DCMedical News: Thursday, February 15, 2018
DCMedical News
Washington, D.C.
Thursday, February 15, 2018
To our new readers: This is an independent newsletter, published every day that one or another House of Congress is in session. The trial subscription period will end February 28. Subscription information will be found at the bottom of these pages.
THE BIG STORY TODAY IN HEALTH CARE
The cost of health care is today’s big story, an estimated $3.5 trillion in 2017, up 4.6%. By 2026 health spending will reach $5.7 trillion.
The Office of the Actuary of CMS released a report projecting health costs for the period 2017-2026. The bottom line: “National health expenditure growth is expected to average 5.5 percent annually over 2017-2026 . . . Growth in national health spending is projected to be faster than projected growth in Gross Domestic Product (GDP) by 1.0 percentage point over 2017-2026. As a result, the report projects the health share of GDP to rise from 17.9 percent of GDP in 2016 to 19.7 percent by 2026.” (CMS website text here, Health Affairs article here).
Coincidentally, the House Subcommittee on Oversight and Investigations held its hearing on health care consolidation Wednesday, with witnesses Martin Gaynor, (testimony here), Leemore Dafny (testimony here) and Kevin Schulman (testimony here). Also, Chairman Harper’s remarks can be found here, and Energy & Commerce Chairman Walden’s remarks can be found here.
DOCTORS AND OTHER HEALTH PROFESSIONALS
From the Oversight Subcommittee hearing:
One issue addressed was physician ownership of hospitals.
Dr. Burgess, a Member from Texas, noted that it was odd that hospitals could own physician practices, but physicians could not own hospitals. He noted that his father with other colleagues had started a hospital in a rural area, and that, without their efforts, there would have been no hospital. Professor Gaynor noted that physician-led Accountable Care Organizations appeared to be more cost-effective than hospital-led ACOs, but Professor Dafny noted that self-referral and cream-skimming were two issues to be controlled to the extent there was any effort to revise Section 6001 of the Patient Protection and Affordable Care Act, which put a moratorium on physician-owned hospitals.
Mr. Barton of Texas noted that Congress had failed in the “site of service differential” and in the 340B program (we have been “bitten in the bottom” he indicated) to provide price relief to consumers. He asked what the implications would be if Medicare, instead of paying the higher of two alternative prices (before and after a merger, etc.), paid the lower. Professor Dafny indicated that Congress might consider rolling back some of the financial advantages associated with consolidation. Professor Gaynor noted that if reform took place concerning the site of service differential (hospitals acquiring physician practices, subsequently charging higher practice and facility fees), there would be “spillover” which would benefit private insurance plans.
HOSPITALS AND HEALTH CARE FACILITIES
In general, the three economists were “negative” concerning consolidation, indicating that many of the arguments promoting consolidation (lower costs, improved quality) had no evidence, and that, to the contrary, the evidence is in the opposite direction, that nearly all of hospital consolidations lead to higher prices, and some lead to lower quality.
Dr. Schulman, who addressed the “business architecture” of the health field, lamented that the field had ten years to prepare for improved quality measures and showed little evidence of accomplishment in that area. Aside from increased market power, no advantages had accrued to the institutions. He noted that hospitals and health systems generally were ripe for “disruptive” innovation, in that the field had become very inflexible and that the increases in hospital cost as a result of consolidation--which might amount to as much as 50% of total hospital cost--were a “tremendous price for America to pay.”
Professor Gaynor noted that, in reviewing the hospital consolidations that he or the Federal Trade Commission had studied price increases amounted to as much as 50% in some cases; that no instances could be found in which quality of care increased; and that quality of care suffered in some, with lower competition.
Professor Dafny noted that she had written a paper on the “good merger” but was “still searching” for an example. She said the most likely area in which positive results from mergers might occur was across the care continuum.
Other subjects of interest to Committee members frequently arose:
Mr. Barton noted that in 1992, when the 340B program was begun, there were 90 safety-net hospitals, and now more than 2,000 hospitals were eligible for the program. Dr. Schulman testified that the program had sufficiently large incentives so as to distort the actions of participants in the field.
Mr. Tonko of New York asked Professor Dafny whether cost reductions might have come from some consolidations. She noted that even when costs were lowered, there was ample evidence that prices still went up.
Mr. Griffith of Virginia noted that, notwithstanding the panelists’ reservations concerning Certificates of Public Advantage (COPA, immunization from anti-competitive activity resulting from a merger), the preservation of hospitals was important, that if one closed there wasn’t another one “around the corner,” but rather only at significant distance. The panelists did not necessarily agree with the questioner concerning the merits of keeping failing hospitals open, noting that telehealth, revision in the Stark laws (to allow more physician entrepreneurial activity) and other measures might substitute to preserve services.
The panel was uniformly enthusiastic about all-payer claims databases (APCD), especially as used by the Massachusetts Health Policy Commission. Professor Gaynor noted that another APCD had been developed in New Hampshire, there was evidence that consumers actually used it, and that providers responded when consumers made choices based on price.
Ms. Castor of Florida mounted a defense of consolidation, especially of hospitals, and asked whether consolidation had not led to more effective coordinated care. Professor Gaynor noted that consolidation was not integration, and that while there has been a great deal of the former, he has seen little evidence of the latter. He noted that the lack of evidence for integration might be due to a lack of incentive or it might be a lack of skills amongst the executives involved in consolidation. Professor Gaynor said that raising prices was easy (through increased market power), but that controlling costs was hard. He also indicated that he had not seen the “good merger,” that is one to which he could point to as having lowered prices to consumers.
