The executive order targets four areas "where lack of competition in healthcare increases prices and reduces access to quality care" -- hospital and health insurance consolidation, high drug prices, and hearing aids.
President Joseph. R. Biden's sweeping executive order to promote competition across a broad range of industries also puts high drug prices, and consolidations of healthcare providers and payers in the crosshairs.
The executive order, signed by Biden on Friday, establishes a broad, multi-departmental "whole-of-government effort to promote competition in the American economy," and includes 72 initiatives by more than a dozen federal agencies.
For the healthcare sector, the order targets four areas "where lack of competition in healthcare increases prices and reduces access to quality care" -- hospital consolidation, health insurance consolidation, high drug prices, and hearing aids.
Hospitals
"Hospital consolidation has left many areas, especially rural communities, without good options for convenient and affordable healthcare service," the administration said. "Thanks to unchecked mergers, the ten largest healthcare systems now control a quarter of the market. Since 2010, 139 rural hospitals have shuttered, including a high of 19 last year, in the middle of a healthcare crisis. Research shows that hospitals in consolidated markets charge far higher prices than hospitals in markets with several competitors."
Claiming that "hospital mergers can be harmful to patients, Biden's order "encourages" the Department of Justice and the Federal Trade Commission to review and revise merger guidelines to ensure that patients aren't harmed.
The order also directs the Department of Health and Human Services to support hospital price transparency rules and to quickly implement federal legislation that address surprise medical bills.
Health Insurance
Biden's order notes that "consolidation in the health insurance industry has meant that many consumers have little choice when it comes to selecting insurers. And even when there is some choice, comparison shopping is hard because plans offered on the exchanges are complicated—with different services covered or different deductibles."
Biden has ordered the Department of Health and Human Services to "standardize plan options in the National Health Insurance Marketplace so people can comparison shop more easily."
Prescription Drugs
The order notes that Americans pay more than 2.5 times as much for the same prescription drugs as peer countries, and sometimes much more.
"Price increases continue to far surpass inflation. As a result, nearly one in four Americans report difficulties paying for medication, and nearly one in three Americans report not taking their medications as prescribed," the order said. "These high prices are in part the result of lack of competition among drug manufacturers. The largest pharmaceutical companies are able to wield their market power to reap average annual profits of 15-20%, as compared to average annual profits of 4-9% for the largest non-drug companies."
The administration accused drug makers of using "pay for delay" ploys -- in which brand-name drug manufacturers pay generic manufacturers to stay out of the market – to stifle competition.
"That has raised drug prices by $3.5 billion per year, and research also shows that “pay for delay” and similar deals between generic and brand name manufacturers reduce innovation—reducing new drug trials and R&D expenditures," the administration said.
Biden has ordered the Food and Drug Administration to work with states and tribes to safely import prescription drugs from Canada, pursuant to the Medicare Modernization Act of 2003.
The order also directs HHS to increase support for generic and biosimilar drugs, and issue a comprehensive plan within 45 days to combat high drug prices and price gouging.
The order also "encourages" the FTC to ban “pay for delay” and similar agreements.
Hearing Aids
The order notes that hearing aids cost $5,000 a pair, on average, and that only 14% of the 48 million Americans with hearing loss use them, often because those costs are not covered by health insurance.
"A major driver of the expense is that consumers must get them from a doctor or a specialist, even though experts agree that medical evaluation is not necessary," the order states. "Rather, this requirement serves only as red tape and a barrier to more companies selling hearing aids. The four largest hearing aid manufacturers now control 84% of the market."
Congress in 2017 passed a bipartisan act to allow hearing aids to be sold over the counter, but the Trump Administration's FDA never issued the necessary rules.
Biden's order directs HHS to consider issuing proposed rules within 120 days for allowing hearing aids to be sold over the counter.
The partners say their collaboration addresses Michigan employers' concerns about rising healthcare costs and barriers to care quality.
Everside Health and Michigan State University Health Care have created a partnership to provide employer-sponsored plans with access to direct and virtual primary care across the state.
Under the model, employers and other plan sponsors pay a fixed cost per employee for nearly 24/7 unlimited access to primary care providers. MSU and Everside say their model is not a replacement for employer-sponsored insurance, but rather a complementary wellness program.
Patients will have low- or no-cost access to physicians and 24/7 virtual care, reducing the need for costly ER use. Everside says that employers using its care model save 20% on average in claims costs each year because the model proactively treats health problems before they become dire and require care at more expensive venues such as urgent care clinics and emergency departments.
This affiliation marks the first time that Denver-based Everside has partnered with a medical school.
