June 17, 2022

The Weekly Gist: The Apologies, AI Overlords Edition

by Chas Roades and Lisa Bielamowicz MD

You may have read that Google put a senior engineer on leave this week, after he suggested that the artificial intelligence (AI) chatbot his division helped create had become “sentient”. According to engineer Blake Lemoine, the LaMDA bot engaged him in deep conversations about personhood, and shared a “deep fear” of being turned off. Google, along with many AI experts, dismissed Lemoine’s assertion as wildly premature. We’re not smart enough to have an opinion on LaMDA’s sentience, but on the off chance that Lemoine’s right, we’d like to start by apologizing to our new AI overlords for pestering them with so many dumb questions. Moving forward, we’ll find other ways of figuring out “what time the game is on” and “what the capital of Azerbaijan is”. We do have a bone to pick, however. We are never, ever looking for more information on Gastro-Intestinal Stromal Tumors. From now on, Google, just give us the Gist.

THIS WEEK IN HEALTHCARE

What happened in healthcare this week—and what we think about it.

  1. Supreme Court reverses 340B Medicare rate cut. In a unanimous decision, the Justices found that the Department of Health and Human Services (HHS) exceeded its legal authority when it cut Medicare reimbursement rates for outpatient drugs by 28.5 percent at 340B-eligible hospitals in 2018. The justices wrote that the Centers for Medicare and Medicaid Services (CMS) shouldn’t have cut payments to these hospitals without first surveying their average drug acquisition costs, as required by statute. CMS must now figure out how to repay 340B hospitals the difference in reimbursement for 2018 and 2019, the two years the unlawful cuts were in effect, during which time it redistributed those savings to all hospitals in the form of higher reimbursement for outpatient services. (For an explainer on the mechanics of the 340B program, see our overview here, and for more details on this Supreme Court case, see our summary here.)

The Gist: This decision was a narrow ruling on administrative grounds, and did not touch on the larger policy debates concerning the 340B program. While 340B-eligible health systems can breathe a momentary sigh of relief, they are still facing significant, ongoing revenue disruptions as at least 17 pharmaceutical manufacturers are restricting discounted drug sales to contract pharmacies. Scrutiny of the 340B program, which has grown to include over 40 percent of US hospitals, will continue to raise questions about whether there are better ways to subsidize the operations of hospitals serving low-income patients, and to ensure that underserved patients have access to lifesaving treatments.

  1. American Medical Association (AMA) takes strong stand on social issues. At its annual meeting this week, the AMA’s policymaking arm voted to adopt resolutions opposing state efforts that criminalize abortion or limit access to reproductive healthcare. This comes ahead of the much-anticipated Supreme Court decision, which is expected to overturn the 1973 Roe v. Wade The nation’s largest physician organization joined the American College of Obstetricians and Gynecologists in calling on the Food and Drug Administration to make birth control pills available over-the-counter and without age restrictions. The AMA also declared climate change a public health crisis, as physicians are already seeing negative health effects from heat-related injuries.

The Gist: As a new generation of physicians has entered the workforce, the policy priorities of physician lobbying organizations have evolved. We are seeing a growing interest in addressing hot-button social issues head-on. The AMA has declared both gun violence and racism to be public health issues, and supports health insurance coverage expansion, positions that would have been unimaginable a few decades ago. Though progressive on social issues, however, the AMA is still advocating against state efforts to expand mid-level providers’ scope of practice—maintaining its traditional role as a protector of the physician guild. 

  1. The Federal Trade Commission (FTC) wants more information on UnitedHealth’s $5.4B LHC deal. LHC, a postacute care behemoth with several hundred home health and hospice locations, as well as a dozen long-term care hospitals, would greatly expand Optum’s ability to provide home-based and long-term care. The FTC’s second request for information threatens to delay the deal, which was set to close in the latter half of this year.

The Gist: The LHC deal is the second UnitedHealth Group (UHG) transaction that antitrust regulators have targeted recently. The Department of Justice filed a lawsuit earlier this year to block UHG’s acquisition of Change Healthcare, alleging that acquiring a direct competitor for claims solutions would reduce competition. The FTC has historically focused its efforts on horizontal integration, but the LHC scrutiny, in combination with a recent inquiry into pharmacy benefit managers, indicates its focus may be expanding to vertical integration.

Pluswhat we’ve been reading.

  1. Philanthropist backs antitrust lawsuits against large health systems. Consumers and employers recently filed lawsuits against Hartford HealthCare, HCA Healthcare, and Advocate Aurora Health, accusing the health systems of using their market power to increase prices through anticompetitive contracting practices. New reporting from the Wall Street Journal finds that all three suits are receiving funding from billionaire John Arnold, through his charitable foundation Arnold Ventures, which has sponsored several efforts to reduce healthcare spending. While the health systems say that the claims are baseless, the law firm leading the suits, Fairmark Partners, says that it’s attempting to enforce antitrust laws through the courts.

