Some drug shortages have worsened because of the closure of Gurnee, Ill.-based Akorn Operating Co., according to the American Society of Health-System Pharmacists.
Major hospital groups are ramping up resistance to physician-owned hospitals, which were checked by the Affordable Care Act but have recently become subject of renewed attention.
Physician-owned hospitals have been largely quiet in conversations about hospitals over the past decade-plus due to the Affordable Care Act. Enacted in 2010, the law placed a number of restrictions on POHs, including a prohibition on expanding the capacity of existing Medicare-certified POHs unless they meet certain exceptions and a moratorium on the establishment of new Medicare-certified POHs.
In December 2022, POHs regained some industry attention when CMS granted a “high Medicaid facility” expansion request from Edinburg, Texas-based Doctors Hospital at Renaissance to establish a new physician-owned hospital 55 miles away in Brownsville.
The Federation of American Hospitals, which represents investor-owned hospitals, heavily criticized the development as unlawful and argued that the 55-mile distance between DHR’s main campus and new location makes it “a thinly veiled attempt to set up a new POH in a new service area.”
Shortly after that development, in February, more than a dozen Republican lawmakers reintroduced legislation that would repeal the ACA’s ban on POHs. The bill, dubbed the Patient Access to Higher Quality Health Care Act, received support from the American Medical Association and Physician-Led Healthcare for America.
“The hospital industry has long argued that physicians cherry-picked healthy patients and preferred those with private insurance as a rationale for supporting the ban on physician-owned hospitals,” legislation co-sponsor Sen. James Lankford, R-Okla., co-authored with an assistant professor of Medicine at the Johns Hopkins University School of Medicine in an op-ed for The Wall Street Journal, likening the ban on physician-owned hospitals to the absurdity of a ban on chef-owned restaurants.
Now, a new report jointly issued by the FAH and American Hospital Association reasserts the idea that POHs cherry pick. The March 23 report, prepared by health economics and policy consulting firm Dobson DaVanzo & Associates, suggests POHs are outliers compared to their non-POH counterparts due in large part to their patient populations and acuity.
Based on an analysis of 163 POHs and 3,020 non-POHs, the report contends that POHs generally treat a population that is younger, less complex or comorbid, and less likely to be dually eligible or non-white, the report states. They also have higher margins and lower unreimbursed and uncompensated care costs as a percent of net patient revenue compared to non-POHs.
“If there was ever any doubt, the evidence against POHs is as crystal clear today as it was when Congress passed the self-referral ban in 2010,” FAH President and CEO Chip Kahn said in a statement. “Weakening or unwinding the current ban opens the door further to the very behaviors that Congress sought to prevent.”
“The growth of physician-owned hospitals was restricted by Congress for good reasons and those remain valid today as this analysis shows,” AHA President and CEO Rick Pollack said in a statement. “Physician-owned hospitals undermine our nation’s health care safety-net and jeopardize access to care by cherry-picking the most profitable cases and avoiding patients with complex conditions and lower-reimbursing coverage.”
Texas regulators have placed Friday Health into liquidation and ordered the company to end all business in the state.
A district court in Austin found that Friday’s Texas subsidiary was insolvent and had not maintained a minimum surplus of $1.4 million under state law, according to regulatory filings dated March 23.
Texas Insurance Commissioner Cassie Brown has been appointed to liquidate and take possession of the company’s remaining operations in the state, including all physical, financial and digital assets. Ms. Brown is also authorized to direct and manage Friday employees and terminate them at her discretion.
Law firm Cantilo & Bennett is now in control of day-to-day operations in Texas, though the state said most policies have expired. Any remaining claims will be paid by the Texas Life and Health Insurance Guaranty Association, meaning health plans in Texas could be financially impacted.
As of May 2022, Alamosa, Colo.-based Friday Health Plans had 330,000 members across seven states and an estimated $1.95 billion in 2022 revenue.
“This development in Texas does not impact our business or operations in any other states,” the company wrote on its website. “We remain committed to our mission to provide simple, high-quality, affordable and easy-to-use insurance to our growing membership.”
Last fall, Texas asked Friday to leave the state’s ACA marketplace for 2023 following operational challenges. The company also pulled out of the New Mexico exchange.
Friday is also laying off 98 workers in Alamosa and Denver on April 30 due to a “loss of business,” according to state filings.
The company was founded in 2015 and offers individual and small group plans both on and off the exchange. In 2023, the company is offering ACA plans in Colorado, North Carolina, Georgia, Nevada and Oklahoma.
Friday’s CEO is Beth Bierbower, Humana’s former president of group and specialty benefits. The company’s CFO is Rhonda Bagby, who was most recently vice president of finance and commercial at Bright Health.
Hospital finances are starting to stabilize as razor-thin margins become the new normal, according to Kaufman Hall’s latest “National Flash Hospital Report,” which is based on data from more than 900 hospitals.
External economic factors including labor shortages, higher material expenses and patients increasingly seeking care outside of inpatient settings are affecting hospital finances, with the high level of fluctuation that margins experienced since 2020 beginning to subside.
Hospitals’ median year-to-date operating margin was -1.1 percent in February, down from -0.8 percent in January, according to the report. Despite the slight dip, February marked the eight month in which the variation in month-to-month margins decreased relative to the last three years.
