Left wants a vote on single-payer bill in new Congress
by Peter Sullivan - The Hill - November 15, 2018
Progressive Democrats are pushing for a vote on a controversial health-care bill after the party takes control of the House early next year.
But the left’s push for “Medicare for all” legislation would likely divide Democrats and pose a headache for House Minority Leader Nancy Pelosi (D-Calif.), who is poised to become Speaker in the next Congress.
Rep. Pramila Jayapal (D-Wash.), who is co-chair of the Medicare for All Caucus in the House, told supporters on an organizing call Tuesday night that simply expressing support for the idea is not enough.
“When we have that majority, we need to make sure that we put it to use,” she said.
Yet, many other House Democrats, including members of the leadership, are not on board with the idea of government-run universal health insurance.
Supporters say they are going to push for a vote and organize grass-roots efforts to pressure Democratic holdouts to sign on to the legislation. However, any floor vote would probably fail, with all Republicans and some Democrats rejecting the measure.
Republicans used Medicare for all — otherwise known as single-payer — as a leading area of attack on Democrats during the 2018 midterm elections. They touted a recent cost estimate by the Mercatus Center at George Mason University, which put the bill’s price tag at $32 trillion over 10 years.
Rep. Raúl Grijalva (D-Ariz.), the co-chairman of the Congressional Progressive Caucus, acknowledged that centrist members did not want a vote on Medicare for all, but countered, “There’s going to be votes that we need to take.”
“Regardless of the political ideology, everybody understands the expectations that we’re under, and you have to satisfy a lot of expectations,” Grijalva said. “Medicare for all is one of them.”
Rep. Ron Kind (Wis.), a centrist Democrat, countered that he did not want a vote on Medicare for all, pointing to what is realistic given that a Republican-controlled Senate would certainly never pass such a bill.
“Even Leader Pelosi and our leadership isn’t pushing that right now, so I think we need to be pragmatic in our legislative ambitions around here with a divided Congress and with Trump down at the White House,” Kind said.
A spokesman for Pelosi referred back to the California Democrat's previous statements on Medicare for All when asked if Pelosi was open to having a vote.
Pelosi said in June that ideas like Medicare for all would “have to be evaluated in terms of the access that they give, the affordability of it and how we would pay for it.”
“But again, it’s all on the table,” she added.
Left-leaning groups are energized about the idea and aren’t taking no for an answer.
On a call put together by National Nurses United on Tuesday night, organizers from progressive groups told supporters how they would use grass-roots pressure to target House Democratic holdouts with phone calls and visits to their offices. They said they would particularly target 13 Democrats on the key House Ways and Means and House Energy and Commerce committees who have not co-sponsored the legislation.
National Nurses United is organizing “barnstorms” of intense grass-roots activity to pressure Democrats on Medicare for all from Feb. 9-13.
Sen. Bernie Sanders (I-Vt.), the leading champion of the idea who may run for president again in 2020, said on the call that proponents needed “massive grass-roots support” in order to pass the measure.
But Rep. Frank Pallone Jr. (D-N.J.), the likely chairman of the Energy and Commerce Committee next year, indicated Wednesday he is not interested in holding hearings or a vote on the bill and pointed to smaller steps to shore up the Affordable Care Act.
“I’ve always been an advocate for Medicare for all or single-payer, but I just don’t think that the votes would be there for that, so I think our priority has to be stabilizing the Affordable Care Act, preventing the sabotage that the Trump administration has initiated,” Pallone said.
The current Medicare for all legislation, H.R. 676, has 123 Democratic co-sponsors, roughly two-thirds of the current House Democratic Caucus. But that is still far short of the number needed to pass the legislation. Neither Pallone nor the likely chairman of the Ways and Means Committee, Rep. Richard Neal (D-Mass.), is a co-sponsor of single-payer.
Jayapal said she is working with colleagues on an updated version of that bill and hopes to have agreement on it “over the next month” to be ready to introduce in the next session, which begins in January.
Organizers on Tuesday night’s call cited as an example of their work that they had already been showering the office of Rep. Joe Kennedy III (D-Mass.) with calls pressuring him to support the legislation.
Kennedy told The Hill on Wednesday that he is open to co-sponsoring an updated version of the bill if it addresses some problems he has with the current text, which would bring a rising Democratic star on board.
“I am more than open to the idea of single-payer,” Kennedy said. He said “unquestionably single-payer is a part of” the discussion going forward, but added: “I think the first step is trying to make sure we maintain the progress that we’ve had with the Affordable Care Act.”
Rep. John Larson (D-Conn.), a former member of Democratic leadership, said he thinks allowing people 50 and over to buy into Medicare is a more “intelligent and incremental” way to address the issue, but did not push back on the idea of a vote on Medicare for all.
“Congress should be about the vitality of ideas,” he said. “That’s an idea that should be discussed.”
Democrats Won a Mandate on Health Care. How Will They Use It?
by Robert Pear - NYT - November 10, 2018
WASHINGTON — After House Democrats’ election triumph, Nancy Pelosi’s appraisal was clear: “Health care was on the ballot, and health care won.”
But how do Democrats intend to use the power they won?
The top priorities for Ms. Pelosi, the House Democratic leader, and her party’s new House majority include stabilizing the Affordable Care Act marketplace, controlling prescription drug prices and investigating Trump administration actions that undermine the health care law.
Administration officials who have tried to undo the Affordable Care Act — first by legislation, then by regulation — will find themselves on the defensive, spending far more time answering questions and demands from Congress.
House Democrats plan to hold early votes on proposals to protect people with pre-existing medical conditions, an issue they continually emphasized in midterm races. The votes will test campaign promises by Republicans who declared their support for such protections.
Democrats will push for the House to intervene in a lawsuit in which 20 states, with support from the Trump administration, are challenging provisions of the Affordable Care Act, including the protections for people with pre-existing conditions.
If the states’ lawsuit succeeds, legislation to shore up the health care law and coverage for people with pre-existing conditions could become a priority for Congress.
While Democratic leaders push legislation and investigations on Capitol Hill, several of the party’s potential presidential candidates will be urging support for a public health insurance option or even “Medicare for all.” Republicans, who retained their Senate majority in the election, are eager to attack Democrats over those proposals, which they portray as a threat to private health plans covering more than half of all Americans.
Stabilizing the Marketplace
Some lawmakers want to try again next year to stabilize the marketplaces where more than 10 million Americans obtain insurance under the Affordable Care Act. Several ideas were set forth in a bill drafted by Senators Lamar Alexander, Republican of Tennessee, and Patty Murray, Democrat of Washington.
One idea is to provide money to resume the payments to insurers that President Trump terminated in October last year. The payments offset the cost of discounts that insurers are required to give low-income people.
Another idea is for the federal government to provide money to states to help pay the largest medical claims. Such assistance, which provides insurance for insurance carriers, has proved effective in reducing premiums in Alaska and Minnesota, and several other states will try it next year.
In addition, many Democrats say they want to provide more money to help consumers enroll in health insurance under the Affordable Care Act. Over the last two years, Mr. Trump has cut the funds for insurance counselors and enrollment assistance by 84 percent, to $10 million.
Reining In Drug Prices
Mr. Trump said he believed he could work with Democrats in Congress on “lowering the cost of prescription drugs,” and the Senate majority leader, Mitch McConnell of Kentucky, said the issue was sure to be on the agenda.
Democrats have praised two of the proposals Mr. Trump has advanced in recent weeks. One would require drug manufacturers to include the list prices of drugs in television advertising. The other would reduce Medicare payments for certain high-cost drugs by using the average of prices in other advanced industrial countries as a benchmark in deciding what Medicare should pay.
