Health Care Reform Articles - October 3, 2016

Ailing Obama Health Care Act May Have to Change to Survive

by Robert Pear - NYT

WASHINGTON — The fierce struggle to enact and carry out the Affordable Care Act was supposed to put an end to 75 years of fighting for a health care system to insure all Americans. Instead, the law’s troubles could make it just a way station on the road to another, more stable health care system, the shape of which could be determined on Election Day.

Seeing a lack of competition in many of the health law’s online insurance marketplaces, Hillary Clinton, President Obama and much of the Democratic Partyare calling for more government, not less.

The departing president, the woman who seeks to replace him and nearly one-third of the Senate have endorsed a new government-sponsored health plan, the so-called public option, to give consumers an additional choice. A significant number of Democrats, for whom Senator Bernie Sanders spoke in the primaries, favor a single-payer arrangement, which could take the form of Medicare for all.

Donald J. Trump and Republicans in Congress would go in the direction of less government, reducing federal regulation and requirements so insurance would cost less and no-frills options could proliferate. Mr. Trump would, for example, encourage greater use of health savings accounts, allow insurance policies to be purchased across state lines and let people take tax deductions for insurance premium payments.

In such divergent proposals lies an emerging truth: Mr. Obama’s signature domestic achievement will almost certainly have to change to survive. The two parties agree that for too many people, health plans in the individual insurance market are still too expensive and inaccessible.

“Employer markets are fairly stable, but the individual insurance market does not feel stable at all,” said Janet S. Trautwein, the chief executive of the National Association of Health Underwriters, which represents more than 100,000 agents and brokers who specialize in health insurance. “In many states, the individual market is in a shambles.”

Mr. Obama himself, while boasting that 20 million people had gained coverage because of the law, acknowledged in July that “more work to reform the health care system is necessary.”

“Too many Americans still strain to pay for their physician visits and prescriptions, cover their deductibles or pay their monthly insurance bills; struggle to navigate a complex, sometimes bewildering system; and remain uninsured,” Mr. Obama wrote in The Journal of the American Medical Association.

The marketplace faces a major test in the fourth annual open enrollment season, which starts on Nov. 1, a week before Election Day. In many counties, consumers will see higher premiums and fewer insurers, as Aetna, Humana and UnitedHealth have curtailed their participation in the exchanges, and many of the nonprofit insurance cooperatives, created with federal money, have shut down.

Mr. Trump has said that Congress must “completely repeal Obamacare,” and Republicans in Congress have repeatedly tried to do so. But parts of the law appear to be here to stay. One such provision, now widely accepted, says that insurers cannot deny coverage because of a person’s medical condition or history.

For their part, many Democrats are clamoring for a public insurance option, as they did nine years ago.

“Supporters of the public option warned that private insurance companies could not be trusted to provide reliable coverage or control costs,” said Richard J. Kirsch, who led a grass-roots organization that fought for passage of the Affordable Care Act in 2009 and 2010. “The shrinking number of health insurers is proof that these warnings were spot on.”

On Sept. 15, Senator Jeff Merkley, Democrat of Oregon, introduced a resolution calling for a public option. The measure now has 32 co-sponsors, including the top Senate Democrats: Harry Reid of Nevada, Chuck Schumer of New York and Richard J. Durbin of Illinois.

“You need competition to make the exchanges successful,” Mr. Merkley said in an interview. “A public option guarantees there’s competition in each and every exchange around the country.”

As they did before the Affordable Care Act was enacted, insurance lobbyists are mobilizing to kill the public option. The main trade group for the industry, America’s Health Insurance Plans, says it would do nothing to stabilize the exchanges, and in an urgent “action alert,” the group asked member companies to lobby against Mr. Merkley’s resolution.

Senator Lamar Alexander, Republican of Tennessee and chairman of the Senate health committee, said the Democrats’ public option plan would compound the problems it seeks to solve.

“Obamacare exchanges are collapsing because of federal mandates and a lack of flexibility,” Mr. Alexander said. “We need to give states more flexibility and individuals more choices so more people can buy low-cost insurance.”

Mr. Trump would replace the Affordable Care Act with an assortment of conservative policies, including some that are similar to ideas favored by House Republicans and by think tanks like the Heritage Foundation or the American Enterprise Institute. But Democrats and some Republicans say that Mr. Trump has not laid out a comprehensive, coherent alternative to the Affordable Care Act.

Mr. Trump would eliminate the requirement that most Americans carry health insurance. He would encourage the sale of insurance across state lines, in a bid to increase competition. And he would convert Medicaid, now an open-ended entitlement, into a block grant, giving each state a lump sum of federal money to provide health care to low-income people.

The basic structure of the Affordable Care Act looked promising to private insurers. The government, in effect, required consumers to buy their products and provided subsidies to help defray the cost, under an arrangement that had few precedents in other industries.

A public option could take market share from private insurers, so it is no surprise they would oppose it. But insurers say the public option would not hold down medical costs, which they describe as the main engine driving up premiums. Moreover, insurers say that the government would have an unfair advantage if it both regulates and competes with private plans.

For some people, the subsidies have proved inadequate. People with annual incomes less than two and half times the poverty level (less than $29,700 for an individual) receive the most generous subsidies and have signed up in large numbers.

But enrollment figures suggest that higher-income people who receive smaller subsidies or none at all have not seen insurance as such a bargain.

“The insurance exchanges have enrolled more than 80 percent of the potential exchange population with incomes below 150 percent of the federal poverty level,” said Caroline F. Pearson, a senior vice president of Avalere, a health policy consulting company. But, she added, they have enrolled only 17 percent of potential customers with incomes from three to four times the poverty level ($35,640 to $47,520 for an individual).

Andrew M. Slavitt, the acting administrator of the Centers for Medicare and Medicaid Services, said the administration was taking steps to ensure “a stable, sustainable marketplace” — by increasing payments to insurers for “high-cost enrollees” and by curbing any abuse of “special enrollment periods” by people who sign up for coverage after they become sick. In addition, federal officials are redoubling efforts to sign up young adults.

