The breadth of the plan's impact will depend in large part on proposals brought forward by the industry.
Health and Human Services Secretary Alex Azar touted the potential cost-curbing benefits Wednesday of importing drugs from foreign markets, outlining the Trump administration's two-pronged action plan to allow importation without undermining safety.
Azar's support for the idea contradicts the position he took in May 2018, when he said the notion of reducing prescription drug prices by importing product from Canada is "just a gimmick." He argued that drug importation would be ineffective and potentially dangerous.
Two months later, however, he directed the Food and Drug Administration to establish a working group to explore the possibility of permitting drug imports, signaling there might be some circumstances after all in which the practice—which is being explored by several states, including Colorado, Florida, and Vermont—could be done safely.
When asked during a press call Wednesday about his reversal, Azar said a lot has changed across pharmaceutical supply chains since the possibility of drug importation was last fully considered under the President George W. Bush administration, during which Azar served as HHS general counsel then deputy secretary. The supply chains are more mature and consolidated than they were in decades past, and the ability for pharmacies to conduct international business and track-and-trace supplies has advanced significantly, he said.
President Donald Trump is the first U.S. president to offer his support for drug importation, and Azar acknowledged that Trump's influence has shaped the path HHS has chosen.
"He is always pushing me, challenging me to find more solutions for patients," Azar said of Trump.
Azar was joined on the press call by Acting FDA Commissioner Ned Sharpless, MD, who expressed support for the ways Azar and Trump are trying to reduce drug prices and committed the FDA's resources to the cause.
"The FDA has a unique role to play in promoting competition that in turn can help reduce drug prices and improve access to medicine for Americans," Sharpless said in a statement. "Driving down drug prices requires a comprehensive approach and we must continue to look at all innovative solutions to this challenge."
Demonstration projects: Both HHS and FDA would propose to allow states, wholesalers, or pharmacists to develop demonstration projects, subject to HHS review, under which they would import certain drugs from Canada that are versions of FDA-approved drugs. The proposed rulemaking would be issued under authority of the Federal Food, Drug, and Cosmetic Act's Section 804, according to the joint announcement.
New drug codes for imported products: The FDA would issue recommendations for drug makers seeking to import versions of FDA-approved drugs they sell in foreign markets. The manufacturers would be able to use a new National Drug Code (NDC) for these products, which could enable them to charge a lower price than their contracts currently require, according to the announcement. "This pathway could be particularly helpful to patients with significantly high cost prescription drugs," the announcement states. "This would potentially include medications like insulin used to treat diabetes, as well as those used to treat rheumatoid arthritis, cardiovascular disorders, and cancer."
There's still a lot of uncertainty over what final policies, if any, will be implemented based on this plan. The joint announcement described the two prongs as "potential pathways," and Azar said in the statement that these are pathways the administration "intends to explore."
Sharpless, too, acknowledged that many hurdles remain.
"We've been keenly focused on ensuring the importation approaches we've outlined pose no additional risk to the public's health and safety," Sharpless said in the statement. "We know there are many operational challenges to address through each of these pathways, and [we] are actively working through them as we look to formally announce these policies, with opportunity for public comment, in the coming months."
Pharmaceutical Research and Manufacturers of America (PhRMA) President and CEO Stephen J. Ubl issued a statement calling the administration's plan "far too dangerous for American patients."
"There is no way to guarantee the safety of drugs that come into the country from outside the United States' gold-standard supply chain," Ubl said. "Drugs coming through Canada could have originated from anywhere in the world and may not have undergone stringent review by the FDA. Law enforcement has repeatedly warned that importation schemes could worsen the opioid crisis and jeopardize public safety."
"Moreover," he said, "Canadian officials have said that the policy is unworkable, and they will not risk shortages by diverting their medicine supply to the United States."
Wednesday's announcement comes at the end of a month that has dealt multiple setbacks to the administration's drug pricing policy agenda. A federal judge vacated a rule that would require manufacturers to include price information in TV ads for certain drugs, and the administration abandoned its ambitious proposal to effectively kill the rebates pharmacy benefit managers (PBM) negotiate with drug makers. (Azar had reportedly been at odds with White House advisers who wanted to weaken the rebate rule.)
The administration has also explored the possibility of imposing an index to reduce the price disparity between drug prices in the U.S. and abroad.
