|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
- Congress passes short-term spending bill—without additional COVID funding. Late last week, both chambers agreed to an interim funding bill to keep the government open through mid-December. In what is likely the last major piece of legislation before the midterm elections, the bill included an extension of two key Medicare payment programs for rural hospitals, but excluded any new funding for vaccines, testing, or treatment for either COVID-19 or monkeypox. It has been more than 560 days since the Department of Health and Human Services last received federal COVID funding, and its free COVID vaccination program only has enough money to last through the end of 2022.
The Gist: Ever since President Biden declared the pandemic “over”, prospects for the White House’s requested $22B to support the continued pandemic response have diminished. While most hospitals had already given up hope of any additional direct COVID aid coming their way, this bill was the last good chance for the lagging bivalent booster campaign to receive a needed shot in the arm. A recent Commonwealth Fund study found that if Americans got the new bivalent COVID booster at a rate similar to seasonal flu shots this fall, we could prevent 75K deaths and $44B in medical spending by March 2023—but unfortunately most Americans know little about the boosters, with less than four percent of eligible Americans receiving them so far.
- New, expensive ALS drug receives approval. On Thursday, the Food and Drug Administration (FDA) announced that Relyvrio, a combination drug produced by Amylyx Pharmaceuticals, had passed an expedited approval process to become the third drug on the market to treat amyotrophic lateral sclerosis (ALS), the debilitating neurological condition diagnosed in around 5K Americans annually. The list price for Relyvrio is set at $158K per year (higher than experts had anticipated), and the drug has yet to fully prove efficacy in clinical trials—adding to ongoing skepticism from critics of the FDA’s drug approval process. The FDA justified its decision based on the life-threatening nature of ALS, and the substantial unmet need for treatment options.
The Gist: Though Relyvrio differs from controversial Alzheimer’s medication Aduhelm in key ways—including lacking serious negative side effects and targeting a smaller population of patients—this is another example of the FDA approving an expensive drug on scant evidence. We expect this to become increasingly common, and we may be entering a new era of high-cost pharmaceuticals that target devastating diseases needing urgent intervention, creating a push to lower the bar for approval. Striking the balance on experimental treatment options is difficult even without considering astronomical per-patient costs, but many of these drugs, which must be taken in perpetuity, are priced so high they could restrict patient access or threaten to permanently balloon Medicare spending. As long as the FDA and other government regulators have no input into the pricing of new drugs, this challenge will continue.
- Federal Trade Commission (FTC) probing large anesthesia group. The FTC is investigating US Anesthesia Providers (USAP), a private equity (PE)-backed group with 4.5K physicians working in nine states, over concerns of monopoly power in certain markets. The inquiry is focused on USAP’s acquisition history, which has followed the PE “playbook” of rolling up small anesthesiology groups into a single entity large enough to exert leverage in contract negotiations. USAP’s presence in Texas and Colorado is likely to be of particular interest, as it controls at least 30 percent of the anesthesiology market in both states.
The Gist: Like many other PE-backed physician groups, USAP achieved market power mostly through myriad acquisitions too small to warrant regulatory attention on their own. The probe is in line with recent government scrutiny of private equity influence in the healthcare sector, and will no doubt be closely watched by investors and PE-backed groups. If USAP is forced to divest from certain markets, the precedent could prove especially damaging to other rapidly growing investor-backed physician groups, particularly those staffing hospital functions, who are already being rocked by ramifications of the No Surprises Act.
Plus—what we’ve been reading.
- Large health systems accused of valuing “profits over patients.” In an explosive two-part series published late last month, New York Times reporters Jessica Silver-Greenberg and Katie Thomas cast a spotlight on the revenue collection tactics used by two of the nation’s largest not-for-profit health systems, Renton, WA-based Providence and Cincinnati-based Bon Secours Mercy Health. The articles detail how Providence leveraged help from consulting firm McKinsey & Company to collect sums as small as $2 from patients pressured to pay anything they could for their care, even if many were actually eligible for free care under state law. Bon Secours was scrutinized for conduct in its Richmond, VA market, where it was portrayed as leveraging safety-net facility Richmond Community Hospital for its 340B license, while stripping out essential services required by the surrounding lower-income community. Both health systems have responded to the Times investigation, Providence by refunding payments collected from hundreds of low-income patients, saying they were charged due to an “unintended error,” and Bon Secours by claiming the allegations in the article were “baseless” and stating that it has invested millions into its Richmond Community Hospital.
The Gist: Providence and Bon Secours Mercy Health are far from the only health systems accused of pursuing patient collections though any means available, which makes these articles especially worrisome to many system executives: the tactics deployed by the two systems are relatively common across the industry. Given current margin pressures, health systems are already beginning to double down on aggressive revenue cycle management. But as most are also not-for-profit organizations who anchor their missions in providing community benefit, their tactics must also pass muster when judged in the court of public opinion.