If these decisions hold up through a potential appeals process, they could result in the federal government owing billions of dollars annually until Congress makes an explicit appropriation or otherwise changes the law.
Federal judges issued four new rulings late last week in favor of insurers who argue the government owes them cost-sharing reduction (CSR) payments under the Affordable Care Act despite the Trump administration's 2017 decision to halt them abruptly.
Since one of the cases is a class action involving 91 insurers, the total number of insurers that have won their CSR cases is nearly 100. These cases could represent billions of dollars annually.
In a blog post on Sunday, HealthAffairs' Katie Keith wrote that she is aware of 12 separate lawsuits that insurers have filed against Health and Human Services for the unpaid CSR dollars. Half of the cases have been decided, all of them in favor of the insurers.
Court of Federal Claims Judge Thomas C. Wheeler decided a case involving L.A. Care Health Plan last Thursday, finding that the insurer was owed about $6 million for the 2017 plan year.
"If their decisions stand, insurers could recover roughly $12 billion a year, every year, until Congress intervenes to stop the bleeding," University of Michigan law professor Nicholas Bagley wrote for The Incidental Economist.
An order from the First Circuit sent the parties back to the District Court for more hearings this week on whether the judge should block former Optum executive David Smith from working for the Amazon-backed healthcare venture.
Parties involved in a trade secrets dispute between Optum Inc. and David Smith, who accepted a senior position with Amazon's healthcare venture in December, must return this week to the District Court in Boston, where new details about Amazon's still-gestating project could be forced into public view.
U.S. District Judge Mark Wolf ordered the parties to appear Wednesday afternoon for more oral arguments on Optum's motion for a temporary restraining order (TRO) to block Smith from working for his new employer, which Optum calls "ABC" because it's backed by Amazon, Berkshire Hathaway, and JPMorgan Chase. Wolf said he hopes to issue a decision verbally on Thursday or Friday.
There's a separate motion on the table as well. The media companies that own The Boston Globe and The Wall Street Journal have intervened jointly in the case and are arguing that the full transcript of a hearing held last month should be made public. News reporters attending the hearing were reportedly tossed out of the courtroom for a portion of the testimony by Jack Stoddard, ABC's chief operating officer, so Stoddard could speak about the venture's strategy. Last month's hearings shook loose a few crumbs of information about what the Amazon-backed venture helmed by CEO Atul Gawande has in store.
Attorneys for Smith argue ABC isn't a competotor to Optum, but Optum complains the venture is still figuring out its model and taking a "haphazard and disingenuous approach" to making sure Smith doesn't divulge Optum's trade secrets. Smith's new job descriptioin, albeit vague, seems to align with what he had been doing for Optum.
Wolf issued the order Friday after the First Circuit Court of Appeals remanded to the District Court "for the limited purpose of resolving the pending motion for TRO as expeditiously as possible."
Smith had appealed to the First Circuit, arguing that the proceedings must be moved into closed-door arbitration, rather than the public record of a federal courtroom. The First Circuit judges haven't said whether they agree with Smith's argument or the District Court's position, so the matter could quickly result in more appellate proceedings.
The financial update comes less than two weeks after talks of a major merger with Memorial Hermann fell apart for reasons that remain unclear.
Dallas-based Baylor Scott & White Health took a financial hit in the six months ended December 31, 2018, despite boosting its operating margin slightly.
The nonprofit health system reported $267.7 million in net income for the first half of fiscal year 2019, a 55% drop from the $595.5 million it reported for the first half of fiscal year 2018, according to unaudited financial statements published Thursday.
Contributing to that decline were $186.8 million in unrestricted unrealized losses on investments. By contrast, the system had recorded $111.8 million in gains on investments during the same period a year prior.
Overall, the system reported operating revenue of $4.9 billion in the first half of fiscal year 2019, up 2% from the $4.8 billion it reported a year prior. Operating expenses, meanwhile, were $4.5 billion, up 1.4% from the $4.4 billion it reported a year prior.
