Volume 34
#1 The Federal Government Avoids A Shuts Down… For Now
Late Saturday, Congress avoided a government shutdown by approving a broadly bipartisan bill less than three hours before the fiscal year closed. The bill keeps federal agency funding at fiscal year 2023 levels for the next 45 days and includes $16 billion for disaster relief. It does not include funding Democrats wanted for Ukraine or the border security boost Republicans craved. While this is good news for American people, the bill is just a band-aid. Funding runs out Nov. 17.
So What’s The Big Deal? As we discussed in our previous newsletter, a federal shutdown has broad implications for public health and healthcare. Politically, the implications of the continuing resolution are far less clear. The far right-wing of the House Republican caucus is furious with their Speaker of the House, Rep. Kevin McCarthy, for moving this bill forward. Ninety of these GOP lawmakers, along with one Democrat, voted against the measure. Now these lawmakers want Speaker McCarthy out. We’ll see how that gambit plays out this week. If Speaker McCarthy survives, it will most likely be because Democrats helped him out in exchange for certain concessions to their agenda. In other words: out of this mess, we could see a path to a new, more middle of the road governing majority. Only time will tell, however. It will be a long and bumpy road before we get there.
Update: McCarthy lost his gavel on Tuesday night. It’s unclear who will be the next Speaker.
#2 FTC Sues U.S. Anesthesia Partners And Welsh Carson
In an unprecedented move, the Federal Trade Commission (FTC) has taken legal action against both a medical group and its private equity backers, alleging anticompetitive behavior that resulted in inflated healthcare costs. The FTC asserts that U.S. Anesthesia Partners (USAP) and the private equity firm Welsh, Carson, Anderson & Stowe conspired to consolidate anesthesia practices in Texas, resulting in increased anesthesia service prices and higher profits for the companies themselves.
So What’s The Big Deal? This lawsuit underscores the FTC's intent to scrutinize mergers and acquisitions within physician practices and indicates the commission could launch additional legal actions aimed at preserving market competition. More broadly, however, is how this action could threaten a common “roll-up” practice deployed by private equity firms. This strategy has been used in healthcare for more than a decade.
Your BIG Thoughts: We think this lawsuit could cool private equity deals. Agree or disagree?
#3 CMMI Costs More Than Expected
During the first 10 years of the Center for Medicare and Medicaid Innovation (CMMI), which was designed to explore cost-effective healthcare delivery, federal spending increased by more than $5 billion. This news is a surprise since it was estimated CMMI would reduce spending by $2.8 billion. In its pursuit of value-based care, CMMI spent $7.9 billion on care models, ultimately reducing benefits spending by $2.6 billion.
So What’s The Big Deal: These findings reveal the complexities of transitioning from fee-for-service to value-based models within the vast healthcare system, even though the totals remain a small portion of total Medicare expenses, emphasizing CMMI's constraints. That said, it is clear CMS continues to push healthcare further along the path of value-based care despite the initial investment costs.
Your BIG Thoughts: Will CMMI eventually save the government money? What will it take to do so?
#4 Modernizing And Ensuring PBM Accountability
After gaining significant support through a 26-1 vote during a July Senate Finance Committee markup, Sens. Ron Wyden (D-Ore.) and Mike Crapo (R-Idaho) have officially introduced the Modernizing and Ensuring PBM Accountability (MEPA) Act. This bill would limit the influence of pharmacy benefit managers (PBMs) by detaching PBM compensation in Medicare from drug prices, enhancing audit and enforcement mechanisms, and assisting independent community pharmacies that have faced challenges due to PBM practices.
So What’s The Big Deal? We will need to see what finally passes, but it does appear that Congress, in a rare bipartisan fashion, is eager to rein in PBMs. One reason could be that public sentiment has begun to weigh more heavily on Congress. Eighty percent of Americans now say they are concerned with the control PBMs have over drug costs.
Your BIG Thoughts: The public wanted action on surprise billing too, but, as you will read below, the No Surprises Act has caused its own pain. How can Congress get it right this time?
#5 Big Boxes, Kirkland Chocolates, Hot Dogs And… Telehealth?
Costco is expanding its healthcare offerings in partnership with Sesame, an online marketplace, to provide its members with affordable medical care. Costco members will have access to Sesame's competitive pricing, offering online primary care visits at $29, mental health visits at $79, and a 10% discount on other services.
So What’s The Big Deal? Two things: First, this move aligns with Costco's growing commitment to enhancing its healthcare services and providing cost-effective healthcare options to its members. They are joining other retailers, like Walmart, Target, and even Dollar General in their efforts to expand healthcare access and keep customers (aka patients) loyal to their growing retail offerings. Second, Costco recognizes the role telehealth plays in healthcare and that younger individuals, Gen Y and Gen Z (those who typically go to Costco), like telehealth services more than older patients.
Your BIG Thoughts: What is the growth potential here, especially in rural communities where access to healthcare is sometimes harder to find than a Walmart?
#6 Hospital Finances Seem To Be Stabilizing
Hospital finances appear to be finding stability, with median operating margins increasing to 1.4% in August. This news marks the sixth consecutive month of positive margins for the 1,300 hospitals analyzed.