Dr. John W. Rowe, who was the chief executive of Aetna from 2000 to 2006 and the president of Mount Sinai Medical Center in New York before that, predicted that “the insurance market will stabilize in two or three years.”

“We are not in a death spiral,” Dr. Rowe said. “If this were a patient, I would say that he’s not in intensive care, but he’s still in the hospital and requires careful monitoring.”

But that does not mean the act will heal on its own, said Sara Rosenbaum, a professor of health law and policy at George Washington University.

“Even the most ardent proponents of the law would say that it has structural and technical problems that need to be addressed,” she said. “The subsidies were not generous enough. The penalties for not getting insurance were not stiff enough. And we don’t have enough young healthy people in the exchanges.”

http://www.nytimes.com/2016/10/03/us/politics/obama-health-care-act.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=a-lede-package-region&region=top-news&WT.nav=top-news&_r=0

Why Health Insurance Industry Consolidation Is Bad For Your Health

by Wendell Potter - Huffington Post

You undoubtedly have heard that some of the country’s biggest health insurers have decided to leave several Obamacare markets, which means that tens of thousands of us will be affected next year. 

You probably haven’t heard — at least not lately — that some of the biggest health insurers are moving full steam ahead to merge with each other, which means that tens of millions of us — yes, millions — will be affected next year. And not in a good way. If the consolidation happens as planned, many of us will find ourselves in health plans with much worse patient satisfaction and customer complaint scores. 

Here’s some context: Executives of UnitedHealthcare, Aetna and Humana made headlines this summer when they announced plans to quit selling policies on several Obamacare exchanges at the end of the year because they haven’t yet figured out how to turn a profit on that business. That means people enrolled in those companies’ Obamacare plans will have to pick a different insurer for 2017. 

If That’s Not Bad Enough

That’s a big inconvenience for those folks, of course. But far more of us, including several million who are enrolled in employer-sponsored plans, will be more than inconvenienced if state and federal regulators approve the Anthem-Cigna and Aetna-Humana mergers. 

Employers, consumer groups, the American Medical Association and many other organizations have told regulators they think those mega mergers are not in the public’s best interest. The U.S. Justice Department and several state officials agree. They filed a lawsuit in July to stop both of them. Nevertheless, the mergers are far from dead. 

That should worry us. A lot. That’s because the acquiring companies, Anthem and Aetna — but Anthem especially — have higher customer complaint ratios and lower patient satisfaction scores than other companies, as recent reports by the state of California’s Office of the Patient Advocate (OPA) show. And if the Anthem-Cigna merger goes through, Anthem, with the worst scores overall, would become the nation’s biggest health insurer. 

“Your Call Is Not Important To Us”

Take a look at OPA’s Annual Health Care Complaint Data Report, which provides a wealth of information about the complaints California regulators received in 2014, the most recent year for which data were available for analysis. 

Anthem scored the worst by far of any of the other health plans operating in the state. Data provided to OPA by the Department of Managed Health Care, which has jurisdiction over most of the state’s HMOs, showed, for example, that Anthem had 12.28 complaints per 10,000 enrollees. Compare that with Kaiser Permanente, the nonprofit company that rivals Anthem in terms of enrollment in California. Kaiser had just 4.50 complaints per 10,000. In other words, Anthem had nearly three times as many complaints as Kaiser.

Anthem also led the pack in the ratio of complaints received by the California Department of Insurance. That department said Anthem had a whopping 47.64 complaints per 10,000. Cigna, the company Anthem is trying to buy, had just 2.69 complaints per 10,000. 

And it’s not just in California that Anthem has generated an inordinate number of complaints about how it treats its customers. It appears to be nationwide. In fact, the Department of Justice cited Anthem’s less than stellar reputation in its lawsuit to block its takeover of Cigna. This is from a September 20 story in the Hartford Courant about the status of the proposed $54 billion deal:

The federal government claims that many large employers dislike Anthem and that doctors fear the company because its large customer base gives it leverage in negotiations.

The Department of Justice complaint says that although Cigna can’t get as low prices from hospital systems and doctors in some markets as Anthem does, “Cigna competes vigorously with Anthem for large groups by offering exceptional customer service, innovative wellness programs that lower its members’ utilization of health care, and provider-collaboration programs with hospitals and doctors. By contrast, many large-group employers believe that Anthem provides poor customer service and is far less innovative. Soon after the merger was announced, two prospective customers complained to Cigna: “We hate Anthem and you guys are about to become them.”

When it comes to how patients rate their experience with their HMOs, another report by the California Office of the Patient Advocate shows that the big for-profits involved in the proposed mergers also get much lower scores than their nonprofit competitors. Nonprofit Kaiser Permanente’s HMOs were the only ones rated “excellent.” 

Earlier this month, a Harvard Law watchdog group filed complaints with the U.S. Department of Health and Human Services against seven big insurers — including Anthem, Cigna and Humana—alleging that they all were in violation of anti-discrimination laws pertaining to the coverage of HIV/AIDS treatments. The allegations involved refusing to cover vital medications that HIV/AIDS patients need and requiring high-cost sharing for other medications used to treat HIV/AIDS. 

“When an insurer requires chronically ill patients to pay a disproportionate share of the cost of medication, it violates federal law,” said Robert Greenwald, clinical professor of law at Harvard Law School. 

The American Medical Association has become one of the most vocal opponents of the mega-mergers, particularly the Anthem-Cigna deal. On September 21, the AMA released a report showing that Anthem’s “market power” would be significantly increased in several states and numerous metropolitan areas — especially in California — if the deal is approved. 

Despite all of this, the mergers could still happen. A U.S. District Court has set a November 21 trial date for the lawsuit the Department of Justice has filed to stop the Anthem-Cigna merger. The Aetna-Humana trial is scheduled to start on December 5. Both trials likely will go on for several weeks. If the Department of Justice loses, millions of Americans will soon find themselves enrolled in health plans administered by companies with some of the industry’s worst quality and customer satisfaction scores. That’s something not only to worry about but also to try keep from happening. The last thing we need is for Anthem and Aetna to be more in control of our lives.

http://www.huffingtonpost.com/wendell-potter/why-health-insurance-indu_b_12158066.html

The Two Mysteries of Medicare

by Austin Frat - NYT

A growing proportion of Medicare beneficiaries are opting out of the government-run insurance program. They are instead choosing a private plan alternative, one of the Medicare Advantage plans. The strength of this trend defies predictions from the Congressional Budget Office, and nobody can fully explain it.

