Health Care Reform Articles - May 16, 2020

Hospitals Knew How to Make Money. Then Coronavirus Happened.

Surgeries are canceled. Business models are shifting. Some of the hardest-hit hospitals may close, leaving patients with fewer options for care.

by Sarah Kliff - NYT - May 15, 2020

When the top-ranked Mayo Clinic stopped all nonemergency medical care in late March, it began to lose millions of dollars a day.

The clinic, a Minnesota-based hospital system accustomed to treating American presidents and foreign dignitaries, saw revenue plummet as it postponed lucrative surgeries to make way for coronavirus victims. The hospital network produced $1 billion in net operating revenue last year, but now expects to lose $900 million in 2020 even after furloughing workers, cutting doctors’ pay and halting new construction projects.

The future offers little relief, at least until the pandemic subsides and the economy recovers. The Mayo Clinic will have to rely more heavily on low-income patients enrolled in the Medicaid program, as others will be hesitant to travel across the country, or the world, for care. “It’s uncontrollable,” said Dennis Dahlen, the clinic’s chief financial officer.

The American health care system for years has provided many hospitals with a clear playbook for turning a profit: Provide surgeries, scans and other well-reimbursed services to privately insured patients, whose plans pay higher prices than public programs like Medicare and Medicaid.

The Covid-19 outbreak has shown the vulnerabilities of this business model, with procedures canceled, tests postponed and millions of newly unemployed Americans expected to lose the health coverage they received at work.

“Health care has always been viewed as recession-proof, but it’s not pandemic-proof,” said Dr. David Blumenthal, president of the Commonwealth Fund, a health research organization. “The level of economic impact, plus the fear of coronavirus, will have a more dramatic impact than any event we’ve seen in the health care system weather in my lifetime.”

The disruption to hospital operations may ultimately leave Americans with less access to medical care, according to financial analysts, health economists and policy experts. Struggling hospitals may close or shut down unprofitable departments. Some may decide to merge with nearby competitors or sell to larger hospital chains. “There is a huge threat to our capability to provide basic services,” Dr. Blumenthal said.

Hospitals are losing an estimated $50 billion a month now, according to the American Hospital Association. And 134,000 hospital employees were among the estimated 1.4 million health care workers who lost their jobs last month, data from the Bureau of Labor Statistics shows. Across the country, hospitals reported seeing between 40 and 70 percent fewer patients from late March through early May, many of them scheduled for profitable services like orthopedic surgery and radiological scans.

The decline affects large, elite hospital systems like Mayo Clinic and Johns Hopkins — which estimates a loss of nearly $300 million into next year and has adopted cost reductions — as well as suburban hospitals and small rural facilities that were already financially stressed.

Lifespan Health, a five-hospital system in Rhode Island, has put off planned construction of a new spine health center. In rural Wyoming, the 12-bed Weston County Health Services hospital has only enough cash available to get through 16 days, half of what it typically kept, and executives are considering closing the emergency room.

Hospitals that treated high numbers of coronavirus patients say they have been hit especially hard, as they had to spend heavily on protective equipment and increased staffing just as their most profitable services were halted. These patients often had long stays in intensive care units, requiring expensive equipment like ventilators and treatment from multiple specialists.

“We began ordering everything at a feverish pace,” said Kenneth Raske, president of the Greater New York Hospital Association. “The costs were sometimes 10 or 20 times normal. We were scrounging all over the world for supplies.”

His organization estimates that, across New York City, large academic medical centers lost between $350 million and $450 million each last month. Unlike hospitals fighting smaller coronavirus outbreaks, they could not furlough workers to offset the decline.

“In terms of taking care of patients, our hospitals did the right thing,” Mr. Raske said. “But the right thing has challenged their ability to continue sustaining themselves.”

The decline in revenue is expected to be especially high among hospitals that have commanded high prices from private health plans, like the Mayo Clinic. Though coronavirus patients make up a small fraction of its patients — about 1,500 in a health system that sees more than a million annually — the global pandemic is upending its finances.

Last year, the clinic generated 60 percent of its $11.6 billion annual patient revenue from privately insured patients and 3 percent from those on Medicaid, according to its annual financial statement. The rest were either were covered by Medicare or paid their own costs.

Other hospitals, including those in low-income areas or with less recognizable brands, rely more heavily on Medicaid funds. This includes many academic medical centers in large cities that see a high number of patients from their surrounding neighborhoods.

At the Johns Hopkins Hospital, a quarter of patient revenue comes from the public program, according to data provided by the nonprofit RAND Corporation. At NewYork-Presbyterian, it accounts for 16 percent of insurer payments.

A nonprofit database shows that Minnesota’s private insurers pay the Mayo Clinic $566 for each obstetric ultrasound, approximately five times the Medicaid price. For an echocardiogram, the difference is tenfold. At Mayo Clinic centers in Florida and Wisconsin, according to RAND estimates, insurers pay three to four times the Medicare prices for outpatient care. Similar data for inpatient prices is not publicly available.

The Minnesota-based hospital system promotes its services to well-off patients, delivering quality health care alongside luxury amenities such as hotel-like suites with fluffy bathrobes, private dining rooms and access to chef-cooked meals.

“They’ve really made a conscious effort to bolster their commercial contracts, and it’s a survival strategy,” said Lynn Blewett, a professor of health policy and management at the University of Minnesota. “To maintain the quality and the research and the excellence they’re known for, they’ve got to bring in revenue. There isn’t a lot of margin, if any, with Medicaid.”

More so than most other hospitals, the 131-year-old Mayo Clinic sees a significant number of patients from afar. In a typical year, more than a million patients travel to the system’s 21 hospitals from all 50 states and 140 countries. Many are seen at its 2,000-bed Rochester, Minn. campus. International patients generally account for 1.3 percent of hospital patients but closer to 3 percent of revenue because of the complex care they receive, a spokeswoman said.