Drug companies oppose both ideas. They say the price disclosures would confuse consumers, who often pay less than the full list price. And drug lobbyists say Mr. Trump’s proposal for an “international price index” would just import price controls from other countries.
Lawmakers from both parties could also find common ground with the administration on a bill that requires manufacturers of brand-name drugs to make samples available to generic drug companies trying to develop inexpensive copies of those medicines.
Dr. Scott Gottlieb, the commissioner of the Food and Drug Administration, says some drug makers have tried to stifle competition by blocking access to samples.
An agreement to lower drug prices is far from certain. Democrats would be reluctant to give Mr. Trump a victory for which he could take credit in the next presidential election.
The pharmaceutical lobby remains powerful and knows how to exploit differences between the Republican-controlled Senate and the Democratic-led House.
“The best outcome for drug makers is divided government,” because it means there will probably be legislative gridlock for the next two years, said Rick Weissenstein, an analyst at Cowen Washington Research Group, which tracks federal policy.
Investigating ‘Sabotage’
Trump administration officials and drug company executives can expect a steady stream of requests for documents and testimony from the Democrats in line to lead House committees.
The Democrats are eager to investigate the many ways in which they say the administration has sabotaged the Affordable Care Act. They also plan to investigate the work requirements that have been imposed on Medicaid beneficiaries in several states with encouragement from the Trump administration.
On the issue of drug prices, Representative Elijah E. Cummings of Maryland, who is poised to become the chairman of the Committee on Oversight and Government Reform, has already asked numerous drug makers to explain how they set them.
With other Democrats, he intends to seek detailed information to show how much drug companies spend on research, marketing, advertising and lobbying.
For their part, Trump administration officials said they did not expect any fundamental changes in health policy as a result of the elections.
Much of the president’s policy has been shaped and carried out by Seema Verma, the administrator of the Centers for Medicare and Medicaid Services.
She tried to persuade governors and members of Congress to support legislation repealing the Affordable Care Act, including its expansion of Medicaid. She has also pushed for federal rules that allow the sale of more short-term health insurance plans, which do not have to cover pre-existing conditions or provide all the benefits required by the health law.
Aides said that Ms. Verma intended to stay on the job, but that the administration’s health policies would remain intact even if she left. Her top deputy, Paul Mango, an unsuccessful candidate for governor of Pennsylvania, wrote last year that “Obamacare has been a disaster.”
The official recruited last month to run the national Medicaid program, Mary Mayhew, strenuously opposed the expansion of Medicaid when she was the commissioner of health and human services in Maine.
Trump administration officials say they still see the expansion of Medicaid to cover able-bodied adults — approved this past week by voters in Idaho, Nebraska and Utah — as a costly departure from the original purpose of the program.
What Neither the Republicans Nor the Democrats Understand About Obamacare
by Bob Leszewski - Health Care Policy and Marketplace Review - November 8, 2018
The 2018 midterm elections weren't a tsunami for Democrats--more like a blue wave hitting a red wall.
Democrats are claiming the election vindicated Obamacare because they were successful in gaining control of the House of Representatives by criticizing losing Republicans for their votes to repeal the Affordable Care Act--including its key consumer protections.
My sense is that both Democrats and Republicans have missed the critical point.
Both sides don't understand that this was not about Obamacare. It was about health insurance security.
Obamacare guaranteed people that they would never again be turned down for health insurance because of a preexisting condition. It assured those who couldn't afford to buy health insurance they would be given financial assistance. And, it offered the expansion of Medicaid to the poorest.
Obamacare offered health insurance security--at least, it turned out, to those with the lowest incomes.
But Obamacare also devastated the individual health insurance market with its prohibitively high prices and out-of-pocket costs for the middle-class.
Let me suggest that what happened in Virginia's 10th Congressional District tells the story.
Like the Virginia 10th, all across the nation one Democrat after another ran effective ads promising to protect Obamacare and its preexisting condition reforms from those Republicans who had voted to repeal the law.
The ads resonated even though Obamacare has continued to devastate the individual health insurance market:
- In March of 2016, there were 20.2 million people covered in the individual health insurance market according to a hard count of state insurance department filings done by Mark Farrah and Associates.
- In March of 2017 that count was down to 17.7 million.
- In March of 2018 the count was 15.7 million--a 22% drop in two years.
Hardest hit are the 40% of middle class individual market consumers who are not eligible for a subsidy.
- In March of 2016 there were 7,520,939 people covered in the off-exchange individual health insurance market where subsidies are not available.
- In March of 2017 5,361,451 were covered.
- In March of 2018 4,004,522 were covered--a 47% drop in two years.
According to the CBO, the average Medicaid outlay for a non-disabled adult is $4,230--a program that virtually has no premiums and co-pays. But because the risk pool is so bad and therefore expensive in the Obamacare exchanges, the average subsidy cost for taxpayers is $6,300--and that doesn't include what the consumer pays in premiums and out-of-pocket expenses for Obamacare coverage.
Why has the Obamacare individual market melted-down in these last two years? Because its premiums and deductibles are sky high--for all but the lowest income participants.
In Northern Virginia, for example, the cheapest 2019 Obamacare individual market Silver plan for a family of four (mom and dad age-40) making a subsidy eligible $65,000 a year costs $4,514. That plan has a $6,500 deductible meaning the family would have to spend $11,014 on eligible health care costs before collecting other than nominal first dollar benefits.
That same family, but making too much for a subsidy, as 40% of families do, and a typical family in the affluent Virginia 10th, would have to spend $19,484 in premiums plus a $6,500 deductible, for a total of $25,984 in eligible costs before they would collect any meaningful benefits.
Democrats are now arguing that Obamacare was the big winner in the midterms. Why would a law that has so devastated the individual market be a winner? And, why would it be a winner in the Virginia 10th?
Because the Republican incumbent voted for the Republican House bill to repeal and replace Obamacare.
In passing the House bill, Republicans were health care tone deaf. The bill would have:
- Arguably allowed states to repeal the pre-existing condition reforms.
- Made significant cuts to the individual market insurance subsidies.
- Made huge cuts to the Medicaid expansion.
And, Democrats to this day tout the "stability" of the Obamacare insurance market--a stability that so far has only paid off for insurance companies that have raised the rates so high only they are among the relatively few doing well in the program.
I will suggest that both Democrats and Republicans--five years into this--still don't understand what has worked and not worked for consumers.
Republicans have seemingly never understood that Obamacare has worked well for low-income people who get the biggest premium and out-of-pocket subsidies. It has worked well for those eligible for Medicaid in the states that have expanded it. And, it has been critically important for those with preexisting conditions. And, that three deep red states--Nebraska, Utah, and Idaho--voted last week to expand Medicaid clearly says that even in the reddest states what people want is health insurance security not only for themselves but for their neighbors.
But what Democrats have never been willing to admit is that the program has been devastating for the middle class--those who get no subsidy, or a relatively small subsidy--for the way it has wrecked their individual health insurance market.
The Republicans tried to take away these health insurance security benefits and it cost them dearly in 2018.
Just like the Democrats so ham-handedly tried to reform the system in the first place only to see it cost them dearly in prior elections.
It's not about Obamacare guys, it's about health insurance security--for everybody.
Federal Officials Shut Down Sales of ‘Ruinous’ Health Insurance Plans
by Robert Pear - NYT - November 5, 2018
WASHINGTON — Federal authorities have shut down a network of Florida companies that they say used aggressive, deceptive tactics to sell skimpy health insurance products that skirt requirements of the Affordable Care Act and left tens of thousands of people around the country with unpaid medical bills.
“There is good cause to believe” that the Florida companies have sold shoddy coverage by falsely claiming that such policies were comprehensive health insurance or qualified health plans under the Affordable Care Act, Judge Darrin P. Gayles of the Federal District Court in Miami said in a temporary restraining order issued last week at the request of the Federal Trade Commission.