Here’s another mystery. Traditional Medicare spending growth has slowed, bucking historical trends and expectations. Though there are theories, we don’t fully know what’s causing that either.

Pinning down explanations for these two mysteries is important. Doing so could help us understand the structure and cost of Medicare in the future.

The mysteries may be connected by something that appears, at first, to be unrelated: Doctors and hospitals tend to treat insured patients the same way, regardless of what kind of coverage they have. A traditional Medicare patient admitted to the hospital with, say, pneumonia will receive the same standard of care as a similar but privately insured pneumonia patient.

From this, an idea emerges that links the two mysteries. As enrollment in Medicare Advantage plans grows, so too do the plans’ influence over how doctors and hospitals provide care. Unlike the traditional program, Medicare Advantage plans establish networks, covering care provided only by certain doctors and specific hospitals. Often those are the ones with lower cost growth. As doctors and hospitals reduce their cost growth to gain access to Medicare Advantage networks and the increasing number of patients enrolled in the plans, they do so for traditional Medicare patients as well.

So, as Medicare Advantage enrollment swells, the growth in the cost of care for traditional Medicare falls — a spillover effect. That’s the theory, anyway. Does it hold water?

A few studies have examined the question, and all support the spillover theory. The first study, examining the period from 1994 through 2001, found that when the proportion of Medicare beneficiaries enrolled in Medicare H.M.O.s grew by an additional percentage point, per enrollee spending in traditional Medicare fell by one percentage point. Another study, focused on the period from 1999 to 2009, found that a 10-percentage-point increase in Medicare Advantage market share was associated with a 4.5 percent decrease in per enrollee traditional Medicare hospital costs and a commensurate reduction in duration of hospital stays.

“These studies extend on a body of research that demonstrates that health care markets are connected,” said Michael Chernew, a Harvard health economist who participated in both studies. For example, research in the 1990s showed that when H.M.O.s grab enough of a health care market, Medicare spending is reduced.

A study published this year by Kevin Callison, an economist at Grand Valley State University, corroborates the phenomenon. It found that greater Medicare Advantage market penetration is associated with reduced hospital costs for traditional Medicare heart attack patients. But such patients were also more likely to die, a finding at odds with other work by Mr. Chernew and researchers at Harvard and Stanford that showed that the expansion of Medicare Advantage is associated with lower mortality.

Those studies examined periods that predate the Affordable Care Act, which changed how Medicare pays plans and hospitals. Since then, Medicare spending has continued to decelerate, and Medicare Advantage enrollment has continued to grow. So it’s important to look at more recent data to see if the spillover could still be connecting the two phenomena. Two studies published in the last year have done so, and they support previous findings.

A study spanning the 2010 passage of the A.C.A. by Katherine Baicker and Jacob Robbins, health economists at Harvard, found that a 10-percentage-point increase in Medicare Advantage market penetration was associated with a 7.3 percent decline in days that traditional Medicare patients spent in the hospital. Instead, patients receive more care in less expensive settings: Outpatient visits increased 5.5 percent, for example. In total, annual per enrollee traditional Medicare costs were lower by $252 for each 10-percentage-point gain in Medicare Advantage market share.

Finally, a study published last month by researchers with the Harvard T.H. Chan School of Public Health provided the most up-to-date look, using data through 2014. It found that in counties with Medicare Advantage market penetration above 17.2 percent, greater growth in Medicare Advantage was associated with slower growth in traditional Medicare spending. According to the study, the spillover effect accounts for 11 percent of the recent traditional Medicare spending slowdown. Because of the methods used, this may be a conservative estimate — the spillover effect could be even larger, explaining more of the slowdown.

If Medicare Advantage is responsible for slower traditional Medicare spending growth, should policy makers do more to encourage greater Medicare Advantage enrollment? One way to do so would be to coax more plans into the market by paying them more, which is controversial. “There’s almost continuous policy debate about how much we should pay Medicare Advantage plans,” Mr. Chernew said. “In addressing that, we should consider the full impact of Medicare Advantage, not just impact on those who choose to enroll in the program.”

We still don’t know exactly why Medicare Advantage is growing in popularity or why Medicare spending is slowing. But now we know that the two are related. Medicare Advantage growth doesn’t completely explain slower Medicare spending growth, but it is one piece of the puzzle.

http://www.nytimes.com/2016/10/04/upshot/the-two-mysteries-of-medicare.html?emc=edit_tnt_20161003&nlid=1311158&tntemail0=y

Rapid Burnout, Dissatisfaction Of U.S. Doctors Threatens Public Health Crisis

by Alexander Reed KellyHalf of U.S. physicians are “disengaged, burned out, and demoralized and plan to either retire, cut back on work hours, or seek non-clinical roles,” reports MedPage Today, citing a new nationwide survey commissioned by The Physicians Foundation.

“Many physicians are dissatisfied with the current state of the medical practice environment and they are opting out of traditional patient care roles,” said Walker Ray, MD, president of The Physicians Foundation, in remarks that appeared with the survey.

“The implications of evolving physician practice patterns for both patient access and the implementation of healthcare reform are profound.”

MedPage Today reports:

The majority of the 17,236 physicians surveyed (54%) describe their morale as somewhat or very negative, 63% are pessimistic about the future of the medical profession, 49% always or often experience feelings of burn-out, and 49% would not recommend medicine as a career to their children, according to the survey.

Physicians identified regulatory/paperwork burdens and loss of clinical autonomy as their primary sources of dissatisfaction. They spend 21% of their time on non-clinical paper work duties, according to the survey, while only 14% said they have the time they need to provide the highest standards of care. About two-thirds (72%) said third-party intrusions detract from the quality of care. …

The survey indicates that only 33% of physicians now identify as private practice owners, down from 49% in 2012, while 58% identify as employees, up from 44% in 2012.