Questioning also took place concerning mergers of religious hospitals and non-religious hospitals. In response to a question from Ms. Schakowsky of Illinois, Professor Dafny said those mergers did not produce the same price increases as were routinely found in other hospital consolidations, the principals apparently having different motivations. With regard to women’s services, and implicitly others, Dr. Schulman asked why we have organized all of our health services around hospitals, noting that much of what should concern women in the availability of services does not need the hospital as a central or organizing participant.
Professor Dafny concluded her remarks by noting that the impact on patients generally appeared to be “an afterthought” in health care consolidations.
HEALTH INSURANCE, MEDICARE, MEDICAID, COMMERCIAL
From the CMS report on growth in health expenses 2017-2026:
“Medicare: Among the major payers for healthcare over the 2017-2026 period, Medicare is projected to experience the most rapid annual growth at 7.4 percent, largely driven by enrollment growth and faster growth in utilization from recent near-historically low rates.”
“Private health insurance: Private health insurance spending is projected to average 4.7 percent over 2017-2026, the slowest of the major payers, reflecting low enrollment growth and downward pressure on utilization growth influenced by: i) lagged impact of slowing growth in income in 2016 and 2017, ii) increasing prevalence of high-deductible health plans, and iii) to a lesser extent, repeal of the penalty associated with individual mandate.”
“Medicaid: Medicaid is projected to average 5.8 percent annual growth over 2017-2026, which is slower than the average observed for 2014-2016 of 8.3 percent, when the major impacts from the Affordable Care Act’s expansion took place.”
PHARMA
From the Oversight Subcommittee hearing:
Professor Gaynor was asked what has changed since his last testimony before the House Ways and Means Committee on this subject, in 2011. His response was that consolidation has accelerated, and the outlook for favorable economic returns to the public has diminished. Ms. Brooks of Indiana asked about pharmacy benefit managers. Professor Gaynor noted that the key question was who was benefiting from their activities; he noted that last year $115 billion was passed by manufacturers to pharmacy benefit managers, but there was no transparency concerning how much of that money had actually reached insurers and how much, if any, benefited consumers directly.
From the CMS report on growth in health expenses 2017-2026:
“Prescription drug spending: Among the major sectors of healthcare, spending growth is projected to be fastest for prescription drugs, averaging 6.3 percent for 2017-2026. This is due in part to faster projected drug price growth, particularly by the end of the period, influenced by trends in relatively costlier specialty drugs.”
ASIDES
Amazon to take on hospital supplies (here). Reports the Wall St. Journal, “Amazon’s comparison-shopping ethos could shake up the hospital- and clinic-supply business, where middlemen fees add costs and proprietary contracts obscure price differences.” Amazon, believing in comparison shopping, will encounter the hospital associations and hospital executives who benefit from the participation of their organizations (Group Purchasing!) in middlemen fees and obscure pricing.
OTHER PUBLICATIONS
Darden, McCarthy and Barrette for the National Bureau of Economic Research on Hospital Pricing and Public Payments (aka “cost shifting”), found here. Hospitals that faced net payment reductions from HRRP [hospital readmission reduction program penalties] and HVBP [hospital value based payment penalties] were able to negotiate 1.5% higher average private payments - approximately $155 extra for the average acute care claim, or $82,000 per hospital, based on an average hospital penalty of nearly $146,000.”
Gupta (here) and Krumholz (here) mix it up in JAMA Cardiology over this question: evidence that increased mortality among congestive heart failure patients is associated with Medicare penalties for hospital readmissions.
EVENTS & MEETINGS
Your February & March Calendar:
February 15
9:00 a.m., Senate Finance Committee hearing on the budget of the Department of Health and Human Services.
10:00 a.m., Committee on Health, Education, Labor and Pensions, Subcommittee on Workforce Protections, on the opioid epidemic implications for America’s workplace.
Noon, CMS Open Forum on BPCI Advanced, https://engage.vevent.com/rt/cms2/index.jsp?ecid=780.
12:30 p.m., The Health Subcommittee of Energy and Commerce will hold a hearing entitled, “Oversight of the Department of Health and Human Services.” Livestreamed.
February 21
11:00, at Medicare.gov, Physician Compare 90-minute webinar on PQRS.
2:00-3:30, CMS and its contractor, Acumen, LLC, host a webinar on MACRA Patient Relationship Categories and Codes, register at https://engage.vevent.com/index.jsp?eid=3523&seid=131
February 26
12:00-1:30, Alliance for Health Policy, “Using State Flexibility to Improve Medicaid Long Term Services and Supports,” Hart Building room 902, info@allhealthpolicy.org.
February 27
10:00-11:30 a.m., The Future Role of Government in Health IT and Digital Health, Bipartisan Policy Center, 1225 Eye Street NW, Suite 1000, Washington, DC 20005.
March 1
MedPAC, Ronald Reagan Building, Horizon Ballroom, 1300 Pennsylvania Ave, continuing March 2.
MACPAC, advisory body on Medicaid and the Children’s Health Insurance Program, continuing March 2.
March 6
8:00-11:00 a.m., Roll Call and CQ News present Health Care Decoded, at the Newseum, information at:
http://go.cq.com/2018HealthCareDecoded_01.RegistrationPage.html?utm_medium=newsletter&utm_source=hbmorning.
March 26
PTAC, Physician-Focused Payment Model Technical Advisory Committee, continuing March 27, information at www.regonline.com/PTACMeetingsRegistration or livestream at www.hhs.gov/live.
FOR REFERENCE
Members of the Senate (here) and Members of Senate Committees (here), Senate Calendar (here).
Members of the House with their House Committees (here), House Calendar (here).
DCMN: February publication dates: 16, 26, 27, 28.
Notes to: Fred Hyde, MD, JD, MBA; fredhyde@aol.com