Your Money and Your Life: Private Equity Blasts Ethical Boundaries of American Medicine
By Lynn Parramore - Institute For New Economic Thinking - May 18, 2022
In a harrowing new book, scholar Laura Katz Olson pulls back the
curtain on a shadowy Wall Street threat that is taking over health care
companies – and preying on human lives.
Newsflash: Private equity firms– the most rapacious entities ever spawned by Wall Street — want your body.
They’re already in your urinary tract and your fallopian tubes. In
your dentist’s chair and your dermatologist’s office. Unbeknownst to
you, these financiers track you from cradle to grave, lining their
pockets through everything from fertility treatments to hospice care,
all the while decimating the quality of services you receive and jacking
up prices.
Kids, the elderly, and the poor are especially tasty targets in their
break-neck hunt for profits. They’re even coming for your pets.
In her harrowing new book, Ethically Challenged: Private Equity Storms US Health Care,
political scientist Laura Katz Olson documents how private equity firms
are reshaping health care in the U.S., circling in to buy dentist
offices, mental health facilities, autism treatment centers, rehab
facilities, physician staffing services, and myriad other providers,
forcing them into bare-bones, bottom-lined focused “care”.
Once upon a time, it was stores like Toys ‘R Us that learned what
happens when billionaire-run PE firms fix companies in their sights.
Now, the harm they do is about more than bankruptcies and lost jobs.
It’s a matter of life and death.
In a nutshell, PE seeks to invest or acquire equity ownership in
companies and flip them fast for a higher price. They’ll get that higher
price by any means necessary – chopping staff, cutting corners, and
loading the company with debt along the way. The idea is to buy,
squeeze, dump, repeat. Private equity is now a major player in the
health care sector, with investments accelerated in recent years at a
mind-blowing pace ($100 billion in capital invested in 2018 alone).
So how do these motives and operations line up with health care?
Let’s see … how would you like to send your loved one to a rehab
facility where successful treatment would be considered a failure because they want the patient to come back?
As Olson documents, that’s how perverse things get. She notes that in
order to gin up business, PE firms taking over rehab centers will
resort to a tactic known as “body brokering” – having companies pay
intermediaries to lure patients in by trolling on social media, hanging
out at 12-step meetings, and spinning fancy marketing campaigns. If the
(often unscientific) treatments don’t work, score one for private
equity! Owners aren’t liable for ineffective treatments, Olson points
out, “so when patients relapse they can charge them another round.”
Meanwhile, they abuse eligibility for federal payments, soaking up
taxpayer funds meant to fight human tragedies like the opioid scourge.
Some of the worst players in this frightening game of human health
roulette have likely already set up shop in your town. Bain Capital (hi,
Mitt Romney!) swoops in on renal care, home health care, substance
abuse, emergency medical transport, and hospitals. The Carlyle Group
goes for dentistry, home health care, hospice, and eating disorders.
KKR, one of the biggest players in the health care industry, targets
physician staffing, emergency medical transport, dentistry, home health
care, substance abuse, autism disorders, health information, and
hospitals.
As usual, it all goes back to the 1980s, when financialization took
hold of the American economy. Olson observes that private equity has
been growing ever since, boosted by lax regulation and preferential tax
treatment. Politicians and regulators grease the wheels of the gravy
train in hopes of hopping aboard the minute they leave office. Private
equity often gushes campaign contributions, and both parties enjoy the
largesse. Never mind that PE bilks taxpayers through Medicare and
Medicaid, making medical bills more burdensome and patients sicker.
“PE firms take over businesses using other people’s money; plunder
what they can, and spit out the remains,” writes Olson. And sadly, it’s
public pensions that feed the hungry beast. She notes that pension
funds, along with endowments and wealthy individuals, finance the
largest percentage of PE deals. This means that workers are invested in
the very business model that wrecks their jobs – and now, their health.
“Private equity’s business model is neoliberalism on steroids,”
declares Olson. It’s the profit motive over everything – most assuredly
over human life. And there’s hardly a whiff of accountability: “private
equity lives in a darkly curtained world, protected from external
scrutiny,” she writes.
It’s like the black hole of capitalism, into which every positive human value vanishes into oblivion.
This is real. This is happening. And as Olson warns, it’s just getting started.
The Institute for New Economic Thinking (INET) has focused on the alarming trend of private equity buying health care providers and taking them private through research by Eileen Appelbaum and Rosemary Batt, and detailed the encroachment of private equity into emergency rooms
in a series of articles over the pandemic. INET’s Thomas Ferguson and
colleagues Paul Jorgensen and Jie Chen have also focused attention on private equity’s political contributions.
Now, Laura Katz Olson shares her perspective with INET on how we got to
this dangerous place and what we can do to get out of it.
Lynn Parramore: We all remember Mitt Romney telling us during
his presidential campaign that private equity firms like Bain Capital
are good for society, saving failing companies and creating jobs. What
didn’t Mitt tell us? How is the public perception skewed?
Laura Katz Olson: There are a few private equity firms that
specialize in buying distressed firms — sometimes they buy businesses
decimated by other PE firms just to milk what’s left. But in reality,
most of them buy up flourishing companies. The results usually aren’t
very good for society.