Telemarketers lured consumers through websites offering Trumpcare and Obamacare, using logos of well-known insurers to make the coverage appear credible, the trade commission said.
The commission filed a lawsuit against Simple Health Plans and its chief executive, Steven J. Dorfman, and five other entities in a “common enterprise,” saying they had misled consumers to believe they were buying comprehensive insurance that would cover pre-existing medical conditions, prescription drugs, doctors’ services and hospital care.
Among the products offered through Simple Health and its websites were “short term” health insurance plans like those promoted by President Trump as an alternative to the Affordable Care Act.
Judge Gayles froze the assets of Simple Health and its affiliates and appointed a receiver to take control of the companies. He said the companies appeared to have made “false and misleading statements,” marketing “limited benefit plans” and membership in medical discount programs as if they were major medical coverage. He will hold a hearing next week on whether to extend his order by issuing an injunction.
The trade commission said the financial consequences of the misrepresentations “have been ruinous for consumers, many of whom do not realize” the limits of the coverage until they incur substantial medical expenses.
The commission described Mr. Dorfman as “the architect of this scam” and said he had “siphoned millions of dollars of proceeds from defrauded consumers to pay for private jet travel, gambling sprees in Las Vegas, the rent for his oceanfront condominium, luxury automobiles, over $1 million in jewelry, and even the nearly $300,000 cost of his recent wedding at the St. Regis Hotel in Miami.”
The luxury vehicles, it said, included a Rolls-Royce Wraith and a Lamborghini Aventador.
Ryan D. O’Quinn, a lawyer for Mr. Dorfman, said on Monday that his client “vigorously denies the allegations of misconduct made by the Federal Trade Commission, and he looks forward to having an opportunity to defend himself in the appropriate forum.”
The members of the trade commission — three Republicans and two Democrats — voted unanimously to take action against the Florida operation, which the commission described as “a classic bait-and-switch scheme designed to trick consumers into paying hundreds of dollars for substandard products under the pretense that they are actually receiving comprehensive health insurance.”
James Quiggle, a spokesman for the Coalition Against Insurance Fraud, a nonprofit alliance of insurance companies and consumer groups, said on Monday: “This latest scam is a classic case of empty promises. It’s reminiscent of fake health plans that were marketed nationally in the early 2000s. How many more scams like this are operating just beneath the radar of federal and state regulators?”
The commission said it had learned about the sales tactics of Simple Health from consumer complaints, undercover telephone calls made by F.T.C. investigators, and bank and phone records of the Florida companies.
Those records indicate that “boiler rooms” of Simple Health and its affiliates handled 62 million calls with consumers, as part of a scheme that generated “well over $150 million in revenue” from January 2016 to April 2018, the commission said in court papers.
The commission said the people behind Simple Health enticed consumers through websites such as trumpcarequotes.com, premiumhealthquotes.com and obamacare-plans.com.
In marketing materials and on websites, the commission said, the Florida companies “falsely claim to be affiliated with AARP” and with legitimate insurers, including Blue Cross and Blue Shield plans.
On a Simple Health website, Mr. Dorfman is identified as the founder and chief executive of the company. The site says he “positioned Simple Health to capitalize” on the Affordable Care Act.
If consumers ask for written information before buying a Simple Health plan, “telemarketers often refuse to provide it, stating that they either are not allowed to provide such information or are not capable of providing it,” the commission said.
The telemarketers typically identify themselves as insurance agents licensed in the consumer’s state, but in many cases “are not, in fact, properly licensed insurance agents,” the complaint said.
The trade commission told Judge Gayles that he needed to take swift action because the annual open enrollment period under the Affordable Care Act began on Thursday.
Michael I. Goldberg, the court-appointed receiver, said he “shut down the business operations” of Simple Health and related companies on Thursday, within hours of being named.
The commission had urged Judge Gayles to freeze the companies’ assets so the funds could be used to provide restitution to victims of the scheme. The defendants have bank accounts in Panama and the Dominican Republic “to which they could easily transfer funds in the absence of an asset freeze,” the commission said.
In its complaint, the commission said that Simple Health had recruited employees with advertisements that showed a cigar-smoking man tossing a wad of cash. “You will have money thrown at you” during open enrollment, the ads tell prospective employees, offering up to $4,000 a week.
Something Happened to U.S. Drug Costs in the 1990s
by Austin Frakt - NYT - November 12, 2018
The New Health Care
There was a time when America approximated other wealthy countries in drug spending. But in the late 1990s, U.S. spending took off. It tripled between 1997 and 2007, according to a study in Health Affairs.
Then a slowdown lasted until about 2013, before spending shot up again. What explains these trends?
By 2015, American annual spending on prescription drugs reached about $1,000 per person and 16.7 percent of overall personal health care spending. The Commonwealth Fund compared that level with that of nine other wealthy nations: Australia, Canada, France, Germany, the Netherlands, Norway, Sweden, Switzerland and Britain.
Among those, Switzerland, second to the United States, was only at $783. Sweden was lowest, at $351. (It should be noted that relative to total health spending, American spending on drugs is consistent with that of other countries, reflecting the fact that we spend a lot more on other care, too.)
Eliminating Some Suspects
Several factors could be at play in America’s spending surge. One is the total amount of prescription drugs used. But Americans do not take a lot more drugs than patients in other countries, as studies document.
In fact, when it comes to drugs primary care doctors typically prescribe — including medications for hypertension, high cholesterol, depression, gastrointestinal conditions and pain — a recent study in the journal Health Policy found that Americans use prescription drugs for 12 percent fewer days per year than their counterparts in other wealthy countries.
Another potential explanation is that Americans take more expensive brand-name drugs than cheaper generics relative to their overseas counterparts. This doesn’t hold up either. We use a greater proportion of generic drugs here than most other countries — 84 percent of prescriptions are generic.
Though Americans take a lower proportion of brand-name drugs, the prices of those drugs are a lot higher than in other countries. For many drugs, U.S. prices are twice those found in Canada, for example.
Prices are a lot higher for brand-name drugs in the United States because we lack the widespread policies to limit drug prices that many other countries have.
“Other countries decline to pay for a drug when the price is too high,” said Rachel Sachs, who studies drug pricing and regulation as an associate professor of law at Washington University in St. Louis. “The United States has been unwilling to do this.”
For example, except in rare cases, Britain will pay for new drugs only when their effectiveness is high relative to their prices. German regulators may decline to reimburse a new drug at rates higher than those paid for older therapies, if they find that it offers no additional benefit. Some other nations base their prices on those charged in Britain, Germany or other countries, Ms. Sachs added.
That, by and large, explains why we spend so much more on drugs in the United States than elsewhere. But what drove the change in the 1990s? One part of the explanation is that a record number of new drugs emerged in that decade.
Huge sales for new and expensive drugs
In particular, sales of costly new hypertension and cancer drugs took off in the 1990s. The number of drugs with sales that topped $1 billion increased to 52 in 2006 from six in 1997. The combination of few price controls and rapid growth of brand-name drugs increased American per capita pharmaceutical spending.
“The scientific explosion of the 1970s and 1980s that allowed us to isolate the genetic basis of certain diseases opened a lot of therapeutic areas for new drugs,” said Aaron Kesselheim, an associate professor of medicine at Harvard Medical School.
He pointed to other factors promoting the growth of drug spending in the 1990s, including increased advertising to physicians and consumers. Regulations on drug ads on TV were relaxed, which led to more advertising. More rapid F.D.A. approvals, fueled by new fees collected from pharmaceutical manufactures that began in 1992, also helped push new drugs to market.