Editor's note: This story was updated Wednesday with a statement from PhRMA.
The report comes as the payments are scheduled to shrink in fiscal year 2020 and policymakers look for ways to curb healthcare spending.
The supplemental funding that Medicaid provides in the form of disproportionate share hospital (DSH) payments covered 51% of uncompensated care costs in 2014 at the hospitals that received the payments, according to a study released publicly Monday by the U.S. Government Accountability Office.
The report comes as Medicaid DSH payments are scheduled to decrease in size in fiscal year 2020 and as lawmakers on Capitol Hill debate how they might tweak the program to rein in spending.
"I hope this report can convince my colleagues in Congress that reforms in this program are badly needed," Senate Finance Committee Chairman Chuck Grassley, R–Iowa, said in a statement saying Medicaid's supplemental payments are "complex to the point of inefficient."
In 2017, Medicaid DSH payments totaled more than $18 billion.
The same federal judge has tossed out the Trump administration's approval of Medicaid work requirements in three states.
U.S. District Judge James Boasberg, who previously blocked Medicaid work requirements in Kentucky and Arkansas, halted a similar set of requirements Monday in New Hampshire.
Boasberg issued a decision vacating the federal government's approval of the work requirements in New Hampshire for reasons that track closely with his decisions in the two prior states.
"The issues presented in this case are all too familiar," he wrote, outlining his view that Health and Human Services had again failed to consider fully the possibility that many people could lose health insurance as a result of the policy.
Boasberg's decision came after New Hampshire officials delayed their rollout of the new work requirements amid loss-of-coverage concerns. Two-thirds of the beneficiaries to whom the state's work requirements would apply—that's nearly 16,900 people—had failed to demonstrate compliance by the deadline, so state officials have launched a ramped-up campaign to raise public awareness.
Although the HHS secretary has wide discretion to approve demonstration projects that he or she expects to further the Medicaid program's statutory objectives, the judiciary have an important role to ensure that government agencies make reasoned decisions after considering the relevant factors, he wrote, finding that HHS had again fallen short.
Supporters of these work requirements have said the policies help beneficiaries climb out of poverty by giving them stronger incentives to work. Opponents have expressed concerns, however, that the added hurdles will simply result in more poor people being barred from Medicaid coverage over technicalities.
Boasberg's order granted summary judgment for the plaintiffs, vacated the requirements and remanded them to HHS for further proceedings, and scheduled a follow-up hearing for August 28. His decisioin will almost certainly prompt an appeal, as federal officials are continuing to defend their actions on the Kentucky and Arkansas programs before the U.S. Circuit Court of Appeals for the District of Columbia.
Trump administration officials have reportedly decided against approving Utah's request, signaling that any others like it will meet a similar fate.
The federal government is expected to reject Utah's request for full federal funding of its partial Medicaid expansion under the Affordable Care Act.
White House advisers had argued it would be illogical for the Trump administration to authorize the funding under the ACA while it urged federal courts to overturn the entire law, as The Washington Post's Yasmeen Abutaleb reported Friday, citing unnamed senior officials.
Utah Gov. Gary Herbert's office learned Friday night that the request would be rejected, as the Deseret News' Ashley Imlay reported Saturday. The rationale cited by the Centers for Medicare & Medicaid Services was that fully funding the partial expansion "would invite continued reliance on a broken and unsustainable Obamacare system," Imlay reported.
Utah voters approved a ballot measure last fall to expand the state's Medicaid program to cover people who earn up to 138% of the federal poverty level, as the ACA allows. But state leaders asked CMS to approve an expansion that would cover only those who earn up to 100% of the federal poverty level.
The president and CEO of the large Catholic health system will be the American Hospital Association's highest elected official for 2021.
Rod Hochman, MD, president and CEO of Providence St. Joseph Health (PSJH) in Renton, Washington, was named chair-elect designate Thursday by the American Hospital Association (AHA) board of trustees.
That means Hochman will become AHA chair in 2021, making him the highest elected official for the national association of hospitals and health systems, according to the AHA's announcement.
"The AHA plays a critical role in the health of the nation," Hochman said in a statement. "I am honored to serve in this role and look forward to continuing to advance our vision of giving all individuals the chance to live to their healthiest potential."
