|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
An epic ACA trilogy draws to a close
Ruling by a decisive 7-2 margin, in what dissenting Justice Samuel Alito described as the third in “our epic Affordable Care Act trilogy”, the Supreme Court rejected the latest—and likely the last—effort to overturn the 2010 health reform law. Holding that the states and individuals that brought the latest challenge to the law did not have “standing”—the legal right to sue—the high court effectively closed the book on a decade-long series of challenges to the Affordable Care Act (ACA). Those efforts have included two previous Supreme Court cases, numerous promises to “repeal and replace” Obamacare, and the neutering of the law’s “individual mandate” to buy health insurance, which led to this latest case, Texas v. California. At issue in the case was whether, by zeroing out the penalty for not purchasing insurance, Congress effectively removed the ACA’s status as a taxation measure, which the Court had previously held as central to the constitutionality of the law. In Alito’s dissenting opinion, the full implications of the issue are laid out: in his view, by invalidating the mandate, Congress rendered the entire law unconstitutional, meaning that it should be overturned. But a majority of seven Justices, including Kavanaugh and Barrett (both appointed by President Trump) disagreed, joining Justice Breyer in his opinion that no harm had been done to the states that brought the suit, and ordering that the case be returned to the lower court for dismissal.
More than ten years after the passage of the ACA, it now (finally) seems as though the law is here to stay. Bolstering its central provisions—subsidized individual insurance coverage, expanded Medicaid benefits, protections for those who purchase insurance—is a centerpiece of the Biden administration’s policy program, featured first in the American Rescue Plan Act, and now in the recovery legislation currently being debated. Republicans, who had long opposed the ACA, barely mentioned it during the last presidential campaign, instead turning their focus to thwarting Democrats’ plans to expand coverage by lowering the Medicare eligibility age or implementing a government-run “public option”. Given the evenly split makeup of the Senate, however, we continue to believe the greatest hurdle such proposals will face is not Republican opposition, but reluctance on the part of conservative Democrats, like Sen. Joe Manchin (WV), whose votes will be needed for any legislation to pass. With the Supreme Court calling a third strike against challenges to the ACA, and the new administration eager to advance its other priorities (infrastructure, childcare, jobs), for the first time in over a decade, we might just be in for a period of relative calm on the healthcare policy front.
Michigan systems announce intent to merge
On Thursday, Grand Rapids-based Spectrum Health and Southfield-based Beaumont Health signed a letter of intent to merge, in a combination that would create a 22-hospital, $12B company that would become Michigan’s largest health system. Spectrum CEO Tina Freese Decker will lead the combined company, while Beaumont CEO John Fox will assist with the merger, then depart. The proposed deal would not only create a system spanning much of Michigan, but would also allow for the expansion of Spectrum’s health plan, Priority Health, which accounted for more than $5B of the system’s $8B in revenue, into the Detroit market. This is the third proposed merger since 2019 for Beaumont, which saw its planned combinations with Ohio-based Summa Health fall apart early in the pandemic; the system’s planned merger with Illinois-based Advocate-Aurora Health was called off in 2020 amid pushback from the system’s medical staff. Both deals fell apart due to challenges in communication and cultural compatibility—which will likely also be the greatest potential stumbling blocks for a Spectrum-Beaumont partnership. The recently abandoned combination between NC-based Cone Health and VA-based Sentara Healthcare also appears to have fallen apart due to cultural challenges, as have many other recent health system deals. Yet despite a string of cautionary tales, health system mergers continue apace—a sign of the pressure industry players are under to seek scale in order to contend with the growing ranks of disruptive (and well-funded) competitors.
Relying on one nonprofit to relieve the debts owed to another
Ballad Health, a not-for-profit health system operating in Virginia and Tennessee, announced this week that it had reached an agreement with RIP Medical Debt, a charity that uses donations to relieve debt created by healthcare bills, to pay off $287M of outstanding debt owed by its patients. According to a report in the Wall Street Journal, the purchase will eliminate the debt of 82,000 low-income patients, many of whom qualified for Ballad’s charity care program but did not take advantage of it. The terms of the purchase were not disclosed, but RIP Medical Debt, which says it has relieved over $4.5B in medical debt nationally, typically pays between one and 1.25 percent of the owed amount for recent debt, and as little as 0.03 percent for older debt. That’s similar to what typical debt-purchasing businesses pay. But unlike those businesses, however, RIP Medical Debt says its debt eradication service has no tax consequences for recipients, effectively wiping away large sums that patients might have owed for years. Since its creation as the result of a 2018 merger, Ballad has faced a mandate to increase the financial aid it provides to low-income patients, but has still come under criticism for aggressive collection practices, including the use of lawsuits against patients who owe the system. The deal with RIP Medical Debt is intended to reduce the amount of debt outstanding—as Ballad CEO Alan Levine told the Journal, “We’re wiping the slate clean.”
As a recent analysis by Axios and Johns Hopkins University showed, most nonprofit hospital systems have tried to reduce aggressive collections in recent years, with just 10 hospitals accounting for 97 percent of court actions against patients between 2018 and 2020. While it’s shocking to hear of a private charity having to step in to relieve patients of crippling medical debt in our nation’s $3.6T healthcare industry, absent larger structural solutions to the broken reimbursement system, it’s at least heartening to know that such services are available. But it’s a Band-Aid solution—more radical treatment remains undelivered.