Seth Ciabotti, CEO for East Lansing-based MSU Health Care, called the affiliation "another example of working with like-minded organizations to fulfill our mission to improve the health of all communities in Michigan."
"The pandemic highlighted the need for every individual to have a medical home supported by a robust relationship with a primary care team for maintaining health," Ciabotti said. "Telehealth visits proved to be a viable delivery mechanism for increasing access to healthcare in rural and underserved areas in Michigan."
Everside CEO Chris Miller said that, until the affiliation with MSU Health Care, employers in Michigan had few healthcare delivery options. "They had to rely on solutions created by large insurance companies or health systems," he said.
"Our new partnership with MSU Health Care is designed to change the status quo in employers' favor by bringing together our proven direct primary care model and advanced technology with MSU's strong innovation and research capabilities," Miller said. "The result is expected to be measurable cost savings with improved access to quality care."
In a retrospective cohort study published this week in Annals of Internal Medicine, NIH researchers examined the records on 144,116 hospitalized patients cared for in 558 hospitals to see how COVID-19 surges affected patient outcomes.
The researchers devised a "unique surge index" that measured the strain on hospitals each month from COVID in relation to bed capacity and found that clusters of high–surge index hospitals experienced 2-fold greater mortality than in hospitals not experiencing surges.
The metric showed that nearly 1 in every 4 deaths and almost 6,000 total deaths may have been attributable to hospital strain due to COVID-19.
"These system perturbations have significant consequences for those who provide clinical care," corresponding author Vineet Chopra, MD, a hospitalist at Michigan Medicine, wrote in an accompanying editorial.
"First of all, providers are marshaled to deal with an adversary they know little about. They are then asked to do so in unfamiliar areas of the building, with people they may never have worked with before," he wrote.
"On top of this, new processes for critical clinical decisions, such as when to test for COVID-19, how to treat, when to intubate, or how to manage cardiac arrests, are introduced. As hospitals swell with cases and these rapid changes unfold, what happens to patients needing care for COVID-19?"
The findings come as healthcare providers grapple with the burgeoning global threat of a surging COVID-19 delta variant.
The authors suggest that many COVID-related deaths could be prevented with smart, coordinated regional public health strategies and health system interventions.
Chopra said an emphasis on bolstering staff is also critical because burnout and stress related to the pandemic are prompting many clinicians to leave the field.
"The findings are sobering and provide several lessons," Chopra wrote. "First, we learn that clusters of high–surge index hospitals not only existed but varied across geography and time."
"Second, we witness the effect of therapeutics in the form of decreasing ICU admissions and mechanical ventilation rates."
"Third, we comprehend how detrimental COVID-19 surges were to clinical outcomes: After risk adjustment, patients cared for in the highest surge strata experienced 2-fold greater mortality than in hospitals not experiencing surges."
The healthcare sector has lost 537,000 jobs since the start of the pandemic in February 2020.
The healthcare sector lost 12,000 jobs in June, with hospitals recording a third straight month of job losses, preliminary federal data show.
Hospitals lost 5,500 jobs, and nursing homes lost 9,600 jobs in June. Those losses were slightly offset by 2,900 new jobs in ambulatory services, the Bureau of Labor Statistics reported on Friday.
After seeing modest gains at the start of 2021, hospitals have recorded 10,200 job losses since April.
The healthcare sector has shed 537,000 jobs since the start of the pandemic in February 2020, with hospitals accounting for 102,000 job losses, and nursing homes accounting for 360,000 job losses. Ambulatory services sector has grown 75,400 jobs in that span. There were 15.9 million people attached to the healthcare sector workforce in June, BLS said.
The BLS report accounts for employment in mid-June and can be subject to considerable revision.
The larger economy saw solid job growth in June, with 850,000 new jobs created. Nonfarm payroll employment is up by 15.6 million since April 2020 but down by 6.8 million, or 4.4%, from its pre-pandemic level in February 2020.
"These measures are down considerably from their recent highs in April 2020 but remain well above their levels prior to the coronavirus pandemic, 3.5% and 5.7 million, respectively, in February 2020," BLS said.
Most of those jobs (343,000) were in the leisure and hospitality sector, with restaurant jobs (194,000) accounting for more than half that total. Those totals are down 2.2 million (13%) from February 2020. State and local government hirings rebounded as well, with 155,000 new jobs reported, as school systems across the nation rehire teachers.
The nation's unemployment rate remained largely unchanged at 5.8% in June, as did the number of jobless people, at 9.5 million.
The Requirements Related to Surprise Billing; Part I , set to take effect on January 1, 2022, is the first in a series of rules to protect patients from healthcare-related financial hardships.
