Volume 26

#1 Debt Ceiling Deal Averts Medicaid Disaster

Over Memorial Day weekend, congressional Republicans and the White House reached a deal to increase the debt ceiling. The agreement avoided a federal default - and the economic turmoil that would come with it - and allowed both parties to claim healthcare victories. The 99-page piece of legislation, which suspends the debt ceiling until January 2025, did not include Medicaid work requirements, something the White House very much wanted to avoid. It does, however, rescind billions in unused COVID-19 relief funds, which was one of Republican lawmakers’ priorities. President Biden signed the legislation into law on June 3.

So What’s the Big Deal? Three things:

The deal prevented the United States from going into default, which could have had massive implications on the global economy.
Medicaid work requirements were taken off the table. Many analysts recognize that adding these requirements did little to actually improve the health and finances of the lower income individuals. Arkansas tried this idea in 2018 and failed miserably. It did not increase employment and thousands of people lost their insurance, which worsened outcomes and increased costs.
Both chambers of Congress pass the legislation with overwhelming majorities. This deal shows that bipartisanship is still possible in Washington.

#2 Oak Street Exands

Less than a month after being acquired by CVS Health, Oak Street Health is set to broaden its reach to four additional states. Beginning this summer, the primary care provider intends to establish value-based care centers in Little Rock, Ark.; Des Moines and Davenport, Iowa; Kansas City, Kan., and Richmond, Va. By year's end, Oak Street Health's operations will span 25 states. The company also has plans to launch new centers within current markets this year, with more facilities slated for Arizona, Colorado, Georgia, Illinois, Indiana, Louisiana, New York, Ohio, and Pennsylvania.

So What’s The Big Deal? Three things:

The Oak Street and CVS/Aetna merger is doing exactly what we thought it would: expand the companies’ footprints by leveraging their size and scale to reach more Medicare Advantage patients. I expect this trend to continue.
Vertical integration - combining payers (CVS/Aetna) and providers (Oak Street) - will continue. The economic benefits to creating a near-monopolistic value chain for the business is clear. What is less clear is if this integration is better for patients or providers. (See the next post.)
The companies have outmaneuvered both their flanks. We could see this strategy for other deals moving forward.

#3 Medicaid Redeterminations Could Be A Big Problem

More than 600,000 Americans have been stripped of their Medicaid coverage following the termination of pandemic safeguards on April 1. Many of the terminations were because of clerical errors. Specifically, a KFF Health News examination of state data revealed the predominant reason for removal was failure to complete the necessary documentation. As states start to unravel the continuous enrollment provision implemented during the COVID crisis and recommence Medicaid disenrollments, preliminary data from a select group of states display considerable variation in disenrollment rates. Though not all states resuming disenrollments have shared their figures publicly, data from 11 states indicate that more than 500,000 enrollees have been disenrolled so far, with nearly 250,000 of them in Florida alone. In the nine states that reported total completed renewals and disenrollments, the disenrollment rate varies from 54% in Florida to a mere 10% in Pennsylvania and Virginia. The median disenrollment rate among these states is 24%.

So What’s the Big Deal? Medicaid is a lifeline for lower-income populations and for hospitals who care for these patients. By sunsetting the redetermination process, Kaiser Family Foundation estimates more than 17 million people could be removed from Medicaid rolls, over half of whom are children. As a result, millions of Americans will struggle with access to care. The paperwork snafus represent a major communication failure on the part of states that must be addressed soon.

#4 We Have A WorkForce Problem In Emergency Medicine

On this year's Match Day, 555 emergency medicine (EM) residency spots remained vacant, a figure that was more than twice the number seen on Match Day 2022. Although these positions were ultimately occupied, the outcome conveyed a powerful message: the formerly competitive EM specialty is experiencing a decline in attractiveness.

So What’s The Big Deal? While unmatched EM positions were eventually filled, the lack of matching in the first and second rounds signal a bigger problem. The profession has become oversaturated and/or less desirable. In the article I wrote for MedPage Today in March, I discussed some of the reasons why and possible solutions for expanding the EM workforce.

#5 CVS Takes A Hit from Poor Star Rating

CVS anticipates a decline in its 2024 operating income between $800 million and $1 billion due to the loss of bonus payments resulting from reduced plan star ratings in the Medicare Advantage program. According to a U.S. Securities and Exchange Commission filing, only 21% of CVS' Medicare Advantage members are enrolled in plans with a minimum star rating of four, a significant decrease from 87% at the end of 2021. Plans with a four-star rating or higher qualify for bonus payments.

The primary cause of this overall reduction in Medicare Advantage members enrolled in highly-rated plans is the decline in the star rating of CVS' largest Medicare Advantage plan, Aetna National PPO, from 4.5 to 3.5 stars. Consequently, this plan, which has more than 1.9 million members and is among the largest in the United States will no longer be eligible for quality bonus payments in 2024.

