2018 Mid-Year Elections

Democrats secured the House majority Tuesday night for the first time in nearly a decade with a projected majority of as many as 35 seats. The victory promises a new era of checks on the Trump administration’s healthcare regulatory agenda as well as a possible odd-couple alliance with the White House against Big Pharma.

The GOP held the Senate as expected, gaining on its slim margin with at least two pickups in Indiana and North Dakota. This tightly calibrated Congress likely won’t push any major healthcare legislation. And Obamacare will remain in place—albeit tweaked at the state level and through administration policies so the law increasingly looks like a mix of competing Democratic and GOP visions.

Analysts don’t expect any big-picture legislation as the sprint to the 2020 presidential election begins. In the especially polarized politics of healthcare, each party bends with their voters, said Robert Blendon, a Harvard University professor of health policy and political analysis. While healthcare polls as a top issue with the majority of voters, priorities shift fast depending on which party is surveyed.

“If I were (saying this) in the mid-1990s, I would say the issues top of mind for all voters would determine what the new House would actually do,” Blendon said.  Pundits called this midterm cycle a base election: healthcare in the 116th Congress will depend on finding the give in the gridlock over a divisive topic.

Drug pricing

Democrats have framed drug pricing as a rare policy area where they can work with the president—the common enemy there is Big Pharma.

Still, following an election that swept them to power as a referendum on Trump, some Beltway insiders doubt Democrats will bend much. Pharma’s panic level will depend on how well this relationship can work, and that’s not only up to Democrats: it’s up to the White House and Trump’s top lieutenants as well.

In her victory speech Tuesday night, House Minority Leader Nancy Pelosi (D-Calif.)—expected to stay on as speaker of the House given the party’s success—said Democrats would pass legislation for direct Medicare negotiation with drug companies. This was a core part of Trump’s own campaign platform. But HHS Secretary Alex Azar has pushed back on such a policy.

Key lawmakers poised to step into influential committee positions have criticized the Trump administration’s drug pricing strategy for not going far enough. These include Cummings on oversight; Rep. Lloyd Doggett of Texas who may get the House Ways and Means health subcommittee gavel; and Vermont’s Rep. Peter Welch, who sits on the House Democratic Steering and Policy Committee and the House Energy and Commerce Committee. As a counterpoint, however, Pharma ally Rep. Anna Eshoo, a Democrat who represents a biotech-dominated district in California, is next in line for the Energy and Commerce health subcommittee gavel.

Criticisms notwithstanding, Azar stunned industry and experts last month with a proposal to tie U.S. drug prices to their lower-cost counterparts abroad. Some industry analysts viewed that as leverage to get Big Pharma to the negotiating table despite that being the boldest move of any administration yet, even as House Democrats said it needed to be bolder.

“Instead of nibbling around the edges, (Trump) should demand in his State of the Union speech that Congress send to his desk within 30 days a broad price negotiation bill that applies to all drugs in the Medicare program,” Welch said in a release after Trump unveiled the policy proposal.

Healthcare costs

Smaller measures targeted at cost could pass bipartisan muster.

This year the Senate Health, Education, Labor and Pensions Committee has focused its hearings on cutting healthcare costs. A bipartisan group of senators has pushed variations of a bill to curb outsize balance bills from hospitals.

As health insurance co-pays and deductibles rise and provider networks narrow, price woes will stay top of mind even as the ACA becomes more entrenched in insurers’ business models. Nearly 75% of individual market plans restrict their provider networks, according to the consulting group Avalere—a steep rise from 2014. Nearly 90% of people in exchange plans hold the IRS definition of a high-deductible plan of more than $1,300.

So as 2020 approaches, voters’ focus may stray from the Obamacare coverage arguments while remaining keenly focused on their wallets—as Pelosi and Senate Republicans seem to be aware.

One longtime House Democrat said she for one wants to see more compromise on the many healthcare issues “that really aren’t partisan.”

“Everybody’s up again in two years and that includes a number of key Republicans in the Senate,” said Rep. Jan Schakowsky (D-Ill.). “In terms of bipartisanship I look rather fondly back to the Bush administration when we actually got things passed and done. And in part that’s because the definition of the job included the word compromise—it wasn’t a dirty word back then.”

