing stores and often partnering with local health systems to provide the actual medical care. Generally, the scope of services available at urgent care centers, such as MedWise clinics, is more robust than what's offered at those retail clinics, according to Horwitz.
But urgent care and retail clinics may not be a panacea for rising health care costs. A study co-authored by Harvard Medical School health policy professor Ateev Mehrotra shows urgent care clinics reduce less serious visits to the emergency room, yet 37 urgent care visits are needed to prevent a single trip to the ER, increasing total health care spending with all those trips.
And ongoing research by Vanderbilt University assistant professor Kevin Griffith suggests that newly constructed urgent care or retail clinics can decrease wait times at nearby private and public sector health centers initially. Eventually, however, the increased access provided by the new clinics increases demand as well, he is finding, and wait times creep back up.
"It's kind of like the 'build it and they will come' of health care," said Griffith, adding that even though the clinics may not decrease wait times long-term or reduce costs, they are getting patients seen. "There is a huge problem with unmet care in the United States. And so ostensibly, these clinics are making a dent into that problem as well."
The experience of some retail clinics is a cautionary tale for companies like MedWise, according to Mehrotra: Disrupting the health care industry is easier said than done, even for businesses with a successful track record of good customer service in a low-margin business such as gas stations.
"Generally people have been happy with the convenience," Mehrotra said, but the clinics have not been very profitable, promptingmanyclosures over the years.
Gas stations are accustomed to competing over customers by offering something special. QuikTrip, for example, was recently ranked ninth on a list of best gas station brands in America that noted QT's "beloved" made-to-order food, such as breakfast tacos. Habeck said he thinks patients today are open to a more transactional approach in health care as well.
That doesn't mean offering roller-grill hot dogs and taquitos in urgent care waiting rooms, although Habeck joked that MedWise might have tried that if it hadn't launched during the pandemic. Rather, he said, the chain is banking on winning customer loyalty by offering patients consistent service without necessarily offering a consistent clinician.
And, Habeck said, even though MedWise and QTs are not in the same buildings, the parent company's experience finding prominent locations for gas stations is useful for placing urgent cares as well.
On a recent Friday afternoon, Billy Rohling and Amy Shaver stood waiting for their ride home in the mostly empty parking lot of a MedWise at the same exit as a QT off Interstate Highway 244 in Tulsa. Rohling, 56, remembers when this corner of Admiral Place and Sheridan Road was a shopping center with tenants like J.C. Penney Co. and a five-and-dime called TG&Y.
Those stores are long gone now, though. The couple came to MedWise because Shaver, 37, was having breathing problems. It was her second time visiting the clinic.
"They aren't busy at all," Rohling said. "It took 15 minutes to get an EKG."
Indeed, MedWise's patient visits have slowed since the unexpected "windfall volume" that came as a result of opening during the pandemic, Habeck said. At one point, MedWise clinics administered curbside covid-19 tests to hundreds of patients a day, many of whom paid cash. The momentum from all those visits helped propel the clinics through abnormally low flu seasons in 2020 and 2021 — typically urgent care's bread and butter.
But Habeck said MedWise is still on track to expand. Four more locations are slated to open in northeastern Oklahoma this year, and the future should bring even more MedWise locations in QuikTrip's 17-state, 1,000-location footprint, in places such as Kansas City, Missouri, and Wichita, Kansas.
State health care rules, public insurance payment rates, and existing health system locations will all factor into where the new clinics are located, Habeck said, although expansion out of state is probably a couple of years away.
Horwitz said scaling up in the industry requires a degree of standardization — everything from clinic layouts to staffing levels, and even where various supplies are stored — that can be hard to attain. But she said it's a trend, with more urgent care chains having a triple-digit number of locations than ever before.
"Nobody's at 1,000, but some are closing in on it," Horwitz said.
This article was produced by KFF Health News, formerly known as Kaiser Health News (KHN), a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF — the independent source for health policy research, polling, and journalism.
Kaiser Permanente is looking to dramatically expand its national presence. It's committed $5 billion to a new unit called Risant Health and has agreed to acquire Pennsylvania-based Geisinger, but skeptics wonder how it will export its unique model to other states.
This article was published on Tuesday, August 15, 2023 in KFF Health News.
