The Business of Health Care

Health Care Execs Behaving Badly

BY KIM BELLARD

In the midst of a pandemic during which health care workers proved themselves to be very bit the heroes we like to think of them as being, it’s sobering to be reminded that the system they work in is filled with perverse incentives that work against patients’ best interests.  Four pieces of excellent journalism – two from The New York Times, and two from Kaiser Health News — this week brought that front and center.  

If you haven’t read them yet, I urge you to do so, but, while you might enjoy the writing, don’t expect to enjoy their content.

Let’s start with two articles in The New York Times “Profits over Patients” series by Jessica Silver-Greenberg and Katie Thomas: They Were Entitled to Free Care. Hospitals Hounded Them to Pay and How a Hospital Chain Used a Poor Neighborhood to Turn Huge Profits.  Both focus on “non-profit” hospitals – Providence, serving the northwest/west/southwest, and Bon Secours Mercy Health, serving Midwest/east/southeast (and Ireland).  

Providence used a program called Rev-Up, designed by McKinsey, to solicit payments from patients who should have been entitled to free care due to their incomes.  “Ask every patient, every time,” employees were instructed.  And, “If patients did not pay, Providence sent debt collectors to pursue them.”  The state of Washington thinks this happened to at least 55,000 patients.

Mind you, Providence gets huge tax breaks in part to support such free care, and claims that it provides some $1.9b in these kinds of “community benefits.”  The article notes: “Providence is sitting on $10 billion that it invests, Wall Street-style, alongside top private equity firms. It even runs its own venture capital fund.”  The article also points out that Providence’s charity care only accounts for 1% of revenue, versus an average of 2% for non-profits nationwide.  

Providence’s CFO told the reporters that the findings “are very concerning and have our attention.”  OK, then.  I’m not sure which would be worse: that the CFO was complicit in the scheme, or was truly unaware it was going on. 

The second article focused on a Bon Secours Mercy Health hospital in Richmond (VA), Richmond Community.  It is an inner city hospital, serving a primarily Black population and now consisting mostly of an emergency room, yet it managed to the highest profit margins of any hospital in Virginia, some 44%, which yields over $100 million in profits.

It did so by using a federal program (340B) that allows certain hospitals to buy prescription drugs at greatly reduced prices, yet charge the full amount to insurers.  The hospitals are supposed to reinvest those profits into improving care and facilities, yet Bon Secours used them to invest in more profitable neighborhoods.  

“Bon Secours was basically laundering money through this poor hospital to its wealthy outposts,” one ER physician told the reporters.  

Bon Secours claims it has invested millions in the hospital and the community, but skeptics think it is more interested in real estate deals and the outlying hospitals.  After a merger with Mercy Health in 2018, Richmond’s former mayor said: “There was a major shift from being mission-oriented to being unashamedly, unabashedly profit-oriented.”

Both systems are not only non-profits, they’re also faith-based/mission organizations. We should expect better.

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Lauren Weber of Kaiser Health News focused on the dual pain of losing a baby and being sent to collections for the care in Shattered Dreams and Bills in the Millions: Losing a Baby in America.  

In one case, a couple had a baby with a congenital heart defect.  She survived some eight months, with the billing meter running the whole time.  The bills ultimately reached $2.5 million, a figure that proved to be incorrect, yet they still had a $4,000 deductible and several charges not covered by insurance.  Then they got the $26.50 collection notice.  

I mean, really? 

Ms. Weber highlights two other couples whose surprise bills came just as they were undergoing that unique pain of losing a child.  Dealing with them cost time and emotional energy the families couldn’t spare. “I just wanted to be with Bennett; that’s all I wanted to do,” one mother told her. “And I just spent hours on these phone calls.”

These bills “compounded their suffering during a time when they were just trying to process their loss.” Shame on the organizations responsible for that.

Finally, Ms. Weber also had time to report on Private Equity Sees the Billions in Eye Care as Firms Target High-Profit ProceduresAs many as 8% of ophthalmologists are in practices owned by private equity firms, and “Acquisitions have escalated so much that private equity firms now are routinely selling practices to one another.” 

KHN’s analysis found: “Sixteen of the 25 private equity firms identified by industry tracker PitchBook as the biggest health care investors have bought stakes in optometry and ophthalmology practices.”

Ms. Weber writes that the private equity groups “buy up these practices — or unify them under franchise-like agreements — with the hopes of raising profit margins by cutting administrative costs or changing business strategies,” but the real upside comes from upselling patients:

For example, doctors can use lasers instead of cutting eye lenses manually, offer multifocal eye lenses that can eliminate the need for glasses, or recommend the astigmatism fix that Green said she was sold. Often, patients pay out-of-pocket for those extras — a health care payday unconstrained by insurance reimbursement negotiations. And such services can take place in outpatient and stand-alone surgery centers, both of which can be more profitable than in a hospital setting.

One Johns Hopkins analysis found that acquired practices got an extra 20% in their insurance reimbursements, as well as increased patient volume.  KHN’s own analysis found that private equity firms like to invest in doctors who are frequent prescribers of expensive macular degeneration drugs.  “The private equity model is a model that focuses on profitability, and we know they are not selecting practices randomly,” one expert told Ms. Weber.

This is not about care; this is not about patients.  This is about money.

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I’m not naïve.  I know there are profits in health care, and, generally, I’m OK with that.  A CEO of a non-profit I once worked for preached: “No margin, no mission.”  But there’s a line, or a slippery slope, when the margin becomes the mission.  When you’re sending struggling families to collections, when you’re overprescribing expensive drugs or services, when you’re laundering money from poor communities to wealthier ones – come on, you know that’s wrong.  

To the health care executives who develop, oversee, or benefit from them: we’re watching.  

Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and now regular THCB contributor.

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