The clinic has used its past strong earnings to expand services abroad, opening a facility in London last fall, and now building a 741-bed for-profit institution in Abu Dhabi, in the United Arab Emirates.

During the last recession of 2008, nonprofit hospitals saw their Medicaid revenue increase 17 percent, according to the credit ratings firm Moody’s, a possible preview of the changes to come in the present downturn.

Minnesota expects to enroll an additional 100,000 residents in Medicaid next year. Nationally, the nonprofit Urban Institute projects between 8 and 15 million new Medicaid enrollments among those losing the private insurance they had through employers. An additional five to 10 million Americans who lose such plans are expected to become uninsured, and four to eight million will transition to the Affordable Care Act’s individual market plans or other sources of private insurance.

The Mayo Clinic expects to see more publicly insured patients in the second half of 2020, although it has not recorded an uptick yet. Mr. Dahlen, the chief financial officer, said, “We’ll probably see a richer mix of locals and people coming from within 100 miles.”

Like other large successful health systems, the clinic has strong cash reserves and access to credit markets. It plans to convert its shortfall by dipping into the $10.6 billion reserve of cash and investments it has built up over decades of profitability.

Independent hospitals that already teetered on the edge have less of a financial cushion and are at greater risk of shutting down services or closing altogether.

Kalispell Regional Medical Center in northwest Montana has already seen a 1 percent increase in Medicaid enrollees as patients begin to trickle back into the hospital last month. That shift from private insurance to public insurance represents a loss of $600,000 because of lower reimbursements, said Craig Boyer, the hospital’s chief financial officer.

The hospital has experienced steep revenue declines after canceling most surgeries and seeing a 34 percent drop in emergency room visits. Kalispell treated a small number of coronavirus patients, including 37 who tested positive and four admitted to the hospital.

“If you are a patient who was scheduled for a total knee replacement, you might say, ‘My knee hurts but I’m still going to put it off while I see what happens,’” Mr. Boyer said. “We know there is a backlog, but we don’t know how many people are going to decide this isn’t the right time.”

He also worries that a lull in summer travel will depress revenue. His hospital typically sees more patients then as visitors flock to Glacier National Park, 30 miles away. The hospital has received $10.3 million in federal stimulus plans but does not expect that to cover its losses.

In neighboring Wyoming, the 90-bed Campbell County Memorial Hospital, which treated 29 coronavirus cases with no deaths, has also been hit hard.

“The last six weeks have been disastrous for us,” said Andy Fitzgerald, the chief executive. “We’ve taken a 50 percent haircut on our revenue, and it’s the best 50 percent: elective surgery, radiology, all the outpatient care that pays for the other services we provide.”

Local coal-mining companies, long a pillar of the economy, recently laid off hundreds of workers as global energy demands have declined. Mr. Fitzgerald expects that will mean a surge in the uninsured, who already account for 12 percent of the hospital’s patients. Wyoming is among 14 states that do not participate in the Affordable Care Act’s Medicaid expansion, which provides coverage to low-income Americans.

“My concern is that there is more of this in our future,” Mr. Fitzgerald said of the layoffs. “The global economy isn’t going to bounce back to full employment. The demand for what we produce here in northeastern Wyoming will probably be depressed for a while.”

His hospital has received $10.1 million from the $72 billion in federal stimulus funds distributed so far to hospitals across the country, which he estimates will offset losses from the past two months but not the higher number of uninsured patients he expects to see in the future.

The Trump administration has earmarked $12 billion in relief funds for hospitals that treated 100 or more coronavirus cases, meant to offset the high costs of caring for patients whose hospital stays could last weeks. Some of that funding will go to Providence Health Systems, which owns 51 hospitals, including the Seattle-area facility that treated the first confirmed coronavirus patient in the United States.

The hospital system has treated 1,200 coronavirus patients, and executives do not yet know whether it will break even on that care. They estimate that, even after accounting for federal stimulus dollars, Providence still lost $400 million in April.

“We have been in this situation much longer, because of Seattle being on the forefront of the pandemic,” said Ali Santore, the hospital system’s vice president for government affairs. “We canceled elective surgeries before there was a government order. We had to see so many patients who required more supplies, isolation and nursing. Our labor costs were through the roof.”
https://www.nytimes.com/2020/05/15/us/hospitals-revenue-coronavirus.html?action=click&module=Top%20Stories&pgtype=Homepage 

Editor's Note -

After reading the above clipping from the NYT, go onto the NYT website and read some of the comments in reaction to the article.  

FYI, I have included a copy (following)  of the article Peter Arno and I wrote. It was published on March 25, 2020 in the Health Affairs blog.

-SPC

Medicare For All: The Social Transformation Of US Health Care

 by Peter Arno and Philip Caper - Health Affairs - March 25, 2020

There is a large elephant in the room in the national discussion of Medicare for All: the transformation of the US health care system’s core mission from the prevention, diagnosis, and treatment of illness—and the promotion of healing—to an approach dominated by large, publicly traded corporate entities dedicated to growing profitability and share price, that is, the business of medicine. 