Physicians also indicated that “they’re disengaged from key initiatives of healthcare reform,” MedPage Today reports.

Only 43% said their compensation is tied to value. Of these, the majority (77%) have 20% or less of their compensation tied to value. Only 20% are familiar with the Medicare Access and CHIP Reauthorization Act (MACRA) which will greatly accelerate value-based payments to physicians.

While 36% of physicians participate in accountable care organizations (ACOs), only 11% believe ACOs are likely to enhance quality while decreasing costs. Physicians also are dubious about hospital employment of doctors, another mechanism for achieving healthcare reform.

Two-thirds (66%) do not believe hospital employment will enhance quality of care or decrease costs. Even 50% of physicians who are themselves employed by hospitals, do not see hospital employment as a positive trend.

The survey additionally found:

* 80% of physicians are overextended or are at capacity, with no time to see additional patients
* 48% of physicians said their time with patients is always or often limited
* Employed physicians see 19% fewer patients than practice owners
* 46.8% of physicians plan to accelerate their retirement plans
* 20% of physicians practice in groups of 101 doctors or more, up from 12% in 2012
* Only 17% of physicians are in solo practice, down from 25% in 2012
* 27% of physicians do not see Medicare patients, or limit the number they see
* 36% of physicians do not see Medicaid patients, or limit the number they see

One Truthdig reader said of the findings:

One should compare what’s happened in the medical profession with what’s happened in the nation’s universities—greed and ideologically driven (rather than empirically based) business modeling turned control of persons educated to perform the profession’s real work over to hordes of bean counting ‘administrators’ whose policies and actions deprive doctors and professors of autonomy, reduce both time to perform and fair reward for their work, and slash due respect for their hard acquired skills and the developed judgment needed to effectively use them with patients and students.

These results follow from privatization, which is a form of theft consisting of the capitalist practice of plundering employees and reducing services to the public in order to leach wealth for owners, managers or both—workers, humanity and Earth’s future be damned.

Update: Via email, Truthdig reader Lawrence Raines, recently retired from a career in health care, adds to the findings and the preceding comment:

I was an independent General Surgeon who retired (after 31 years in same location) in August 2013 because of the relentless, oppressive intrusion of Corporatised Medicine which is nicely described by the above quote from one of your readers. There are myriad reasons that led to my retirement but using my long acquired and honed skills to care for my patients was not one of them. I loved being a doctor but my professional life was literally sucked out of me and according to the article and conversations with former colleagues it has continued to get worse, “much worse.” I don’t think this is unique to healthcare and I have grave concerns about what type of society will exist for my grandchildren. Greed and Power and the associated Immorality are corrupting the world.

https://www.popularresistance.org/rapid-burnout-dissatisfaction-of-u-s-doctors-threatens-public-health-crisis/

Cerberus Uses Private Equity Looting Strategy With Scandal-Ridden Steward Health Care Hospitals

by Yves Smith

By Roy Poses, MD, Clinical Associate Professor of Medicine at Brown University, and the President of FIRM – the Foundation for Integrity and Responsibility in Medicine. Cross posted from the Health Care Renewal website

This looks like the latest trend in the financialization of and diffusion of accountability for health care organizations.  The case involves good ol’ Steward Health Care, which was the subject of quite a few Health Care Renewal posts back in the day.

Background – Caritas Christi Bought by Cerberus Capital Management, Became Steward Health Care

Steward is what used to be Caritas Christi Health Care System, formerly a Catholic, non-profit health care system in Massachusetts.  In 2010, Caritas Christi was purchased by Cerberus Capital Management, a private equity, aka leveraged buyout firm, which was known for its not very successful run managing Chrysler (look here) and GMAC (look here).  Cerberus also had enlarging holdings in the gun industry, later expanded into the Freedom Group, and in military contracting, specifically including DynCorp which hired armed “security forces” and was involved in multiple scandals in Iraq, all of which might strike some health care professionals as inappropriate (look here and here).

Steward Health Care, as run by Cerberus, was one of the earlier leaders in hiring corporate physicians, whom it pressured to avoid “leakage” of patients to other hospitals and doctors, even if some might question whether the care provided elsewhere might be better for those patients (look here).  The multimillion dollar a year CEO of Steward suggested the health care had become a commodity, objectionable to those who thought that health care should be a mission-based calling (look here).

After Steward consolidated, operational misadventures began.  In 2013, it closed the pediatric unit at Morton Hospital (look here).  In 2014, it closed Quincy Hospital, despite promises that it would expand health care services, and specifically not close that hospital so quickly (look here).  Starting in 2014, Steward stonewalled state requests to disclose financial data as required by state regulations after the private equity takeover (look here).  In 2016, Steward continued to withhold financial data (look here), and closed the short-lived family medicine residency program at Carney Hospital,  amidst complaints by the residents about poor organization, and inadequate numbers of faculty (look here).

Steward to Sell All its Hospitals, but Keep Running Them

This week, the Boston Globe reported a stunning example of financial engineering:

Steward Health Care System said Monday that it lined up $1.25 billion from a real estate investment firm that will help the Boston-based company finance a national expansion, pay off debt, and return money to the private equity firm that bought it almost six years ago.

Steward said Medical Properties Trust Inc. would buy all of its hospital properties for $1.2 billion and pay $50 million for a 5 percent equity stake in the company. Steward will lease the properties from MPT, based in Birmingham, Ala. 

Note that nearly all the “financing” was obtained by selling all the hospital properties, which somehow sound like the core assets of a hospital system.

Of course, current Steward management thought it was a great idea:

Steward’s chief executive, Dr. Ralph de la Torre, said the MPT investment will give Steward a second source of capital funding and allow it to grow its model of community-based care in other states. ‘This validates the model,’ he said in an interview.

Presumably he was talking about a financial model, maybe the model used by private equity firms (see below).  It did not appear that this model had anything to do with providing health care to patients.