So What’s the Big Deal? These numbers indicate a shift toward a new normal for hospitals following the tumultuous years of the COVID-19 pandemic and concerns about economic downturns. While uncertainties persist, the consistent positive margins over the past six months offer reassurance that hospital finances are on a path to recovery.
Your BIG Thoughts: This six-month trend suggests a more balanced outlook for the healthcare industry. Will the trend be more enduring than the Taylor Swift-Travis Kelce fall romance? Why or why not? (We’re looking for healthcare analysis here. Not opinions on TayTrav.)
#7 Surprise! “No Surprises Act” Arbitration Fees Increase!
Despite the disastrous rollout of the No Surprises Act, the U.S. Department of Health and Human Services (HHS) is doubling down. It has suggested a substantial 200% increase in the administrative fee for the No Surprise Act's independent resolution process, raising it from $50 to $150, as outlined in a recent proposed rule. HHS also is considering a 20% increase for single determinations and a 25% increase for batched determinations regarding the upper limit of the fee range for certified IDR entities. This proposal, slated for January 1, 2024, aims to cover the estimated $70 million required for implementing IDR in 2024. The move follows a Texas federal court's order to revoke a previous fee increase to $350, deemed cost-prohibitive to some parties, particularly healthcare providers.
So What’s The Big Deal? While the law passed by Congress seemed to have safeguards for providers and provider groups, HHS’s implementation of the law has been extremely flawed. As a result, lawsuits have piled up, arbitration has faced significant backlogs, and payers simply refuse to play ball (or pay bills). And while patients have seen a significant decline in “surprise bills,” insurers have reduced reimbursement rates or kicked providers out of network, forcing providers into a flawed arbitration system and lower negotiated rates. Ultimately, practices and hospitals are losing cash, and some are making significant cuts to staffing and services.
Your BIG Thoughts: How can HHS fix this mess? Will they or will Congress have to step in… again?
#8 Medicare Can Proceed With Drug Pricing Negotiations
U.S. District Judge Michael J. Newman has declined to block the Medicare Drug Price Negotiation program. Negotiations can proceed. The judge argued drug companies do not have to participate in Medicare, therefore negotiating with the federal government is voluntary. Specifically, he wrote, “As there is no constitutional right (or requirement) to engage in business with the government, the consequences of that participation cannot be considered a constitutional violation.” Medicare drug price negotiations are a critical component of the Biden administration’s Inflation Reduction Act.
So What’s The Big Deal? This decision means pharmaceutical companies will need to cooperate with the government's negotiation efforts as the case moves forward. The ruling has come just ahead of the Oct. 1 deadline, where drugmakers with products up for negotiation had to determine whether to engage in the process or face penalties. Importantly, while Judge Newman rejected the U.S. Chamber of Commerce's request for an injunction, he also overruled the federal government's plea to dismiss the case entirely. (The federal government argued that the USCC lacked standing to sue over Medicare negotiation since it is not a pharmaceutical company.) Judge Newman issued no opinion on whether the trade group had standing and said he “will entertain the filing of one or more renewed motion(s) to dismiss.”
Your BIG Thoughts: The legal saga will continue. Will it find its way to the Supreme Court and, if so, how likely is it the current majority will side with the federal government? (Remember: Chief Justice John Roberts surprised everyone by upholding key parts of the Affordable Care Act.)
#9 Canceled: Eight Health Systems Cancel MA Contracts
In a significant development, eight prominent U.S. health systems have opted to terminate their Medicare Advantage (MA) contracts in 2023. These decisions have been primarily attributed to challenges related to low reimbursement rates and the complexities of prior authorization procedures.
So What’s The Big Deal? Medicare Advantage is increasingly popular with Medicare beneficiaries and most lawmakers. Transparency and patient access are problems, however. With several health systems canceling MA contracts, there could be far-reaching implications. This news underscores the ongoing challenges and financial considerations that healthcare organizations are grappling with in the Medicare Advantage landscape.
Your BIG Thoughts: Will more health systems follow the first eight?
#10 Dual Degrees: MD/AI?
The University of Texas at San Antonio and UT Health San Antonio have introduced a groundbreaking dual degree program that merges a Doctor of Medicine (MD) with a Master of Science in Artificial Intelligence (MSAI). This degree is the first of its kind in the United States. The 5-year program aims to equip students with expertise in both medicine and AI. Similarly, Harvard Medical School is launching an AI in Medicine PhD track via its Department of Biomedical Informatics, beginning in the next academic year.
So What’s The Big Deal? Universities are increasingly acknowledging AI's vital role in healthcare. While AI has seen prior applications on a limited scale, it is evident AI, including technologies like ChatGPT, will play an expanding role in the healthcare sector. Ensuring physicians are not just users. but active contributors to AI's development will be imperative to ensure patient safety. Integrating healthcare professionals into AI's evolution is key to harnessing its full potential and maintaining high standards of care.
Your BIG Thoughts: It also will be imperative to help current physicians and health systems integrate AI into their practices. How can tech and medicine work together to teach those who have already completed their undergraduate educations and medical school?
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