The problem is not that these corporate entities are doing something they shouldn’t. They are simply doing too much of what they were created to do—generate wealth for their owners. And, unlike any other wealthy country, we let them do it. The dilemma of the US health care system is due not to a failure of capitalism or corporatism per se, but a failure to implement a public policy that adequately constrains their excesses.
Since the late 1970s, US public policy regarding health care has trended toward an increasing dependence on for-profit corporations and their accompanying reliance on the tools of the marketplace—such as competition, consolidation, marketing, and consumer choice—to expand access and assure quality in the provision of medical care.
This commercialized, commodified, and corporatized model is driving the US public’s demand for fundamental reform and has elevated the issue of health care to the top of the political agenda in the current presidential election campaign.
Costs have risen relentlessly, and the quality of and access to care for many Americans has deteriorated. The cultural changes accompanying these trends have affected every segment of the US health care system, including those that remain nominally not-for-profit. Excessive focus on health care as a business has had a destructive effect on both patients and caregivers, leading to increasing difficulties for many patients in accessing care and to anger, frustration, and burnout for many caregivers, especially those attempting to provide critical primary care.
As a result, the ranks of primary care providers have eroded, and that erosion continues. One of the major reasons for burnout in this group is the clash between its members’ professional ethics (put the patient first and “first do no harm”) and the profit-oriented demands of their corporate employers. Applying Band-Aids can’t cure the underlying causes of disease in medicine or public policy. Ignoring the underlying pathology in public policy, as in clinical medicine, is destined to fail. 
Many of the symptoms of our dysfunctional health care system are not in dispute:

• We pay more than twice as much per person on total health care spending and on prescription drugs in comparison to other developed countries. This spending totals nearly 18 percent of our economy.
• Between 2008 and 2018, premiums for employer-sponsored insurance plans increased 55 percent, twice as fast as workers’ earnings (26 percent). Over the same time period, the average health insurance deductible for covered workers increased by 212 percent.

• An average employer-sponsored family health insurance policy now exceeds $28,000 per year, with employers paying about $16,000 and employees paying about $12,000. 

• Almost half (45 percent) of US adults ages 19 to 64, or more than 88 million people, were inadequately insured over the past year (either they were uninsured, had a gap in coverage, or were underinsured; that is, they had insurance all year but their out-of-pocket costs were so high that they frequently did not receive the care they needed). 

• Compared to other developed countries, the US ranks near the bottom on a variety of health indicators including infant mortality, life expectancy, and preventable mortality. 

We must therefore ask: How is it that we spend more on health care than any other nation, yet have arrived at such a sorry state of affairs?
The answer is that only in the United States has corporatism engulfed so much of medical care and come so close to dominating the doctor-patient relationship. Publicly traded, profit-driven entities—under constant pressure from Wall Street—control the financing and delivery of medical care in the US to an extent seen nowhere else in the world. For instance, seven investor-owned publicly traded health insurers now control almost a trillion dollars ($913 billion) of total national health care spending and covers half the US population. In 2019, their revenue increased by 31 percent, while their profits grew by 66 percent.
The corporatization of medical care may be the single most distinguishing characteristic of the modern US health care system and the one that has had the most profound impact on it since the early 1980s. The theology of the market and the strongly held—but mistaken—belief that the problems of US health care can be solved if only the market could be perfected have effectively obstructed the development of a rational, efficient, and humane national health care policy.
There are three main reasons to pursue a public policy that embraces genuine health care reform:

1. Saving lives: To simplify our complex and confusing health care system while providing universal affordable health care coverage;
2. Affordability: To rein in the relentless rise in health care costs that are cannibalizing private and public budgets; and
3. Improving quality: To eliminate profitability and share price as the dominant and all-consuming mission of the entities that provide health care services and products when that mission influences clinical decision making. Profitability should be the servant of any health care system’s mission, not its master as seems to be increasingly the case in the US. 

What Is The Best Approach To Reform?  

It is not an exaggeration to say that no reforms except publicly financed, single-payer universal health care will solve the problems of our health care system. This is true whether we are talking about a public option, a Medicare option, Medicare buy-in, Medicare extra, or any other half-measure. The main reason is because of the savings that are inherent only in a truly universal single-payer plan. Specifically, the administrative and bureaucratic savings gained by eliminating private insurers are the largest potential source of savings in a universal single-payer framework, yet all the “option” reforms listed above leave largely intact the tangle of wasteful, inefficient, and costly private commercial health insurers. The second largest source of savings comes through reducing the cost of prescription drugs by using the negotiating leverage of the federal government to bring down prices, as is done in most other developed countries. The ability, will, and policy tools (such as global budgeting) to restrain these and other costs in a single-payer framework are the key to reining in the relentless rise in health care expenditures and providing universal coverage.
The various “option” reform proposals will not simplify our confusing health care system nor will they lead to universal coverage. None have adequate means to restrain health care costs. So why go down this road? Is it too difficult for the US to guarantee everyone access to affordable care when every other developed country in the world has done so?
The stated reason put forth in favor of these mixed option approaches is that Americans want “choice.” But choice of what? We know with certainty from former insurance company executives such as Wendell Potter that the false “choice” meme polls well with the US public and was used to undermine the Clinton reform efforts more than 25 years ago. It is being widely used today to manipulate public opinion.
But choice in our current system is largely an illusion. In 2019, 67.8 million workers across the country separated from their job at some point during the year—either through layoffs, terminations, or switching jobs. This labor turnover data leaves little doubt that people with employer-sponsored insurance are losing their insurance constantly, as are their spouses and children. And even for those who stay at the same job, insurance coverage often changes. In 2019, more than half of all firms offering health benefits reported shopping for a new health plan and, among those, nearly 20 percent actually changed insurance carriers. Trading off choice of doctors or hospitals for choice of insurance companies is a bad bargain.
The other major objection to a universal single-payer program is cost. Yet, public financing for health care is not a matter of raising new money for health care but of reducing total health care outlays and distributing payments more equitably and efficiently. Nearly every credible study concludes that a single-payer universal framework, with all its increased benefits, would be less costly than the status quo, more effective in restraining future cost increases, and more popular with the public—as 50 years of experience with Medicare has demonstrated.
The status quo generates hundreds of billions of dollars in surplus and profits to private stakeholders, who need only spend a small portion (millions of dollars) to influence legislators, manipulate public opinion, distort the facts, and obfuscate the issues with multiple competing reform efforts.