In addition, in the 1990s and through the mid-2000s, coverage for drugs (as well as for other health care) expanded through public programs. Expansions of Medicaid and the Children’s Health Insurance Program also coincided with increased drug spending. And Medicare adopted a universal prescription drug benefit in 2006. Studies have found that when the potential market for drugs grows, more drugs enter it.
In 2007, U.S. drug spending growth was the slowest since 1974. The slowdown in the mid-2000s can be explained by fewer F.D.A. approvals of blockbuster drugs. Annual F.D.A. approvals of new drugs fell from about 35 in the late 1990s and early 2000s to about 20 per year in 2005-07.
In addition, the patents of many top-selling drugs (like Lipitor) expired, and as American prescription drug use tipped back toward generics, per capita spending leveled off.
The spike starting in 2014 mirrors that of the 1990s. The arrival of expensive specialty drugs for hepatitis C, cystic fibrosis and other conditions fueled spending growth. Many of the new drugs are based on relatively recent advances in science, like the completion of the human genome project.
“Many of the new agents are biologics,” said Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center. “These drugs have no meaningful competition, and therefore command very high prices.”
A U.S. Department of Health and Human Services issue brief estimated that 30 percent of the rise in drug spending between 2000 and 2014 could be attributed to price increases or greater use of higher-priced drugs. Coverage expansions of the Affordable Care Act also contributed to increased drug spending. In addition, “there has been a lowering of approval standards,” Dr. Bach said. “So more of these new, expensive drugs are making it to market faster.”
“As in the earlier run-up in drug spending, we’re largely uncritical of the price-value trade-off for drugs in the U.S.,” said Michelle Mello, a health law scholar at Stanford. “Though we pay high prices for some drugs of high value, we also pay high prices for drugs of little value. The U.S. stands virtually alone in this.”
Outlook for the future
If the principal driver of higher American drug spending is higher pricing on new, blockbuster drugs, what does that bode for the future? “I suspect things will get worse before they get better,” Ms. Sachs said. The push for precision medicine — drugs made for smaller populations, including matching to specific genetic characteristics — may make drugs more effective, therefore harder to live without. That’s a recipe for higher prices.
Democratic politicians have tended to be the ones advocating governmental policiesto limit drug prices. But recently the Trump administration announced a Medicare drug pricing plan that seems to reflect growing comfort with how drug prices are established overseas, and there’s new optimism the two sides could work togetherafter the results of the midterms. Although the effectiveness of the plan remains unclear, it is clearly a response to public concern about drug prices and spending.
CVS also recently announced it would devise employer drug plans that don’t include drugs with prices out of line with their effectiveness — something more common in other countries but unheard-of in the United States. Even if these efforts don’t take off rapidly, they are early signs that attitudes might be changing.
When Hospitals Merge to Save Money, Patients Often Pay More
by Reed Abelson - November 14, 2018
The nation’s hospitals have been merging at a rapid pace for a decade, forming powerful organizations that influence nearly every health care decision consumers make.
The hospitals have argued that consolidation benefits consumers with cheaper prices from coordinated services and other savings.
But an analysis conducted for The New York Times shows the opposite to be true in many cases. The mergers have essentially banished competition and raised prices for hospital admissions in most cases, according to an examination of 25 metropolitan areas with the highest rate of consolidation from 2010 through 2013, a peak period for mergers.
The analysis showed that the price of an average hospital stay soared, with prices in most areas going up between 11 percent and 54 percent in the years afterward, according to researchers from the Nicholas C. Petris Center at the University of California, Berkeley.
The new research confirms growing skepticism among consumer health groups and lawmakers about the enormous clout of the hospital groups. While most political attention has focused on increased drug prices and the Affordable Care Act, state and federal officials are beginning to look more closely at how hospital mergers are affecting spiraling health care costs.
During the Obama years, the mergers received nearly universal approval from antitrust agencies, with the Federal Trade Commission moving to block only a small fraction of deals. State officials generally looked the other way.
President Trump issued an executive order last year calling for more competition, saying his administration would focus on “limiting excessive consolidation throughout the health care system.” In September, Congress asked the Medicare advisory board to study the trend.
But not only have big consolidations continued, the behemoths have further cemented their reach in some regions of the country by gobbling up major doctors’ and surgeons’ practices.
“You have to watch for these systems throwing their weight around,” said Xavier Becerra, the California attorney general whose office has sued Sutter Health, a sprawling system in the northern part of the state. “We are looking for cases where consolidation does nothing for efficiency and leads to distortions of the market.”
Ted Doolittle, who heads Connecticut’s Office of the Healthcare Advocate, has fielded angry complaints from residents, but he sees few options available to officials. “A lot of this is too little and too late,” he said.
Finding new paths for growth
The latest giant hospital consolidations continue to stir concerns. Dignity Health and Catholic Health Initiatives, two large chains, are expected to become one of the nation’s largest groups — with 139 hospitals in 28 states — by the end of the year. And two of Texas’ biggest systems, Baylor Scott & White Health and Memorial Hermann Health System, recently announced plans to combine.
The New Haven area has witnessed the most significant decline in competition. Yale New Haven Health, one of the largest hospital groups in Connecticut, took over the only competing hospital in the city and has also aggressively expanded along the state’s coast. The group recently added another hospital to its collection, merging Milford with its Bridgeport location.
Although the price of a hospital admission in the New Haven-Milford area was already three times higher than in other parts of the state, prices surged by 25 percent from 2012 to 2014, compared with 7 percent elsewhere in the state, according to the Petris Center.
In the national analysis, a third of the metropolitan areas experienced increases in the cost of hospital stays of at least 25 percent from 2012 to 2014, from roughly $12,000 to at least $15,000.
Prices rise even more steeply when these large hospital systems buy doctors’ groups, according to Richard Scheffler, director of the Petris Center.
“It’s much more powerful when they already have a very large market share,” said Mr. Scheffler, who recently published a study on the issue in Health Affairs. “The impact is just enormous.”
Thousands of Connecticut residents were stranded without a local hospital last year when another big hospital group, Hartford HealthCare, battled the state’s biggest health insurer over how much it would charge for patient care.
Its six hospitals are clustered around the state capital and are the only resort for residents in broad swaths of the eastern part of the state. This month, it announced plans to add a seventh hospital to its network.
“These systems are empire-building, there’s no question,” said Jill Zorn, a senior policy officer for the Universal Health Care Foundation of Connecticut, which seeks to improve access for residents. “But to whose benefit?”
Numerous studies by economists and others have underscored how hospital consolidation is driving up the cost of medical care. “Within the academic community, there is near unanimity,” said Zack Cooper, a health economist at Yale University who is among a group of researchers that has looked at how dominant hospitals affect prices.
Some hospitals need a savior
The emergence of a one-hospital town is inevitable in many places, and the Parkersburg, W.Va., area is no exception. St. Joseph’s merged with neighboring Camden-Clark Memorial in 2011, and then they were consumed by what is now the state’s largest health system.
“We’ve got it down to a single campus,” said Albert L. Wright Jr., the chief executive of West Virginia University Health System. “Parkersburg is not big enough to support two hospitals.”
Residents can get most care locally but they go to Morgantown, where the academic medical center is situated, for complex conditions. “We’ve elevated the level of care,” Mr. Wright said.
But private insurers are paying more. In the Parkersburg-Vienna area, the overall price of a hospital stay increased 54 percent from 2012 to 2014, after the mergers. That is compared with 10 percent elsewhere in the state, according to the Petris Center.
Large systems “get paid better by some of the insurers,” Mr. Wright said.
Flailing hospitals often have little choice but to be acquired or go out of business, and a larger system can offer badly needed capital and management skills. “They can fix a hospital and benefit the community,” said Torrey McClary, a lawyer who specializes in mergers at King & Spalding.