Hochman is currently a member of the AHA board's executive committee; he chairs the AHA Regional Policy Board 9; and he is the immediate past chair of the Catholic Health Association of the United States board of trustees, according to the announcement.
Hochman has helmed PSJH since 2012, overseeing the 51-hospital nonprofit Catholic health system. He was featured on the June 2018 cover of HealthLeaders magazine and quoted in the story, "4 Strategies to Compete With Disruptors and Win." He has frequently shared his industry insight with the HealthLeaders audience.
Prior to his work for PSJH, Hochman was president and CEO of Swedish Health Services, a five-hospital nonprofit health system in the Seattle area. He also has worked for Sentara Healthcare and Health Alliance of Greater Cincinnati.
Hochman's medical background is in rheumatology and internal medicine.
The announcement came on the first day of the AHA Leadership Summit, where Hochman appeared on stage with the current AHA chair, Brian Gragnolati; chair-elect for 2020, Melinda Estes, MD; and AHA President and CEO Rick Pollack.
The dyad isn't just a compromise between executives clinging to power in their post-merger organization. It's a viable solution that can work, at least temporarily.
Ever since the respective CEOs of Advocate Health Care and Aurora Health Care said they would co-lead the massive Midwestern health system created last year by the merger of their nonprofits, there have been questions about the workability of their dual CEO model.
Many people, including members of Advocate Aurora Health's post-merger workforce of 70,000, have wondered how co-CEOs could ever govern effectively. Who would have final decision-making authority? What would happen if the co-leaders disagree? How could they avoid stereo messaging?
All of that ambiguity over who holds ultimate responsibility for the decisions being made is precisely why some industry analysts advise against this atypical governance structure. The potential for confusion is too big of a risk, they reason.
So this week's announcement that Advocate Aurora Health has ditched its dual CEO model and picked Jim Skogsbergh to serve as its sole president and CEO moving forward—thereby releasing Skogsbergh's former co-president and co-CEO Nick Turkal, MD, to "pursue other interests"—might be viewed by some as the inevitable outcome of what is and always was an unworkable model.
To others, however, the end of this particular dyad says nothing about the viability of dual CEO models in principle.
Sarah E. Wilson, principal analyst of market access insights at Decision Resources Group in Nashville, was among those to say early on that Advocate Aurora Health might benefit from its co-CEOs, especially given the general lack of overlap between the geographic areas Skogsbergh and Turkal would oversee. And she still says keeping both legacy CEOs at the helm of a post-merger health system makes sense, in certain circumstances.
"Each consolidation agreement is unique," Wilson says. "For mergers between a larger system and smaller system, I don't think a dual CEO model makes sense. But I think in the case of large and/or multistate mergers, a dual CEO model can certainly help ease the transition of combining entities."
"Eventually, though, a dual CEO model will cease to make sense," Wilson adds. "There may be too many cooks in the kitchen, so to speak. You could have a situation where there are conflicting strategies or visions, which may do more harm than good to the organization."
Advocate Aurora Health brought together 27 hospitals and hundreds of other facilities but maintained both of its legacy headquarters: one in Downers Grove, Illinois, and the other in Milwaukee, Wisconsin. Despite moving to a single CEO position, the organization continues to have both headquarters, a spokesperson told HealthLeaders on Thursday.
Researchers See Benefits in Dual Model
Some academics have argued that two CEOs may actually be better than just one.
Researchers who studied co-CEO arrangements at 111 publicly traded companies across a wide variety of industries, for example, found that some CEO pairs complement each other in ways that meaningfully contribute to their company's strengths. The complementary factors generally include differing educational backgrounds or executive responsibilities, the researchers wrote in their 2011 paper.
Mergers and acquisitions were the most common factor to prompt a dual CEO model, according to the paper. "Such an arrangement can be used to accelerate merger approval and to ease the implementation of the merger," the researchers wrote.
When the Advocate-Aurora deal was announced in 2017, one of the study's coauthors, Matteo Arena, PhD, an associate professor and finance department chair at Marquette University, told Milwaukee Journal Sentinel columnist Steve Jagler that a side-by-side leadership arrangement would put Skogsbergh and Turkal in some awkward but manageable situations.
"It can work, but it doesn't always work," Arena said.