So What’s the Big Deal? Insurers are concerned the Centers for Medicare and Medicaid Services (CMS) is now more miserly in awarding star ratings, a trend that will result in reduced profits. I believe CMS’ movement is positive, however, because: 1) Medicare patients should have plans that meet their needs and improve outcomes; and 2) CMS bonus payments should not be seen as free taxpayer money to corporations that already earn billions of dollars in profits.

That said, CMS has placed greater emphasis on patient experience when assessing scores. For the 2024 plan year, just four prominent Medicare Advantage (MA)-managed care providers - UnitedHealth, Humana, Elevance, and Cigna - received four stars or higher. This fact could push other MA plan administrators to increase quality. To be clear, however, even though they may be less than desired, these bonus payments still represent large dollar amounts. UnitedHealth Group received $2.8 billion in bonus payments for 2022, for example.

#6 Glimmers Of Hope In Hospital Finances

A number of health systems regained profitability in the initial quarter of 2023 after experiencing a chaotic 2022 that led to massive losses in the billions. To strengthen their operating margins, these systems are making required reductions in staffing, supplies, and facilities. Simultaneously, they are investing in innovative care delivery methods and expanding into high-growth markets.

So What’s the Big Deal? As hospitals begin to slowly stabilize from COVID, there are glimmers of hope. While trend lines appear to be turning in a more favorable direction, however, staffing shortages and labor costs continue to plague the system. These issues will likely not improve in the near-to-mid future. Hospitals must recognize the importance of strong recruitment and retention practices.

#7 AI Sounds Great, But Does It Make Sense Financially For Hospitals?

Nuance Communications, a Microsoft subsidiary, offers its AI medical scribe platform to healthcare providers with an enticing guarantee: by investing in this advanced technology, they can reduce physician burnout and increase revenue by allowing doctors to treat more patients. Unfortunately, executives from four health systems utilizing the DAX software informed said that, while it may enable them to see more patients or validate increased billing to insurance companies, the software’s hefty cost does not necessarily improve the bottom line.

So What’s the Big Deal? This argument sounds vaguely familiar to adoption of electronic medical records, or EMRs, in the early 2000s. Hospitals ultimately will balance the capital investment versus the long-term return with more financially stable institutions foregoing the technology.

#8 Handful Of Health Systems Try AI

UNC Health has been selected to pilot Epic's generative AI solutions in order to assist overwhelmed healthcare professionals in managing the influx of patient communications. Although large language models such as ChatGPT and Microsoft's Azure OpenAI service have only been accessible to the public for a short period of time, technology leaders at several health systems are enthusiastic about becoming early adopters.

So What’s the Big Deal? It appears the first iterations of AI will be used to support documentation, lessening workflow and administrative burdens on clinicians. Over time, however, AI technologies could improve decision support for clinicians. Make no mistake: We are only at the beginning of the generative AI revolution in healthcare. We have yet to determine how far the technology can go, how useful it will be, what the ultimate cost will be, and what regulatory parameters must be put in place.

#9 UHC Drops Controversial Colonoscopy Pre-Authorization

UnitedHealth is retracting a contentious plan that mandated prior authorizations for colonoscopies and other endoscopic procedures. The controversy surrounding insurer approvals may persist, however. Proponents of prior authorizations argue that they ensure medical necessity while detractors claim they obstruct access to care and burden the healthcare system with bureaucracy. Following strong opposition from physician groups, the insurer said it will implement an alternative advance notification process, obligating healthcare professionals to gather and submit patient information before conducting a procedure.

So What’s the Big Deal? It “advanced notification” may simply be a rebranding effort of prior authorization. While a prior authorization will not be required, there is still an administrative burden required by physicians to perform a widely approved and necessary screen test for colon cancer. The UnitedHealth approach may still deter patients from getting tests that are known to improve outcomes and diagnose fatal cancers. That outcome is not good for anyone, patients especially.

#10 Ford Motor Sues Insurer BCBS

In what appears to be more bad behavior by insurers, Ford Motor Company has filed a lawsuit against Blue Cross Blue Shield (BCBS) Association in a U.S. court. The company alleges BCBS was involved in a price-fixing conspiracy that led to the automaker paying excessive costs for health insurance products for its workforce. Ford claimed the purported scheme to limit competition between BCBS entities deprived the car manufacturer of "the chance to acquire health insurance products and services from a more affordable competitor and/or at a price determined by the free market."

So What’s the Big Deal? Ford may be right. More than 74% of commercial health insurance markets exhibit concentration, which over the years, has allowed insurers to gain market power to increase prices, limit competition, and deprive consumers of options. We have seen companies go after insurers before. In 2022, several companies sued BCBS, resulting in a $2.7B settlement. If the lawsuit goes the way of that settlement, other insurers would be able to compete in areas exclusive to BCBS plans. This outcome also would relax limitations on acquisitions and revenue caps for businesses not affiliated with BCBS plans.

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Adam Brown