Conclusion

The real struggle for a universal single-payer system in the US is not technical or economic but almost entirely political. Retaining the status quo (for example, the Affordable Care Act) is the least disruptive course for the existing medical-industrial complex, and therefore the politically easiest route. Unfortunately, the status quo is disruptive to the lives of most Americans and the least effective route in attacking the underlying pathology of the US health care system—corporatism run amok. Following that route will do little more than kick the can down the road, which will require repeatedly revisiting the deficiencies in our health care system outlined above until we get it right.
The US public and increasingly the business community are becoming acutely aware of the rising costs and inadequacies of our current system. It is the growing social movement, which rejects the false and misleading narratives, that will lead us to a universal single-payer system—truly the most effective way to reform our health care system for the benefit of the US people.

 https://bit.ly/psapcM4A

 

Editor's Note -

Here's a somewhat shorter version on the same topic Peter and I wrote - not yet published elsewhere.

-SPC

American Health Care – The Illusion of Choice
“Choice” is a major buzzword in current discussions of healthcare. So let’s discuss our actual healthcare choices—as individuals and as a nation, starting with the argument made by politicians, pundits, and media that over 160 million Americans love their health insurance and do not want this choice forcibly taken away by the likes of Bernie Sanders or Elizabeth Warren.
As a physician and a health economist, we know that the concept of individual choice in the US healthcare system is largely an illusion. We also know with certainty from former insurance executives such as Wendell Potter that the false “choice” meme polls well with the American public. It was used to undermine the Clinton reform efforts more than 25 years ago and is being widely used today to manipulate public opinion. Americans really value choice of doctors and hospitals, as long as insurance plans are affordable and comprehensive.
Regarding employer-sponsored insurance coverage, it’s important to realize that 66.1 million American workers lost or changed jobs in 2018, often accompanied by a loss or change in health insurance. Coverage also changed frequently for those remaining at the same job. In 2019, over half of all firms offering health benefits shopped for a new health plan, and nearly 20 percent of those actually changed carriers. The workers had no recourse, no choice when the new network chosen by their employer didn’t cover their personal doctors or favored hospitals.
Additionally, almost half (45 percent) of U.S. adults ages 19 to 64—or more than 88 million people—were inadequately insured over the last year (either they were uninsured, had a gap in coverage, or had insurance all year but their out-of-pocket costs were so high that they frequently did not receive the care they needed). What choices did they have to improve their care?
Our choices on the national level are between unsustainable increasing expenditures and skimpier coverage with more out-of-pocket costs. While we shell out more than twice as much per person on total healthcare spending and prescription drugs as people in other developed countries, we rank near the bottom on infant mortality, life expectancy, and preventable mortality.
The real elephant in the room here is the transformation of the American healthcare system’s core mission from the promotion of healing and the prevention, diagnosis, and treatment of illness to an approach dominated by large, publicly traded corporate entities dedicated to growing profitability and share price—in other words, the business of medicine. This commercialized, commodified and corporatized approach has failed. Costs have risen relentlessly, and the quality of and access to care for many Americans have deteriorated.

To reduce costs and have real choice, it is no exaggeration to say that the only option is publicly financed single-payer universal healthcare—Medicare for All. A public option, a Medicare option, Medicare buy-in, Medicare extra, or other half-measures will not succeed because the single largest source of savings in a single-payer framework is eliminating the bloated administrative costs generated by private insurers. And all “option” reform proposals leave these wasteful and unnecessary costs mostly intact.
The second largest source of savings in a universal single-payer system comes through reducing prescription drug costs, using the powerful negotiating leverage of the federal government. The ability, will, and policy tools to restrain costs in a single-payer framework are the key to reining in the relentless rise in healthcare expenditures and to providing universal coverage.
Beyond choice, the major objection to a universal single-payer system is cost. Yet public financing for healthcare is not about raising new money, but about reducing total healthcare outlays and distributing payments more equitably. Nearly every credible study concludes—and 50 years of Medicare demonstrates— that a single-payer universal framework would be less costly than the status quo, more effective in restraining future cost increases, and more popular with the public. The fact that every other developed country in the world provides this kind of coverage makes it clear that the challenges of overhauling our healthcare system are not insurmountable.
The real struggle for a universal single payer system in the US is not technical or economic but almost entirely political. Retaining anything resembling the status quo is the least disruptive, and therefore politically easiest, route. Unfortunately, it is also the least effective route to attack the underlying pathology of the American healthcare system—corporatism run amok. Adopting the easiest route will do little more than kick the can down the road and will require repeatedly revisiting the deficiencies in our healthcare system until we get it right.

Peter S. Arno, PhD
Director, Health Policy Research Political Economy Research Institute University of Massachusetts, Amherst parno@peri.umass.edu
Cell: 914-844-9175

Philip Caper, MD
Founding Board Chair, Maine AllCare Brooklin, ME pcpcaper21@gmail.com
Cell: 207-252-8514

Employers Can Let Workers Change Health Plans Without Waiting

The I.R.S. is giving companies flexibility to allow those decisions, and on pretax accounts for medical expenses and child care, outside an enrollment period.

By Margot Sanger-Katz and Ron Lieber - NYT - May 12, 2020

The Internal Revenue Service on Tuesday made it easier for employers to allow workers to make adjustments to their health insurance plans and flexible spending accounts in response to the coronavirus pandemic.

Normally, strict rules prevent employees from changing health insurance plans in the middle of a year. But the I.R.S. is giving employers a way to let workers make changes without waiting for the usual enrollment period.

Under the new guidance, employers can let their workers drop out of their health insurance if they have another option, or sign up if they failed to earlier in the year. Workers could also be allowed to add more family members to their plan, or switch from one workplace plan to another.

The change doesn’t require employers to offer these options; they must opt in if they want to give their employees the added flexibility.