As regulators review Kaiser Permanente's proposed acquisition of a respected health system based in Pennsylvania, health care experts are still puzzling over how the surprise deal, announced in April, could fulfill the managed care giant's promise of improving care and reducing costs for patients, including in its home state of California.
KP said it would acquire Danville, Pennsylvania-based Geisinger — which has 10 hospitals, 1,700 employed physicians, and a 600,000-member health plan in three states — as the first step in the creation of a new national health care organization called Risant Health. Oakland-based Kaiser Permanente said it expects to invest $5 billion in Risant over the next five years, and to add as many as six more nonprofit health systems during that period.
Industry experts believe KP's aim is to build a big enough presence across the country to effectively compete with players like Amazon, Aetna CVS Health, Walmart Health, and UnitedHealth Group in providing health care for large corporate customers. Kaiser Permanente executives touted the potential for spreading the group's vaunted brand of quality, lower-cost care around the country.
But it's not clear how KP will be able to bring its model, in which facilities and doctors receive a monthly per-member fee for all care, to markets where it doesn't own an integrated system of physicians, hospitals, and health plans, as it does in California. Critics note that KP's efforts to expand failed in a number of states in the 1980s and 1990s.
In addition, the physician-led Permanente Medical Groups, which lead KP's patient care, were not involved in the Risant deal, raising questions about how their expertise would be shared.
"I don't know how Kaiser will bring its knowledge and best practices to improve health care delivery without the involvement of the medical group, which does all the care delivery," said Robert Pearl, a former CEO of the Permanente Medical Group who's now a lecturer at the Stanford Graduate School of Business.
There are also questions about how the expansion will benefit current KP customers. The tax-exempt, nonprofit organization has 39 hospitals, 24,000 physicians, and 12.7 million health plan members in eight states and Washington, D.C., though about three-quarters of its members are in California, where it controls nearly half of the private insurance market. KP reported $95 billion in revenue last year.
"We've asked Kaiser Permanente management questions about the deal's advantages to employees and customers, but we haven't heard back," said Caroline Lucas, the executive director of the Coalition of Kaiser Permanente Unions, several of which are in contentious contract talks with the company. "Where is the money coming from? Are the citizens of California and other states subsidizing this expansion? How are they benefiting?"
Kaiser Permanente CEO Greg Adams declined to comment. A KP spokesperson, Steve Shivinsky, said the group's physicians would be involved in developing a "platform" to offer other health systems its value-based care expertise, including in design of care models, pharmacy practices, consumer digital engagement, development of health insurance products, and best practices for supply chains. Shivinsky said work on the platform was just beginning.
"Risant Health's success will firmly establish value-based care as a better model for health care in this country," said Shivinsky, KP's director of national media relations.
"If there is a commitment to truly delivering higher-quality and lower-cost care, it will take time and hard work," said John Toussaint, chair of Catalysis, a nonprofit that trains executives in health care and other industries in quality improvement. "But frankly I'm skeptical that's the reason for these types of mergers. Bigger may be better for increasing prices, but not necessarily for improving care."
The deal may be a sign that KP, founded in 1945, is hearing the alluring call of lucrative fee-for-service medicine. "This gets Kaiser into the much bigger part of the market — commercial insurance — and expands beyond their traditional model of owning all the pieces and selling their own insurance," said Glenn Melnick, a health economics professor at the University of Southern California.
The Geisinger acquisition is being reviewed by the Pennsylvania Insurance Department, with a 30-day public comment period ending Aug. 7, 2023. The Federal Trade Commission and the California attorney general's office declined to say whether they were reviewing the deal. KP expects the deal to close sometime in 2024. There was no purchase price, but KP said Risant would make a minimum of $2 billion available to Geisinger through 2028, including income that Geisinger generates itself.
Federal and state antitrust regulators have expressed growing concern about consolidation of hospitals and physician groups into ever-larger organizations with the power to drive up prices. But antitrust experts say it's unlikely regulators will challenge the deal since KP does not currently have a presence in Pennsylvania, Delaware, or Maine, where Geisinger operates.
Indeed, the deal could boost competition if KP's investment enables Geisinger to expand beyond central and eastern Pennsylvania and take on the University of Pittsburgh Medical Center and Highmark, the state's two dominant integrated health systems.