It remains to be seen what levels of compromise a base election can yield.

Clinics catering to immigrants take a hit from White House policy

It was just a couple of years ago that Sinai Health System’s Touhy Health Center in Chicago stood as the primary site in the state for newly arrived refugees. At that time, as many as 60% of all refugees who arrived in the U.S. and resettled in Illinois visited the clinic, which saw an average of about 500 new refugees a month.

These days, the Touhy clinic is preparing to close its doors permanently.

Sinai Health President and CEO Karen Teitelbaum announced last week the clinic will close in December. She attributed the closure to the Trump administration’s decision in the past year to significantly limit how many refugees can enter the country, which has led to an 85% drop in new patient visits to the clinic since January 2017, which now has less than 50 visits a month.

“We held off on any action for as long as we could, hoping for a reversal or stabilization of the immigration activity,” Teitelbaum said. “With none in sight, and with the clinic requiring a large subsidy, we had to make the decision to close the clinic and transition care to other agencies. We were left with little choice.”

But what’s happened at Touhy speaks to the growing financial pressures that U.S. clinics specializing in caring for refugees face because of the Trump administration’s hard-line immigration policies.

Such clinics play a valuable role in helping refugees navigate the complexities of the healthcare system, which advocates say goes far toward to getting them to better acclimate to their new surroundings. At Touhy, the staff of 15 speak up to 25 different languages, which allows patients to get health screenings, follow-up care,and other services in their native language, in a culturally sensitive manner.

But the bulk of the Touhy clinic’s funding comes from federal grant money distributed by the state to provide health assessments to new refugees. Refugees are required to receive a health assessment within 90 days after arriving in the country. Grant funding allocated to clinics like Touhy is based on the number of new patients they receive for health assessments.

While much of the health screening across the country is conducted by state and local public health departments, a number of clinics like Touhy also serve as comprehensive care sites where patients are referred by public and private resettlement agencies, and they can receive their health assessment as well as follow-up care if needed. Teitelbaum said the decline in new refugees because of the federal policy shift has caused a steep drop in funding for assessing new patients. She estimated it has left a funding gap of around $800,000.

“Isolated (screening) programs that stand alone fill a check box,” said Dr. Gary Kaufman, medical director of the Touhy clinic. “But if you’re talking about the actual care to a patient, that’s when things fall short.”

Over the past year the Trump administration has drastically lowered how many refugees are admitted to the country in a series of moves seen by many as part of an overall agenda to impose tougher immigration restrictions and make claiming refugee status more difficult.

It began in January 2017, when President Donald Trump signed an executive order to reduce the Obama administration’s limit of 110,000 admitted refugees to 50,000, suspend all admissions for 120 days, and ban admissions from seven majority-Muslim countries. The result has been the lowest number of refugee admissions in more than 40 years.

Over a 12-month period ended Sept. 30, 22,491 refugees were allowed entry into the U.S., the fewest number admitted under the program since 1977, according to data from the State Department. The number of new refugees actually admitted into the country fell way short of the cap of 45,000 refugees set by the administration for fiscal 2018. Last month, the White House announced plans to lower the cap on refugee admissions even further to 30,000 next year.

Declines in the number of new arrivals has also meant fewer visits to refugee health clinics. For many, the decrease has begun to cause financial strain and to raise uncertainty for some about their ability to meet the needs of refugees already living here and help them better integrate into society.

“The number of people that have come in through that pathway has pretty much disappeared,” said Dr. Sarah Kimball, director of resident education for the Immigrant and Refugee Health Program at Boston Medical Center, which also provides healthcare services to individuals with any immigration status as well as asylum seekers.

Since 2011, an average of 1,800 to 2,400 refugees a year have resettled in Massachusetts and received care through one of 10 designated refugee clinics in the state. In 2018, the state has received just 464 individuals.

Refugees can get up to eight months of federal medical assistance. Once that period ends, they are expected to either find employment that provides health insurance or purchase a plan on the market if they are not eligible to receive Medicaid or disability coverage. But many have difficulty after the eight-month period gaining coverage on their own.