On the other hand, perhaps Dr de la Torre was enthused because he stood a chance of personally profiting from this deal, which

is also designed to allow top Steward leaders to have a ‘substantially larger stake’ in the company.

The implication is that Dr de la Torre would end up with some piece of Steward, Cerberus, and/or MPT.

Furthermore, the deal apparently would let Cerberus Capital Management recover all the money it initially put into its buyout of Caritas Christi:

The entire initial investment to Cerberus will be paid back, but the amount is proprietary, de la Torre said. The deal will also pay down all of the company’s $400 million in debt, he said.

This would apparently now render the initial take-over of Caritas Christi financially risk-free for Cerberus Capital Managment, but perhaps not risk-free for patients and health care professionals (who essentially were not mentioned in the article.)

Summary – What Happens When Private Equity Owns Hospitals

We have previously described the private equity playbook here, and here.  The main points were:

–  Private equity is just the new name for leveraged buyout firms (the type of firm described the book, and later movie Barbarians at the Gate.)

–  Therefore, when they buy out firms (e.g., the primary care practices discussed above), they use borrowed money.

–  But they leverage in two senses.  Once firms are bought, the private equity owners makes the firms take out further loans, and the money from them may go back to the owners, usually in the form of a special dividend, to pay down the debt originally incurred by the private equity owners.  This leaves the bought out firms heavily in debt, but frees the private equity firm from its original debt.  If the firm is eventually sold, the new buyers take over the debt.  In a worst case scenario, however, the bought out firm goes bankrupt, the private equity’s firm stock in it becomes worthless, but the private equity firm need not be responsible for its financial obligations.

–  If the private equity firm desires more money while it still owns the acquired firm, it may sell parts of it off.

–  To make the finances of the acquired firm look more attractive to the next buyer, the private equity firms often undertakes short term cost cutting measures that may involve layoffs, increased workload on remaining workers, etc.

Other dark aspects of private equity are discussed on the Naked Capitalism blog here.

So Steward Health Systems, which bought out by Cerberus Capital Management, has now largely followed this playbook.  Cerberus initially infused hundreds of millions into Steward, ne Caritas.  Steward then closed facilities and programs, and otherwise cut costs.  Now Steward is going to sell off its biggest assets, the actual hospital facilities that one might think are at the core of hospital systems.  Doing so apparently would allow Cerberus to at least break even on the deal, while still remaining in control.

But now Steward Health is split.  It is still owned by Cerberus.  Its major facilities would be owned by Medical Properties Trust Inc.  Apparently, Steward would have no assets other than its employees.  Of course some employees, that is, top  management, would be more equal than others, since they are likely being paid millions in compensation, and would have the opportunity to enlarge their stakes in “the company,” although whether that company is Steward, Cerberus, or even MPT is not clear.

Thus, a hospital system which ostensibly exists to take care of acutely and chronically ill patients, often in their hours of need and vulnerability, would now be split among multiple corporate entities.  Who woud actually be in charge of upholding the mission?  Who would be accountable when things go wrong?  Those questions are not clear.

But it does seem likely that top executives of Steward, Cerberus Capital Management, and perhaps Medical Properties Inc stand to personally gain from this bold bit of financialization.  Whether patients may benefit, or health care professionals work and ability to care for patients might be facilitated by all this is not clear, and was not addressed in the current article.

As we have said again and again,…

Physicians need to realize that to fulfill their oaths to put patients first, they have to reduce the influence of rich and powerful organizations with other agendas, like health care corporations, and especially corporations owned by private equity.  The metastasis of private equity into the corporate practice of medicine and into hospitals and hospital systems should make us all rethink the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.

http://www.nakedcapitalism.com/2016/10/cerberus-uses-private-equity-looting-strategy-to-scandal-ridden-steward-health-care-hospitals.html

Glaxo to pay $20 million for bribing doctors in China

by Ed Silverman

GlaxoSmithKline on Friday agreed to pay $20 million to settle charges of violating the Foreign Corrupt Practices Act for what authorities called a pay-to-prescribe scheme in China. In doing so, Glaxo becomes the latest global drug maker to face such accusations as part of a long-running probe by US authorities into companies that paid bribes overseas in order to boost sales of their medicines.

The settlement is an outgrowth of the bribery scandal that rocked Glaxo and resulted in a $490 million fine two years ago after a Chinese court found the company guilty of bribing doctors, hospital officials, and other non-governmental personnel. The former head of the Glaxo unit in China also pleaded guilty to bribery-related charges and was given a three-year suspended sentence.

As part of the scheme, Glaxo employees allegedly funneled kickbacks through trade groups and travel agencies that planned events. Between 2010 and June 2013, Glaxo spent nearly $225 million on planning and travel services. But after reviewing a sample of invoices, authorities found about 44 percent were inflated and approximately 12 percent were for events that did not occur, according to an SEC order.

In 2010, Glaxo hired a Chinese company to develop a project to provide clinics with tools to store and administer vaccines that required refrigeration. Instead, the project was used to give laptops and other electronic devices as gifts to clinics that were believed to have the potential to market still other Glaxo drugs. In all, the drug maker spent about $2.3 million doing this.

And while Glaxo had policies to limit speaker fees, the SEC said the effort was ineffective. Of $17 million spent on such fees in 2012, about $2.2 million was paid to people whose qualifications as a health care provider could not be verified. Overall, the SEC found that Glaxo “lacked an effective anticorruption compliance program to detect and prevent these schemes.”

Since then, Glaxo has vowed to alter its marketing practices and points to changes in compensation for sales reps in the United States as a prominent example. Nonetheless, the drug maker has scrambled over the past two years to conduct internal probes in still other countries where allegations have surfaced of bribes being paid. These include Poland, Yemen, Jordan, Lebanon, and Syria.

A Glaxo spokeswoman wrote us to say that both the SEC and the US Department of Justice have now concluded their probes into its activities in China. A source added that there are no outstanding investigations into Foreign Corrupt Practices Act violations in any other country where Glaxo operates.