Doing so will involve some administrative headaches — managing insurance sign-ups is a major task that many companies may prefer to keep to once a year. But several employer groups have been lobbying the Treasury Department for these new options, suggesting that at least some businesses want their workers to have them.

The changes could make it easier for workers who are furloughed to drop benefits temporarily and resume them when they return to work. They may also be attractive to workers who decided against buying health insurance earlier in the year but feel different now that they are worried about their risk of catching the coronavirus.

Cynthia Cox, a vice president at the Kaiser Family Foundation, a health research group, said employers might want new flexibility as a way of encouraging reluctant employees to return to work during the pandemic.

“I can imagine being an uninsured worker and being hesitant about returning to work and exposing myself to the virus without having health insurance,” she said.

The new flexibility for workplace health plans stands in contrast to the Trump administration’s policy on health insurance for people who buy their own coverage. Officials at the Centers for Medicare and Medicaid Services declined to establish a special period that would allow uninsured people to easily enroll in health plans on the individual market. Instead, health officials said people who remained uninsured but needed hospital care for Covid-19, the disease caused by the coronavirus, would be able to obtain such care for free.

Under the new guidance, employers will also be able to allow workers to make changes to pretax flexible spending accounts that pay for health expenses and dependent care.

The pandemic has changed the math for both kinds of accounts, limiting options for spending money that has been set aside. Many people have postponed elective medical procedures, and many child-care services — preschools, after-school programs and summer camps — have closed down. Workers who leave money unspent forfeit the cash.

If employers allow it, employees could enroll in a flexible spending account offering in the middle of this year, and they could decrease or increase the amount they are setting aside, up to the usual account limits.

Employers may also offer exceptions on rules for rollovers. For instance, people who had money left over from a plan that ran on the 2019 calendar year may be able to get the rest of this year to spend it. Other plans that normally end their 12-month spending period in May or June could get the same extension.

The new guidance does not allow for extensions for flexible spending accounts that began their year in January. People in those accounts can, however, halt their savings now, in most instances, and try to spend what they’ve accumulated so far before they must forfeit it next year.
https://www.nytimes.com/2020/05/12/business/employer-health-plans-coronavirus.html?action=click&module=Spotlight&pgtype=Homepage

Private equity firms now control many hospitals, ERs and nursing homes. Is it good for health care?

Private equity firms are buying up hospitals, nursing homes and ER operations. The drive for profits can run counter to helping patients, critics say.

By Gretchen Morgenson and Emmanuelle Saliba - NBC Newes - May 13, 2020

In March, as the coronavirus gripped the nation, veteran emergency room doctor Ming Lin was growing concerned. Lin felt his facility, PeaceHealth St. Joseph Medical Center in Bellingham, Washington, was unprepared for the pandemic, so he went to his superiors for help.
Frustrated by their response, Lin took to social media, criticizing the hospital's operations in a series of posts.
Days later, the hospital removed Lin from the rotation in the emergency department. He had worked at PeaceHealth for 17 years.
Under typical medical industry practice, Lin's case would have been subject to peer review, experts said. But Lin's employer wasn't PeaceHealth. It was TeamHealth, a physician practice and staffing company that provides the hospital with emergency room services. TeamHealth is owned by Blackstone Group, a finance giant.
When a private staffing firm teams up with a hospital, the right to due process can disappear. Lin's case was never heard.
"One of the objectives is to point out any deficiencies in the system that may harm the patient," Lin told NBC News. "Because private equity has taken over health care, it has made that difficult."

Blackstone, which bought TeamHealth in 2016 for $6.1 billion, is what's known as a private equity firm, a type of financial entity that buys companies and hopes to sell them later at a profit.
Over the past decade, private equity firms like Blackstone, Apollo Global Management, The Carlyle Group, KKR & Co. and Warburg Pincus have deployed more than $340 billion to buy health care-related operations around the world. In 2019, private equity's health care acquisitions reached $79 billion, a record, according to Bain & Co., a consulting firm.
Private equity's purchases have included rural hospitals, physicians' practices, nursing homes and hospice centers, air ambulance companies and health care billing management and debt collection systems.
Partly as a result of private equity purchases, many formerly doctor-owned practices no longer are. The American Medical Association recently reported that 2018 was the first year in which more physicians were employees — 47.4 percent — than owners of their practices — 45.9 percent. In 1988, 72.1 percent of medical practices were owned by physicians.
In some parts of the health care industry, private equity firms dominate. For example, TeamHealth, owned by Blackstone, and Envision Healthcare, owned by KKR, provide staffing for about a third of the country's emergency rooms.
This has been a seismic shift. During the 1900s, most hospitals were owned either by nonprofit entities with religious affiliations or by states and cities, with ties to medical schools. For-profit hospitals existed, but it wasn't until recently that they became nearly ubiquitous.
For the past 20 years, private equity has been a source of immense wealth for the executives overseeing the entities. Most of those who head major private equity firms are reported to be billionaires, like the two men atop Blackstone: Stephen Schwarzman, a close adviser to President Donald Trump, and Hamilton "Tony" James, a major donor to Democrats.
The impact private equity has had on employees and customers of the companies it has taken over, however, isn't always beneficial. To finance the purchases, private equity owners typically load the companies they buy with debt. Then they slash the companies' costs to increase earnings and appeal to potential buyers down the road.
In the business of health care, the drive for profits can run counter to the goal of helping patients and protecting workers, critics say.
Research shows, for example, that when private equity firms acquire nursing homes, the quality of care declines markedly. And when COVID-19 hit, hospitals associated with private equity firms were early to cut practitioners' pay and benefits because the operations could no longer generate profits on elective surgical procedures postponed during the pandemic. The heavy debt loads typically associated with private equity-owned businesses hinder their ability to withstand profit downturns.
Finally, some medical professionals say, private equity's growing involvement in health care in recent years has contributed to shortages of ventilators, masks and other equipment needed to combat COVID-19, because keeping such goods on hand costs money. And to private equity, that's like putting dollar bills on a shelf.
Private equity firms have jumped into health care with both feet. Apollo Global Management, a $330 billion investment firm overseen by Leon Black, owns RCCH Healthcare Partners, an operator of 88 rural hospital campuses in West Virginia, Tennessee, Kentucky and 26 other states. Cerberus Capital Management, a $42 billion investment firm run by Steve Feinberg, owns Steward Health Care; it runs 35 hospitals and a swath of urgent care facilities in 11 states.