The uninsured rate among lawfully present non-elderly immigrants, which include refugees, asylum seekers and lawful permanent residents, among others, was 17% in 2016, according to a Kaiser Family Foundation analysis, nearly double the uninsured rate among non-elderly U.S. citizens.

Kimball said many of BMC’s clients have needs beyond their medical conditions and that the clinic provides assistance to help them better integrate into society. Like Touhy, BMC offers culturally sensitive mental health services that includes trauma-related care, as well as case management to connect them with social service supports.

She said while the decrease in refugee visits had strained the hospital financially, Kimball felt the impact was buffered because the clinic is part of Boston Medical Center’s primary-care clinic. She said the clinic’s decision to serve all immigrants regardless of their status has also helped to offset the loss in refugee visits.

“It would definitely have (financial) consequences for our clinic if that was the only type of care we were doing,” Kimball said regarding refugee clinic visits. “Because our model is that we’re seeing any immigrant who needs our services, we are able to stay afloat.”

Dr. Jeffrey Walden, director of Cone Health’s Refugee and Immigrant Health Clinic, said the number of new refugee visits have fallen from an average of five patients a week to just two new patients between June and the beginning of October. It has been able to sustain itself because it’s part of the family medicine residency program at the Greensboro, N.C.-based health system.

Like Sinai, Cone Health’s refugee clinic specifically serves refugees. But similar to BMC, Cone Health’s clinic does not rely solely on patient volume, but instead benefits from its status as an educational training program for residents.

“If you were trying to rely specifically on refugee patients to maintain viability, from a financial standpoint that would be close to impossible to do,” Walden said. He said the clinic is not really affected financially by a drop in the number of refugee visits, but there were concerns over whether the dearth in patients would jeopardize its viability as a training resource. “For four months over the summer we were really having discussion about what we were going to do next,” Walden said.

For the Touhy clinic, its closure means the loss of the only site within Chicago and all of Cook County designated to provide new refugee health screenings, which means patients will have to travel nearly an hour to be assessed beginning next year. Teitelbaum said Sinai has been working with the state’s Bureau of Refugee and Immigrant Services to develop a plan to transition patients to other providers and is also working on finding other employment opportunities for Touhy’s 15 staff members.

For many, Touhy’s closure will signify the loss of a trusted resource that will be hard to replace. As of Oct. 26, more than 2,100 people had signed a petition on Change.org calling for the Touhy clinic to remain open. When asked about the possibility of re-opening the clinic if the federal government began admitting more refugees, Teitelbaum said it would be difficult to once again find personnel that have the right clinical, language and cultural skills.

“Once you dismantle a program that is as special as this, I don’t know how you really put it back together,” Teitelbaum said. “It’s an unfortunate fatality of bad federal policy.”

Published by Modern Health on 10/26/2018

Baylor Scott & White, Memorial Hermann sign letter of intent to merge

Dallas-based Baylor Scott & White Health and Houston-based Memorial Hermann Health System have signed a letter of intent to merge, the organizations announced Monday.

The combined not-for-profit entity would have 68 hospitals, two health plans and around $14.4 billion in revenue. Its footprint would include more than 1,100 care delivery sites, about 73,000 employees and nearly 14,000 employed, independent and academic physicians.

“As the whole field is in the midst of a transformation related to a combination of cost issues and technology disruption, our boards got together and talked about how to come together in a more structural way rather than just sharing best practices,” said Jim Hinton, CEO of Baylor Scott & White.

Together, Baylor Scott & White and Memorial Hermann could expand their academic arms related to research and medical training and accelerate the implementation of new technology, said Chuck Stokes, president and CEO of Memorial Hermann.

“There is a lot of synergy and opportunity to do things in a different way,” Stokes said. “When we are independent of each other, it is harder to do that.”

Hinton would be the CEO of the combined system. His office of the CEO would include Stokes and Baylor Scott & White President Pete McCanna.

The board would be equally split between Baylor Scott & White and Memorial Hermann. Ross McKnight, the current chair of Baylor Scott & White’s board, would also chair the combined system’s board. It would have executive and support staff based in Austin, Dallas, Houston and Temple.

The combined entity would operate under a new name, although Baylor Scott & White and Memorial Hermann facilities would maintain their brands in their respective markets. The organizations expect to reach a definitive agreement in early 2019 and finalize the merger by midyear.

