THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
- First hospitals penalized for failing to comply with price transparency requirements. The Centers for Medicare and Medicaid Services (CMS) fined two of Atlanta-based Northside Hospital’s five facilities a total of $1.1M for failing to disclose their prices. Though only six percent of hospitals are fully in compliance with the federal rules that went into effect in January 2021, CMS has only sent 352 warning letters to date, and this week’s fines are the first the agency has issued.
The Gist: While these first fines are notable, it remains an open question whether the financial penalties for not complying with price transparency are stiff enough to motivate hospitals to submit their data. While more substantial than those under the Trump Administration, the current fines remain a rounding error for many hospitals, as they represent less than one percent of net patient revenue on average. Market dynamics may be more of a factor in compliance than monetary penalties: a recent JAMA study found that hospitals in more competitive, urban markets were more likely to share prices.
- Federal Trade Commission (FTC) to investigate pharmacy benefit managers (PBMs). The FTC is requesting information from six PBMs, including the largest three that, when combined, control 80 percent of the market: UnitedHealth Group’s OptumRx, CVS Health’s Caremark, and Cigna’s Express Scripts. PBMs act as third-party administrators, operating prescription drug plans for employers and insurers. The inquiry is focused on how vertical integration in the PBM sector impacts consumer access to drugs, as well as pricing in the prescription drug market.
The Gist: While critics accuse PBMs of raising drug prices for employers and consumers through opaque pricing and rebate models, PBMs blame drug manufacturers for the high prices. The details of how PBMs negotiate drug formularies and prices have been obscure, and it’s unclear what, if any, value these middlemen provide to consumers and employers. Regardless, they are incredibly profitable, accounting for significant portions of parent insurance companies’ revenue. It is worth keeping a close eye on the results of this investigation and the possible calls for PBM reform that may follow—this inquiry could be a harbinger of broader antitrust efforts to investigate the impact of vertical integration in the healthcare industry.
- Oracle completes its $28B Cerner acquisition. Kansas City, MO-based electronic health record (EHR) company Cerner is now a business unit within Oracle, the Austin, TX-based software behemoth. Oracle, which already sells some software to insurers, hospitals, and public health departments, calledCerner the company’s “anchor asset”, and hopes to use it to expand its healthcare presence. Oracle co-founder and board chair Larry Ellison unveiled lofty plans to create a national health records database,but he didn’t detail how the company would get access to health records from non-Cerner systems, as interoperability standards haven’t been fully implemented.
The Gist: In addition to the challenge of entering the complex EHR and healthcare data market, Oracle now faces the challenge of rebuilding Cerner’s growth, and its clients’ confidence.Cerner lags Epic in terms of hospital market share: Epic holds about a third of the US hospital market, compared to Cerner’s 24 percent. Epic gained an additional 74 hospitals last year, compared to Cerner’s five. Anecdotally, we know of several long-term Cerner health system clients who are either in the middle of, or planning for, a transition to Epic, which is seen by health system leaders as the superior EMR option. (In the words of one executive, “No CEO ever got fired for choosing Epic.”) If a stronger Cerner product emerges as a result of the acquisition, it could help to stem this tide.
Plus—what we’ve been reading.
- Insurer carve-outs hampering mental healthcare access. Health insurance companies have been contracting out mental health coverage to specialized providers since the 1980s, but the boom in demand for behavioral health support unleashed by the pandemic has exposed problems in this patchwork system. A recent Kaiser Health News story highlights the difficulties that many patients and their primary care physicians (PCPs) face when trying to address behavioral care needs. Many PCPs find that they are limited in their ability to bill for these services, as they are “out-of-network” for mental health treatment.
The Gist: The pandemic has heightened the call for PCPs to provide increased mental health support within their practices. Not only is there a national shortage of mental health providers, but research shows PCPs can treat mild to moderate depression as well as psychiatrists. PCPs already cover 40 percent of all visits for depression and anxiety, and prescribe half of all antidepressant and anti-anxiety medications. Unfortunately, the way many insurers cover mental health is preventing further integration of mental health into primary care. Patients, often unaware of these carve-outs, suffer most, finding it harder to receive holistic care, and possibly being hit with unexpected bills for out-of-network care provided by their own primary care doctor. As demand for mental healthcare increases, employers and other purchasers—who often rank mental health as one of the most important needs—must assess their health plan offerings, scrutinizing behavioral health carve-outs in particular.