|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
President Trump calls for increased transparency in healthcare
On Monday, President Trump issued a highly-anticipated Executive Order aimed at lowering the cost of healthcare by allowing the public access to privately-negotiated rates that insurers pay hospitals for their services. The order directs the Department of Health and Human Services (HHS) to propose a rule requiring hospitals to make available consumer-friendly information on the “actual prices” for “common or shoppable items and services”, including “information based on negotiated rates”. HHS, along with the Departments of Labor and the Treasury, is also directed to draft rules requiring payers and providers to work together to give consumers information on expected out-of-pocket costs in advance of receiving care. Other provisions of the Executive Order direct agencies to consolidate and streamline federal quality reporting measures, and to plan the creation of a national all-payer claims database (APCD) to allow greater visibility into the cost of care.
As expected, hospital and insurance industry lobbyists reacted negatively to the President’s Executive Order, pointing to concerns that revealing negotiated rates could cause prices for care to increase, not fall, as low-priced providers seek access to the same rates as higher-priced competitors. While that phenomenon has occurred in a handful of other industries, such as the Danish concrete market, experts are divided on whether transparency will have the same impact in US healthcare. We continue to believe that more transparency is better than less, and that industry opposition is driven more by concerns over potential purchaser dismay over outsized rates. Depending on the extent of the information required to be made public by eventual rulemaking (which could well be watered down in response to industry pressure), purchasers of care could be about to get their first full look at the irrational pricing that has driven healthcare costs to their current, unsustainable level. At that point, it could fairly be asked: why isn’t our third-party payer system getting us a better deal on healthcare, even as insurance companies have grown into multi-billion-dollar behemoths? And why has provider consolidation not resulted in rate-lowering efficiencies? A moment of reckoning approaches.
Healthcare features prominently in the first Democratic debate
Everyone should have health coverage—that’s about all the 20 Democratic presidential candidates could agree on in this week’s back-to-back televised debates. Across two nights of sometimes chaotic exchanges, the candidates largely divided into two camps in response to questions on the topic of “Medicare for All” (M4A). Among major contenders, only Sens. Elizabeth Warren (D-MA), Bernie Sanders (I-VT) and Kamala Harris (D-CA) raised their hands in support of abolishing private insurance and moving fully to a government-run insurance plan. Warren took a hard line, asserting that insurers favor their own profits over the health of their enrollees. “That leaves families with rising premiums, rising co-pays, and fighting with insurance companies to try to get the healthcare that their doctors say that they and their children need,” she said. More moderate candidates—including South Bend, IN Mayor Pete Buttigieg, Sens. Kirsten Gillibrand (D-NY), Michael Bennet (D-CO), and Amy Klobuchar (D-MN), all defended at least a transitional role for private insurers, while supporting “public option” and “Medicare buy-in” approaches to increasing coverage. There’s surely much more to come from the candidates on the topic of M4A, but after the first debate it’s worth noting just how much the discussion has shifted in the years since the passage of the Affordable Care Act (ACA). Back in 2010, talk of single-payer healthcare was dismissed entirely as unfeasible, and even the “public option” was abandoned as too radical. While future debates will surely rejigger the pecking order among Democratic candidates, it appears as though most of the party’s frontrunners are staking out positions that would have been untenable at the beginning of the decade.
An “ominous sign” in a critical court case
While Democratic presidential hopefuls debated whether to move to a single payer system or build on the ACA, the fate of the 2010 health law grew more uncertain this week, when a Fifth Circuit Court of Appeals panel asked 16 Democratic state attorneys general to explain why they believe they have standing to defend the law in the ongoing Texas vs. Azar case. A federal district court judge in Texas ruled in December that without the individual mandate, which Congress repealed as part of the 2017 tax reform law, the entire ACA should be held unconstitutional. The “blue state” attorneys general, along with the Democratic-led House of Representatives, stepped in to lead an appeal of the ruling after the Trump administration demurred, but now the appeals court appears to be questioning whether appeal is even possible. University of Michigan law professor Nicholas Bagley said on Twitter this week that the court’s ask was an ominous sign. “If neither the blue states nor the House has standing, it would mean that no one has standing to appeal the decision. That would effectively leave the lower court decision unappealable.” Such an outcome would be world-shattering for most sectors of the healthcare economy. Over the past nine years the ACA has changed nearly every part of the American healthcare system, and it’s not clear what would happen it if were to come unraveled. The law altered the structure of the insurance marketplace, expanded Medicaid coverage to millions of Americans, established new payment and quality measurement programs, and much, much more. We’re frankly surprised at how little attention the Fifth Circuit’s action this week has garnered, and we’d advise keeping an even closer eye on Texas vs. Azar as the case continues to unfold.
New healthcare deals in the upper Midwest
More healthcare deal-making in the Midwest this week, as two large health systems announced their intent to merge, and a regional insurer agreed to take a minority stake in another system’s clinic operations. On Thursday, Des Moines, IA-based UnityPoint Health and Sioux Falls, SD-based Sanford Health, two dominant systems whose operations span 26 states and 76 hospitals, announced merger plans. The combined entity would have more than $11B in revenue, putting it in the top 15 health systems nationally. Both systems have aggressively pursued integration strategies aimed at bringing together hospitals, outpatient services, physician practices, and insurance capabilities, in an effort to shift away from traditional fee-for-service care toward a risk-based model. Sanford Health also recently moved into the long-term care market, after merging with Evangelical Lutheran Good Samaritan Society earlier this year. By coming together, Sanford and UnityPoint hope to be better positioned to pursue contracts with purchasers to manage the health of employee populations, as well as care for Medicare enrollees.
Meanwhile, Blue Cross Blue Shield of Minnesota (BCBS-MN) announced plans to take a minority ownership stake in 14 primary care and six specialty clinics operated by Robbinsdale, MN-based North Memorial Health, which owns one hospital in the Minneapolis suburbs and partners with Fairview Health Services to operate another. The new joint venture is aimed at creating financial alignment between the insurer and the clinics and joins other payer-provider hybrids in the state, such as Aetna’s venture with Allina Health, and Minnesota insurer HealthPartners’s extensive clinic operations. Both the North Memorial and Sanford-UnityPoint deals point to the growing prevalence of vertical integration in healthcare, as providers and payers seek to assemble the clinical and risk-management assets needed to manage care for large populations of patients. Expect more blurring of the payer-provider divide in the months to come.