Baylor Scott & White reported $291.9 million in operating income on revenue of $9.09 billion in 2017, down from $494.2 million in operating income on $8.37 billion of revenue in 2016. The health system’s operating income of $494 million in the first nine months of fiscal 2018 was up 44.2% from the same period in 2017.

Memorial Hermann reported $70.6 million in operating income on revenue of $5.06 billion in 2017, down from $225 million in operating income on revenue of $4.89 billion the year prior. But in 2018, Memorial Hermann’s unaudited operating income improved to $128.7 million on revenue of $5.26 billion.

Texas is one of the fastest-growing markets in the country, although a declining oil and gas market has dampened the area’s economy.

About 17% of Houston’s population is uninsured, or about 4.8 million people, which is the largest share of uninsured individuals in a metro market in the country, Stokes said.

Memorial Hermann has reached capacity in some of its facilities, he said. It has also flattened the management structure over the last 18 months, which will serve it well going forward, Stokes said.

“We are the safety net organization for the Houston market, just like Baylor, Scott & White is for Dallas,” he said. “We have to figure out how we can continue to strengthen our communities so we can be true to our mission.”

Cerner president steps down

Cerner President Zane Burke will leave the company on November 2 after five years in the role. John Peterzalek, Cerner executive vice president of worldwide client relationships, will take on Burke’s duties and become chief client officer.

Burke helped oversee Cerner’s $16 billion deal to replace the Department of Veterans Affairs homegrown electronic health record with one made by the Kansas City, Mo.-based company. Contract negotiations stretched out almost a year, during which officials from the federal government and Cerner had to overcome some sticky issues, including interoperability. The VA’s installation of a new EHR will put it on the same system as the Department of Defense. A House oversight committee is schedule to dig into the EHR upgrade during a September 13 hearing.

Cerner did not offer any specifics behind Burke’s decision to leave. “Zane leaves the company with a strong client focus and commitment to continued innovation, partnership and sustainable growth deeply engrained in our culture and leadership philosophy,” said Cerner CEO Brent Shafer in a statement.

Burke, for his part, is optimistic about Cerner’s future, though he noted in a statement that “complex and evolving challenges remain.”

Late last week, Burke sold almost $10 million in company stock. In the announcement of Burke’s departure, Cerner stuck by the guidance it offered in its August earnings. Bookings in the most recent quarter were up 9%, thanks in part to the VA contract, and revenue was up 6% to $1.37 billion.

Amazon, Berkshire Hathaway, and JPMorgan Chase to hire CEO based in Boston, MA

Dr. Gawande will start in the CEO effective July 9. The new company will be headquartered in Boston and will operate as an independent entity that is free from profit-making incentives and constraints, the three organizations announced today.

As Healthcare Informatics noted in a news report published on January 30, “With an ambitious-sounding, if vaguely worded, announcement, three corporate giants—Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. announced Jan. 30 that they were launching an initiative to improve satisfaction and reduce costs for their companies’ employees…The three companies, which bring their scale and complementary expertise to this long-term effort, will pursue this objective through an independent company that is free from profit-making incentives and constraints. The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.’”

Details behind the initiative are still rather vague, but experts have pointed to reducing healthcare fraud and administrative costs as key areas that the companies will focus on. The lack of clarity has also led to skepticism among healthcare stakeholders. A recent survey from venture capital firm Venrock revealed that the majority of respondents are dubious about the impact of the Amazon/Berkshire Hathaway/JP Morgan healthcare partnership and believe the effort will face substantial challenges and take a lot of time to be successful.

CEO of athenahealth is stepping down

Athenahealth CEO Jonathan Bush has stepped down from the helm of the electronic health record system vendor effective immediately, the company said Wednesday.

The move comes after several allegations came to light in recent weeks, including “numerous physical altercations” with his now ex-wife, a sexual harassment settlement and inappropriate behavior at an industry event.

Athenahealth said in a statement that it is searching for CEO candidates. For now, Chief Financial Officer Marc Levine will take on additional leadership responsibilities. The company also named Jeff Immelt, former chairman and CEO of General Electric, as executive chairman.