Around the country, Risant could be appealing to businesses that offer health plans to their employees. "If Kaiser can become an effective player in more markets through Risant and that leads to greater price competition, that will be very attractive to large employers," said Bill Kramer, senior adviser for health policy at the Purchaser Business Group on Health, which represents large employer health plans.
Smaller health systems and physician groups that are struggling financially may also see joining Risant as a more palatable option than being acquired by more profit-hungry entities, such as private equity firms, Melnick noted.
Through tight coordination between its physicians, hospitals, and health plans, KP has a strong track record of producing good health outcomes, particularly for plan members with chronic conditions such as high blood pressure and diabetes. KP hospitals and doctors are paid a monthly per-member fee for all care — called capitated payment. That gives KP a powerful financial incentive to keep members healthy and prevent costly hospital admissions and emergency room visits.
In contrast, Geisinger and most other health systems across the country generally are paid for each separate procedure — known as fee-for-service payment — giving them less incentive to keep patients healthy and reduce overall costs. Because of that, it's not clear how KP's value-based care model will work at Geisinger and other health systems acquired through Risant.
Adams has said Risant won't try to fully replicate Kaiser Permanente's model. Instead, Risant will help other health systems achieve the same kind of outcomes and cost savings while working with multiple insurers and providers.
KP also could potentially learn lessons from Geisinger and other health systems about producing better health outcomes at lower cost for members. Geisinger has won acclaim for its ProvenCare model, in which it accepts a fixed fee for providing an entire episode of care, such as heart bypass surgery, with no extra charge if the outcome isn't satisfactory and the patient needs additional care.
But Kramer, a former KP executive, is skeptical. "It's hard if not impossible to transform a medical group that's reliant on fee-for-service payment into something like the Kaiser Permanente Medical Group," he said.
Critics of the deal, citing KP's failed expansion moves in the 1980s and 1990s, also worry that building Risant Health could distract KP executives from cost-control and quality improvement efforts in their home state and draw down the organization's financial reserves, potentially leading to premium hikes.
In 1999, for example, KP sold a money-losing medical group it had established in North Carolina in the mid-'80s. It faced opposition from the local medical community and challenges with employer health plans, among other factors. Kramer also pointed to its withdrawal from other markets including Connecticut, Missouri, Ohio, and Texas.
Still, KP did succeed in establishing a significant presence in the mid-Atlantic states, Washington, D.C., and Georgia, though it doesn't own hospitals in those markets. It also has long-standing operations in Hawaii, Colorado, and Oregon.
With Risant, KP will be up against very large, sophisticated managed care competitors including UnitedHealth's Optum, which employs about 70,000 physicians across the country.
"Hopefully Kaiser's senior leadership will be smarter this time around and avoid the kinds of problems they had when they expanded in the past," Kramer said.
California's largest public hospital plans to start notifying 43,000 former patients Monday that they may be eligible for refunds or billing corrections, part of what advocates called a major legal settlement that will help force the hospital to fulfill its charity care obligations.
Santa Clara Valley Medical Center, along with other units of county-owned Santa Clara Valley Healthcare, will also adopt procedures to ensure patients are informed of their eligibility for charity care, which nonprofit and public hospitals must provide.
"This is huge," said Helen Tran, a senior attorney with Western Center on Law & Poverty, which joined another California-based legal group, the Consumer Law Center, in a lawsuit against the hospital. "It's so important that the hospital is stepping up to take corrective action. That's something we haven't seen many hospitals do."
Filed in 2019 and settled in June, the lawsuit alleged that Santa Clara Valley Medical Center billed patients and sent them to collections for charges they should not have been required to pay. Emily Hepner, one of the plaintiffs, was a full-time student, raising two children alone,and uninsured in 2014 when she needed urgent surgery, according to the lawsuit. The hospital never followed up after telling her she might be eligible for charity care and, nearly a year later, she received a $34,884 bill. The hospital later sued her for that amount plus attorney fees.
The Santa Clara settlement comes at a time of mounting scrutiny of charity care around the country. A number of nonprofit hospitals have been found skimping on their obligations to provide free and discounted care, and failing to inform patients about their eligibility as more Americans struggle with medical debt.