The federal government on Thursday unveiled the first in a series of new rules designed to protect patients from financial hardship due to surprise medical bills and balance billing.
"No patient should forgo care for fear of surprise billing," Health and Human Services Secretary Xavier Becerra said in a media release announcing Requirements Related to Surprise Billing; Part I.
"Health insurance should offer patients peace of mind that they won't be saddled with unexpected costs," Becerra said.
The interim final rule will take effect for providers on January 1, 2022, and on or after that date for commercial plans or contract years. It will restrict excessive out-of-pocket costs to consumers from out-of-network billing and balance billing, which is already banned by Medicare and Medicaid. The interim rule extends those protections to people insured through employer-sponsored and commercial health plans.
Bans surprise billing for emergency services, regardless of where they are provided. Those services must be billed on an in-network basis without requirements for prior authorization.
Bans high out-of-network cost-sharing for emergency and non-emergency services. Patient cost-sharing, such as co-insurance or a deductible, cannot be higher than if such services were provided by an in-network doctor, and any coinsurance or deductible must be based on in-network provider rates.
Bans out-of-network charges for ancillary care (such as anesthesiology or an assistant surgeon) at an in-network facility in all circumstances.
Bans other out-of-network charges without advance notice.
Requires providers and hospitals to give patients a plain-language consumer notice explaining that patient consent is required to receive care on an out-of-network basis before that provider can bill at the higher out-of-network rate.
The interim rule was implemented under the bipartisan No Surprises Act, a provision of the Consolidated Appropriations Act, 2021. HHS, the Department of Labor, Treasury, and the Office of Personnel Management cowrote the interim rule.
Surprise billing is rampant, and patient advocates have been howling for years for the federal government to take action. It's one of the few issues in Congress that Democrats and Republicans can agree upon.
Two-thirds of bankruptcies are caused by outstanding medical debt. Research has shown that one-in-six emergency department visits and inpatient hospital stays include care from at least one out-of-network provider.
A 2019 study by the Government Accountability Office found that air ambulance providers charged anywhere from $36,400 to more than $40,000, with 70% of these transports furnished out-of-network and most or all of the cost falling on patients.
Biden administration officials say such egregious practices are why the rules are needed.
"No one should ever be threatened with financial ruin simply for seeking needed medical care," said Secretary of Labor Marty Walsh. "Today's interim final rule is a major step in implementing the bipartisan No Surprises Act that will protect Americans from exorbitant health costs for unknowingly receiving care from out-of-network providers."
Written comments must be received within 60 days after the rule is published in the Federal Register.
Hospitals are voicing their opposition to the use of sequestration cuts and unspent COVID-19 provider relief funds to help pay for the plan.
The nation's biggest hospital associations are raising objections to the newly released $1.2 trillion Bipartisan Infrastructure Framework after learning that it would be partially paid for with continued sequestration cuts and unspent money from the COVID-19 provider relief funds.
In a one-page letter sent Tuesday to Senate Majority Leader Chuck Schumer, D-NY, and Minority Leader Mitch McConnell, R-KY, the American Hospital Association and eight other stakeholder associations said they supported improving "core infrastructure needs" that would allow providers to better serve their communities.
"However, we are opposed to the use of an extension of mandatory sequestration, as well as unspent COVID-19 provider relief funds, as financing sources for any infrastructure package," the letter said.
Sequestration Cuts
As part of the relief package put forward in April 2020, Congress suspended until the end of 2021 Medicare's reviled 2% across-the-board sequestration cuts that were supposed to take effect on April 1, 2020. Now, some lawmakers are looking at the cuts as a potential source of infrastructure funding.
"Congress recognized that hospitals and health systems needed relief from Medicare cuts during the pandemic and we appreciate the recently provided delay through the end of this year in the two percent mandatory reductions," the letter said.
"Unfortunately, the Bipartisan Infrastructure Framework lists a continuation of mandatory sequestration as an offset for the infrastructure agreement. Medicare funds should not be used to pay for roads and bridges. We cannot sustain additional cuts to the Medicare program."
COVID Relief Funds Tapped
The Bipartisan Infrastructure Framework identifies unused COVID relief money as a possible funding source.
But hospitals said syphoning away COVID relief money would harm health systems that "are still recovering from the impact of the pandemic, and unfortunately caseloads have increased in some areas of the country due to new virus variants and a lack of vaccinations."
"As you know, hospitals and health systems and other healthcare providers are awaiting the distribution of additional dollars in Provider Relief Funds as well as the recently allocated $8.5 billion for rural healthcare providers," the letter said.
"We would ask that none of these COVID-19 healthcare relief funds be used for the purpose of funding an infrastructure package, given the ongoing need for healthcare providers to offer assistance to their patients and communities."