The Gist: Amid the Biden administration’s increased scrutiny of health system anticompetitive behavior, state governments and philanthropic groups are also taking a more active role in challenging hospital deals and contracting practices. While these groups have targeted hospital prices because they’re a significant source of increased healthcare spending, these lawsuits do little to address the perverse underlying incentives that push hospitals to seek higher prices from commercial patients, to cross-subsidize what they view as insufficient pricing from public payers.


GRAPHIC OF THE WEEK

A key insight or teaching point from our work with clients, illustrated in infographic form.

Hospitals face increasing competition for lower-wage workers 

Although the nursing shortage has attracted much attention in recent months, the healthcare workforce crisis is hitting at all levels of the labor force. As the graphic below shows, the attrition rate for all hospital workers in 2021 was eight percentage points higher than in 2019. Among clinicians and allied health professionals, certified nursing assistants (CNAs) have the highest turnover levels. Given the demands of the job and relatively low pay, CNA openings have been consistently difficult to fill. But it’s become even harder to hire for the role in today’s labor market as job openings near an all-time high. Although labor force participation rates have rebounded to 2019 levels, pandemic-induced economic shifts have led to a boom in lower-wage jobs. In 2021 alone, Amazon opened over 250 new fulfillment centers and other delivery-related work sites. The company is competing directly with hospitals and nursing facilities for the same pool of workers at many of these new sites. In fact, our analysis shows that more than a quarter of hospital employees currently work in jobs with a lower median wage than Amazon warehouses. Health systems have historically relied on rich benefits packages and strong career ladder opportunities to attract lower-wage employees, but that’s no longer enough—Amazon and other companies have ramped up their benefits, such that they now meet, or even surpass, what many hospitals are providing. The time has come for health systems to reevaluate their position in local labor markets, and better define and promote their employee value proposition.


THIS WEEK AT GIST—ON THE ROAD

What we learned this week from our work in the real world.

The tight labor market is impacting provider volumes

Health systems are on edge after two quarters of shaky financial performance, with skyrocketing labor and supply costs compressing margins. But in addition to cost challenges, many are also reporting a softening of demand, with profitable surgeries and other procedures and diagnostics being hit hard. Some report seeing a drop in elective services (as one COO told us, “We may have finally worked our way through the backlog of delayed procedures from 2020 and 2021”), but in many cases, hospitals are missing the staff necessary to open up much-needed surgical capacity. One system reported having to shut down operating rooms due to a lack of surgical techsEven more pressing is a shortage in anesthesia capacity, with systems across the country having trouble staffing anesthesiologists and nurse anesthetists. Some practitioners have been rolled up into large, investor-owned groups, which then have taken providers out-of-network for key insurers. But regardless of ownership structure, a shortage of providers has led to “shoestring staffing” with little ability to cover absences or departures, leading to last-minute cancellations of procedures. Pediatric hospitals have been particularly hard-hit. Most rely on subspecialty-trained anesthesiologists, and as one physician leader pointed out, children’s hospitals use anesthesia not just for surgeries, but also for diagnostics, radiation therapy and other treatments where sedation isn’t required for adults. All in, the shortage of anesthesiologists is leading to critical treatment delays and exacerbating revenue concerns. Moreover, systems are facing frustrated consumers, who care little about the complexities of the healthcare workforce shortage and supply chain challenges that led to an abrupt cancellation of their care.


THIS WEEK AT GIST—ON THE PODCAST

All the headlines in healthcare policy, business, and more, in ten minutes or less every weekday morning.

In last Monday’s episode we heard from Vijay Yanamadala, MD, a neurosurgeon at Hartford HealthCare and CMO of digital physical therapy company SWORD Health. He discussed how SWORD works with orthopedic groups, health systems, and physical therapists to supplement in-person therapy, as well as triaging patients before surgery referrals.

Coming up this Tuesday, we’ll hear from Nigel Ohrenstein, president of digital musculoskeletal startup Kaia Health. He expects that digital physical therapy will become the default form of physical therapy in the future.

[Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.]


That’s all for this week—now for a long weekend! Hope everyone has a happy Father’s Day and enjoyable Juneteenth holiday. We’ll see you back here next week for more Weekly Gist fun. In the meantime—drop us a line! We love hearing from you, and we’re grateful for your readership. Let your friends and colleagues know about us, and tell them to subscribe and listen to our daily podcast.

Let us know how we can be of assistance in your work. You’re making healthcare better—we want to help!

Best regards,

Chas Roades
Co-Founder and CEO
chas@gisthealthcare.com

Lisa Bielamowicz, MD
Co-Founder and President
lisa@gisthealthcare.com