Baylor Scott & White Health's reported operating margin rose slightly to 8.5% in the first half of fiscal year 2019, from 8% in the first half of fiscal year 2018.
This news comes less than two weeks after Baylor Scott & White Health and Houston-based Memorial Hermann Health System called off plans to merge, without offering much detail as to why their talks fell apart.
Some have argued the House should focus on solving the pending ACA dispute through legislation, not litigation. Others argue the House is taking the best route available.
The U.S. House of Representatives officially intervened Thursday to defend the Affordable Care Act at the Fifth Circuit Court of Appeals, where 38 state attorneys general and the U.S. Department of Justice are arguing over whether any or all of the sprawling legislation remains constitutional.
Although attorneys for the House had argued that the chamber, newly under Democratic control, has a right to intervene in the case, Circuit Judge Leslie H. Southwick ruled that she didn't have to determine whether the House has such a right.
"In the absence of any other federal governmental party in the case presenting a complete defense to the Congressional enactment at issue, this court may benefit from the participation by the House," Southwick wrote, granting the request.
While the DOJ is defending part of the ACA, it last year declined to defend key elementsof the law, including its community-rating and guaranteed-issue provisions, which prohibit insurers from hiking premiums for or refusing to cover consumers with preexisting conditions. Those provisions were rendered invalid by Congress zeroing out the tax penalty tied to the ACA's individual mandate because those provisions are inseverable from the mandate, the DOJ argues.
The argument raised by the Texas-led coalition of 18 plaintiff states, plus Mississippi Gov. Phil Bryant, goes much further. The plaintiffs argue that the entire ACA is inseverable from its individual mandate, so the entire law is invalid if the mandate is unconstitutional. That was the basis for U.S. District Judge Reed O'Connor's ruling late last year declaring the entire law invalid.
Thus far, the primary force defending the ACA has been a California-led coalition of Democratic state attorneys general who filed an appeal last month of O'Connor's decision. That coalition grew to include 20 members after Southwick granted a request Thursday by four states—Colorado, Michigan, Nevada, and Iowa—to join in the defense. She denied a request to expedite the proceedings.
Attorney Donald B. Verrilli Jr., who served as U.S. Solicitor General under the Obama administration and argued a previous ACA case before the Supreme Court, filed an appearance Thursday on the House's behalf.
Some have welcomed the House's involvement in the suit, while others have argued that lawmakers should pursue a legislative fix, rather than taking a risk on the litigation.
"Congress could fix the problem by saving, severing, or sinking the mandate," University of Michigan law professors Nicholas Bagley and Richard Primus wrote for The Atlantic, arguing that Congress could kill the suit by raising the individual mandate tax penalty from $0 to $1, legislatively declaring the mandate to be severable from the rest of the ACA, or repealing the mandate entirely (leaving the rest of the law behind).
Washington and Lee University health law professor Tim Jost, however, worries that a legislative maneuver of the sort Bagley and Primus propose could bolster the Texas-led plaintiffs' claims.
"Any proposed fixes will likely be partial, would open up the ACA to further amendment in the Senate, and would lend weight to plaintiff legislative history arguments," Jost told Vox's Dylan Scott. "This case is winnable in the courts and should stay there."
As Xpostfactoid blogger Andrew Sprung points out, Bagley and Jost are oft-cited as ACA defenders, so their differing views on how the House should proceed are noteworthy.
A deal that might have easily passed antitrust review a decade ago on account of its verticality may face greater skepticism these days from not only the DOJ and FTC but judges as well.
The federal government's review of a megamerger between CVS Health and Aetna is a step closer to final judgment after the U.S. Department of Justice published its response online Wednesday to public comments about the proposed transaction.