When Yale New Haven Health took over the Hospital of Saint Raphael, a Catholic hospital six blocks away from its New Haven location, Saint Raphael was in danger of going under. Over the last six years, the system has invested more than $200 million in capital improvements at Saint Raphael, said its president Richard D’Aquila, including modernizing “everything behind the walls.”
Because it converted Saint Raphael into what is essentially a second 555-bed campus for its academic medical center, Yale New Haven Health defends the higher rates it charges private insurers as appropriate for a top-tier medical institution. Its community hospitals negotiate prices individually with insurers.
“Our focus is not on getting bigger,” Mr. D’Aquila said. He said Saint Raphael, which was half empty when it was taken over, is now seeing record numbers of patients.
Systems also say they are trying to improve the care for smaller communities. “We’re actively trying to move care toward places that are accessible,” Hartford’s chief executive, Elliot Joseph, said.
Patients wind up paying more
But patients rarely reap the rewards of lower insurance premiums or out-of-pocket expenses when mergers occur.
Hartford executives talk about reducing the total cost of care in the same breath that they discuss the need to charge insurers more. “The math for us is how we move the care out of the hospitals while maintaining our financial stability,” Mr. Joseph said.
To defend higher rates, many hospitals cite low reimbursements from government sources, particularly Medicaid, and highlight their role as a safety net. “We’re left with no choice,” Mr. D’Aquila said.
Others, like Hartford, negotiate prices as a single entity, forcing health insurers to include all of their hospitals in a network or risk losing access in areas where there are no alternatives.
Hartford “has taken over so many hospitals and practices that, with the Anthem dispute, we felt we had no choices at all,” Sharry Goldman, a Storrs, Conn., resident, told state lawmakers. Although Hartford and Anthem Blue Cross, the insurer, eventually reached an agreement, Connecticut passed a law this year requiring hospitals and insurers to extend previous contracts for two months to protect consumers when the parties are at an impasse.
While patients may pay more for a well-known brand, like Yale, it is not clear that the higher price tags lead to better care, said Francois de Brantes, a health care executive who once worked at General Electric, which is headquartered in the state.
“We have more lower-rated hospitals in Connecticut than in other New England states,” he said, pointing to an analysis he did at the time of the Anthem-Hartford dispute.
What happens when mergers are opposed
In the Albany, Ga., area, where the Berkeley researchers found a rare decline in hospital prices, the Federal Trade Commission had unsuccessfully attempted to block HCA, the for-profit hospital chain, from selling its hospital to its only local competitor in 2011. But the merger took place, and the F.T.C. reached a settlementwith the parties involved.
While Berkeley researchers foundarea prices dropped, another study by two former F.T.C. employees, Christopher Garmon and Laura Kmitch, found that certain hospital quality measures declined. The merger “highlights the problems that can occur when competition is reduced,” the authors said.
The hospital group, Phoebe Putney Health System, dismissed the findings. “Phoebe has made great strides in enhancing the quality of health care available to the people of southwest Georgia,” Dawn Benson, Phoebe’s general counsel, said in a statement.
To foster competition, Lee County is planning a new 60-bed hospital within the Albany area.
In some cases, state regulators have opposed actions they consider illegal and anti-competitive. In Washington, state officials accused CHI Franciscan Health, based in Tacoma, of using its ties to two doctors’ practices to raise prices and decrease competition on the Kitsap Peninsula, according to a lawsuit filed last year.
The regulators argue that CHI wanted to wield its newfound clout by shifting some operations and imaging from less expensive outpatient settings to hospitals where they could charge more.
“I am all for taking advantage of hospital-based pricing, if we think it is doable in the market and the market can support it,” a CHI executive is quoted as saying in the lawsuit. “It would be great to drop a couple of million more to our bottom line.”
CHI Franciscan said the attorney general’s allegations were “misguided and unfounded.”
In California, Mr. Becerra, the state attorney general, brought a lawsuit against Sutter in March, claiming that its actions led to significantly higher prices in Northern California.
Sutter says it adopted methods encouraged by the federal health care law, by combining hospital services with care delivered outside the hospital to better meet patients’ needs.
But Mr. de Brantes, the health care executive in Connecticut, and others wonder why many mergers were allowed in the first place. “The puzzling part for many of us in the state is why anyone would allow these oligopolies to form,” he said.
The Disappearing Doctor: How Mega-Mergers Are Changing the Business of Medical Care
by Reed Abelson and Julie Crewel - NYT - April 7, 2018
Is the doctor in?
In this new medical age of urgent care centers and retail clinics, that’s not a simple question. Nor does it have a simple answer, as primary care doctors become increasingly scarce.
“You call the doctor’s office to book an appointment,” said Matt Feit, a 45-year-old screenwriter in Los Angeles who visited an urgent care center eight times last year. “They’re only open Monday through Friday from these hours to those hours, and, generally, they’re not the hours I’m free or I have to take time off from my job.
“I can go just about anytime to urgent care,” he continued, “and my co-pay is exactly the same as if I went to my primary doctor.”
That’s one reason big players like CVS Health, the drugstore chain, and most recently Walmart, the giant retailer, are eyeing deals with Aetna and Humana, respectively, to use their stores to deliver medical care.
People are flocking to retail clinics and urgent care centers in strip malls or shopping centers, where simple health needs can usually be tended to by health professionals like nurse practitioners or physician assistants much more cheaply than in a doctor’s office. Some 12,000 are already scattered across the country, according to Merchant Medicine, a consulting firm.
On the other side, office visits to primary care doctors declined 18 percent from 2012 to 2016, even as visits to specialists increased, insurance data analyzed by the Health Care Cost Institute shows.
There’s little doubt that the front line of medicine — the traditional family or primary care doctor — has been under siege for years. Long hours and low pay have transformed pediatric or family practices into unattractive options for many aspiring physicians.
And the relationship between patients and doctors has radically changed. Apart from true emergency situations, patients’ expectations now reflect the larger 24/7 insta-culture of wanting everything now. When Dr. Carl Olden began watching patients turn to urgent care centers opening around him in Yakima, Wash., he and his partners decided to fight back.
They set up similar clinics three years ago, including one right across the street from their main office in a shopping center.
The practice not only was able to retain its patients, but then could access electronic health records for those off-site visits, avoiding a bad drug interaction or other problems, said Dr. Olden, who has been a doctor for 34 years.
“And we’ve had some folks come into the clinics who don’t have their own primary care physicians,” he said. “So we’ve been able to move them into our practice.”
Merger Maneuvers
The new deals involving major corporations loom over doctors’ livelihoods, intensifying pressure on small practices and pushing them closer to extinction.
The latest involves Walmart and Humana, a large insurer with a sizable business offering private Medicare plans. While their talks are in the early stages, one potential partnership being discussed would center on using the retailer’s stores and expanding its existing 19 clinics for one-stop medical care. Walmart stores already offer pharmacy services and attract older people.
In addition, the proposed $69 billion merger between CVS Health, which operates 1,100 MinuteClinics, and Aetna, the giant insurer, would expand the customer bases of both. The deal is viewed as a direct response to moves by a rival insurer, UnitedHealth Group, which employs more than 30,000 physicians and operates one of the country’s largest urgent-care groups, MedExpress, as well as a big chain of free-standing surgery centers.
While both CVS and UnitedHealth have large pharmacy benefits businesses that would reap considerable rewards from the stream of prescriptions generated by the doctors at these facilities, the companies are also intent on managing what type of care patients get and where they go for it. And the wealth of data mined from consolidation would provide the companies with a map for steering people one way or another.