The letter was cosigned by the AHA, America's Essential Hospitals, Association of American Medical Colleges, Catholic Health Association of the United States, Children's Hospital Association, Federation of American Hospitals, National Association for Behavioral Healthcare, Premier healthcare alliance, and Vizient, Inc.
The suit was in response to the 2018 site-neutral final rule that paid hospitals the same reimbursement for some inpatient and outpatient services.
The American Hospital Association expressed dismay this week with news that the U.S. Supreme Court declined -- without comment -- to consider the hospital lobby's appeal of a lower court ruling upholding Medicare's site-neutral payments.
The suit by the AHA and other provider stakeholders was in response to the 2018 Trump-era Outpatient Prospective Payment System final rule by the Department of Health and Human Services that paid hospitals the same reimbursement for some inpatient and outpatient services.
"We are disappointed that the U.S. Supreme Court has declined to hear the compelling arguments in our case on payment cuts for hospital outpatient visits," AHA General Counsel Melinda Hatton said Monday.
"These cuts to hospital outpatient departments directly undercut the clear intent of Congress to protect them because of the many real and crucial differences between them and other sites of care," she said.
OPPS had reduced reimbursement rates for clinic visits at hospital-owned outpatient provider departments by 40%, to match the rates paid under the Medicare Physician Fee Schedule for office visits. CMS estimates that the OPPS final rule could save the Medicare program about $760 million annually.
The Trump administration – and now the Biden administration -- has maintained that CMS has the authority to impose payment cuts under the Bipartisan Budget Act of 2015 to reduce unnecessary and costly increases in hospital procedures.
The AHA had argued that the site-neutral cuts undercut the intent of Congress to protect hospitals.
A federal appeals court had twice ruled that HHS exceeded its statutory authority when it reduced these payments. In July 2020, however, a three-judge appeals panel unanimously reversed those decisions.
"Hospital outpatient departments are held to higher regulatory standards and are often the only point of access for patients with the most severe chronic conditions, all of whom receive treatment regardless of ability to pay," Hatton said.
"While we are disappointed, we will continue to fight to ensure the ability of all hospitals and health systems to continue to provide the essential services and programs their patients and communities need to realize their highest potential for health."
LUGPA Cheers
The Large Urology Group Practice Association, one of the few medical associations that filed a friend-of-the-court brief supporting HHS, cheered SCOTUS' decision.
"We believe the Supreme Court made the right decision to reject the hospital industry's challenge to the site-neutral payment rule," said LUGPA President Jonathan Henderson, MD.
"The court's denial of the AHA's petition sends a clear message the argument had no merit, and more importantly, it's an acknowledgment of the value of independent practices as a crucial counterbalance to monolithic health care systems," Henderson said.
Henderson said his association would keep pushing "to level the playing field for independent physicians to fairly compete with hospitals systems to increase quality and access to care for all Medicare patients across the country."
Hospital margins remained narrow despite in May rising patient volumes.
Physician compensation and hospital volumes, revenues, and margins all saw strong gains in May, signaling that the healthcare sector may be returning to pre-pandemic levels, two reports Monday from consultants Kaufman Hall suggest.
Meanwhile, employed physician groups saw gains in productivity, revenues, and compensation in the first quarter of 2021 compared to the same period in 2020, due in part to higher patient visits.
At the same time, the average investment required to supplement physician revenues fell slightly, according to the latest Physician Flash Report.
"The data reflect an encouraging trajectory for our nation’s hospitals and health systems, as they continue to recover from the devastation of COVID-19," Erik Swanson, a senior vice president of Data and Analytics with Kaufman Hall, said in a media release. "We expect to see gains over the lows seen in early 2020, but comparisons to 2019 provide greater insights to how hospitals are faring relative to pre-pandemic performance."
Hospital margins remained narrow despite rising patient volumes. The median Kaufman Hall hospital operating margin index was 2.6% in May, not including federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding.
With the funding, it was 3.5%. The average operating margin rose 95.2% from January to May 2021 compared to the same period in 2020 without CARES, and 56.6% year-to-date with CARES. Compared to pre-pandemic levels in the first five months of 2019, however, operating margins were down 20.5% YTD without CARES and down 9% YTD with CARES.
Patient volumes increased YTD compared to low levels seen with national shutdowns and restrictions on non-urgent procedures early in the pandemic. However, volumes were down compared to 2019 levels in most cases.
Adjusted discharges were up 9.1% YTD from January-May 2020, but fell 7.1% YTD compared to January-May 2019. Adjusted patient days rose 14.3% YTD from 2020 to 2021, but were close to pre-pandemic performance—down only 0.4% YTD compared to the first five months of 2019.