LP: How do they make money buying well-functioning companies?
LKO: The first way is to put high debt on the company and have the
company pay it off. PE firms generally aren’t putting in more than 2% in
equity themselves. Maybe 28% or so comes from their limited partners,
like public pension funds. When the PE firm sells the company, the debt
has been paid off by the company but the PE firm gets 20% of the money,
having put very little in.
The second way is to charge the company all kinds of enormous fees –
transaction fees, monitoring fees, annual management fees, consulting
fees, advisory fees, servicing fees. The PE firms siphon a great deal of
money in fees both from the company and from their limited partners,
like the pensions.
The third way, becoming more popular recently, is to take special
dividends called “dividend recaps.” The company has to take on even more
debt to pay these dividend recaps. The PE firms share a little bit of
the money with limited partners but they pocket most of it. And it’s a lot of money – PE took in $58 billion this way in 2021.
Just think about all this debt and all this money going into the PE
firm’s pockets! The company is stuck paying off the debt, so it has to
increase the cash flow any way it can. It all makes me think of that old
medical practice of bloodletting. PE just drains the company and
weakens it, at times driving it into bankruptcy.
Private equity firms used to take huge conglomerates and tear them
apart to sell off the parts because the parts were worth far more than
the whole. Today what they do is the opposite – they take a small piece
that’s well-functioning, like a flourishing dental practice, and they
add more and more dental practices to it — consolidating. They’re
especially interested in niches that are not consolidated. After they
consolidate for three or four years, they sell it in a secondary LBO
[leveraged buyout], and after that, they’re selling it to a third, on
and on.
LP: It seems like a neat trick to extract so much money from a
company and at the same time build its market worth for resale. How do
they manage it?
LKO: Consolidating is one of the main ways they do it now. Instead of
the parts being worth more than the whole, the sum is worth more than
the parts. They put all this debt on the company and then squeeze it.
When you’re talking about services like home care or hospice care, it’s
the front-line staff that will get squeezed. They cut the workforce, so
you have fewer workers per patient. You lower the qualifications for the
staff so you can get cheaper labor. You have fewer physicians because
they’re expensive. You have less training and supervision. You overbook –
you get a kind of production line going. For products, you use cheaper
materials. You skimp on medical supplies, etc.
In the case of dermatology, we’ve seen unnecessary treatments being
pushed, as well as untrained people who may not know, for example, how
to spot cancer. Dentistry has had an especially egregious history — and
some companies known for abuses, like the chain Aspen Dental, are still around. It’s incredible.
LP: Private equity firms like to claim that they are
maximizing efficiency and controlling costs, but it looks like what
they’re really doing is pushing shoddy services and products at higher
prices.
LKO: That’s right.
LP: What happens to patients when they get into the hands of a
health care provider under pressure from private equity? What else can
go wrong beyond getting poorly trained staff?
LKO: Well, you have to worry about getting lured into procedures you
don’t need. I’ve heard of dental offices where children were put in
straight jackets and teeth were pulled that didn’t need to be pulled.
Elderly people have been given unnecessary dental work. I’m particularly
offended by what goes on in hospice care. You have people dying and
Medicare is paying for them to have a dignified, quiet death. Instead,
they are neglected as these PE firms are profiteering. Children with
autism are being harmed, too. Autism is an easy target for profiteering
because there’s a shortage of practitioners and you’re free to do
whatever treatment you want and call it standard treatment. There’s so
much that goes wrong. These are just a few examples.
LP: As you’re pointing out, children and the elderly are
especially vulnerable to the harm done by the intrusion of private
equity into medicine. How are the poor affected?
LKO: If you go through all of these areas of health care, Medicaid is
paying a significant percentage. The poor are very vulnerable.
Minorities are also vulnerable.
LP: And the taxpayers?
LKO: Taxpayers get hit hard by the Medicare and Medicaid costs.
Medicaid is the second-largest item on every state budget and around the
fifth largest item on the federal budget. Medicare, for example, is the
major payer for hospice services.
LP: How is this allowed to go on? Why isn’t anybody in government doing anything about it?
LKO: I would have to argue – I’m trying to think how to put it – this
is not a partisan issue. The Democrats and the Republicans both take
advantage of it. They go back and forth between private equity and top
government positions, like secretaries of defense and secretaries of
state. It’s so lucrative. Even presidents. George H.W. Bush was
involved—he went to a private equity firm.
LP: We’re talking about big money here, as you say. In your
book, you mention that the heads of the six main listed PE firms are
among the topmost earners in the U.S. right now.
LKO. It’s very big money. A significant percentage of our
billionaires now come from private equity. They make far more money than
investment bankers.
LP: Let’s talk about how this money is working its way through the political system. What most concerns you?
LKO: You have the lobbying and the campaign donations, of course. But
the larger issue in my view is the revolving door. If government
officials come down hard on private equity, that would preclude them
from joining the PE firms when they leave the Biden administration, for
example. It just keeps anybody from being interested in this, with a few
exceptions like Elizabeth Warren. Such a lack of interest!