To derive the benefits of their management model, the two CEOs would need several important things, Arena said, including complementary skills, an ability to keep their egos under control, an attentiveness to the market's perception of their co-CEO arrangement, a willingness to accept a pay cut, and a temporary tenure.
Arena's research found that co-CEO arrangements last an average of four and a half years, which is pretty similar to the average tenure for all CEOs.
A different team of researchers, from the University of Arkansas and Appalachian State University, wrote that co-CEOs seem to be better equipped to increase corporate social responsibility. The top executive job, in many companies, has become "so complex that they may have outgrown their traditional one-person boundaries," the team wrote in their 2017 paper.
"Modern CEOs must address multiple escalating and often conflicting economic and social expectations that vary both within and between stakeholders over time. Our findings suggest that one way to increase the chances that CEOs may make both more responsible decisions and fewer irresponsible ones is to share the CEO title," they wrote. "Such collaboration at the top may help reduce the isolation of the solo CEO and result in better-vetted solutions."
Parallels in CommonSpirit's C-Suite
Advocate Aurora Health isn't the only major health system to keep both CEOs in place after a 50-50 merger—it's not even the only one to do so last year, in the Chicago area.
How the system handles its dual CEO model in the coming months will be something for industry watchers to keep an eye on, says Wilson, the Decision Resources Group analyst.
"It would not surprise me if, eventually, one of CommonSpirit's CEOs leaves," she says.
That is, in fact, what the large Catholic system has planned, a spokesperson confirmed to HealthLeaders in a statement Thursday afternoon.
"The success of an alignment between two large organizations such as Catholic Health Initiatives and Dignity Health is a function of integration planning," the spokesperson said. "The office of the CEO—led by Lloyd Dean and Kevin Lofton, two highly successful healthcare executives—was established to ensure the success of the integration. Under their leadership, the integration effort thus far has been very effective and efficient. The CommonSpirit Health Board of Stewardship Trustees will determine the future structure of the Office of the CEO."
"Ultimately, we anticipate that there will be a single CEO for the organization," the spokesperson added.
When a health system like Advocate Aurora or CommonSpirit abandons its post-merger dual CEO model, then, the question isn't whether the dyad ever had potential. The question is whether the CEOs accomplished their plans.
The outgoing executive's duties will be split between and president and an interim CEO, the company said.
Health Care Service Corporation (HCSC) announced the departure Wednesday of President and CEO Paula Steiner, who had led the Chicago-based health insurer three and a half years.
The company's announcement credited Steiner with expanding HCSC's Medicare and Medicaid programs and stabilizing its presence in the Affordable Care Act exchange market, but it didn't offer a reason for her exit.
"Paula led the company through significant industry change and oversaw our continued diversification and steady growth," said HCSC board chair Milton Carroll in a statement expressing gratitude and well-wishes.
Steiner's duties overseeing health plans with more than 16 million members nationwide will be split between a president and an interim CEO, the company said.
Maurice Smith, who has been with the company more than two decades and who was named president of Blue Cross and Blue Shield of Illinois in 2015, was named HCSC's new president.
David J. Lesar, CPA, MBA, who was CEO of Halliburton Energy Services Inc. for 17 years and who joined the HCSC board last year, was named interim CEO while the company. A search for Steiner's permanent successor "will begin immediately," according to the announcement.
"The Board has complete confidence in Dave and Maurice to lead our great company forward," Carroll said in the statement. "As we look to the future and our next generation of leadership, our commitment to standing with our members in sickness and health will not change."
HCSC is an independent licensee of the Blue Cross and Blue Shield Association. It describes itself as the nation's fourth-largest health insurer overall, with health plans in Illinois, Montana, New Mexico, Oklahoma, and Texas.
The health system had been operating with both CEOs from the pre-merger entities, but the board decided to move to a leadership team with a single top executive instead.
Advocate Aurora Health, which formed last year through a merger of two large Midwestern nonprofit health systems, has done away with the dual CEO model it had in place since the merger and has instead selected a single executive for the road ahead.
Jim Skogsbergh will serve as Advocate Aurora's sole CEO moving forward, effectively immediately, the health system announced Wednesday afternoon. Skogsbergh had been co-president and co-CEO with Nick Turkal, MD, since Advocate Health Care and Aurora Health Care merged in April 2018.
The nonprofit health system's board decided, with the help of an independent advisor, to move to the single CEO model as the best strategic move for the organization's future, board chair Joanne Disch, PhD, RN, FAAN, said in a statement.
