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Category: The Business of Health Care

Last in Line: Hospitals Brace for a Chilly 2023

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BY JEFF GOLDSMITH

As they emerge from the COVID pandemic, US hospitals have a terrible case of Long COVID.  They experienced the worst financial performance in 2022 in this analyst’s 47 year memory.  As the nation recovers from the worst inflation in forty years, hospitals will find themselves locked in conflict with health insurers over contract renewals that would reset their rates to the actual delivered cost of care.  “Last in line” in the US battle with inflation, hospitals will be exposed to public criticism when they attempt to recover from pandemic-induced financial losses. 

Hospital payment rates for commercial payers are backward looking. Commercial insurance contracts between hospitals and health insurers were multi-year contracts negotiated before the pandemic.  They continued in force during the pandemic, despite explosive rises in people and materials costs.    As a consequence, health costs were conspicuously missing from the main drivers of the 2021-22 inflation surge– food, housing, energy, durable goods, etc.    

Hospitals’ operating costs blew up during COVID due to a shortage of clinicians, the predations of temporary staff agencies, shortages of supplies and drugs and crippling cyberattacks that disabled their IT systems.   Hospital losses worsened during 2022 because they are unable to place patients who are no longer acutely ill but who cannot be placed in long term, psychiatric or home-based care (a problem shared by Britain’s disintegrating National Health Service).   Thousands of patients are stuck in limbo in hospital “observation” units, for which government and commercial payers do not compensate them adequately or at all.   

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Matthew’s health care tidbits: Medicare Advantage is now a provider fracking contest

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Each time I send out the THCB Reader, our newsletter that summarizes the best of THCB (Sign up here!) I include a brief tidbits section. Then I had the brainwave to add them to the blog. They’re short and usually not too sweet! –Matthew Holt

Yes it’s time to talk Medicare Advantage (MA). It’s been a huge couple of weeks for the world of MA. On the commercial side, CVS bought the biggest pure play MA provider, Oak Street Health for $10bn. This pissed me off as if they paid $2 a share more I’d have made a profit on the stock I foolishly bought “on a dip” in 2021.

But this amazed many of us on THCB Gang, as they paid a huge premium and it works out to some $60k per patient. Now health care organizations have been overpaying for patient “lives” as long as I can remember–going at least as far back as Aetna nearly going out of business when it bought US Healthcare in 1996. So why is today’s incarnation of Aetna buying providers?

Well that’s to do with the regulatory side of MA. I have been on record since the very first post of THCB that Medicare FFS is an inefficient and expensive program–even if 80% of American hospitals say they lose money on it and have to charge commercial insurers more to make up for it. But while it’s possible to agree with George Halvorson that MA delivers better care at a lower cost than FFS Medicare, it is simultaneously possible to believe that MA costs more than it should. That’s because of aggressive RAF upcoding that’s been built both into home visits from companies like Signify and also into the EMRs doctors have been using to code MA members’ health status.

There are lots of proposals on how to fix this–including this one from Chenmed on how to change MA from paying for inputs (i.e how sick people are when they join MA) to outputs (how much better they got while in MA). But it’s clear that CMS is now officially coming after upcoding including full cross plan audits back to 2018. Even if not back to 2011. The MA plans will grumble about those past audits and tie CMS up in court but they know going forward the game is up

To make more money in MA they need to get hold and shake loose or frack some of the 85% of the premium that goes to provider organizations. Hence they are all getting into bed with them or buying them outright. UHG, Humana & now Aetna/CVS have been buying physician groups that serve MA populations at a quickening rate, and their goal is to put more of the 50% of seniors already into MA into those groups.

Will this save any money?  Well probably not, at least not yet. Humana has been reporting on the costs in its full risk capitated MA groups versus its FFS ones for a couple of years, and the difference is a rounding error. But the point is that the next war in Medicare Advantage is going to be what happens inside these plan-owned medical groups. So expect a lot more scrutiny of both costs, outcomes and patient experience within MA focused medical groups starting about now. 