One thing that has to be looked at is how the public pension funds
are invested in private equity. That is steadily increasing, and it
means that PE is getting more and more money. They are now going to
appeal to retail so that the general public can put in money. And the
more money they get, the more they have to spend, and the more health
care facilities and practices they buy.
LP: So this problem is metastasizing as we speak, to use a term from medicine.
LKO: Yes. That’s a good word.
LP: How does a regular person know if private equity has gotten involved in their health care? Are there any telltale signs?
LKO: You have to ask. It’s difficult to know. Many of these chains
have separate names for each of their businesses so they are hard to
identify. Often I’ve noticed that the facilities have nice, shiny nice
buildings, like the rehab centers, for example. They’re gorgeous.
LP: Let’s talk about this involvement of private equity in
rehab and mental health facilities. It seems that PE contributes to the
distress in our society – and then turns right around and profits from
that distress. How are patients faring in these facilities?
LKO: Not very well. Look at the rehab facilities – one thing they
tend to have in common is that people who have alcohol or drug problems
usually have other issues, too. But the facilities taken over by PE tend
not to have other kinds of specialists. They focus on one thing and
don’t look at the co-existing issues. The staff tends to be less
trained. It’s all the things we’ve talked about. They use techniques and
treatments without scientific backing. One of the techniques is using
horses. Look, horses are wonderful. I love horses. But there’s no proof
that horse therapy can treat drug or alcohol abuse!
LP: Sounds like there’s not much oversight on the efficacy of treatments.
LKO: It’s a problem with private equity in general. They tend to pick areas that have very little oversight.
LP: Private equity is even getting into pet care, as I understand it.
LKO: I haven’t studied it specifically, but I belong to groups and I
see things coming in about pet facilities that are very concerning.
PetSmart, for example, is reported to have some serious issues. Animals
are reportedly being killed and abused.
LP: Is there any case that you’ve seen in which private equity makes medicine better?
LKO: No, I haven’t. Private equity argues that one of the best things
they do is make more services available in scarce markets. Well,
certainly they do make more services available, as in the case
of autism services. But is it better to have more low-quality services
than none at all? Experts will tell you that low-quality autism services
are pretty damaging to the child.
LP: Does private equity belong in medicine at all? Should it be banned?
LKO: This is something I didn’t put in my book, but the conclusion I
have come to is yes, we have to ban it. We really need to prohibit, I
think, the corporate practice of medicine, period. If you look at the
private equity playbook, its only goal is to make outsized profits –
they can’t make ordinary profits. If they make ordinary, respectable
profits, their investors will go somewhere else because of the risk.
Private equity doesn’t care whether the product is Roto-Rooter or
hospice. That’s one of the major differences between PE and a regular
company, which may care about the community, the reputation of the
company, and the quality of the product. They want to keep their
customers. They care about the future. But private equity doesn’t work
like that. Because private equity often aims to sell a company after
four or five months, they don’t care about the future. They don’t care
about the product at all. Private equity is antithetical to our health
care system.
So yes, we need to ban private equity from health care. But given
that it’s not going to happen, I would say that we need to prohibit the
corporate practice of medicine – anybody can make a case for that. You
can eliminate their tax advantages. You can limit the debt imposed on
companies, especially in the health sector. You could easily control
consolidation and monopolies in the health sector. You could use
specific anti-trust laws. I would definitely forbid investment by retail
customers such as their 401(k)s. I would forbid non-disclosure and
non-disparagement agreements, which make it so difficult to obtain
information. I had such a hard time interviewing people. When I could
get people to talk to me – and that was really hard — they were
extraordinarily careful. I would also prohibit “stealth branding” –
where the PE firm buys a chain, like a dental chain, but gives each
office its own name, like Marilyn’s Happy Dental Care. It’s very
deceptive.
LP: It’s interesting that PE players and firms don’t tend to
be household names. They’ve really managed to fly under the radar. Can
you mention a few that came up a lot in your research? Folks to look out
for?
LKO: Bain Capital, the PE company that Mitt Romney still profits
from, is one. The Carlyle Group has really been involved in recruiting
high-ranking people from the government – one of its co-founders, David
Rubenstein, served as Deputy Assistant to the President for Domestic
Policy during the Carter administration. George H.W. Bush became a
senior member of its Asia advisory, and so on. KKR, of course, is one of
the biggest. They control a lot in health care.
I’m concerned that as PE gets more and more money – with these
pension funds, and especially if they get their hands into the 401(k)s –
they’re just going to keep buying up anything and everything. And it’s
not just health care. More and more of these firms are appearing and
getting into more and more industries. As young people, or even older
people involved in the well-established financial firms, realize how
much money is involved, they just start a PE firm. Look at Jared Kushner
[Affinity Partners]. It’s a very worrisome situation.