President Barack Obama pats outgoing Treasury Secretary Timothy Geithner on the back in January 2013. Geithner is now president of Warburg Pincus, which owns Modernizing Medicine.Pablo Martinez Monsivais / AP

Warburg Pincus, overseen by former Treasury Secretary Timothy Geithner, owns Modernizing Medicine, an information technology company that helps health care providers ramp up profits through medical billing and, to a lesser degree, debt collections. The Carlyle Group owns MedRisk, a leading provider of physical therapy cost-containment systems for U.S. workers' compensation payers, such as insurers and large employers.
Private equity's laser focus on cost cutting and operational efficiencies can benefit consumers, economists say, if lower costs are passed on to end users. Problems arise, however, when the push for profits reduces quality. That can be especially harmful in health care, in which patients' lives are on the line and it is difficult for consumers to comparison shop by analyzing quality of care.
Full coverage of the coronavirus outbreak
Mark Reiter is residency program director of emergency medicine for the University of Tennessee and past president of American Academy of Emergency Medicine, an advocacy group for practitioners. "Private equity-backed health care has been a disaster for patients and for doctors," he told NBC News. "Many decisions are made for what is going to maximize profits for the private equity company, rather than what is best for the patient, what is best for the community."
Representatives of every firm identified in this article declined to respond to broad criticisms of private equity in the health care arena.

Dr. Mark Reiter.Courtesy Mark Reiter

As for PeaceHealth St. Joseph Medical Center, spokeswoman Bev Mayhew said it removed Ming Lin from the emergency department rotation because "his actions were disruptive, compromised collaboration in the midst of a crisis and contributed to the creation of fear and anxiety among staff and the community." She said his case wasn't subject to peer review because he still has privileges at the hospital.

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A TeamHealth spokesman said it continues to employ Lin and had offered to place him "in another contracted hospital anywhere in the country."

'Physician Extenders'

Private equity firms have targeted health care investments for an array of reasons, most having to do with their potential profits.
First, health care drives a huge part of the nation's economic output — almost 20 percent of gross domestic product. In addition, health care is a fragmented business with many small operators like physicians; private investors often find outsize gains in industries in which they can create economies of scale through consolidation.
Ever on the hunt for efficiencies, private equity has brought changes to traditional health care practices, experts say. One example: the use of so-called physician extenders, like nurse practitioners, to see patients instead of actual doctors.
Because such extenders have less training under their belts, their costs are well below those associated with physicians. In general, employing three extenders equals the cost of one physician, said Robert McNamara, professor and chairman of emergency medicine at Temple University and chief medical officer of Temple Faculty Physicians.

Dr. Robert McNamara.Daniel Burke

Private equity-owned firms also use practitioners with less experience or training to save money, say doctors associated with the American College of Emergency Physicians and the American Academy of Emergency Medicine.
In February, a patient arrived at the Calais Regional Hospital emergency department in Calais, Maine, near the Canadian border. He required intubation — the insertion of a breathing tube down his throat — but the doctor was unable to perform the procedure and had to call in local paramedics for help. The patient recovered.
The doctor worked for Envision Physician Services, the KKR-owned company that had taken over staffing of the emergency department two weeks before the incident.
DeeDee Travis, the hospital's spokeswoman, said that the doctor is no longer in rotation at the hospital but that his move had nothing to do with the incident. She said rural medicine requires the use of all resources, including local paramedic staff.
Assessing the impact of private equity on the overall quality of care has been difficult, in part because ownership by the firms is relatively new. But in February, four academics at the University of Pennsylvania, New York University and the University of Chicago published an in-depth study analyzing care at private equity-owned nursing homes. The findings were stark.
"In the nursing home setting," the study said, "it appears that high-powered profit maximizing incentives can lead firms to renege on implicit contracts to provide high quality care, creating value for the firms at the expense of patients."
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Looking at data from 2000 to 2017 from over 18,000 nursing homes, the academics found "robust evidence of declines in patient health and compliance with care standards" after private equity concerns bought facilities. And when private equity firms' purchases of nursing homes were compared with those bought by other for-profit entities, such as nursing home chains, the private equity-owned properties resulted in greater quality declines, the study concluded.
On April 2, well into the COVID-19 crisis, Steward Health Care, owned by Cerberus Capital, created a firestorm. It suspended intensive care unit admissions at Nashoba Valley Medical Center, a hospital in rural northeastern Massachusetts, and redeployed equipment and staff elsewhere to meet COVID-19 demand, according to a memo from the president of the facility. Hospitals aren't supposed to close such units without first notifying state authorities and holding community hearings.
Audra Sprague, a longtime registered nurse at the facility, said the move "completely took out an entire level of service. Anybody that needed ICU care, we didn't have one, we couldn't keep you."
Darren Grubb, a spokesman for Steward, said that the suspension has "not impacted patient care" at the facility and that state officials had "validated that the ICU at Nashoba Valley remains adequately staffed and equipped to care for clinically appropriate patients."
Sprague said she is proud to serve patients in the same hospital where her grandmother was a nurse. She said that the facility had previously been owned by a private company but that patient safety and staff treatment had worsened since Steward took over. So she joined the nurses' union.
"Even when you say something is unsafe, there's little change that comes out of it," she said. "They're not going to do a single thing that doesn't benefit them first and foremost."
Grubb called Sprague's view a "baseless, selective, hyper-generalized claim."