What is Health Care’s LEGO?

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BY KIM BELLARD

Last week the esteemed Jane Sarasohn-Kahn celebrated that it was the 65th anniversary of the famous LEGO brick, linking to Jay Ong’s blog article about it (to be more accurate, it was the 65th anniversary of the patent for the LEGO brick). That led me to read Jens Andersen’s excellent history of the company: The LEGO Story: How a Little Toy Sparked the World’s Imagination.  

But I didn’t think about writing about LEGO’s until I read Ben’s Cohen’s Wall Street Journal profile of  University of Oxford economist Bent Flyvbjerg, who studies why projects succeed or fail.  His advice: “That’s the question every project leader should ask: What is the small thing we can assemble in large numbers into a big thing? What’s our Lego?”

So I had to wonder: OK, healthcare – what’s your LEGO?

Professor Flyvbjerg specializes in “megaprojects” — large, complex, and expensive projects.  His new book, co-authored with Dan Gardner, is How Big Things Get Done. Not to spoil the surprise (which would only be a surprise to anyone who hasn’t been part of one), their finding is that such projects usually get done poorly.  Professor Flyvbjerg’s “Iron Rule of Megaprojects” is that they are “over budget, over time, under benefits, over and over again.”

In fact, by his calculations, 99.5% of such projects miss the mark: only 0.5% are delivered on budget, on time, and with the expected benefits.  Only 8.5% are even delivered on budget and on time; 48% are at least delivered on budget, but not on time or with expected benefits.  

As Professor Flyvbjerg says: “You shouldn’t expect that they will go bad. You should expect that quite a large percentage will go disastrously bad.” 

He has two key pieces of advice.  First, take your time in the planning process: “think slow, act fast.”  As Dr. Flyvbjerg and Mr. Gardner wrote in a Harvard Business Review article recently, “When projects are launched without detailed and rigorous plans, issues are left unresolved that will resurface during delivery, causing delays, cost overruns, and breakdowns….Eventually, a project that started at a sprint becomes a long slog through quicksand.” 

Second, and this is where we get to the LEGOs, is to make the project modular; as Mr. Cohen puts it, “Find the Lego that simplifies your work and makes it modular.”

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Elia Stupka, Angelini Ventures

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I’ve been friends with Roberto Ascione for many years. Roberto is a keen Napoli fan who on the side runs the Healthware Group and also the Frontiers Health Conference that I’ve been going to for many years (and where Jess DaMassa is co-MC). Recently Healthware acquired the media company pharmaphorum and hired star reporter (and another friend) Jonah Comstock, ex MobiHealthNews and HIMSS Media. THCB will be doing some occasional cross-posting with pharmaphorum starting with this interview of the boss of a new and well heeled Italian health tech VC fund!–Matthew Holt

Elia Stupka, Managing Director at Angelini Ventures, talks to Paul Tunnah, pharmaphorum founder, about his career, life passions and the exciting launch of Angelini Ventures – a €300 million fund paving the way for healthcare transformation across digital health and life sciences

With access to my records, I took my business elsewhere

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By EPATIENT DAVE DEBRONKART

Not our usual headshot but it is Dave!

I had a skin cancer diagnosed in November. It’s my third, and I researched the last one heavily, so I knew what I wanted (Mohs on the nose). But the hospital that did the diagnosis insisted I wait and have a consult visit in January, and *then* they’d let me schedule the procedure, probably in March.

I said I know what treatment I want – can’t I schedule the surgery now? They said, “That’s not how we do it.”

So I went home and called around. Beth Israel Deaconess Medical Center said if I could get them the information they would book me for January, right then and there.

How long did it take me to get them the data? 15 minutes. I went back to the first place’s portal and downloaded my visit note and pathology report and emailed it all to BIDMC. An hour after I dialed the phone I had the appointment I wanted.