Prices for New Drugs Are Rising 20 Percent a Year. Congress Needs to Act.by Benjamin N. Rome, Alexander C. Egilman, Aaron S. Kesselheim - NYT - June 8, 2022 Millions of Americans are forced to ration or go without prescription drugs because of their high cost. Yet Congress has so far failed to pass legislation to lower drug prices. They
may have another shot. Drug pricing reforms passed by the House of
Representatives last November stalled after Senator Joe Manchin of West
Virginia withdrew his support for President Biden’s signature Build Back Better legislation. But last week Senator Manchin said that drug pricing reform is “the one thing that must be done” this year. He is reportedly
in talks with the Senate majority leader, Charles Schumer, on a revised
spending bill that would address high prescription drug prices,
although the success of the negotiations is far from assured. Details of the renewed attempt to rein in drug costs remain unknown but could mirror the provisions that were included in the Build Back Better Act.
These include allowing Medicare to negotiate prices for some
top-selling drugs, limiting price increases once drugs are marketed and
fixing the broken Medicare Part D benefit that saddles some seniors with unaffordable out-of-pocket costs. This would be a major improvement over the current situation, in which brand-name manufacturers set and raise prices as they please.
However, these provisions do not go far enough in curbing the prices of
new drugs. Build Back Better would have excluded drugs from price
negotiation for at least nine years after market approval (13 years for
complex biologic drugs), meaning manufacturers would still be allowed to
set unlimited prices for newly marketed drugs. This is a glaring issue because prices for new drugs are skyrocketing. In a new analysis
published in The Journal of the American Medical Association, we found
that average prices for newly marketed prescription drugs in the United
States grew by 20 percent per year from 2008 to 2021, amounting to a
tenfold increase in just over a decade. In 2020 and 2021, nearly half of
new drugs were priced at more than $150,000 per year, compared with
fewer than 10 percent of drugs introduced at this price level in 2008. This trend dramatically outpaces the 1 to 3 percent annual inflation
for other health care services. The rapid growth in prices is only
partly attributable to the introduction of more complex medicines, such
as injectables and biologics, or drugs focused on treating rare diseases. Even after accounting for shifts in the types of drugs being introduced and discounts provided by manufacturers, we found that prices for new drugs increased by 11 percent per year. The
barometer for what constitutes an acceptable price has apparently grown
by orders of magnitude. Three commonly used, once-a-day oral
medications to treat Type 2 diabetes exemplify the problem. In 2009
saxagliptin, known by the brand name Onglyza, entered the market at
roughly $5 per pill. Five years later, empagliflozin (Jardiance) was
introduced at over $10 per pill, and in 2019 semaglutide (Rybelsus)
kicked off at over $25 per pill, for an annual cost of almost $10,000.
In a decade, the price of new oral diabetes treatments increased
fivefold. Other developed countries
broker prices for new drugs soon after the drug is approved for
marketing. For example, Canada, France and Germany negotiate with
manufacturers the price of each newly approved drug, based on the clinical benefits it provides compared with other available treatments. With these negotiations, other countries pay less than half as much as people in the United States do for the exact same drugs. Price
negotiations need not impair or delay access to treatments. In Germany,
for instance, drug manufacturers can freely market their medicines for
one year while negotiations are underway, and 98 percent of drugs offering a benefit over existing treatments continue to be available after the negotiated price is set. Negotiating drug prices will not harm innovation.
In fact, the status quo of allowing drug companies to freely set prices
incentivizes development of many products that do not offer important therapeutic advances.
These less innovative drugs offer low financial risk to manufacturers
because they are based on existing products or work via similar
biochemical pathways. The pharmaceutical industry has pushed a
Congressional Budget Office estimate that lowering drug prices might
lead to marginally fewer new drugs over the next several decades, but
the report
says nothing about which types of drugs would be affected. With new
drugs, quality is at least as important as quantity. Shifting toward
paying for drugs commensurate to their added therapeutic value could promote the development of more drugs that offer meaningful benefits to patients. Efforts to lower drug prices have always faced stiff opposition from the pharmaceutical industry, which has lobbied aggressively to avert and scale back congressional reforms. Uninhibited U.S. prices have, after all, allowed the pharmaceutical industry to become one of the most profitable sectors in the U.S. economy. Yet instead of investing most of their profits in innovation, large drug companies spend more on stock buybacks and marketing.
Possibly in part because of this lobbying effort, the proposed reforms
that Democrats championed last year already were a pared-back version of
their party’s previous drug pricing proposals. In the absence of federal reforms, states have started taking action. It is still too early to measure the impact of these policies, which include setting up affordability boards tasked with setting upper payment limits for certain drugs. But with Medicare accounting for nearly one-third of prescription drug spending in the United States and many private insurance plans escaping state regulation, federal reforms are needed. In
the meantime, many patients struggle to afford necessary medications.
For seniors with Medicare, some cancer therapies cost patients more than $10,000 per year. And these high costs lead patients to not fill or to discontinue important medications or face mounds of debt. Democrats in Congress might have only a few months left
in which they can pass legislation with a simple majority. They must
act now to lower drug prices. This time around, lawmakers cannot ignore
the fact that prices for new drugs are rising by 20 percent each year.