Several other large drug makers have similarly paid fines recently for violating the Foreign Corrupt Practices Act. Last month, AstraZeneca agreed to pay $5.5 million to settle charges of bribing doctors in Russia and China. Over the past year, Novartis agreed to pay $25 million to settle charges of making illegal payments to doctors in China, and Bristol-Myers paid a $14 million fine for the same offense.

https://www.statnews.com/pharmalot/2016/09/30/glaxo-bribes-china-sec/

Drinks, junkets and jobs: How the insurance industry courts state commissioners

by Michael J. Mishak - Washington Post

When the Arkansas insurance commissioner weighed the merits of a hospital’s billing complaint against United Healthcare, her interactions with one of the nation’s largest health insurers extended far beyond her department’s hearing room.

During months of deliberations, Commissioner Julie Benafield Bowman met repeatedly with United Healthcare lawyers and lobbyists over lunch and drinks at venues such as the Country Club of Little Rock.

“I had a blast with you Monday night,” Benafield emailed United Healthcare lawyer Bill Woodyard, himself a former state insurance commissioner. “Thank you so much for entertaining us.”

Benafield ultimately decided the case in United Healthcare’s favor — a 2008 ruling that stood to save the company millions of dollars. Nearly two years later, by the time a judge vacated the commissioner’s orders because there was “an appearance of impropriety in the proceedings,” Benafield had moved on: She was working for United Healthcare, having joined at least three of her predecessors representing insurers in Arkansas.

Woodyard is deceased, and Benafield has said her meetings with United Healthcare lobbyists did not influence her decisions as commissioner. United Healthcare has said it did not discuss employment with Benafield until after she had issued her final ruling in the case.

It’s a common career move. An investigation by the Center for Public Integrity found that half of the 109 state insurance commissioners who have left their posts in the past decade have gone on to work for the industry they used to regulate — many leaving before their terms expire. Just two moved into consumer advocacy.

The revolving door swings in the other direction, too. For almost a year, Connecticut’s insurance commissioner was overseeing a merger involving a company where she had been a lobbyist. She recused herself last month amid a state ethics review.

Consumer advocates and some commissioners say the tight bond between regulators and the insurance industry — reinforced by campaign contributions, lavish dinners and the prospect of future employment — diminishes consumers’ voices as insurers press rate increases, shape regulations and scuttle investigations.

“It’s very difficult at times to take a stand for consumers and have your voice heard,” said Sally McCarty, a former Indiana commissioner and retired consumer advocate. “A lot of commissioners don’t bother doing that for that reason — and they don’t want to alienate the industry. . . . Many people consider the job an audition for a better-paying job.”

Insurers counter that the industry is highly regulated and say that their lobbying efforts are key to informing commissioners and other policymakers who oversee a part of the financial sector that touches millions of Americans’ lives.

“It is crucial for commissioners and other state and federal policymakers to understand the products and services we provide to people,” said Jack Dolan, a spokesman for the American Council of Life Insurers.

The stakes are enormous.

Because Congress has long left regulation of the insurance industry to the states, these little-known regulators, one per state, wield immense power over one of the largest segments of the U.S. economy. Charged chiefly with protecting consumers, commissioners review rate changes, investigate complaints and make sure insurers have enough money to pay claims.

Their decisions affect nearly every American. And yet, most commissioners operate outside of public view, sometimes exempted from disclosure requirements that cover other state officials and often ignored by the decimated statehouse press corps.

The cozy relationships between regulators and the industry were revealed in the Center for Public Integrity’s review of lobbyist reports, regulator financial disclosures, campaign finance records and more than 3,700 pages of emails obtained through open-records laws in 13 states.

Four commissioners had direct financial ties to firms their offices oversee, either through business holdings, a spouse’s job or a retirement plan from a former employer. New Jersey’s top regulator sold his insurance stocks — prohibited investments under state ethics laws — only after the Center asked the State Ethics Commission about the shares.

Many more have accepted thousands of dollars in trips to conferences sponsored by insurance companies and their trade groups at such locales as the Four Seasons resort in Jackson Hole, Wyo.

Multiple commissioners rely on industry campaign contributions. Over the past decade, insurance companies and their employees were among the top donors to commissioner candidates in at least five of the seven states that elect regulators and allow campaign contributions from the insurance industry, according to the National Institute on Money in State Politics.

Above all, there is a steady drumbeat of lobbyists wining and dining commissioners. Often, the ones picking up the tab are former insurance commissioners.

In Mississippi, George Dale, who served as commissioner for more than three decades before becoming a lobbyist, represents at least two insurers, including Allstate. Eight years after he left office, department staffers still address him as “Commissioner,” keep him abreast of employees’ birthdays and retirements and share internal reports on legislative developments, according to the documents obtained by the Center for Public Integrity.

“It impresses our clients that we know the commissioner,” Dale wrote to Insurance Commissioner Mike Chaney after a night out in 2010.

In an interview, Dale said his close ties with the department were the inevitable result of his 32-year tenure. “They’re friends of mine,” he said. “If that’s wrong, I’m guilty.”

Allstate declined to comment.

Emails from other states also show personal relationships between regulators and insurers and their representatives, who share dinner invitations, family news and friendly sports wagers.

“It gets at the whole integrity of the process,” said Bob Hunter, a former Texas commissioner who runs the insurance program for the advocacy group Consumer Federation of America. “It raises among the public more and more doubt about the honesty of government and about government generally.”

Underfunded and understaffed

While several current and former insurance commissioners lament the outsize influence of the industry, they reject the notion that coziness breeds corruption.

“Access gets you in the door,” said Chaney, the Mississippi commissioner. “But it doesn’t mean you’re going to get any better treatment than anybody else.”

To counter industry influence, the National Association of Insurance Commissioners (NAIC) pays for a small group of consumer advocates to attend its meetings, where regulators set insurance standards and draft model laws.

“State insurance regulators are committed to their shared dual responsibilities of consumer protection and the regulation of insurance company solvency,” said NAIC President John Huff, who is also director of the Missouri Department of Insurance.

Still, often underfunded and understaffed, commissioners face a number of political and financial head winds.