Patient power. I took my records – and my business – elsewhere.

This is of course a nightmare for providers who think they can lock us in. And it’s a dream come true for providers who have been longing to win us away by providing better service.

(I would have had the surgery before now, within January, but COVID struck so we postponed.)

Medical record access is empowering! Thank you to those who worked so long and hard to create these policies!

It’s also great news for providers who are trying hard to be #patientcentric: now we can easily reward them with our business!

It’ll be even better in the coming years because data #interoperability via FHIR will let apps and hospitals go GET the data … or, even better, let consumers already have their data in their own app, to do anything they want with it. True patient autonomy.

Dave deBronkart is a patient activist, speaker and author. This was originally published on his LinkedIn page

13 Year Old McAllen

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BY IAN MORRISON

As a Scot, obviously I am a whisky fan, and although I prefer the smoky malts of Islay (where my grandfather was from and where I visit my friends there frequently), I am also a huge fan of McCallan 18-year-old whisky, the sticky toffee pudding of single malts.

But as all policy wonks know, McAllen Texas is not famous for whisky but for Atul Gawande’s “Cost Conundrum” article in the New Yorker, in 2009 which is still required reading in medical school and MPH classes and was arguably the cornerstone of Obama health policy and the ACO movement.

Dr. Atul Gawande described overutilization and high cost of Medicare revealed by Dartmouth Atlas nationally and zeroed in on McAllen Texas.  Compared to El Paso (a seemingly like comparison) McAllen was the most expensive place in America for healthcare based on Medicare claims data.  Gawande highlighted the entrepreneurial, doctor-owned, Doctor Hospital at Renaissance DHR in Edinburg, TX as having fancy, modern technology while the community as a whole seemed underserved.  

I have always had unease with just using Medicare data to judge costs, because there was no recognition of what I was observing on my travels, namely an enormous variation in commercial prices (not simply utilization) in hospital costs in terms of paid claims by self insured employers.  Poignantly, sources at the time claimed McAllen, Texas had among the lowest commercial insurance premium places in the country.  Interesting.

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MedEd in an AI Era

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BY KIM BELLARD

I’ve been thinking a lot about medical education lately, for two unrelated reasons.  The first is the kerfuffle between US News and World Report and some of the nation’s top – or, at least, best known – medical schools over the USN&WR medical school rankings.  The second is an announcement by the University of Texas at Austin that it is planning to offer an online Masters program in Artificial Intelligence.

As the old mathematician joke goes, the connection is obvious, right?  OK, it may need a little explaining.

USN&WR has made an industry out of its rankings, including for colleges, hospitals, business schools, and, of course, medical schools. The rankings have never been without controversy, as the organizations being ranked don’t always agree with the methodology, and some worry that their competitors may fudge the data.   Last year it was law schools protesting; this year it is medical schools.

Harvard Medical School started the most recent push against the medical school rankings, based on:

…the principled belief that rankings cannot meaningfully reflect the high aspirations for educational excellence, graduate preparedness, and compassionate and equitable patient care that we strive to foster in our medical education programs…Ultimately, the suitability of any particular medical school for any given student is too complex, nuanced, and individualized to be served by a rigid ranked list, no matter the methodology.

Several other leading medical schools have now also announced their withdrawals, including Columbia, Mt. Sinai, Stanford, and the University of Pennsylvania.  

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Matthew’s health care tidbits: How do you tell the price of a drug?

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Each time I send out the THCB Reader, our newsletter that summarizes the best of THCB (Sign up here!) I include a brief tidbits section. Then I had the brainwave to add them to the blog. They’re short and usually not too sweet! –Matthew Holt

As the average THCB reader is probably all too well aware I live in Marin County, California and therefore my kids are on amphetamine-based medication for ADHD. This is annoying as all get out because, as a controlled substance, this medication needs to be re-prescribed every month (no automatic refills allowed). In addition no 90 day supplies are allowed, and the kids must have checkups with their prescribing physician every 3 months (which are not cheap).