On top of these corporate partnerships, Amazon, JP Morgan and Berkshire Hathaway decided to join forces to develop some sort of health care strategy for their employees, expressing frustration with the current state of medical care. Their announcement, and Amazon’s recent forays into these fields, are rattling everyone from major hospital networks to pharmacists.
Doctors, too, are watching the evolution warily.
“With all of these deals, there is so much we don’t know,” said Dr. Michael Munger, president of the American Academy of Family Physicians. “Are Aetna patients going to be mandated to go to a CVS MinuteClinic?”
Constant Changes in Care
Dr. Susan Kressly, a pediatrician in Warrington, Pa., has watched patients leave. Parents who once brought their children to her to treat an ear infection or check for strep, services whose profits helped offset some of the treatments she offered, are now visiting the retail clinics or urgent care centers.
What is worse, some patients haven’t been getting the right care. “Some of the patients with coughs were being treated with codeine-based medicines, which is not appropriate at all for this age group,” Dr. Kressly said.
Even doctors unfazed by patients going elsewhere at night or on weekends are nervous about the entry of the corporate behemoths.
“I can’t advertise on NBC,” said Dr. Shawn Purifoy, who practices family medicine in Malvern, Ark. “CVS can.”
Nurse practitioners allow Dr. Purifoy to offer more same-day appointments; he and two other practices in town take turns covering emergency phone calls at night.
And doctors keep facing new waves of competition. In California, Apple recently decided to open up its own clinics to treat employees. Other companies are offering their workers the option of seeking medical care via their cellphones. Investors are also pouring money into businesses aiming to create new ways of providing primary care by relying more heavily on technology.
An Absence of Proof
Dr. Mark J. Werner, a consultant for the Chartis Group, which advises medical practices, emphasized that convenience of care didn’t equal quality or, for that matter, less expensive care.
“None of the research has shown any of these approaches to delivering care has meaningfully addressed cost,” Dr. Werner said.
Critics of retail clinics argue that patients are given short shrift by health professionals unfamiliar with their history, and may be given unnecessary prescriptions. But researchers say neither has been proved in studies.
“The quality of care that you see at a retail clinic is equal or superior to what we see in a doctor’s office or emergency department,” said Dr. Ateev Mehrotra, an associate professor of health care policy and medicine at Harvard Medical School, who has researched the retail clinics. “And while there is a worry that they will prescribe antibiotics to everybody, we see equal rates occurring between the clinics and doctor’s offices.”
Still, while the retail clinics over all charge less, particularly compared with emergency rooms, they may increase overall health care spending. Consumers who not long ago would have taken a cough drop or gargled with saltwater to soothe a sore throat now pop into their nearby retail clinic for a strep test.
Frustration with the nation’s health care system has fueled a lot of the recent partnerships. Giant companies are already signaling a desire to tackle complex care for people with a chronic health condition like diabetes or asthma.
“We’re evolving the retail clinic concept,” said Dr. Troyen A. Brennan, the chief medical officer for CVS. The company hopes its proposed merger with Aetna will allow it to transform its current clinics, where a nurse practitioner might offer a flu shot, into a place where patients can have their conditions monitored. “It requires new and different work by the nurse practitioners,” he said.
Dr. Brennan said CVS was not looking to replace patients’ primary care doctors. “We’re not trying to buy up an entire layer of primary care,” he said.
But people will have the option of using the retail clinic to make sure their hypertension or diabetes is well controlled, with tests and counseling provided as well as medications. The goal is to reduce the cost of care for what would otherwise be very expensive conditions, Dr. Brennan said.
If the company’s merger with Aetna goes through, CVS will initially expand in locations where Aetna has a significant number of customers who could readily go to CVS, Dr. Brennan said.
UnitedHealth has also been aggressively making inroads, adding a large medical practice in December and roughly doubling the number of areas where its OptumCare doctors will be to 75 markets in the United States. It is also experimenting with putting its MedExpress urgent care clinics into Walgreens stores.
Big hospital groups are also eroding primary care practices: They employed 43 percent of the nation’s primary care doctors in 2016, up from 23 percent in 2010. They are also aggressively opening up their own urgent care centers, in part to try to ensure a steady flow of patients to their facilities.
HCA Healthcare, the for-profit hospital chain, doubled its number of urgent care centers last year to about 100, according to Merchant Medicine. GoHealth Urgent Care has teamed up with major health systems like Northwell Health in New York and Dignity Health in San Francisco, to open up about 80 centers.
“There is huge consolidation in the market right now,” said Dr. Jeffrey Le Benger, the chief executive of Summit Medical Group, a large independent physician group in New Jersey. “Everyone is fighting for the primary care patient.” He, too, has opened up urgent care centers, which he describes as a “loss leader,” unprofitable but critical to managing patients.
Eva Palmer, 22, of Washington, D.C., sought out One Medical, a venture-backed practice that is one of the nation’s largest independent groups, when she couldn’t get in to see a primary care doctor, even when she became ill. After paying the annual fee of about $200, she was able to make an appointment to get treatment for strep throat and pneumonia.
“In 15 minutes, I was able to get the prescriptions I needed — it was awesome,” Ms. Palmer said.
Patients also have the option of getting a virtual consultation at any time.
By using sophisticated computer systems, One Medical, which employs 400 doctors and health staff members in eight major cities, allows its physicians to spend a half-hour with every patient.
Dr. Navya Mysore joined One Medical after working for a large New York health system, where “there was a lot of bureaucracy,” she said. She now has more freedom to practice medicine the way she wants and focus more on preventive health, she said.
By being so readily available, One Medical can reduce visits to an emergency room or an urgent care center, said Dr. Jeff Dobro, the company’s chief medical officer.
As primary care doctors become an “increasingly endangered species, it is very hard to practice like this,” he said.
Long-Term Lifelines
But more traditional doctors like Dr. Purifoy stress the importance of continuity of care. “It takes a long time to gain the trust of the patient,” he said. He is working with Aledade, another company focused on reinventing primary care, to make his practice more competitive.
One longtime patient, Billy Ray Smith, 70, learned that he needed cardiac bypass surgery even though he had no symptoms. He credits Dr. Purifoy with urging him to get a stress test.
“If he hadn’t insisted,” Mr. Smith said, “it would have been all over for me.” Dr. Purifoy’s nurse routinely checks on him, and if he needs an appointment, he can usually see the doctor that day or the next.
“I trust him 100 percent on what he says and what he does,” Mr. Smith said.
Those relationships take time and follow-up. “It’s not something I can do in a minute,” Dr. Purifoy said. “You’re never going to get that at a MedExpress.”
Editor's Note:
Elizabeth Rosenthal, a physician and former New York Times reporter, published a book about our dysfunctional health care system in 2017. She titled it "An American Sickness: How Health Care Became Big Business and How You Can Take It Back".
The following clipping suggests that the sickness Rosenthal describes may be communicable.
All the more reason to be worried, and to cure it ASAP.
-SPC
Scandals Catch Up to Private Chinese Hospitals, After Fortunes Are Made
by Sui Lee Wee - NYT - November 15, 2018
Mansions built with wealth from the Putian network of private hospitals, behind a pair of farmers in the village of Dongzhuang in southern China.Bryan Denton for The New York Times
PUTIAN, China — Chen Deliang, wearing an orange tunic, a gold watch and fluffy bedroom slippers decorated with snowflakes and the word “Love,” stood proudly in the 130,000-square-foot temple he had built. He had filled it with pagodas, Buddhas and a towering statue of a local goddess. There were several wings, with bedrooms and an office where he practiced calligraphy.
A chain smoker with a wispy beard, he initially hesitated talking about his path to unimagined wealth, but eventually relented with a matter-of-factness that betrayed no sense of smugness: “I was the first person to create everything.”