The DOJ signed off on the $69 billion CVS-Aetna deal with stipulationsin October, and the two companies celebrated the completion of their mergerin November. But a federal judge instructed them to keep some operations separate while he reviews the DOJ-approved agreement, a move that highlights what some see as rising regulatory skepticism of vertical mergers.
A proposed deal that might have sailed through the antitrust review process a decade ago on account of its verticality may be greeted with warier eyes these days by the DOJ, the Federal Trade Commission, judges, and others, says Andrea Murino, a partner at Goodwin in Washington, D.C., and co-chair of the firm's antitrust and competition practice.
"Vertical transactions as a whole, not just in the healthcare industry but in all industries, are garnering increased scrutiny by the FTC and the DOJ for sure," Murino tells HealthLeaders.
"There's a lot of chatter in the antitrust bar about the willingness of the antitrust enforcers to look more closely and potentially to challenge vertical transactions, and anybody that wants to be giving their clients good advice has to be paying attention to those trends," she adds.
Some had expected CVS-Aetna's verticality to unlock regulatory approval without a challenge. But even beyond the DOJ's stipulations, U.S. District Judge Richard J. Leon in the D.C. District Court has made clear the he shouldn't be seen as a rubber stamp in this process.
"It's certainly unusual and interesting that a judge is getting involved with this level of detail, but it is not unprecedented," Murino says, noting that Leon is the same judge who signed off last summer on a merger between AT&T and Time Warner (with a 172-page opinion).
Despite the partial government shutdown, Leon last month ordered DOJ attorneys to continue working on their responses to public commentsregarding the proposed CVS-Aetna transaction, giving them until this Friday to publish the materials.
"You have to be monitoring what's coming out of the agencies, what's coming out of the courts, and you have to be willing to adjust your strategy as a result."
—Andrea Murino
The DOJ published those comments and detailed response Wednesday, affirming its position that Leon should issue final judgment in favor of the DOJ-approved terms for the CVS-Aetna merger. The response acknowledges that some commenters raised vertical concerns about the deal but said such questions are beyond the scope of Leon's review.
"The United States investigated the potential for vertical harms from the merger by obtaining and reviewing documents as well as interviewing industry participants," the DOJ response states. "For the reasons outlined below, the United States concluded that vertical harms were unlikely to occur and did not allege any harm related to vertical concerns in its Complaint. The vertical concerns therefore are outside the scope of this Tunney Act proceeding."
Even if Leon ultimately agrees to sign the DOJ's proposed order of final judgment, this entire episode serves as a good reminder for any executives contemplating M&A activity to do so with antitrust considerations at forefront of mind.
"You have to be monitoring what's coming out of the agencies, what's coming out of the courts, and you have to be willing to adjust your strategy as a result," Murino says.
Healthcare is one of those industries that will always find itself wrapped up in antitrust proceedings, so healthcare executives especially should be paying attention to these enforcement trends, Murino adds.
"Before they contemplate any kind of transaction," she says, "it behooves them to make sure they have a read on what the potential risks are in light of the current enforcement landscape."
The government's plan would put pressure on hospitals and other providers that engage in 'information blocking.'
A highly anticipated proposed rule released Monday morning by the Trump administration would require health plans to begin giving patients immediate electronic access to their medical claims and health information, at no cost, by next year.
Hospitals and other providers that engage in "information blocking"—i.e., limiting the availability of information in ways the government deems unreasonable—would be publicly reported in an effort to pressure them into changing their ways, according to a Health and Human Services announcement.
"We are going to expose the bad actors who are purposely trying to keep patients from their own data," Centers for Medicare and Medicaid Services Administrator Seema Verma said during a press call Monday morning.
The announcement comes on the first day of the Healthcare Information and Management Systems Society (HIMSS) conference in Orlando, Florida, where Verma is scheduled to speak Tuesday on interoperability and patient engagement.
Requiring insurers to share information in an accessible format by 2020 will ensure that 125 million beneficiaries have electronic access to their claims data, Verma said in Monday's announcement.