It’s not just prescribing which is complicated. Supply is an issue too and frequently pharmacies run out. This is furtherly frustrating because if one pharmacy is out it can’t move the Rx to another, even in the same chain like Walgreens or CVS. The new pharmacy requires a whole new prescription. I discovered last year that Alto Pharmacy, a VC backed home delivery pharmacy, will deliver controlled medications. This has saved me 12-24 visits to CVS in the past year.

But with a new year there are new problems. The “allowed” price, i.e. the price my insurer Blue Cross of Massachusetts had agreed with Alto Pharmacy (and other pharmacies) for the specific generic for one of my kids somehow went from $29 a month to $107. That’s the amount I actually pay until we hit our $4,500 family deductible. Incidentally because it’s a medication we still pay $10 a month after we hit the deductible.

Alto kept telling me that the cash price was around $50. But of course if we pay the lower cash price (either there or elsewhere using GoodRx) that doesn’t count against the deductible. So if we hit the deductible we are out the $50 (which works out to roughly $1200 per year for 2 kids). I kept asking Alto what had changed that made the cost go up? They kept not telling me an answer, other than it cost $107. I asked the good people at Health Tech Nerds slack group if they could guess what was going on. Their consensus was that the formulary tier had been changed. “But it’s a generic”, (I foolishly thought).

Finally I called the pharmacy number on BCBS Massachusetts website, and ended up talking to someone at CVS Caremark– their PBM. In the course of the 30 minute call they ran a dummy claim with several other pharmacies. All came back at the $107 number. They then looked up the formulary to see if it had changed. Meanwhile I looked at the formulary on the BCBS Mass website while this was going on. The medication was still tier 1. So why has the cost to me and perhaps to the Blues plan gone up from $29 a month to $107? (Yes that’s more than a factor of 3!)

While she was talking to me the Caremark rep was also able to Slack with several other colleagues–relatively advanced for an old world PBM I thought. Eventually the answer came back. The med was indeed tier one. But until we spent our deductible the med was tier 2. In other words if we were paying for the drug the price is $107. As soon as BCBS Massachusetts starts paying for it the price goes back to $29 (of which they only pay $19) as we have a $10 copay.

Why this has happened is beyond me? Is Caremark or BCBS Massachusetts suggesting another cheaper drug? I haven’t heard from them. Are they trying to discourage patients from getting to their deductibles? My cynical conclusion is that Caremark is trying to increase the revenue for CVS– its corporate pharmacy–which that accounts for 1/3 of all outpatient Rx.

Otherwise this pricing strategy makes no sense to me. Of course this is just another example of a completely opaque process. And that appears typical for American health care.

Matthew’s health care tidbits: My retina & what it tells us about primary care

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Each time I send out the THCB Reader, our newsletter that summarizes the best of THCB (Sign up here!) I include a brief tidbits section. Then I had the brainwave to add them to the blog. They’re short and usually not too sweet! –Matthew Holt

I had a little scare the other night. I was driving home from a weekend in the mountains and I asked my wife if she saw that flashing light. No it wasn’t the cops, and no she hadn’t seen it. Turns out that I had a bright flash if I moved my eye a certain way. Oh, well I assumed I was tired and a good night’s sleep would fix it.

Next morning the flash was still there when I looked quickly to the left and a few weird floaters had appeared. I headed to the Mayo Clinic website and it looked to me like I had a detaching retina. I got on the urgent visit video with One Medical. The NP who answered said it sounded like I might have retina problems and I should get it checked by my ophthalmologist. But my eyesight has always been great (other than me needing reading glasses in my old age) and I haven’t got one. So who, I asked, do you recommend?

Here we fall into the crux of the problem. One Medical is an excellent primary care service. So good that Amazon bought it for $3bn. But it’s not a multi-specialty group nor is it a system like Kaiser. The answer was, “we don’t really recommend anyone–that’s not how it works.” The NP ended up looking up ophthalmologists near me & sent me a name as a referral in their app. But that’s not a link to anything and it wasn’t one chosen through some analytical process of seeking quality excellence.