Doctors as owners in name only

For more than a century, company ownership of doctors' practices was barred under the Corporate Practice of Medicine doctrine, which was enshrined in most state laws. The doctrine and the laws hold that only individual physicians should be licensed to practice medicine, not corporations. But in the years leading up to COVID-19, the laws were rarely enforced.
"The states realized a long time ago that this is a real problem — fiduciary duty to shareholders rather than patients," Reiter said. "These corporations are not taking an oath to do what's best for their patients, and they thought it would be better if doctors owned their own practices."
In response to the laws, private equity firms have structured their health care investments with physicians as owners, but in name only, McNamara said. Staffing companies like TeamHealth, for example, use what he called sham professional associations with doctors to get around prohibitions against the corporate practice of medicine.
McHenry Lee, TeamHealth's spokesman, said the company's "organizational structure is fully compliant with long established laws and precedents." Referring to the American Academy of Emergency Medicine, Lee said the company has prevailed while facing judicial scrutiny "initiated or funded by AAEM, where Dr. McNamara has made identical charges."
In a typical emergency room, McNamara said, the usual physician group charges three to four times the Medicare rate. TeamHealth is charging six times, he said.
Last fall, United Healthcare, the giant insurer, canceled coverage at 500 hospitals with TeamHealth-run emergency rooms, largely because of high costs, a company spokeswoman said.
"A small number of providers are driving up the cost of care for the people and customers we serve," she said. "This is particularly evident with private equity-backed physician staffing companies like TeamHealth."
United Healthcare provided NBC News with examples of TeamHealth costs far exceeding median charges for specific emergency department procedures. A patient visiting an emergency department with chest pains, for example, would face a median charge of $340, United Healthcare said, versus a TeamHealth bill for $976. Stitches on a minor cut would be $200 at the median rate, compared with $888 from TeamHealth. And the median rate for a broken arm is $665, while TeamHealth's charge is $2,947.
Lee of TeamHealth declined to comment on the figures.
Envision Healthcare is a physician staffing, emergency medicine and billing services company bought for almost $10 billion by KKR in 2018. Envision's website says it provides emergency medicine at 650 facilities in 40 states.
Before the acquisition, Envision acknowledged in a 2014 securities filing that its contracts with physician groups might run afoul of laws barring the corporate practice of medicine, as well as fee-sharing arrangements between doctors and companies. It could be subject to civil or criminal penalties, and its contracts with affiliated physician groups "could be found legally invalid and unenforceable," Envision said in the filing.
A flurry of such cases didn't arise. But today, Envision's business has collapsed, again a result of postponed elective operations. Carrying $7.5 billion in debt, the company recently hired restructuring advisers and may file for bankruptcy.
Aliese Polk, a spokeswoman for Envision, said the company is experiencing the same financial problems that many other health care providers are and is "focused on fighting the COVID-19 pandemic, deploying significant resources to front-line clinicians caring for sick patients." She declined to discuss its previous warnings about possible legal violations in its business model.

Congress and private equity health care

Even before the COVID-19 crisis, private equity-owned health care operations had come under criticism from members of Congress and outsiders.
TeamHealth, for example, was featured last year in a report by MLK50 and ProPublica for aggressively suing poor patients who had been unable to pay their emergency room bills. After the report, TeamHealth said it would stop the practice. The TeamHealth spokesman didn't respond to a question from NBC News about why it sued patients.
Surprise emergency care medical bills have also emerged as a problem at private equity-run Envision. Patients can be ambushed by such bills when they visit an emergency department in a hospital that is in their insurance network but whose doctors work outside the network, charging separately for their services.
Polk of Envision declined to discuss surprise billing.
Congress tried to address the problematic practice with legislation last year. But as the bill gained traction, Envision and TeamHealth quietly backed a purported grass roots organization called Doctor Patient Unity to advocate against the legislation, according to The New York Times. Doctor Patient Unity funded a $28 million media blitz against the bill, the report said, which didn't pass.
Doctor Patient Unity didn't respond to an email seeking comment. Representatives from TeamHealth and Envision accused insurance companies of causing problems for patients seeking emergency care and said they didn't support the legislation because it would have benefited insurers at the expense of patients.
Emily Maddoff and Chet Waldman, lawyers at Wolf Popper LLP, are fighting surprise medical bills in six class-action lawsuits in state and federal courts across the country. A unit of Envision is a defendant in three of the cases.
A class-action case involving a patient in California has a final settlement hearing scheduled for June. If approved, the deal would provide 100 percent relief to the plaintiffs.
"We should not be running our health care system as a profit-making operation on steroids," said Eileen Appelbaum, an authority on private equity and co-director of the Center for Economic and Policy Research, a left-leaning think tank in Washington, D.C. "Health care is not so much anymore about taking care of patients. It's way more about making money."
https://www.nbcnews.com/health/health-care/private-equity-firms-now-control-many-hospitals-ers-nursing-homes-n1203161

Medicaid Retroactive Eligibility Waivers Will Leave Thousands Responsible For Coronavirus Treatment Costs

Paul Shafer, Nicole Huberfeld and Ezra Golberstein - Health Affairs - May 8, 2020