Emergency department visits were essentially flat compared to January-May 2020, but remained significantly below 2019 rates, while operating room minutes grew 28.3% YTD in May compared to 2020 and were close to 2019 levels.
Revenues and expenses both increased compared to the first five months of 2019. Gross operating revenue (not including CARES) was up 18.6% YTD from 2020, and 5.9% YTD from 2019. Total expense per adjusted discharge was down 1.7% YTD from January-May 2020, but up 16.6% above January-May 2019.
Physician Comp
For physician groups, the median investment/subsidy per physician full-time equivalent (FTE) was $239,502 for the first quarter of 2021, down just 1.9% from the first quarter of 2020.
Physician comp per FTE was $332,187 in Q1 2021, up just 1.1% from the same period in 2020. Increasing patient visits contributed to an increase in physician productivity, with physician work Relative value units (wRVUs) per FTE up 3.6% from Q1 2020 to Q1 2021.
Net revenue per physician FTE (including advanced practice providers or APPs) was $575,113 in the first quarter, up 9.4% from Q1 2020, and total direct expense per physician FTE (including APPs) was up 4% over the same period.
Clinical and front-office productivity has largely returned to pre-COVID levels as physician productivity has increased, with Support Staff FTEs per 10,000 wRVUs falling just 1.3% from the first five months of 2020 to the same period in 2021, KH said.
The bond rater downgraded the sector on March 25, 2020 to negative, and reaffirmed that rating in January 2021.
The outlook for the nation's not-for-profit healthcare sector -- rocked for more than one year by the coronavirus pandemic – has been upgraded from negative to stable by S&P Global Ratings.
The bond raters downgraded the sector on March 25, 2020 to negative, and reaffirmed that rating in January 2021.
S&P cited several reasons for the return to a stable outlook, including:
* A trend of revenue recovery, ongoing balance sheet strength, and proactive management teams' focus on maintaining financial stability;
* Declining risk levels that are consistent with pre-pandemic years when the outlook was stable;
* CARES Act funding over the past 15 months that propped up providers and helped curtail the negative and downside risk from the pandemic;
* Generally stable or positive outlooks for about 85% of S&P's rated healthcare organizations.
The upgrade for the not-for-profit healthcare sector means that all U.S. public finance sectors are stable in U.S., except higher education, including community colleges and student housing.
After announcing plans to merge, the outlook for both for-profit health systems was revised down from stable to "under review."
Moody's Investors Service has placed LifePoint Health Inc. and Kindred Healthcare on review for bond rating downgrades following the announcement this week that the two for-profit hospital companies were merging.
The outlook for both for-profit health systems was revised down from stable to "under review," Moody's said.
"LifePoint faces a moderate level of implementation risk, however, with respect to the outsourcing of revenue cycle management functions at some of its hospitals over the next few quarters," Moody's said, adding that it "has very low growth expectations for non-urban hospitals given multiple industry headwinds."
As for-profit hospital operators, Moody's said Kindred and LifePoint also face "high social risk."
"The affordability of hospitals and the practice of balance billing has garnered substantial social and political attention. Hospitals are now required to publicly provide the list price of all of their services, although compliance and practice is inconsistent across the industry," Moody's said, adding that the hospitals' reliance on Medicare, Medicaid and other government payers makes the hospitals particularly suseptible to reimbursement changes.
"Further, as LifePoint is focused on non-urban communities, slow population growth tempers the company's capacity to grow admissions," Moody's said.
Brentwood, Tennessee-based LifePoint, which merged with RegionalCare in 2018, operates 88 hospitals in 29 states, with revenues of approximately $8.2 billion annually. LifePoint is owned by Apollo Management, and Moody's said the private equity firm could deploy "aggressive financial policies."
"While LifePoint may pursue an IPO longer-term given its large scale, Apollo may take dividends along the way, particularly if the company achieves its cash flow and deleveraging goals," Moody's said.
Like LifePoint, Moody's notes that Louisville, Kentucky-based Kindred, "faces social risk but less so than operators in the general acute-care space."
"The affordability of hospitals and the practice of balance billing has garnered substantial social and political attention. However, this is less of an issue in the IRF (inpatient rehabilitation facility) and LTAC (long-term, acute-care) space because patient stays in these facilities are never a "surprise,'" Moody's said.
Kindred is one of the largest long-term and acute rehabilitation care providers in the nation, with annual revenues of about $3.1 billion. The hospital chain is owned by private equity firms TPG Capital and Welsh, Carson, Anderson and Stowe.