The EHR vendor’s path forward is unclear. The board of directors will consider selling or merging the company as well as continuing operations independently. Elliott Management, which has a roughly 9% stake in Athenahealth, offered nearly $7 billion in May to purchase the company and has increased pressure on the board to accept the deal.

“We approach this process with an open mind and a commitment to continuing to strengthen the company—including its rich data asset, platform strategy and culture of innovation,” Immelt said in a statement. “We are fully focused on serving the best interests of our shareholders, employees and clients.”

Other investors—including Janus Henderson Group, which has a roughly 12% stake in Athenahealth—met with the Athenahealth board this month to urge a sale and to raise concerns about Athenahealth management’s “execution of strategic initiatives.”

Athenahealth had a relatively rough first quarter in 2018, booking less business than the same period a year earlier. Bush attributed the drop-off to weak demand, but said the company was in a strong position to grow. It laid off about 9% of its workforce at the end of 2017.

Cybersecurity: Nightmare scenarios and guiding principles

From legacy infrastructure to potential medical device hacks, some of the industry’s leading voices opened up about how the industry can begin to combat the inevitable breach.

By now, the healthcare sector is fully aware of the looming target placed on its back by hackers. The issue is that legacy infrastructure, staffing shortages and insider threats can make it tough to tackle these issues.

The biggest threats lie within the legacy infrastructure of healthcare itself. This includes medical devices operating on outdated platforms, along with IoT devices. We have not have seen it happen frequently but, if those devices are hacked cybercriminals can actually put patient lives at risk.

But security risks go beyond a breach. In healthcare, when a hacker gets in it often interrupts patient care, throws clinicians back to pencil and paper and downtime can last for weeks.

Consider the WannaCry attack that crippled the U.K. National Health Service last year.

Hackers are hitting EHR vendors, as well, which impacts providers operating on the impacted platforms. Allscripts was hit earlier this year, and some of its providers were unable to access patient records for up to a week.

“Breaches are always a concern, but lack of access to data and extended downtime with no access to records has huge impacts for revenue, patient care and community trust,” said Max Stroud, lead consultant with Galen Healthcare Solutions.

For some, the crux of security issues lies with the users. Often seen as the biggest threat, “user threats have the potential to cause significant losses and evade detection.”

Indeed, insider threats have been the biggest vulnerability to healthcare security for more than a year. Verizon’s April breach report found insider threats and human error were the biggest risks to security. In fact, healthcare is the only industry where insider threats outnumber outside threat actors.

Incremental steps and human-centric design

What can be done given the attack surface and seeming inevitability of a breach?

“A viewpoint has emerged in the last few years that organizations should just assume they are going to be compromised, so they should focus their efforts on detection and response for when an attack inevitably happens,” said a spokesperson from health IT firm Cognosante.

Detection and response, however, only comprise half the equation: “It’s a huge mistake to back off on preventive controls like strong access control, web application security, adaptive firewalls and user awareness training.”

Several experts said security needs to be designed with the user in mind. According to Stroud, she’s seen doctors share their passwords with nurses in order to complete charts, as it’s seen as “a care efficiency and not a risk.”

Even worse, Stroud said, “I’ve also seen EHRs delivered with standard admin logins. It’s not pretty out there.”

“Human-centered design should account for human-centered tendencies,” said Geeta Nayyar, MD, Femwell Group Health’s chief healthcare and innovation officer. “Understanding how we can help our folks develop an internal motivation to actively embrace the role of our first line of defense.”

With that in mind, organizations need to make it nearly impossible to do the wrong thing, Harlow added. “Very important to reduce exposure, reduce public face, limit internal access on role-based need-to-know basis.”

Organizations should also conduct pen testing and bug bounty programs on the regular to make sure they’re not susceptible to attacks.

“You can try to predict the future, or you can just continually review and improve your systems, processes, personnel, training, etc. including doing new risk assessments as changes are made,” said Harlow.

“We plan for what we can plan for – but there are many unknowns in this business,” said Nayyar. “Keep solid post-event contingency and crisis plans current.”

VA Finalizes ‘Anywhere to Anywhere’ Telehealth Program For Vets

The VA’s new telehealth program, posted in the Federal Register, enables VA practitioners to use connected care technology to treat veterans no matter where either the veteran or the doctor are located.