"This unprecedented step toward a healthcare future where patients are able to obtain and share their health data, securely and privately, with just a few clicks, is just the beginning of a digital data revolution that truly empowers American patients," Verma said.
This change will help beneficiaries make informed decisions about when and where they seek care, HHS Secretary Alex Azar said in the statement.
"These proposed rules strive to bring the nation's healthcare system one step closer to a point where patients and clinicians have the access they need to all of a patient's health information, helping them in making better choices about care and treatment," Azar said.
"These steps forward for health IT are essential to building a healthcare system that pays for value rather than procedures, especially through empowering patients as consumers," he added.
The proposed rule, which was issued Monday by CMS and the Office of the National Coordinator for Health Information Technology (ONC), would apply to Medicaid, the Children's Health Insurance Program (CHIP), Medicare Advantage plans, and plans on the federally facilitated Affordable Care Act exchanges.
Comments on the proposed rule and two related requests for information will be accepted until early April. More information is available in a CMS fact sheet and the proposed rule itself.
The proxy skirmish between a major healthcare player and an aspiring disruptor is headed to the First Circuit Court of Appeals, where judges will be asked to weigh in on whether an ex-Optum vice president should be blocked from starting his new job.
As attorneys for United Health Group's Optum Inc. seek to block one of the company's former vice presidents from starting his new job with Amazon's healthcare initiative, the executive at the center of the conflict is fighting to take the proceedings private.
After being sued last month for allegedly breaching his Optum employment contract and taking trade secrets to a competitor, David Smith asked the judge to force Optum into closed-door arbitration, rather than the public record of a federal courtroom. The judge declined that request Tuesday, and Smith appealed to the First Circuit.
Smith was hired in December as the new director of product strategy and research for Amazon's joint healthcare venture with Berkshire Hathaway and JPMorgan Chase, so his dispute with Optum represents a proxy skirmish between the interests of an established healthcare powerhouse and those of an aspiring disruptor.
While attorneys for Optum describe the Amazon-backed venture as a competitor to Optum, Smith and his attorneys dispute that characterization. The kerfuffle comes as the venture ramps up hiring, with an emphasis on recruiting what newly hired Chief Technology Officer Serkan Kutan described as "the best technology team in health care."
Two days of hearings last week elicited a few crumbs of information about what the Amazon-backed venture helmed by CEO Atul Gawande has in store. Chief Operating Officer Jack Stoddard testified that the initiative is "currently using data, analytics, and expertise to combine products from third-party vendors" that could include Optum, as The Wall Street Journal reported. When asked whether any ideas could be scaled up and sold to consumers beyond the pool of employees who work for the three companies behind the initiative, Smith reportedly said that's "not the near-term goal."
Smith argued that his employment contract with Optum requires that the present dispute be handled in arbitration, saying in a court filing last week that the matter represents "a purely private dispute" with "no issue of public interest."
Optum's attorneys, however, argued that the U.S. District Court for Massachusetts could issue a temporary restraining order (TRO) against Smith before addressing the arbitration question, and Judge Mark Wolf agreed, finding that the court clearly had jurisdiction to issue a TRO, should it choose to do so.
"The Arbitration Policy is not ambiguous," Wolf wrote in a ruling Tuesday. "Smith's disagreement with the court's understanding of the plain meaning of the relevant language does not create an ambiguity."
Wolf put proceedings in the District Court on hold, pending appeal of his decision on the TRO request and motion to compel arbitration.
But Wait. There's More.
Optum's attorneys asked Wolf to do one more thing at the District Court level before the First Circuit weighs in: issue an injunctionto restrict Smith's activity.
They laid our their reasoning Wednesday in a 21-page memo with a significant amount of redacted material, arguing that every day Smith is allowed to work for the Amazon-backed venture—which Optum calls "ABC"—is an opportunity for him to use Optum's confidential information and trade secrets.