"We have been fortunate to come together as Advocate Aurora Health under the leadership and expertise of two tremendous individuals, and we express our sincerest gratitude to both Nick and Jim for their outstanding contributions," Disch said.
"The Board is confident Jim is uniquely positioned to guide our system into the future by transforming our core business and redefining how we help people live well," Disch added. "He has earned national acclaim for his visionary leadership and laser focus on safety, value-based care and consumer-first strategies that will continue to propel our organization forward."
Skogsbergh had been president and CEO of the pre-merger Advocate Health Care, based in Downers Grove, Illinois.
"I am honored to continue to lead Advocate Aurora Health and our talented physicians, nurses and team members into the future as we transform care and deliver on our purpose of helping people live well," Skogsbergh said in the statement. "I'm grateful to Nick for his partnership and commitment in co-creating an industry leader that is well-positioned to redefine health care as we know it."
Turkal had been president and CEO of pre-merger Aurora Health Care, based in Milwaukee, Wisconsin. He will support the leadership transition "as he departs to pursue other interests," according to the organization's announcement.
"It has truly been a privilege to work alongside Jim and lead this remarkable organization and its talented and passionate team members," Turkal said in the statement. "We have formed an incredible organization dedicated to serving our patients and community, and I have full confidence that Advocate Aurora Health is well-positioned for the future under Jim's leadership."
Despite the bleak numbers, the for-profit hospital operator's leaders have tried to set an optimistic tone.
Shares of Community Health Systems (CHS) stock closed Tuesday at their lowest price ever: just $2.01 apiece.
The Franklin, Tennessee–based for-profit operator of more than 100 hospitals has been struggling for the past five years, shedding more than 80 hospitals from its portfolio as its stock price tumbled from a peak at nearly $53 in 2015.
Chairman and CEO Wayne T. Smith and fellow CHS executives have sought to set an optimistic tone, signaling that the company's long-running divestiture spree may be nearing its end. But some analysts say CHS' problems run deeper than its balance sheets.
The company recorded a first-quarter net loss of $118 million attributed to shareholders. It is slated to release second-quarter financials on August 6.
Tenet, a for-profit operator of 65 hospitals and about 500 outpatient centers, announced the plan Wednesday about a year and a half after saying its leaders would conduct a strategic review of Conifer's best path forward.
"This decision supports our longstanding objectives to maximize the value of Conifer, build on its strong growth potential and deliver the best outcome for Conifer and for Tenet shareholders," said Tenet Executive Chairman and CEO Ronald A. Rittenmeyer in a statement.
"Pursuing a tax-free spin-off is an important step forward in Conifer's evolution," Rittenmeyer added, "and we believe the business is well-positioned to capitalize on its growth opportunities as a standalone company."
Conifer, which offers outsourced revenue cycle management and other services to healthcare providers, generated more than $1.53 billion in revenue last year, with adjusted EBITDA of $357 million, up 26% from 2017, according to the announcement.
Stephen M. Mooney, MBA, who had been Conifer's CEO since its formation in 2008, "has stepped down from his position," according to Tenet's announcement, which didn't give a reason for his departure. (His bio was removed from Conifer's website, as of Wednesday morning.)
Kyle Burtnett, who had been chief operating officer since joining the company in October 2017, has been appointed Conifer's interim CEO as Tenet conducts a national search for Mooney's permanent successor, with plans to evaluate internal and external candidates alike.
Rittenmeyer thanked Mooney for his dedication and work and praised Burtnett as "a driving force behind the company's exceptional cost management and margin improvement."
"His operational rigor and tenacity has helped to sharpen all corners of the organization to be more efficient and effective," Rittenmeyer said of Burtnett in the statement. "I look forward to working with him to advance the many important initiatives underway at Conifer."
Paths Not Chosen
Tenet's leaders conducted "an exhaustive review" of Conifer's potential strategic options, according to a presentation delivered Wednesday morning to investors. They focused on two potential options: either a cash sale of the enterprise or a merger and tax-free spin-off.
In exploring a possible Conifer sale, Tenet made initial contact with 74 parties, received nine preliminary bids, and narrowed the list down to three final parties that conducted diligence and revised their offers, according to Tenet's presentation.