Allowing Medicare to negotiate prices for newly marketed drugs would
apply the brakes to this runaway train. https://www.nytimes.com/2022/06/08/opinion/us-drug-prices-congress.html The Doctor Prescribed an Obesity Drug. Her Insurer Called It ‘Vanity.’Many insurance companies refuse to cover new weight loss drugs that their doctors deem medically necessary. Maya Cohen, of Cape Elizabeth, Maine, lost 54 pounds using a drug for which her pharmacy was charging $1,500 by Gina Kolata - NYT - May 31, 2o22
Maya Cohen’s entree into the world of obesity medicine came as a shock. In
despair over her weight, she saw Dr. Caroline Apovian, an obesity
specialist at Brigham and Women’s Hospital, who prescribed Saxenda, a
recently approved weight-loss drug. Ms. Cohen, who is 55 and lives in
Cape Elizabeth, Maine, hastened to get it filled. Then she saw the
price her pharmacy was charging: $1,500 a month. Her insurer classified
it as a “vanity drug” and would not cover it. “I’m being treated for obesity,” she complained to her insurer, but to no avail. While
Ms. Cohen was stunned by her insurer’s denial, Dr. Apovian was not. She
says it is an all too common response from insurers when she prescribes
weight-loss drugs and the universal response from Medicare drug plans. Obesity specialists despair but hope that with the advent of highly effective drugs, the situation will change. Novo-Nordisk,
the maker of the medicine Dr. Apovian prescribed, and patient advocacy
groups have been aggressively lobbying insurers to pay for weight-loss
drugs. They also have been lobbying Congress to pass a bill that has
languished through three administrations that would require Medicare to
pay for the drugs. But for now, the status quo has not budged. No one disputes the problem — more than 40 percent of Americans have obesity,
and most have tried repeatedly to lose weight and keep it off, only to
fail. Many suffer from medical conditions that are linked to obesity,
including diabetes, joint and back pain and heart disease, and those
conditions often improve with weight loss. “The evidence is now
overwhelming that there are physical changes in weight regulating
pathways that make it difficult for people to lose weight and maintain
their weight loss,” said Dr. Louis Aronne, an obesity medicine
specialist who directs the comprehensive weight control center at Weill
Cornell Medicine. “It’s not that they don’t have willpower. Something
physical is holding them back.” Dr. Aronne and other obesity medicine specialists emphasize that
obesity is a chronic disease that should be treated as intensively as
heart disease, diabetes, high blood pressure or any other chronic
illness are. But, they say, that rarely happens. “Access
to medicines for the treatment of obesity is dismal in this country,”
said Dr. Fatima Cody Stanford, an obesity medicine specialist at
Massachusetts General Hospital and Harvard Medical School. But
even if a patient’s insurer will cover weight loss drugs, most doctors
do not suggest the drugs and most patients do not ask for them, as they
fail to realize there are good treatment options, said Dr. Scott Kahan,
an obesity medicine specialist in Washington, D.C. And, he added, even
if doctors and patients know there are F.D.A. approved drugs, many think
they are “unsafe or not well studied and that everyone regains their
weight.” The medical system bears much of the blame, Dr. Stanford said. Just 1 percent of doctors
in the United States are trained in obesity medicine. “It’s the biggest
chronic disease of our time, and no one is learning anything about it,”
she said. Data on medication use by patients predate the newer,
more effective and safe drugs made by Novo Nordisk and Eli Lilly. Still,
obesity medicine doctors say, they doubt that the number has changed
much from the earlier studies that found that less than 1 percent who are eligible obtained one of these drugs. That is about the same percentage as those who get bariatric surgery, which most insurers, including Medicare, pay for. “The perception is, ‘If you are heavy, pull yourself up from your bootstraps and try harder,’” Dr. Kahan said. And
that, he adds, is a perception many patients, as well as doctors,
share, making them reluctant to seek medical help or prescription
medications. Then there is the problem Ms. Cohen ran into: Insurers that do not cover weight-loss drugs. But
some obesity specialists have found a strange workaround to get an
effective but expensive Novo Nordisk drug for patients with obesity
whose insurers will not pay. The workaround exploits quirks in the way Novo Nordisk markets
its drugs. The company sells a drug, semaglutide, for both diabetes and
for obesity. As a diabetes drug, it is called Ozempic and has a list
price of $892 for four weeks. It is easily available at pharmacies, and
insurance companies cover it for people with diabetes. Novo
Nordisk sells two weight loss drugs that are of the same class in two
doses — liraglutide as Saxenda, and semaglutide at a higher and more
effective dose as Wegovy. The list price — the suggested retail price —
for both is about $1,350 a month. That means the same drug costs 51
percent more if it is used to treat obesity than if it is used for
diabetes. But as an obesity drug, it is hard to get. Not
only do most U.S. insurers decline to pay for Saxenda or Wegovy because
they are weight-loss drugs, but Wegovy supplies are so limited that the
company has asked doctors not to start new patients on it. Eli
Lilly has a similar and seemingly more powerful weight-loss drug,
tirzepatide, which it hopes to get approved for people with obesity. It
was recently approved to treat diabetes under the name Mounjaro. As a
diabetes drug, its retail price is $974 a month. Douglas Langa, an
executive vice president at Novo Nordisk, said the Wegovy supply
problem was caused by a manufacturing issue that should be resolved
later this year. He also said that diabetes and obesity
were “separate categories, separate marketplaces” to explain the
difference in price between the companies’ two drugs that were based on
the same medicine, semaglutide. He said Wegovy’s price “reflects
efficacy and clinical value in this area of unmet need.” Dr. Stanford was appalled. “It’s
unbelievable,” she said, adding that it was a gross inequity to charge
people more for the same drug because of their obesity. She finds
herself in an untenable situation: getting excited when her patients
with obesity also have diabetes because their insurers pay for the drug. Dr.