"Santa Clara Valley Healthcare prides itself on delivering quality healthcare for individuals and communities that face significant socioeconomic hurdles to receiving this basic benefit," said Paul Lorenz, the system's chief executive, in a press release. "These newly implemented outreach efforts, combined with our current programs, multilingual approaches, and recent state-initiated efforts, will allow us to better serve those most in need." The health system and the county declined further comment.
The federal Affordable Care Act requires nonprofit hospitals to provide charity care, known officially as "financial assistance policies," to maintain their tax-exempt status. California requires it of all acute care hospitals. California patients whose income is below 400% of the federal poverty level can be eligible, meaning a single person earning less than $58,320 can qualify for financial assistance. A family of three, like Hepner's, could qualify today if the household makes less than $99,440. Factors such as a person's assets and the amount of medical expenses can also be considered.
In 2020, Santa Clara County raised the eligibility threshold for discounts from 350% of the federal poverty guidelines to 650%, and patients can qualify for free care if they make below 400%.
Under the settlement, the county agreed to give former patients at SCVMC the opportunity to apply for financial assistance retroactively, seek refunds, and have court judgments corrected. The entire Santa Clara Valley Healthcare system, which includes SCVMC and two other hospitals, also now must inform patients in eight languages about its charity care program and discount payment options in a timely manner.
A 2019 KFF Health News investigation found that St. Joseph Medical Center in Takoma, Washington, for example, settled a similar lawsuit in 2019 and agreed to pay more than $22 million in refunds and debt forgiveness. Tax-exempt hospitals around the country sent $2.7 billion in bills over the course of a year to patients who probably qualified for free or discounted care, the investigation found.
Tran said it's the first charity care settlement in California that provides restitution for a large group of patients since the Hospital Fair Pricing Act, which aims to protect patients from unaffordable hospital costs, took effect in 2007.
Emma Dinkelspiel, a senior attorney at Bay Area Legal Aid, said many hospitals obfuscate, making it difficult for patients to access financial aid.
"When you call in, they'll tell you that charity care doesn't exist and instead suggest payment plans," Dinkelspiel said. "There are some hospital systems who maybe advertise with posters but don't include information when they send out their debt collection letters."
According to a December report by KFF Health News, 1 in 5 hospitals that were scrutinized didn't post aid policies online.
In California, more than 4 million families could be income-eligible for free or discounted care, according to the 2022 American Community Survey.
Tran credits the county for addressing the issue and said private hospitals should follow their example.
"It's really setting the bar for what hospitals are able to do," Tran said. "We're hoping that other hospitals throughout California will too."
"How much is the ice cream?" A simple enough question, featured on a new TV and online advertisement, posed by a man who just wants something cold. A woman behind the counter responds with a smile: "Prices? No, we don't have those anymore. We have estimates."
The satirical ad pretends to be a news report highlighting a "trend" in which more retail outlets take up "the hospital pricing method": substituting estimates for actual prices for the cost of meals, merchandise on store shelves, and clothing. The scene ends with a partially deleted expletive from the ice cream-seeking man.
While the use of estimates in retail settings is imaginary and preposterous, the advertisement is part of an ongoing campaign by the advocacy group Patient Rights Advocate, which contends that some hospitals are still falling short of a law that went into effect in 2021 requiring them to publicly post their prices. Even then, said Cynthia Fisher, the group's founder and chairperson, too many post estimates rather than exact dollar-and-cent figures.
"People need price certainty," said Fisher. "Estimates are a way of gaming the people who pay for health care."
Although government data shows that hospitals' compliance with price transparency rules has improved, updating the requirements of that law is the focus of a new proposal by the Biden administration, which aims to further standardize the required data, increase its usefulness for consumers, and boost enforcement. Even with all that, however, the goal of exact price tags in every situation is likely to remain elusive.
"We're closer to that, but we're not there," said Gerard Anderson, a professor at the Johns Hopkins Bloomberg School of Public Health, who studies hospital pricing using the data that hospitals have already posted.
The proposed rule is designed to make it easier for consumers to learn in advance exactly what they might owe for nonemergency hospital care — though that was what the original price transparency rules were supposed to do.