The Department of Veterans Affairs has posted former Secretary David Shulkin’s ambitious connected care initiative in the Federal Register, finalizing a plan to improve access to healthcare for veterans who have difficulties visiting the VA’s estimated 900 hospitals and clinics around the country. The rule enables VA practitioners to use telehealth to connect with veterans in any state, effectively bypassing state licensure laws.

“This final rulemaking clarifies that VA healthcare providers may exercise their authority to provide health care through the use of telehealth, notwithstanding any State laws, rules, licensure, registration, or certification requirements to the contrary,” the rule, dated May 8, states. “In so doing, VA is exercising Federal preemption of conflicting State laws relating to the practice of healthcare providers; laws, rules, regulations, or other requirements are preempted to the extent such State laws conflict with the ability of VA health care providers to engage in the practice of telehealth while acting within the scope of their VA employment.”

“Preemption is the minimum necessary action for VA to furnish effective telehealth services because it would be impractical for VA to lobby each State to remove any restrictions that impair VA’s ability to furnish telehealth services to beneficiaries and then wait for the State to implement appropriate changes,” the rule continues. “That process would delay the growth of telehealth services in VA, thereby delaying delivery of healthcare to beneficiaries. It would be costly and time-consuming for VA and would not guarantee a successful result.”

VA officials have stressed that the rule doesn’t give VA practitioners any extra liberties, but allows them to treat veterans through telehealth. It also does not apply to physicians involved in the VA Choice program.

Ascension forges first-ever global supply chain company to reduce costs

Ascension is partnering with a large Australia-based international hospital company to form what appears to be the first-ever global supply chain firm.

A major goal of the joint venture between Ascension and Sydney-based Ramsay Health Care, announced Tuesday, is to reduce costs at Ascension’s 151 U.S. hospitals and hundreds of other not-for-profit facilities to the levels in lower-cost countries.

“We believe our providers, and any providers, want products at high quality and lower cost,” Ascension CEO Anthony Tersigni said in an interview. “This gives us visibility into product offerings around the world, and patients will benefit from this greater awareness.”

he joint venture is part of Ascension’s new strategic direction, announced in March, that includes downsizing hospital operations and expanding ancillary businesses such as group purchasing.

Until now, there have been no meaningful efforts to rationalize the healthcare supply chain internationally, even though that’s been done in other industries. Much higher prices for drugs and other products in the U.S. are a major contributor to much higher healthcare spending here compared with other advanced countries.

Rob Austin, director of healthcare consulting at Navigant, said the deal could help reduce U.S. healthcare costs if it helps Ascension learn how much other countries pay for medical products, and it uses that knowledge to negotiate lower prices for U.S. providers.

“Especially with pharmaceutical drugs, if they could get the pricing, that would really make an impact on bending the cost curve,” he said.

But Austin cautioned that it won’t be easy for the new buying group to navigate the differing regulations in each country, particularly when it comes to drugs and medical devices.

The deal, finalized on Tuesday, will be owned equally by Ascension and Ramsay, a for-profit company founded in 1964. Ramsay owns 230 hospitals and outpatient surgery centers in six countries—Australia, France, Indonesia, Italy, Malaysia and the United Kingdom. It’s the largest private hospital operator in Australia and France. It reported revenue of about $6.5 billion (in U.S. dollars) last year, with a net profit of $451.5 million.

Ascension reported $552.7 million in operating income on net operating revenue of $22.6 billion in 2017, down 27% from $753.2 million in operating income on revenue of $21.9 billion in 2016.

In a written release, Ramsay CEO Craig McNally said the new global buying group will seek products internationally that deliver a high level of service and clinical outcomes. This partnership “will allow us to share learnings, best practices and industry knowledge to seek improved quality and outcomes whilst also reducing costs,” he said.

Ramsay’s share price dropped 4% Monday on news that McNally sold 75,000 shares of his company last week for about $4.8 million. The company said McNally sold his shares primarily to meet personal income tax obligations, The Motley Foolreported.

Through the joint venture, Ascension initially will seek out global sources mainly for medical-surgical products such as gowns, sutures and mattresses. It may also source some pharmaceutical products, most likely generic drugs. Later, the buying group may move into medical devices, implants and a broader range of drugs—all of which would face much tougher regulatory hurdles.