Apovian says she too finds herself rejoicing when patients have high
blood sugar levels — and that was what ultimately resolved Ms. Cohen’s
problem. Her insurance company would cover Ozempic, but it would
not cover Saxenda. So she started taking Ozempic, with a $70 a month
copay. Ms. Cohen — who measured at five feet tall and weighed 192
pounds when she saw Dr. Apovian — had a dramatic response to Ozempic.
She has lost 54 pounds and now weighs 138 pounds. Her waist size, which
was 46 inches, is now 33 inches. She has more energy and her joints do
not hurt. “It has absolutely changed my life,” Ms. Cohen said. https://www.nytimes.com/2022/05/31/health/obesity-drugs-insurance.html When routine medical tests trigger a cascade of costly, unnecessary care by Ryan Levi and Dan Gorenstein - NPR - June 13, 2022
Dr. Meredith Niess saw her patient was scared. He'd come to the
Veterans Affairs clinic in Denver with a painful hernia near his
stomach. Niess, a primary care resident, knew he needed surgery right
away. But another doctor had already ordered a chest X-ray instead.
The test results revealed a mass in the man's lung.
"This guy is sweating in his seat, [and] he's not thinking about his hernia," Niess said. "He's thinking he's got cancer."
It was 2012, and Niess was upset. Though ordering a chest X-ray in a
case like this was considered routine medical practice, Niess understood
something her patient didn't. Decades of evidence
showed the chest X-ray was unnecessary and the "mass" was probably a
shadow or a cluster of blood vessels. These non-finding findings are so
common that doctors have dubbed them "incidentalomas."
Niess also knew the initial X-ray would trigger more tests and delay the man's surgery further.
In fact, a follow-up CT scan showed a clean lung but picked up another suspicious "something" in the patient's adrenal gland.
"My heart just sank," Niess said. "This doesn't feel like medicine."
A second CT scan finally cleared her patient for surgery — six months after he'd come for help.
Niess wrote about the case in JAMA Internal Medicine as an example of what researchers call a "cascade of care" — a seemingly unstoppable series of medical tests or procedures.
Cascades can begin when a test done for a good reason finds something
unexpected. After all, good medicine often requires some sleuthing.
"Low-value care"
The most troubling cascades, though, start like Niess' patient's,
with an unnecessary test — what Ishani Ganguli, a primary care physician
who is an assistant professor of medicine at Harvard University, and
other researchers, call "low-value services" or "low-value care."
"A low-value service is a service for which there is little to no
benefit in that clinical scenario, and potential for harm," Ganguli
said.
Over the past 30 years, doctors and researchers like Ganguli have
flagged more than 600 procedures, treatments and services that are
unlikely to help patients: Tests like MRIs done early for uncomplicated
low back pain, prostate cancer screenings for men over 80 and routine
vitamin D tests.
Research suggests low-value care is costly, with one study estimating
that the U.S. health care system spends $75 billion to $100 billion
annually on these services. Ganguli published a paper in 2019 that found
the federal government spent $35 million a year specifically on care
after doctors performed EKG heart tests before cataract surgery — an
example of low-value care.
"Medicare was spending 10 times the amount on the cascades following
those EKGs as they were for the EKGs themselves. That's just one example
of one service," said Ganguli.
Cascades of care are common. Ninety-nine percent of doctors reported
experiencing one after an incidental finding, according to a survey
conducted by Ganguli. Nearly 9 in 10 physicians said they'd seen a
cascade harm a patient, for example, physically or financially.
And yet, in that same survey, Ganguli reported that 41% of doctors
said they continued with a cascade even though they believed the next
test was not important for medical reasons.
"It's really driven by the desire to avoid even the slightest risk of
missing something potentially life threatening," said Ganguli. Critics
of low-value care say there's a mindset that comes from medical training
that seeks all the answers, as well as from compassion for patients,
some of whom may have asked for the test.
As health care prices rise, efforts to root out low-value care keep
emerging. In 2012, the American Board of Internal Medicine Foundation
began urging doctors to reduce low-value care through a communication
campaign called Choosing Wisely.
An electronic warning to doctors
Over that time, about a dozen companies have developed software that
health systems can embed in their electronic health records to warn
doctors.
"We pop up an alert just making them aware of the care that they were about to deliver," explained Scott Weingarten.
Weingarten worked as a physician at Cedars-Sinai Medical Center in
Los Angeles for three decades and spent years lobbying hospitals across
the U.S. to tackle the problem.
Weingarten realized even the most sophisticated, well-resourced
hospitals and physicians needed help developing new routines and
breaking old habits — like knee-jerk ordering a chest X-ray.
Fewer than 10% of health systems have purchased software tools known
as "clinical decision supports." But Weingarten, who co-founded Stanson Health
and has since left the company, said an internal analysis found the
electronic warnings canceled unnecessary tests only 10% to 13% of the
time.