Because most are appointed officials serving at the pleasure of governors, turnover is high. According to a Center for Public Integrity analysis, the median tenure of a commissioner is less than four years.

On average, NAIC data from last year shows that 6 percent of the annual revenue collected by insurance departments was spent on regulation — well below the 10 percent that the Consumer Federation of America says is needed to properly staff regulatory functions. In most cases, the rest of the money is deposited into states’ general funds and used for other government services.

The workload is considerable. At best, when everyone from secretaries to the commissioners is taken into account, each employee of the average department oversaw 14 insurance companies and 1,150 agents.

Yet insurance companies are economic development engines for many states, as well as cash cows. Texas reaps about $2 billion a year from insurance taxes, more than it collects from levies on natural gas production.

‘Appropriate expertise’

Of the 50 sitting commissioners, 24 came directly from the insurance industry or had worked for an insurer.

“You get somebody with expertise, and you get someone who is qualified to do the job from Day One,” said Kathleen Sebelius, a former Kansas insurance commissioner who served as U.S. secretary of health and human services in the Obama administration. But, she added, there is a fine line between “appropriate expertise and overly cozy” relationships.

“People are supposed to be doing the public’s business and not lining their own pockets or making their own deals for future benefit,” said Sebelius, who declined to accept industry campaign contributions while commissioner.

For much of the last year, New Jersey Commissioner Richard Badolato and his spouse held at least $10,000 worth of stock in two insurers that his office oversees, a violation of the state’s ethics code. After an inquiry from the Center for Public Integrity, he got rid of the shares — and all of his remaining stocks “out of an abundance of caution,” an insurance department spokesman said on his behalf. Badolato told ethics investigators that he failed to identify the insurance stocks as prohibited holdings after a broker purchased them on his behalf.

Consumer advocates say that weak ethics laws — and lackluster enforcement — encourage officials to push the boundaries.

For example, Connecticut’s top regulator, Katharine Wade, had been overseeing the merger of health-care giants Anthem and Cigna, even though she is a former Cigna lobbyist and her husband is a lawyer with the company. For months, she resisted calls from lawmakers and consumer groups to recuse herself, agreeing to step aside last month after state ethics officials pressed her for financial information to determine how she and her spouse would benefit from the health-care deal.

Even then, Wade told the state ethics board that she was recusing herself from her office’s review simply because the controversy had “created unwarranted and unfair distractions for the department.” No conflict of interest exists under Connecticut law, she said, because her husband is not an officer of Cigna and the couple does not own 5 percent or more of the company. Cigna declined to comment.

Consumer advocates also point to Kentucky, where new Insurance Commissioner Brian Maynard, a former life insurance executive, sided with life insurance companies this year in a legal dispute over a consumer protection law.

The action was surprising given that the state — under the previous administration — had spent years defending a portion of the law, which sought to force life insurers to find and pay beneficiaries when policyholders die.

Maynard told the Center for Public Integrity that the state “believed that the statute was not intended to apply retroactively” to policies that predated the 2012 law, the same argument used by the life insurers.

The law’s sponsor in the legislature and the state’s former insurance commissioner, however, sharply disputed that interpretation.

“I thought it was a very good consumer-protection bill, worth defending, and that was the department’s position,” former commissioner Sharon Clark told the Lexington Herald-Leader. “I don’t know exactly what changed other than, obviously, the new administration came in with a different philosophy.”

‘Awesome power’

At least 33 states ban former legislators and sometimes other officials from lobbying their past colleagues during a “cooling-off” period, according to the National Conference of State Legislatures, but in many cases, relationships endure and interactions continue.

In Iowa, where the law prohibits insurance commissioners from lobbying for two years after leaving office, emails show that former commissioner Susan Voss began contacting her old office within months of stepping down in 2013, first as a consultant and then as an executive for American Enterprise Group. She repeatedly asked her successor and his top aides for information on insurance matters, even attending breakfast regularly with a deputy commissioner.

In 2014, Voss asked Commissioner Nick Gerhart’s assistant for five minutes of the commissioner’s time. Within two hours, Gerhart phoned her.

“How was that for efficient,” the assistant wrote back. “You ask, and he calls.”

“Wow! Awesome power!” Voss replied.

In an interview, Gerhart said his office also meets with consumer groups regularly. Still, he said frequent communication with insurers is essential.

“Our job is to really make sure we understand their business,” Gerhart said, “and understanding their business is about more than just reviewing their financial books.”

Voss said that she did not violate the lobbying ban because she did not seek to influence legislation or regulations, the official definition of lobbying under Iowa’s laws.

Extraordinary access

For five days in April, commissioners and their staffs convened for a meeting of the National Association of Insurance Commissioners. Gathered at the Sheraton New Orleans Hotel, they were outnumbered by insurance representatives. Among the industry advocates were 21 former commissioners from 18 states and the District of Columbia, many wearing special NAIC badges advertising their status as ex-officials.

One night, lawyers and lobbyists mingled with regulators at a cocktail reception sponsored by Locke Lord, a law firm with a roster of blue-chip insurance clients. The event at Roux Bistro featured an open bar and buffet stations of crab cakes with roasted corn couscous and Cajun-dusted beef with horseradish cream.

Year-round, company representatives treat commissioners — and sometimes their family members — to dinner, emails show. But in nearly a dozen states, the public may never know: Nine don’t require commissioners to file public disclosure reports, and two others do not consider food or drink for “immediate consumption” a gift.

The industry also offers commissioners and their top aides scholarships to attend corporate-sponsored training sessions and conferences.

Each year, the Insurance Regulatory Examiners Society Foundation hosts what it calls “a national school on market regulation,” usually at a luxury hotel in a scenic location. In 2013, the most recent data available, the foundation spent $13,554 on 16 scholarships.

The three-day, industry-backed summit affords insurance companies extraordinary access to regulators. Firms pay as much as $7,500 for special privileges, including a book of 50 drink tickets, attendees’ email addresses and exclusive marketing opportunities. According to the foundation’s website, insurers can sign up for private 15-minute sessions with “a regulator of your choice.”