 The coronavirus pandemic has led to record numbers of American workers being laid off or seeing their hours and paychecks dwindle. The economy is on the brink of a deep recession, and waves of coronavirus infections may continue for the foreseeable future. Medicaid will be a crucial piece of the puzzle that helps to ensure access to health care while protecting people from further financial ruin. Yet, one of Medicaid’s key provisions has been weakened by recently approved section 1115 “demonstration projects”, commonly referred to as waivers, that eliminate or reduce retroactive coverage. These waivers will diminish coverage for thousands of people seeking testing and treatment for COVID-19 and other medical care.
Medicaid, the federal-state health insurance program that focuses on low-income populations, contains core benefits and protections that guarantee coverage for medical care. This includes specific eligibility rules, a standard package of benefits, affordability requirements, and due process protections. Medicaid’s special eligibility rules include retroactive coverage, a provision that is particularly important during an economic recession, when need for Medicaid coverage rises as individual and state budgets tighten.
Retroactive eligibility is a long-standing feature of Medicaid that covers health care expenses for three months prior to the application date, provided that the beneficiary would have been eligible during that period. Before the Affordable Care Act (ACA), a handful of states imposed narrow restrictions on retroactive eligibility, but these limitations were paired with expansions of eligibility and had exemptions for vulnerable groups. Recently, however, many states—including Arizona, Arkansas, Florida, Indiana, Iowa, Kentucky, and New Hampshire—have gained Department of Health and Human Services (HHS) approval for 1115 waivers that drastically limit or completely eliminate retroactive eligibility, though four have been stayed by courts or halted by states as part of litigation challenging the legality of those waivers that include work requirements (Arkansas, Kentucky, Indiana, and New Hampshire).
These waivers disproportionately affect populations that are, or would be, Medicaid-eligible due to ACA Medicaid expansion. For example, Arizona and Florida have limited retroactive coverage to the month of application for all adults except pregnant women. Arkansas’ waiver (blocked by an appellate court) would limit retroactive coverage to 30 days prior to the application date for expansion enrollees. In Iowa, only pregnant women, children under the age of one, and nursing home residents maintain three-month retroactive eligibility, while other beneficiaries are covered as of the first day of the month that they applied. Kentucky and Indiana wanted to limit retroactive eligibility for everyone eligible under the ACA’s Medicaid expansion, except for pregnant women and certain vulnerable groups, limiting coverage to the first of the month in which the first premium payment was made. Kentucky’s new governor, Andy Beshear, withdrew that state’s waiver. In Indiana, the Family and Social Services Administration halted implementation of the waiver, and a federal judge stayed litigation during the pandemic.
Those who lose employer-sponsored insurance and then shift to Medicaid may not be exposed to as much financial risk under these waivers, assuming they enroll quickly. But those who were employed and uninsured because they couldn’t afford coverage or their employer didn’t offer it could be exposed to the financial risk of health care costs related to COVID-19 and any other medical needs before they enroll in Medicaid. In a non-expansion state, like Florida, it might take all workers in a household losing their jobs before becoming Medicaid-eligible, at which point, one or more might have already needed medical care. Presumptive eligibility, in which hospitals and other entities can temporarily approve patients for Medicaid pending a complete application, is one way to avoid this problem. The ACA extended this authority nationwide, and 30 states are using it for pregnant women, but fewer than ten states are using it to cover other adults.
Many of the millions of people who are losing their jobs in the current economic downturn are also losing health insurance coverage, or they may not have had it in the first place. Treatment for COVID-19 can cost tens of thousands of dollars even without severe complications that require a stay in intensive care, which can push bills into the six figures. A recent report illustrated the problem: an uninsured woman about to move and start a new job felt short of breath. Doctors assumed pneumonia, but after several emergency department visits she tested positive for coronavirus. Now she has recovered, but she was billed $34,927.43. She has “applied for Medicaid and is hoping the program will retroactively cover her bills.”
Restrictions on retroactive eligibility were questioned long before this crisis, but now rise to a decidedly greater level of concern. In March alone, more than half a million new unemployment claims (541,442) were filed in just three states with broad retroactive eligibility restrictions—Arizona, Iowa, and Florida—that haven’t been stayed by courts. For many middle and low-income individuals, employment and income are changing on a week-by-week, if not day-by-day, basis. Last month’s income, often used for documenting Medicaid eligibility, is quickly outdated, and producing proof of a change in circumstances is difficult when an employer has ceased operations. Administrative burdens for obtaining public insurance are frustrating enough during “normal” times, and the COVID-19 pandemic stands to make this even worse.
We have already seen social service agencies’ systems and staff struggle to keep up with the surge in unemployment claims, and it isn’t hard to imagine the same occurring with Medicaid. “Shelter in place” orders will prevent people from sitting down with a caseworker to deal with any application issues in addition to making a job search nearly impossible until the pandemic passes. Many low income Americans and those living in rural areas don’t own smartphones or lack adequate internet access, which can make applying for Medicaid and other public programs that much harder when going to an office is no longer a safe option, or an option at all. All of these barriers increase the importance of retroactive Medicaid coverage.
Congress created a $100 billion fund for hospitals, which will help to cover uncompensated care for uninsured patients affected by COVID-19. HHS has announced that the first $30 billion will be allocated based on Medicare reimbursements. This choice prompted a response from the Medicaid and CHIP Payment and Access Commission (MACPAC) expressing concerns that this approach insufficiently prioritizes the “nation’s poorest and most vulnerable people.” HHS Secretary Alex Azar responded that hospitals accepting funds won’t be able to send bills to uninsured patients. This is certainly better than no coverage, but it is unclear how uninsured people seeking care would be covered for treatment outside of hospitals. The newly uninsured will also need health care besides coronavirus testing and treatment, and nothing in this fund or the larger federal policy efforts thus far will address those needs.
A core purpose of Medicaid is supporting people when they need help, which is why Medicaid has continual open enrollment and retroactive eligibility to cover the cost of care when those who are eligible aren’t already enrolled before a crisis. States should restore full retroactive eligibility immediately to protect thousands of newly-unemployed workers from even greater health and economic suffering.
https://www.healthaffairs.org/do/10.1377/hblog20200506.111318/full/