Nearby his family and friends owned mansions, many several stories tall, rising above the unpaved roads and sweet potato fields of the village of Dongzhuang in southern China. They exuded a gaudy opulence — elevators, minarets, gilded gates, fountains with Greek gods. Just days before the Lunar New Year, the most important festival in China, Ferraris and Lamborghinis lined their driveways.
Even in a country where multimillionaires are minted daily, Mr. Chen and his brethren are unlikely testaments to the Chinese dream. A middle school dropout turned martial arts performer turned itinerant salesman, Mr. Chen parlayed a remedy to treat scabies into a chain of clinics for sexually transmitted diseases and then into the country’s largest network of private hospitals. Along the way, his relatives and neighbors in Dongzhuang and the surrounding area of Putian got into the same business and also made lots of money.
“All of us were from Dongzhuang, and one by one, we started engaging in medicine,” Mr. Chen said. “It was your relatives, his relatives — all of us were relatives.”
Chen Deliang founded the network decades ago after making money selling his own remedy for scabies. Today, eight in 10 private hospitals in China are affiliated with the Putian system.Sui-Lee Wee
The Putian system, a loosely affiliated network that traces back to Mr. Chen’s initial forays into medicine, accounts for eight of every 10 private hospitals in the country, some 8,000 facilities. Although they don’t all have the same owners, all were started by people with connections to the area of Putian and are members of the same trade group.
They offered a vision of the future of medicine, promising everything the old state hospitals lacked, like well-trained specialists, quick appointments at the click of a mouse and state-of-the-art equipment. Public officials praised the hospitals, while big Wall Street firms invested billions of dollars in them.
Then came the scandal. A university student died after a doctor at a Putian-linked hospital tried to treat his cancer with a discredited form of immunotherapy. The case prompted nationwide outrage and protests. Shares of Putian-linked hospitals plummeted. The government announced an investigation into Putian ads.
For the Chinese leadership, the death has exposed weaknesses in the country’s health care system. While public hospitals are subject to tighter scrutiny at the national level, private hospitals like those in the Putian network are largely overseen by local governments, many of which don’t have the resources and expertise to police the medical profession.
Some hospitals in the Putian group fabricated patients’ testimonies and doctors’ credentials. Others listed false certifications or used outdated treatments. The Global Times, a nationalist tabloid owned by the official newspaper of the ruling Communist Party, called them “harmful hospitals.”
Read and watch more about how illness drives rural Chinese into poverty.
Wu Xidong, executive president of the Putian health industry association, which oversees the group of private hospitals, defended its practices and operations. The public anger at Putian hospitals reflected dissatisfaction with poor regulation and the entire health care system, he said.
“The patients still give us recognition, isn’t that correct?” Mr. Wu said. “This proves that we have no problems. The state has also not taken any measures against us, right? Because our hospitals themselves are very good.”
Mr. Chen, 67, lives a quiet life in Dongzhuang after retiring in the 1990s from the health care empire he created. He drives his golf buggy around the temple complex, which has a statue devoted to Chen Jinggu, a woman who is revered in the area as the goddess of the land. None of the pilgrims seemed to recognize him.
Like other Putian tycoons, Mr. Chen has been keeping a low profile. He doesn’t want to talk about the scandal but rails against the “misinformation” out there.
“The reports were nonsense. They were a mess,” Mr. Chen said. “Now, when people go and see a doctor, they’ll ask: ‘Is this a private hospital? Should we go in?’ There’s a question mark. Will they be deceived? It’s making things difficult for us.”
“All of us were from Dongzhuang, and one by one, we started engaging in medicine,” Mr. Chen said. “It was your relatives, his relatives — all of us were relatives.”Bryan Denton for The New York Times
From Scabies to S.T.D.s
During the turmoil of the Cultural Revolution, doctors were scarce and medicine was limited. Scabies, an itchy, highly infectious disease caused by mites, afflicted many Chinese. “It spread like wildfire,” Mr. Chen said.
Mr. Chen saw an opportunity, coming up with a homemade remedy — a combination of nitric acid, mercury and vinegar. Traveling throughout China, he sold it for 30 cents a bottle, 10 times the cost. Mr. Chen made about $2,200 a year, at a time when public servants earned about $5 a month.
“The country’s medical system was so backward,” Mr. Chen said. He attracted a core group of disciples, training them in his practice. “None of us had any medical background.”
For decades, the Communist Party provided the basics. In the countryside, legions of so-called barefoot doctors, medical professionals with limited training, treated farmers, with the government picking up most of the costs. In cities, most Chinese workers received coverage through their employers, state-owned companies.
When China’s paramount leader, Deng Xiaoping, started to open the economy in the late 1970s and introduce market reforms, he took away government subsidies for health care. “Barefoot doctors” lost their source of income, and hospitals were left to fend for themselves.
Mr. Chen and his apprentices started renting rooms in small hotels across from bus stations, where there was a lot of foot traffic. They posted ads on utility poles to target more customers.
In the decades that followed, Mr. Chen and his partners branched out, starting clinics to treat sexually transmitted diseases. Prostitution was on the rise, and people were embarrassed about going to public hospitals to be treated. The clinics allowed patients to register anonymously.
“S.T.D.s are embarrassing. You don’t want anyone else to know,” Mr. Chen said. “You could write down any name — we wouldn’t care.”
He and others in the Putian network soon developed a signature style, expanding widely with clinics in nonemergency fields like infertility, dermatology and cosmetic surgery. After clinics, they opened entire hospitals.
Mr. Chen bowed out of the business in the 1990s, after a car accident. The network continued to flourish.
The group got a major boost from the government in 2003, when China granted private hospitals tax-free status for three years. Severe acute respiratory syndrome had swept the country, forcing the authorities to scramble to get more hospital beds and build more quarantine facilities. And officials realized the public hospitals were insufficient to care for the rapidly swelling population.
A decade later, the government, at a meeting of the top party leadership, said it would further encourage the development of private hospitals. Chen Zhili, former vice chairwoman of the National People’s Congress, wrote a letter to the Putian network in 2014, thanking it for “making positive contributions to the development of private medical care in China.”
The government backing attracted interest from Wall Street. American financial firms like Sequoia Capital and Morgan Stanley have invested billions of dollars in health care companies in the Putian network. Several of the companies listed their shares on the stock exchanges of Shanghai and Hong Kong.
Steven Wang, founder of HighLight Capital, a private equity fund in Shanghai, said he had first heard about the Putian network from his parents, both doctors in public hospitals. When Mr. Wang visited the city of Putian in 2001, he found a place still mired in poverty, but he was impressed by the spirit of the locals.
Centuries earlier, the city had been invaded by Japanese pirates. A massacre followed, and people fled to the mountains. They were a people, Mr. Wang said, who could “eat bitterness,” referring to an expression used by Chinese to describe the ability to endure hardship.
Mr. Wang invested $150 million in the Putian-linked Angel Group (China) Holding Company, which runs a maternity hospital in the southwestern city of Chengdu. He said the second generation of entrepreneurs from Putian, who followed Mr. Chen and the initial founders, were mostly university educated. So their “knowledge, insights and vision” are different from those of their forebears, Mr. Wang said.
“They are full of vitality, are keen to learn, are open-minded and want to improve,” he said.
Xing Jiaming, a former Putian intern, said he had been told to make up résumés of doctors and testimonials from patients.Bryan Denton for The New York Times
Patina of Legitimacy
Xing Jiaming was excited in 2015 to start his internship at a marketing firm for Putian hospitals in the cities of Nanjing and Jinan. As an economics student, he thought it would be useful to gain some other experience, especially at a fast-growing business. Over the previous decade, more than 9,000 private hospitals had opened in China, most connected to the Putian group.