The foundation declined to comment but says on its website that it organizes such events “to promote professionalism and education in the insurance regulatory community and to educate the private sector about state insurance regulation.”

A new role

In September 2008, a little more than a week after Benafield rendered her decision on the United Healthcare case in Arkansas, she had lunch with one of the company’s lobbyists. According to court records, Benafield asked him whether the division of UnitedHealth Group might be interested in employing her.

The lobbyist passed along Benafield’s résumé to an executive, saying, “She believes she has contacts among many state insurance commissioners and staff that would be beneficial to an insurer.”

Two months later, she was regulatory affairs director for United Healthcare in Arkansas and Tennessee.

Benafield declined to comment for this article but told Arkansas Business in 2009 that she had done nothing wrong.

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“No matter how I ruled on anything, this hearing or anything else, during the last year, somebody would have said, ‘She’s ruling that way so [she] can get a job,’ ” Benafield said.

The state subsequently passed a “revolving door” law that bars former insurance commissioners and others from lobbying for one year.

In 2015, the door turned again. Benafield is now Arkansas’s chief deputy attorney general, a job in which she oversees a variety of departments — including one charged, in part, with helping consumers in health insurance disputes.

Ben Wieder contributed to this report.

This article is from the Center for Public Integrity, a nonprofit, nonpartisan investigative media organization in Washington.

https://www.washingtonpost.com/investigations/drinks-junkets-and-jobs-how-the-insurance-industry-courts-state-commissioners/2016/10/02/1069e7a0-6add-11e6-99bf-f0cf3a6449a6_story.html?hpid=hp_hp-more-top-stories-2_insurance-937pm%3Ahomepage%2Fstory

The first thing cancer patients saw when they got to this hospital: An ad for a funeral home

by Cleve R. Wootson, Jr. - Washington Post

When Lori Waltenbury's dad and aunt came to Royal Victoria Regional Health Center's cancer hospital for treatment, the first thing they saw was this ad for a funeral home. (Courtesy of Waltenbury family)

First Lori Waltenbury's dad got cancer, then her aunt did.

On the days she went with them to treatment in the past year, Waltenbury considered her job part chauffeur, part distraction.

During drives to the hospital and during sessions, she would start conversations about family or "the silly questionnaire" they filled out during treatment. Anything, she said, to take their minds off the chemicals so strong that hospital employees had to wear a protective suits.

Afterward, at home, she'd help her aunt learn how to tie headscarves.

It was her aunt who warned her about the sign on the hospital's parking gate in Barrie, Ontario. It would be the first thing they saw when they got there  — 50 feet from the main entrance:

Adams Funeral Home and Cremation Services Ltd., the sign read. "Caring | Compassionate | Professional." 

"This just dampened our spirits," Waltenbury told The Washington Post. "It’s just completely insensitive. ... People are suffering and fighting for their lives every day. And they’re supposed to be fighting with us."

"But the sign says if [patients] choose not to fight this battle, or if they lose, we have a place for you. It’s just a little too much forward thinking."

Still, Waltenbury's family didn't see the Royal Victoria Regional Health Center cancer treatment center as some cold, uncaring monolith. It saved her father's life. The doctors were helping her aunt fight for hers. The family was angry, but wanted to give the hospital a chance to do the right thing.

"I said, when we go tomorrow, we’ll go talk to the people at the hospital and see how they respond," Waltenbury said. "And if they don't, we'll post it online."

The response — from the half a dozen or so hospital officials they talked to that day — was lukewarm. "Everyone thought that we were just kind of being crazy."

So Waltenbury logged onto Facebook and posted a picture of the sign and a livid diatribe directed at the hospital:

"Why do you feel it SO important to remind our loved ones EVERY time they go in for treatment that just in case they (lose) their fight, just in case they give up … that there’s a funeral home just waiting for our business?"

The post has been shared more than 1,100 times since Thursday. And dozens of people chimed in.

"Funeral home advertising in a hospital is just disturbing no matter where it is put," Danielle Gouett commented on the post. "But definitely agree that very little thought was put into this particular placement at the cancer centre."

Waltenbury's viral post caught the hospital's attention. On Friday, it posted a statement on its Facebook page.

"Please allow us to say 'we are sorry,' " the statement said. "Patients are at the centre of everything we do at RVH and this advertisement on a parking lot gate arm is not in keeping with that commitment.

The placement was insensitive and short-sighted. Although advertising revenue does support patient programs, this ad — visible to vulnerable, brave patients and families who deserve nothing but our care and compassion — was simply wrong. RVH staff removed the gate advertisement early this morning.

Again, we offer you our most sincere apologies. We will do better.

The owner of Adams Funeral Home also responded. In a statement on its website, Adams said the ad was a way to support the cancer center, which helped the owner's wife fight the disease.

"Let me apologize to those that this advertising has offended as that certainly wasn’t our intent," the statement on the website says.

"I agreed to advertise in this way as all proceeds from the advertising go directly to the RVH Foundation for the purchase of hospital equipment and this was a way in which we could support our local hospital. Two years ago my wife Lorie and I were through those gates on a regular basis as Lorie underwent treatment for breast cancer. Because of this, we have great empathy for people going through those gate arms."

The statement says the owner requested that the advertising be placed in less conspicuous places around the hospital, a request that wasn't honored.

But, most important for Waltenbury, the funeral home asked that the advertisement come down.

Waltenbury said she still has questions. Placing the funeral ad in that spot was a choice, not a random occurrence, and she wants to know who authorized the placement.

Her viral post has also shown her family the power of social media. She said they are considering a crowdfunding campaign to put up a new sign on the entry gate near the cancer center.

She hasn't worked out exactly what it would say, but it would be "something along the lines of 'You matter. Keep fighting.' "

https://www.washingtonpost.com/news/to-your-health/wp/2016/10/03/the-first-thing-cancer-patients-saw-when-they-got-to-this-hospital-an-ad-for-a-funeral-home/?hpid=hp_hp-more-top-stories-2_tyh-patients-818am%3Ahomepage%2Fstory