Tersigni said he wants the joint venture to extend Ascension’s reach domestically and internationally, strengthen Catholic healthcare, and help his organization gain insight into clinical research around the world.

“Vendors will benefit from having a single point of negotiation to an international platform like ours and streamline discussions between them and health systems,” he said.

Ascension will benefit from Ramsay’s experience in buying products to meet the needs of providers and patients in different countries. For instance, in some Asian countries, people are smaller in stature and require smaller scrubs. In addition, each type of hospital staffer may wear a different color scrub. In the U.K., hospital basins and bedpans are made of disposable cardboard rather than plastic.

Ramsay could gain insights from the operating model of Ascension’s group buying division, called the Resource Group. It focuses on streamlining the purchasing process to reduce vendor costs and thus enable them to offer lower prices without sacrificing profit.

The Resource Group manages a portfolio of $7.7 billion in annual spending for supplies, purchased services, pharmacy, construction materials, capital and IT, and it claims to save participants $1 billion annually.

It plans to channel about $143 million in spending through the new buying group in the first year.

Hospitals around the world buy the same types of products but pay sharply different prices in different countries. “If the new buying group shares any of that comparative pricing, that will be really eye-opening,” Navigant’s Austin said. “Imagine price transparency around the globe. That will call suppliers on the carpet for pricing much more aggressively in the U.S. than in other places.”

Why does the U.S. spend so much more on healthcare? It’s the prices

Dr. John Cullen’s four-physician family medicine practice in Valdez, Alaska, employs three full-time staffers who work on insurance and patient billing. A fourth full-timer focuses on obtaining prior authorizations from nine private and public insurers.

Even then, Cullen and his partners often must call and write letters to convince insurers to approve coverage or pay claims.

“It’s an incredible bureaucratic mess to get anything done for patients,” said Cullen, president-elect of the American Academy of Family Physicians.

In contrast, Dr. Trina Larsen Soles’ 12-physician general practice in Golden, British Columbia, has one full-time staffer assigned each day to billing the province’s public medical services plan, its public workers’ compensation plan and its quasi-public auto insurance company. She and her colleagues don’t get involved in billing or utilization-review issues.

“It’s not a big hassle,” said Larsen Soles, president of Doctors of BC, which represents British Columbia physicians in fee negotiations with the provincial health plan. “I can focus on patient issues, not administrative issues.”

The sharp difference between the two doctors’ experience partly explains why the U.S. healthcare system has much higher administrative costs than Canada and other countries. Those costs, plus much higher prices for medical services and pharmaceuticals and much higher pay for physicians and nurses, were the major reasons the U.S. spent a larger share of GDP on healthcare in 2016 than 10 other wealthy nations, according to a recent study in JAMA.

The authors said the huge spending gap—17.8% of GDP in the U.S. versus an average of 10.8% in the other 10 countries—was not primarily driven by the factors that often get the blame. Those commonly cited culprits include excessive utilization caused by the U.S. fee-for-service payment system, defensive medicine prompted by liability worries, underinvestment in social programs, and a low mix of primary care to specialty care.

The JAMA study findings reinforce doubts about whether the current U.S. policy mantra of shifting from fee-for-service to value-based payment, plus adopting high-deductible health plans to squeeze out unnecessary care will be the silver bullet to reduce spending. Instead, the authors suggest the need for measures aimed directly at bringing down the prices of drugs and medical services.

“We do have some overutilization, and value-based programs can help,” said Dr. Ashish Jha, a professor of global health at Harvard and a co-author of the article, which was based on data from the Organisation for Economic Co-operation and Development. “We completely have a price problem. MRIs cost twice as much in Kansas as in London, and that makes no sense.”

“We don’t want to tackle the issue of prices so we defer the discussion to things we think we can deal with, like the differences in quantity,” added Gerard Anderson, a health policy professor at Johns Hopkins University who has studied international systems.

More administrators

Eight percent of U.S. healthcare spending went to administrative costs incurred by private and public insurers, compared with an average of 3% in the 10 other wealthy countries, the JAMA authors found.