During his first week at work, he got a plum assignment. A doctor had recently left one of the hospitals, and Mr. Xing was assigned to write up the credentials of the doctor’s replacement. The résumé of the replacement was identical to his predecessor’s. When the intern asked about the similarities, his boss told him to finish.
For the Nanjing Brain Hospital, Mr. Xing said, he was told to promote its treatment success rate as 100 percent. He also made up testimonials, including one of a woman in Nanjing who was cured of anxiety after going to a Putian-related hospital.
“Everything was fabricated by us,” he said. “None of them was a real case.”
Mr. Xing said he and his colleagues had been given templates. “We had to exaggerate the harm caused by the disease,” he said. “The more exaggerated, the better.” The company, he said, had a “professional art team” that would steal online photographs of other people and stick them onto testimonials.
Mr. Xing resigned after two weeks.
“This phenomenon doesn’t only pertain to the Putian network, right?” Mr. Wu of the Putian health association said. “All over the internet, it’s likely that there are many other businesses who engage in that.”
Putian tapped the power of the internet to expand, plowing profits into marketing. Liang Jianyong, a former Communist Party secretary in Putian, said the network invested $1.8 billion in advertising on the Chinese search giant Baidu in 2013. It amounted to nearly half the search engine’s advertising revenue that year, according to the National Business Daily. Baidu declined to comment.
Many of the online marketing materials have a similar feel. They feature dozens of specialists, with lengthy résumés promoting “abundant clinical experience” and “praise from peers within the industry.” There are glowing testimonials from satisfied patients with emotional narratives.
One details the case of a father who “knelt down” pleading with the chief doctor at the Putian-linked Edward Hospital, in the far western region of Xinjiang, to treat his 5-year-old daughter. She received treatment that was “the most advanced technology in the world.”
Some Putian hospitals promoted credentials they didn’t have. Two of the nine doctors advertised on Shenyang Metropolis Hospital’s website are not accredited to work there, according to an analysis of a doctor database run by the National Health and Family Planning Commission, the government agency.
Others tried to make it seem they were affiliated with some of the country’s top hospitals.
Weining He Mu Jia, one of the 8,000 hospitals in the Putian network, had the patina of legitimacy. He Mu Jia was the Chinese name of Beijing United Family Hospital, China’s first foreign-owned hospital and one of its most respected.
President Barack Obama and Gary F. Locke, a former United States ambassador to China, graced the covers of Weining He Mu Jia’s magazines. A photo of Roberta Lipson, the founder of Beijing United Family Hospital, hung in the Weining hospital’s lobby. The photo, which was doctored, featured Ms. Lipson at the grand opening of the emergency room expansion of the “Weining United Family Hospital and Clinics.”
The connections were purely show. Despite no relation, more than 20 hospitals in the Putian network have used the Chinese name He Mu Jia or similar variations, according to Ms. Lipson. Her company, Chindex International, has sued six Putian hospitals for trademark infringement, including Weining He Mu Jia.
“Every single day in the news, there are people on the internet complaining about them, complaining about malpractice, and it’s our name,” Ms. Lipson said.
Beijing United won the trademark infringement lawsuit against the Weining hospital in 2014. But Weining still runs an account on Weibo, China’s version of Twitter, with the He Mu Jia name.
Putian properties are scattered throughout Dongzhuang. Mr. Chen, who lives quietly there in retirement, denounced the “misinformation” about the Putian network.Bryan Denton for The New York Times
A Scandal Erupts
Wei Zexi, a 22-year-old university student, was lured by the promises of a Putian hospital.
With a diagnosis of synovial sarcoma, a rare form of cancer that attacks the tissue in the muscle joints, Mr. Wei had undergone three operations, four chemotherapy sessions and 25 radiation therapy sessions and had taken traditional Chinese medicines hundreds of times. With the help of donations, he bought Keytruda, an immunotherapy drug that is not available in most parts of the mainland, for $5,000 in Hong Kong.
When none of it worked, Mr. Wei desperately looked online for options. A Putian center at a military hospital in Beijing, appearing at the top of his search results on Baidu, offered what seemed like a miracle: an immunotherapy program called DC-CIK.
“As long as you have 1 percent of hope, it is worth using your life to take a gamble,” he wrote in a May 2015 reply to a post on Zhihu, a Chinese knowledge-sharing website.
A doctor, a specialist for the Putian treatment center, Shanghai Kangxin hospital management company, told him that the DC-CIK treatment had a success rate of 80 to 90 percent and could extend his life by 20 years. He touted a partnership with Stanford University.
His parents borrowed money from relatives and friends for the four treatments, which cost $30,000. Within a few months, the cancer had spread to his kidneys. In April 2016, 19 months after he first sought treatment in the Putian-linked hospital, Mr. Wei was dead.
The DC-CIK treatment had been phased out in the United States because it was largely ineffective. There was no partnership with Stanford.
Mr. Wei, according his best friend, Wang Xi, believed the treatment was legitimate because of Baidu’s search results. The influential state broadcaster China Central Television had also once interviewed the doctor who treated Mr. Wei.
“He felt he was already cautious enough,” his friend said.
Read and watch more about how China’s health care system is failing patients.
A nationwide scandal erupted after his death. The Putian network became the emblem of unfettered corruption within the private health care system. Local authorities took particular aim at one of its more egregious violations, operating clinics within other hospitals. The practice had been outlawed years earlier, but many players in the Putian network continued to develop them.
In 2017, a court in Anhui Province said a hospital had violated local regulations by renting out several specialist departments in andrology and dermatology, among others, to a man from Putian, who was eventually forced to shut down. That same year, the local governments in the provinces of Liaoning and Henan announced crackdowns on the practice.
“China’s health care fraud is pretty rampant,” said Dr. Ma Jun, director of the Harbin Institute of Hematology and Oncology, a public hospital in China’s northeast. “With China’s private hospitals, there are a lot of traps.”
In October 2016, Chen Zhanghao paid $580 for nasal surgery in the eastern city of Ningbo at what he believed was a subsidiary of Tongren Hospital, a prestigious hospital in Beijing. He had found the Putian-affiliated hospital on Baidu.
According to Mr. Chen, the hospital at the time purported on its website to be a Tier 3 institution, the government’s top classification. Later, Mr. Chen learned, through a freedom of information request, that the hospital did not have the designation and was not allowed to conduct that type of surgery, according to a copy of the government’s response to his request, which was viewed by The Times. (The hospital has since removed the classification.)
Mr. Chen, 25, now has difficulty breathing sometimes because his nose either hurts or is congested, he said. He tried looking for the doctors who had treated him, but they have left the hospital, now known as the Ningbo Yinzhou Tongren Hospital.
Mr. Chen has nightmares thinking about his surgery. “I just don’t want to think about it anymore,” he said.
In March 2017, he joined five other patients with similar problems, protesting outside the offices of Baidu for compensation. They held banners that read: “We are the living Wei Zexis.”
Chen Zhanghao discovered after he had nasal surgery at a Putian hospital that it wasn’t classified to perform the procedure.Bryan Denton for The New York Times
Back at his temple, Chen Deliang defended the health care empire that he founded all those decades ago.
Mr. Chen said the hospital department that Mr. Wei had visited in Beijing had nothing to do with Putian but was owned by a company from Zhejiang Province. He did not elaborate, and corporate records showed otherwise.
When asked about the fake ads, Mr. Chen defended them, saying all ads need to have an element of “boastfulness,” but added that “it’s impossible that they are fake.”
He said many Putian hospitals had lost money, struggling to get loans and pay their workers. But when asked how many exactly, he said he could not tell for sure.
“We are not selling fake drugs, nor are we deceiving people,” Mr. Chen said. “The government has done nothing to us.”
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