"And the longer Smith works at ABC, the more entrenched he becomes in the company, and the greater the risk his employment poses to Optum," they wrote, adding that there is a public interest at play.
"Granting an injunction pending appeal would not harm the public interest; to the contrary, it would benefit the public," they wrote. "The public has a strong interest in ensuring that contracts are upheld."
Optum's attorneys asked Wolf to permit the redactions, saying the material was hidden from public view "out of an abundance of caution." Wolf rejected the request Thursday, ordering Optum to file an unredacted version by 9:30 a.m. Friday. Optum's attorneys complied, filing an unredacted motion that included quotes from testimony during last week's hearings.
While attorneys for Smith argue the Amazon-backed venture isn't a competotor to Optum, Optum complains that the venture is still figuring out its model and taking a "haphazard and disingenuous approach" to making sure Smith doesn't divulge Optum's trade secrets. Smith's new job descriptioin, albeit vague, seems to align with what he had been doing for Optum. The removal of redactions revealed three areas in which Smith won't be working: pharmacy, healthcare benefits administration, and specialty networks.
The filing notes, furthermore, that ABC is paying for two sets of attorneys for Smith and that ABC has committed to keep paying Smith's salary—which is $300,000 per year, according to an offer of employment filed with the court—even if the court blocks Smith from beginning his new job.
Smith, his attorneys, and attorneys for Optum did not respond to HealthLeaders' requests for comment.
Editor's note: A version of this story was first published Wednesday, February 6, 2019, then it was updated Thursday and Friday with additional information.
The administration outlined a strategy to target geographic "hot spots" and demographic groups at heightened risk of infection, without addressing expected costs.
President Donald Trump outlined an ambitious public health goal in broad terms Tuesday during his second State of the Union Address, calling on Congress to commit "to eliminate the HIV epidemic in the United States within 10 years."
The administration's health officials added some specificity to the plan, saying they would target the demographic groups and geographic areas at greatest risk.
More than half of the new HIV diagnoses documented in recent years have been concentrated in 48 counties; Washington, D.C.; and San Juan, Puerto Rico. These urban areas and seven states facing a high HIV burden in rural areas are identified in a Health and Human Services fact sheet.
HHS Secretary Alex Azar said in a blog post Tuesday that the goal is to end the HIV epidemic by reducing new infections by 75% in five years and 90% in 10 years.
"Since the late 1980s, enormous progress has been made in the fight against HIV, but there is still work to be done," Azar wrote, noting that the number of new infections has dropped to about 40,000 annually.
Azar said the federal government spends more than $20 billion per year in direct health expenditures for HIV care and prevention. Officials said Wednesday that they could not provide an estimated additional investment that the administration intends to seek. That figure will have to wait for the president's budget proposal to be released in a few weeks.
The coordinated effort across several agencies will seek to diagnose everyone with HIV as quickly as possible and connect people at heightened risk—such as men who have sex with men—with pre-exposure prophylaxis, or PrEP.
During a briefing with reporters Wednesday, officials acknowledged the Trump administration is looking to put into practice many of the principles outlined in the 90-90-90 plandevised by UNAIDS.
"The concept of that is very, very similar to what we are doing," Anthony S. Fauci, MD, director of the National Institute of Allergy and Infectious Diseases, said.
The two systems announced their decision without offering much detail.
Merger talks between Memorial Hermann Health System and Baylor Scott & White Health, two of the largest nonprofit health systems in Texas, have fallen apart.
Without offering much detail about what led to the decision, the systems announced Tuesday that they would abandon their efforts to combine operations.
"After months of thoughtful exploration, we have decided to discontinue talks of a merger between our two systems," the organizations said in a joint statementreleased by each organization.
"Ultimately, we have concluded that as strong, successful organizations, we are capable of achieving our visions for the future without merging at this time," they added. "We have a tremendous amount of respect for each other and remain committed to strengthening our communities, advancing the health of Texans and transforming the delivery of care. We will continue to seek opportunities for collaboration as two forward-thinking, mission-driven organizations."