"The glass half full is you stick an app in the EHR [electronic
health record] and you eliminate 10 to 13 percent of low-value care,
just like that," Weingarten said. "That could mean, if it's rolled out
across the country, [we could eliminate] billions and billions of
dollars of waste."
But that 10% to 13% also gnaws at Weingarten. "Why do doctors reject this advice 87 to 90 percent of the time?" he asked.
Even with software that warns physicians about unnecessary care,
major barriers to change persist: a medical culture of more is better,
doctors fearful of missing something, patients pushing for more.
Perhaps the biggest challenge: Hospitals still make most of their money based on the number of services provided.
Cheryl Damberg, a senior economist at the Rand Corp., said what may
get hospitals' attention is money. "If payers stop paying for certain
low-value care services, it will definitely change the calculation about
whether the juice is worth the squeeze," she said.
Damberg said some commercial insurers and Medicare have started
paying doctors bonuses to reduce specific low-value services and to hold
providers accountable for the total cost of a patient's care. But those
contracts are rare.
No one wants to deliver low-value care or receive it. But in American
medicine, the pressure to "just do one more test" remains strong. https://www.mainepublic.org/npr-news/2022-06-13/when-routine-medical-tests-trigger-a-cascade-of-costly-unnecessary-care
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 Private Equity Takes Aim at Primary Care
by James Kahn - Health Justice Monitor - June 1, 2022
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| Summary: If private equity firms have their way, traditional primary care will disappear, replaced by corporate skeletons stripped of financial assets and the most skilled practitioners, with investors sitting on billions in extracted profits. That’s the private equity model, now targeting front-line providers. We must stop them before they destroy our health system. |
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Ethically Challenged
Private Equity Storms US Health Care
By Laura Katz Olson
Johns Hopkins University Press
2022
The advent of the neoliberal order and its restructuring of the US political economy coincided with the emergence of private equity in its shadow. Financialization took root and surged during the 1980s, and PE has been riding on that wave ever since. Buttressed through eased regulations and preferential tax treatment, the financiers have steadily advanced their tentacles into ever more market sectors, from manufacturing and retail to business and monetary products, energy, and information technology. Eventually, they gravitated toward human services, such as health care, where in some cases they created markets that had not previously existed.
Private equity's business model can be characterized as a later stage of neoliberalism, one that takes its rationale to greater extremes; it is neoliberalism on steroids. Supersized earnings for PE and its shareholders are front and center, with no pretense otherwise. Nothing else matters. The profit motive guides everything in both word and deed. At a PE conference I (Laura Olson) attended in 2019 hosted by the Wharton School, the entrepreneurs discussed their buyout priorities, value-enhancing strategies, return on investment, and other metrics; not once did anyone mention the impact of their playbook on individuals or society, at least not at the sessions I joined.
The PE industry - capitalism in overdrive - weighs down its health companies with enormous debt while pushing for extra large earnings. Faceless PE shops take an oversized bite into US health dollars, transferring substantial public and private money for medical needs into the pockets of financiers who do not provide any health services per se.
PE firms are on a roll, pushing full steam ahead in the physician practice, urgent care, and medical staffing domains. What will be the next niche? It seems that the indispensable but long-neglected primary care doctors are on their radar, as are other relatively unclaimed health care spaces. If the trend continues - and I'm sure that it will - medical decisions will be less and less between you and your doctor.
Other Resources:
Brief article about / summary of the book.
Interview with Laura Katz Olson The possibility it will lead to lower health care prices remains slim, and distant. by Merrill Goozner - Gooznews - June 12, 2022
The Biden administration’s reinvigorated Federal Trade Commission earlier this month filed suit to stop proposed hospital system mergers in Utah, where for-profit giant HCA wants to buy five hospitals from for-profit Steward Health Care, and in central New Jersey, where non-profit RWJBarnabas Health wants to acquire non-profit St. Peter’s HealthCare. The complaints follow on the heels of recent challenges to mergers in northern New Jersey, where the FTC sued to stop Hackensack Meridian’s takeover of the Englewood Healthcare Foundation; and the Philadelphia region, where it opposed a proposed merger between Jefferson Health, the major academic medical center with 14 hospitals, and Albert Einstein Healthcare, a struggling small system with four hospitals. Clearly, the trustbusters are again on the march. But there’s little evidence to suggest antitrust enforcement will have a significant impact on hospital prices, which in the U.S. are the highest in the world. Conservative judges ruleThe federal courts, which will be dominated by conservative judges for the foreseeable future, will have the final say. The most recent decision in health care doesn’t bode well for the government agencies prosecuting antitrust violations. In December 2020, a federal district court judge ruled the FTC’s challenge to the Philadelphia area merger failed to prove it would result in higher prices for insurers, which is the only benchmark contemporary antitrust jurisprudence considers when judging the effects of consolidation. The two systems completed the merger last October. The decision followed conservative antitrust dogma that has been in force since the late Judge Robert Bork claimed in his 1978 book, The Antitrust Paradox, that the only thing that mattered in antitrust law is whether mergers raised prices. As Harvard public health professor John McDonough notes in a new commentary in the Milbank Quarterly, “Bork’s idea, central to that era’s neoliberal