That 8% figure doesn’t include billing and insurance-related activities by hospitals and physician offices. Including those costs would bring the share of U.S. healthcare spending on administrative costs up to about 14%, according to Dr. Steffie Woolhandler, a health policy professor at Hunter College.

A 2013 Health Affairs study co-authored by Woolhandler found that administrative costs accounted for 25.3% of U.S. hospital spending in 2010, compared with 19.8% in the Netherlands, 15.5% in England, and 12.4% in Canada.

For example, Minnesota-based HealthPartners employs about 200 full-time staff to handle back-end billing and collection work for its one hospital and 36 clinics and specialty locations, a HealthPartners spokesman said.

In contrast, the University Health Network in Toronto, which has six hospitals including Toronto General and 1,272 beds, has just 5.5 full-time-equivalent employees handling insurance billing and patient collection activities, a UHN spokeswoman said. Meanwhile, its CEO was one of the highest-paid hospital managers in the province of Ontario with a 2017 salary of $558,000 (C$720,000) at recent currency rates, according to the Canadian Broadcasting Corp. The median base salary of a stand-alone hospital CEO in the U.S. in 2017 was $550,000 and with bonuses and incentives that rises to $648,000, according to Modern Healthcare’s Executive Compensation Survey.

It’s the same story for doctors. Physician practices in Ontario spent just 27% as much per physician per year on interactions with insurers as U.S. physician practices spent, according to a study published in Health Affairs in 2011.

Those administrative cost disparities arise from starkly different payment systems. While the U.S. has hundreds of private and public payers that each set their own rates with providers and drugmakers, the other 10 countries either have a single public health plan or have private insurers that pay the same nationally negotiated prices.

“We have a much more complicated healthcare system than anyone else, so it’s no surprise that the cost of administering it is so much higher than in any other place,” Jha said.

The profit motive

Some analysts say the mandate to maximize revenue is an inseparable part of a U.S. system that is more profit-oriented than systems in other countries. “It’s the ideological model,” said Aaron Katz, a lecturer in global health at the University of Washington who has studied the U.S. and Canadian systems. “The system is perfectly designed to provide opportunities for organizations to make money.”

At the urging of business consultants, U.S. providers have boosted revenue by breaking out separate fees for every service item, such as OR recovery room time, in contrast to much simpler billing in other countries, Rosenthal said. At the same time, U.S. patients have come to expect fancy, hotel-like facilities and amenities, far different from the utilitarian facilities abroad.

Even so, she and others say identifying villains is not productive. “How did we get to this crazy place nobody likes?” Rosenthal said. “Everyone wants to name a bad guy—insurers, drugmakers, high salaries. But it’s kind of all of the above.”

Nevertheless, many experts agree with the JAMA study’s conclusion that high prices and administrative costs, more than overutilization, are to blame for this country’s singularly high healthcare spending.

That won’t change until the people who pay the bills start using their clout to push down prices, Johns Hopkins’ Anderson said.

Indeed, it may be starting to happen with the January announcement that three corporate powerhouses, Amazon, Berkshire Hathaway, and JPMorgan Chase, are teaming up to tackle healthcare costs.

“When American corporations say we are no longer willing to pay 50% more than Medicare for the same service, we’ll have a discussion about healthcare spending,” he said. “Until then, we’ll be talking around the edges.”

Jha’s preferred solutions are for Medicare to take the lead in trimming provider payments for certain overpriced specialist services, and for the government to more aggressively enforce antitrust laws to prevent providers from consolidating to raise prices.

The University of Washington’s Katz, who sees no evidence that market competition works in healthcare, wants to see the government set overall spending levels and payments to providers and drugmakers, as other advanced countries do. “But that would impair everyone’s revenue and profit growth, and the U.S. players don’t want to hear that story,” he said.

Any spending reduction effort would have to lighten the crushing administrative burden associated with the numerous U.S. payers each setting their own payment rates and coverage policies.

Cullen, the family physician in Alaska, said he tried to persuade a Canadian doctor who works a few months a year at his office to join his practice full-time. She turned him down flat due to the hassles she’s experienced in dealing with U.S. insurers.

“She’s just horrified with what we do here,” Cullen said with a laugh. “This is a crazy system.”

By: Harris Meyer