Requiring hospitals to post their prices is part of a larger effort to make medical costs less opaque, which could help individual consumers predict their expenses and possibly slow health cost inflation, if it leads employers and insurers to contract with less expensive providers.
But the data files themselves are massive, often hard to find, and complex to decipher.
"Even for us, it's really hard to use," said Anderson.
Under current regulations, hospitals must publicly post prices for every service they offer, from drugs to stitches to time a patient spends in an operating room, as well as show all the bundled costs associated with 300 "shoppable" services, which are things people can plan for, such as a hip replacement or having a baby. Several different prices are required, including those they've negotiated with insurers and what they charge cash-paying customers.
Similar regulations, but with more prescriptive details and tougher penalties for noncompliance, went into effect for insurance companies in 2022, requiring them to post prices not only for hospital care, but also for outpatient centers and physician services.
The new hospital requirements proposed by the Centers for Medicare & Medicaid Services help "catch up to what they did with health plans," said Hal Andrews, CEO and president of Trilliant Health, a market research and analysis company.
"It's a step down the path to making the data more accessible" to data analysis firms that create online price comparison tools, said Jeff Leibach, a partner at the consulting firm Guidehouse. "And, ultimately, consumers who want to shop will then find this data more easily." Many hospitals, insurers, and third-party data firms have made such cost comparison tools available.
Even the new requirements may not resolve the demand that is central to the dystopian ad's ice cream-seeking man: getting exact prices, in dollars and cents. Such specificity may remain elusive for some consumers, if only because of the nature of medical care.
"Each patient is unique and uses a slightly different bundle of services," said Anderson of Johns Hopkins. "You might be in the operating room for 30 minutes, or it might be 45. You might need this lab test and not that one."
The proposed rule would, for one thing, further standardize the data required so that reporting is more comparable between facilities. It also mandates hospitals make their data sets easier to find on their websites, which could help data aggregators and consumers alike, and puts administrators in the hot seat to attest that their hospitals have posted all the required information accurately.
Individual hospitals that fail to post properly would face additional publicity by federal regulators: "Consider it a public naughty list," said Marcus Dorstel, vice president of operations at data analysis firm Turquoise Health, which provides an online tool consumers can use to check prices across hospitals.
In addition, the proposal adds a data category awkwardly called "consumer-friendly expected allowed charges," aimed at giving more information tied to the varied ways hospitals set prices. In plainer language, those allowed amounts are what hospitals expect to be reimbursed by insurance companies.
Some experts say that will be helpful.
For example, Dorstel said, currently a service might not be listed as a particular dollar amount, but the hospital will show the price is based on "70% of charges."
"Without the expected allowed amount, that doesn't tell you anything," Dorstel said.
Still, critics — such as Patient Rights Advocate, the group behind the new ad campaign — say that nodding to such allowed amounts will lead to even more estimates, rather than what they prefer: dollar-and-cent assessments.
"You and I would not buy a blouse at an average estimated amount," said Fisher.
Health care isn't like blouses or ice cream, responded executives from the American Hospital Association when asked about the advertisement and Fisher's concerns about exact, upfront amounts. In many situations, for example, it may be hard to know ahead of time exactly what kind of care a patient will need.
"Very few health services are so straightforward where you can expect no variation in the course of care," which could then result in a different cost than the original assessment," said Molly Smith, AHA's group vice president for public policy. "Organizations are doing the best they can to provide the closest estimate. If something changes in the course of your care, that estimate might adjust."
While hospitals' compliance with posting price information has improved, it still falls short, said Fisher, whose group in a July report said only 36% of 2,000 hospitals it reviewed complied with all aspects of the current law, marking as deficient those that had incomplete data fields or used formulas instead of dollar prices.
But the American Hospital Association says Fisher's group "misconstrues" hospital compliance, in part because hospitals are allowed to leave spaces blank, if, for example, they don't have a cash-only price. And formulas are allowed if that is how the prices are set.
The hospital group points instead to a CMS report from earlier this year that showed compliance was increasing year over year. It said 70% of hospitals were compliant with the current requirements of the law.
It took some doing to get that far. Since 2021, the federal government has sent more than 900 warning letters to hospitals about their posted data, with most resolving those concerns, according to the proposed rule. Four hospitals have been fined for failing to comply with the transparency law.