revolution, asserted that any merger or consolidation that promoted ‘consumer welfare’ in the form of lower prices to someone was de facto legal.” The contemporary challenge to that idea came from Lina Khan, whom Biden appointed to chair the FTC. While a law student at Yale, she authored Amazon’s Antitrust Paradox, a 2017 law journal article that described how predatory pricing by a market monopolist destroyed competition and undermined innovation even as it delivered lower prices. “Through this strategy, the company has positioned itself at the center of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it” she wrote. “Elements of the firm’s structure and conduct pose anticompetitive concerns—yet it has escaped antitrust scrutiny.” While this is an important debate in considering the ill-effects of predatory pricing in e-commerce, it is hardly relevant to what goes on in health care. As the Kaiser Family Foundation noted in an issue brief in 2020, “a wide body of research has shown that provider consolidation leads to higher health care prices for private insurance. This is true for both horizontal and vertical consolidation.” Moreover, three-quarters of all metro area hospital markets are considered “highly concentrated.” A new issue brief from Health Affairs documents the impact this has had on commercial (not government) spending on health care. Spending per enrollee grew nearly 22% between 2015 and 2019, with higher prices accounting for two-thirds of the growth. Increases in the quantity of services, whether through population growth, medical innovation or overuse, accounted for just a fifth of the additional spending. You would think insurers, who represent the employers who pay most of the tab, would be up in arms by these hefty increases. Yet the four major insurers in the Philadelphia region called in to testify in the Jefferson-Einstein case gave mixed testimony on the effects of the merger. Only two supported the FTC’s case while one expressed no concern about the merger. The other declined to testify. Insurers lack incentives to compete Why would health insurers greet higher prices with a big ho-hum? The simple answer is that it’s not their money. They are intermediaries. More than 60% of the nation’s workforce gets its health insurance from employers who are self-insured. They hire insurers as third-party administrators (TPAs) of their plans. These insurance company-run TPAs receive a set free, usually a percentage of total claims, for administering the plan. The more expensive the claims, the higher the fee. The same absence of incentive to pursue lower prices exists for insurers who sell plans to the other 40% of employers. The prices of their plans depend on their actuaries’ projections of anticipated claims for the coming year times whatever rates they negotiate with providers. If they underestimate the claims or fail to negotiate a manageable price, they simply turn around the following year and raise rates to make up for the shortfall. Now, in theory, lower provider prices would enable them to lower rates and win more business. But that presumes effective competition in the insurance market. Alas, as the annual American Medical Association survey points out, nearly three-quarters of the nation’s 384 metro areas have “highly concentrated”insurance markets — almost exactly the same percentage of metro areas whose hospital markets are considered highly concentrated. If you operate in a monopolistic or duopolistic insurance market, higher prices are good for you because they translate into higher commercial premiums, which translate into higher profits for your plans. As with their TPA plans, who cares when it’s somebody else’s money. Why employers put up with this nonsense one of the enduring mysteries of America’s dysfunctional health insurance system. Perhaps, and I’m just speculating here, it’s because most big employers operate in highly concentrated markets themselves, where their freedom to engage in price gouging goes largely unchecked. Their self-interest dictates not calling attention to their own behavior, which might happen if they call out their colleagues in the insurance industry. It’s their own version of the golden rule: Do unto others what others are doing unto you. That’s what you get in an economy where virtually every sector is now dominated by oligopolistic giants. The alternative to antitrustIn her law school paper, FTC chief Khan outlined two possible approaches to reversing the harms caused by excessive industry concentration. The first lay in more rigorous application of antitrust law: preventing mergers, busting up monopolies, policing predatory pricing. The alternative is rate regulation, which exists for health care in its Medicare and Medicaid programs but not for insurance-run plans. Government-set prices has allowed price inflation in Medicare to trail well behind commercial inflation. But the net effect of price regulation in just one part of the system is higher prices in the unregulated part of the system, what in effect is cross-subsidization that preserves provider profits and margins. The latest Rand study shows commercial payer rates are 224% higher on average than Medicare’s rates. While the Biden administration continues to focus on renewing antitrust enforcement, the clamor for rate regulation in health care is growing louder. Michael Chernew, the former vice chair of the Medicare Payment Advisory Commission, and two colleagues at Harvard recently proposed a flexible rate-setting regime to deal with “the harms associated with market failures in health care.” They called for caps on the highest service prices in a market and caps on annual price growth for all providers and insurers. They also called for renewed regulatory oversight at the state or federal level to address potential evasion of regulated prices. That would be a faster and surer path to lower prices than breaking up monopolies and praying “the market” will work its magic.
When routine medical tests trigger a cascade of costly, unnecessary care
WWhen routine medical tests trigger a cascade of costly, unnecessary care
hen routine medical When routine medical tests trigger a cascade of costly, unnecessary care
tests trigger a cascade of costly, unnecessary care
Prices for New Drugs Are Rising 20 Percent a Year. Congress Needs to Act.Prices for New Drugs Are Rising 20 Percent a Year. Congress Needs to Act. |
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