THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
- 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.
- 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.
- 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.
Plus—what we’ve been reading.
- 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.