The proposed merger of Dallas-based BS&W with Houston-based Memorial Hermann, which was announced last October, would have formed a 68-hospital system with more than $14 billion in annual revenue, making it one of the largest nonprofit systems nationwide.
Some community stakeholders expressed a sense of relief Tuesday at news that the merger had fallen through.
Chris Skisak, PhD, executive director of the nonprofit Houston Business Coalition on Health, said past mergers have consistently failed to deliver any meaningful cost savings, so there's no reason to believe this union would have been any different. Rather than focusing on scale, these two systems should prioritize value-based care initiatives and working with employers to better meet employee health needs, Skisak told HealthLeaders.
Others were saddened by the news.
"I'm surprised and disappointed that these companies couldn’t come together," Britt Berrett, a former hospital executive and a professor at the University of Texas at Dallas, told Dallas Morning News business columnist Mitchell Schnurman. "It's imperative that we create these large integrated systems because we have to get more efficient, lower costs, improve quality and increase access. There will be many more of these combinations in health care."
A spokesperson for Memorial Hermann who declined Tuesday to arrange for an interview told HealthLeaders that there was no single reason for the mutual decision to remain separate. Spokespeople for Baylor Scott & White did not respond.
One hurdle that the parties acknowledged early-on was the incongruity between their electronic medical record (EMR) systems. While BS&W uses Epic, Memorial Hermann uses Cerner.
"We don't think it's a huge obstacle, and we'll make a decision about moving to a single EMR down the road, if and when that becomes a priority," BS&W CEO Jim Hinton, who would have led the combined entity, told HealthLeaders in October.
Vivian Ho, an economics professor and the director of the Center for Health and Biosciences at Rice University's Baker Institute for Public Policy in Houston, said last fall that the two systems were motivated by increasing market concentration not only among providers but also among insurers and between insurers and providers. The combined entity would have created "a state-based healthcare behemoth to rival HCA," one analyst told HealthLeaders after the plan was unveiled.
A joint website created for the merger, which had as recently as last month shown executives for both health systems laughing alongside one another, displayed only the joint statement and logos for each entity Tuesday.
Editor's note: This story was updated Tuesday and Wednesday with additional information and commentary.
The venture's new CTO says it must recruit 'the best technology team in health care.'
The secretive healthcare venture being launched by Amazon, Berkshire Hathaway, and JPMorgan Chase hired a chief technology officer and is in the process of hiring for a wide range of other roles, with an emphasis on data and technology.
Serkan Kutan, who left his job as an Amazon engineer in 2015 to be CTO for Zocdoc, announced in a LinkedIn postthat he landed "a dream job" working with CEO Atul Gawande on "the most promising attempt to improve health care in the U.S."
The long-term vision being cast by the founders of this venture, combined with their rejection of a profit-seeking motive, "is exactly what it will take to make a difference," Kutan wrote.
"The challenging task will require the best technology team in health care," he added.
Kutan included a link to a list of full-time job categories, with a portal where candidates may submit their applications. The list includes six different tech-related categories, including emphases on data science and data analytics.
Kutan is not the only recent hire for whom the venture represents a dream job.
David Smith was a vice president for UnitedHealth Group's Optum Inc. when he sent his resume directly to Gawande last summer, just four days after Gawande was named CEO of the venture. Smith accepted a job in December as director of product strategy and research for the Amazon-backed venture, but Optum sued to block Smith from beginning his new job, accusing him of taking Optum's trade secrets to a competitor.
Smith and Stoddard testified last week in a federal courtroom in Boston, where Optum has asked for a temporary restraining order to protect its intellectual property and Smith has asked the judge to compel Optum into closed-door arbitration. The hearings reportedly shed dim light on the venture's ambitions under Gawande's leadership.