I looked up MarinHealth (my local hospital)’s website and searched ophthalmology. That referred name was on it. I called. The doctor was out this week. They gave me another name. That doctor’s office gave me another name and that third office could see me that same day. I felt some pressure to see them right away as in the case of a detached retina Mayo says “ Contacting an eye specialist (ophthalmologist) right away can help save your vision”. The good news is having spent a couple of hours at the ophthalmologist’s my retina needs watchful waiting not surgery.

But the bad news is that for me, like 90% of Americans, there’s no easy way to get referred into a trustworthy system for specialty care. This can be even worse. My friend Sarah McDonald explains in her book The Cancer Channel how, after being diagnosed with a rare incurable cancer by a head & neck surgeon, the all encompassing support she received was to be given the number of a specialist at UCSF who couldn’t even talk to her for 3 weeks.

Mike Magee talks about the role of the health care system being to reduce patients’ “fear and worry”. Our lack of a specialty care referral system, especially when potentially serious and urgent care is on the line, is a big reason why there is so much fear and worry. I wish I had a concierge advocacy system like Included Health or Transcarent which could get me to the right place and work with me through the experience. But like most Americans at the time I need reassurance the most I’m calling a list of phone numbers hoping someone can see me.

We have primary care, we have specialty care. But we don’t have a system that cares.

My family’s disastrous experience with a growth-driven long-term care company

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by “E-PATIENT” DAVE DEBRONKART

Continuing THCB’s occasional series on actual experiences with the health care system. This is the secondin a short series about a patient and family experience from one of America’s leading ePatients.

I’ve been blogging recently about what happens in American healthcare when predatory investor-driven companies start moving into care industries because of, as Pro Publica puts it, “easy money and a lack of regulation.”  The first two posts were about recent articles in The New Yorker on companies that are more interested in sales and growth than caring.

My mother died in October. What we haven’t disclosed until now is that it happened in horror story #3: she passed after a single week of “respite care” provided by the local outlet of a growing chain of assisted living facilities.

Our mom, a 93 year old cardiac patient, had been in the hospital for ten days, and was discharged to go “home with assistance” because she was steadily improving. The respite facility’s director, an RN, evaluated Mom in the hospital, declared her appropriate for their respite care service, and took payment in full (in advance) for two weeks.

Mom’s primary caregivers were, as usual, the family’s daughters (my sisters), who had been with her throughout the hospitalization (and for countless hours every year). Mom and they discussed the discharge plans at length. Believing that a good respite care facility was an excellent bridge for continued progress between hospital and returning home, they purchased a two week stay after discharge. An important part of the decision was the website’s promise of “Strengthening during physical therapy.”

We soon found out that the facilities and understaffing were so precarious and stress-inducing, and so many things went wrong, that we didn’t dare leave her alone. To the contrary, after just one week, our mom said she was so stressed that she wanted to get out of there, and two days later she passed away.

Mom loved to sit in this gazebo, along a tributary of the Chesapeake. Photo by my sister.

Our complaint letter and management’s response

Much has been written in healthcare and other industries about how to document and report a service problem and how management should respond.

My sisters carefully composed a detailed seven page letter to management, listing everything that went wrong, from a wrong-height toilet seat, to a shower chair with missing handrail (perfect for assisted living, not!), to the Bluetooth room key that kept failing, to staff that couldn’t recognize the on/off switch on her oxygen, to stress-inducing fire alarms with nobody coming to help. That’s only a few items; their entire letter was published yesterday on The Health Care Blog (thank you THCB!).

And the facility’s response? After walking through the whole letter with my sisters on a call, their emailed bottom line was, verbatim:

“The services listed for respite program were available to your mother.”

Well, their marketing people need to talk to their facility managers.

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