Today, I’m closing out the year of Health in 2 Point 00 from the ski slopes. In Episode 103, Jess asks me about the ACA ruling that the individual mandate is unconstitutional, whether Sutter Health got what they deserved after the $575 million settlement, health insurer Bright Health raising a huge $635 million round, and a rumor about a $250M Softbank investment coming next week. Wishing you all a very happy 2020! —Matthew Holt
Sometimes big game hunters find frustration when their prey moves by the time they’ve lined up to blast it. That certainly appears to be the case with the health policy target de jour: whether providers, hospital systems in particular, exert too much market power. A recent cluster of papers and policy conferences this spring have targeted the question of whether hospital mergers have contributed to inflation in health costs, and what to do about them.
Hospitals’ market power appears to be one of those frustrating moving targets. The past eighteen months have seen a spate of hospital industry layoffs by market-leading institutions, and also a string of terrible earnings releases from some of the most powerful hospital systems and “integrated delivery networks” in the country. These mediocre operating results raise questions about how much market power big hospital systems and IDNs do, in fact, exert.
The two systems everyone points to as poster children for excessive market power-California-based Sutter Health and Boston’s Partners Healthcare, both released abysmal operating results in April. Mighty Partners reported a paltry $3 million in operating income on $2.7 billion in revenues in their second (winter) quarter of FY14. Partners cited a 4.5 percent reduction in admissions and a 1.6 percent decline in outpatient visits as main drivers. Captive health insurance losses dragged down Partners’ patient care results. Sutter did even worse, losing $22 million on operations in FY13 (ended in December), — compared to a gain of $697 million in FY11 — on more than $9.6 billion in revenues. A 3 percent decline in admissions led to FY13 revenue growth of 0.9 percent (that is, nine-tenths of one percent), against 7.3 percent in expense growth.
The going rate for a compromised medical record seems to be $1000 (well, at least that’s the asking price) as seen in papers filed in the eleven class action lawsuits against Sutter Health following the theft of a desktop computer last fall. The computer contained unencrypted protected health information on about 4.24 million members. The eleven class action suits are likely to be consolidated for ease of handling by the courts.
For an outfit whose most recently reported year-end financials show just under $900 million in income on just over $9 billion in revenue, a $4.24 billion claim certainly qualifies as a big deal. The data breach claims against Sutter Health were filed last year following its self-reporting of the computer theft, and are in the news again due to the potential consolidation.
The company had reportedly begun to encrypt its data last year, starting with more vulnerable mobile devices, and moving on to desktop computers, but had not gotten to the desktop in question by the time of the breach. It remains to be seen how these facts end up affecting the final damages awarded in this case.