“After years of erratic fluctuations, over the last several months we are beginning to see trends emerge in the factors that affect hospital finances like labor costs, goods and services expenses and patient care preferences,” Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said. “In this new normal of razor thin margins, hospitals now have more reliable information to help make the necessary strategic decisions to chart a path toward financial security.”
High expenses continued to eat into hospitals’ bottom lines, with February signaling a shift from labor to goods and services as the main cost driver behind hospital expenses. Inflationary pressures increased non-labor expenses by 6 percent year over year, but labor expenses appear to be holding steady, suggesting less dependence on contract labor, according to Kaufman Hall.
“Hospital leaders face an existential crisis as the new reality of financial performance begins to set in,” Mr. Swanson said. “2023 may turn out to be the year hospitals redefine their goals, mission, and idea of success in response to expense and revenue challenges that appear to be here for the long haul.”
Twenty-four hospitals in the U.S., Canada and Western Europe are using “black boxes” — named after the recording devices in airplanes — to collect and analyze operating-room practice data in hopes of reducing medical errors and improving patient safety and operating room efficiency, The Wall Street Journal reported March 19.
The OR Black Box, made by Surgical Safety Technologies in Toronto, gathers video, audio, patient vital signs and data from surgical devices during surgery. Audio and video are deidentified, giving participants blurred faces and cartoonish bodies, according to the report. Hospitals can use the data to view performance over time or to analyze particular operations.
Mayo Clinic has used the device in three operating rooms over the last year in order to improve surgical safety and outcomes, according to Susan Hallbeck, PhD, professor of healthcare systems engineering at Rochester, Minn.-based Mayo Clinic’s Kern Center for the Science of Health Care Delivery.
Durham, N.C.-based Duke University Hospital has installed OR Black Boxes in two operating rooms to study and improve patient positioning to reduce skin tissue and nerve injuries and to improve communication among nurse personnel during surgical procedures. The boxes have helped the system identify a need for a better sending and tracking system for specimens, Rebecca McKenzie, DNP, RN, assistant vice president for perioperative services at Duke University Hospital, told the Post. The Duke teams have also found new ways to increase operating room efficiency and productivity by reducing the amount of time to prepare an operating room for the next procedure. The health system is considering using the box as a teaching tool for nurses’ OR training, she said.
The University of Texas Southwestern Medical Center in Dallas is using five black boxes to understand the characteristics of a high-performing operating room team.
However, some worry the black boxes could be used to assign blame and punishments.
“Aggregate data is deidentified and anonymized so we can learn from it now and in the future, and audiovisual data is deleted after 30 days to protect the privacy and confidentiality of patients and healthcare providers,” Surgical Safety Technologies founder Teodor Grantcharov, MD, PhD, a professor of surgery and practicing surgeon at Stanford Medicine, said in the article.
Others worry the information could be used in lawsuits; however, there has not yet been a case where this information was requested or used in court.
The anonymization of information from the OR Black Box makes it unlikely to be used in malpractice litigation, David Feldman, MD, chief medical officer at Healthcare Risk Advisors, a New York City-area company working with hospitals on how to reduce malpractice risk, said in the report.
“I believe it will make surgery safer and thus reduce liability and malpractice claims,” he said.
About 40 hospitals across five states have filed a lawsuit against HHS Secretary Xavier Becerra, alleging that yearslong delays in correcting Medicare disproportionate share hospital payments have cost them “tens of millions” of dollars.
The safety-net hospitals in California, Arizona, Nevada, Hawaii and Minnesota filed the lawsuit March 14 in a Washington, D.C., district court.
DSH payments are meant to support hospitals that have a high mix of low-income patients. In 2008, a federal court in Washington, D.C., ruled against how HHS calculates the payments and ordered the government to send payments to its contractors to determine how much was still owed to the hospitals.
“The agency’s contractors have not performed the revised determinations required under the ruling and the rule and have not paid the plaintiff hospitals any of the additional amounts due them for the periods at issue,” the lawsuit alleges.
In 2010, HHS revised the process it uses to calculate DSH payments and said it would correct identified errors, but the hospitals allege there have been delays in the amended payments.
“The agency’s unreasonable delay has cost the plaintiff hospitals tens of millions of dollars in funds that should have been paid to them many years ago for the higher costs that they incurred to treat low-income patients more than a decade ago,” the plaintiffs’ attorneys wrote.
In 2020, CMS instructed Medicare contractors to halt efforts to settle cost reports, saying they had not yet completed the appropriate public notification process. Medicare contractors were told not to take further action “until expressly instructed by CMS,” according to court documents obtained by Becker’s.
The plaintiffs are seeking reimbursement from HHS via revised payment determinations — reflecting additional DSH amounts as a result of recalculated SSI fractions — plus interest and legal costs.
The lawsuit also alleges that HHS is using another lawsuit, Azar v. Allina Health Services, as a reason for “unreasonably” delaying and “unlawfully” withholding payments.
More than 20 of the plaintiffs are affiliated with San Francisco-based Dignity Health. Becker’s has reached out to Dignity Health and HHS for comment and will update this article if more information becomes available.
The first hospitals seeking CMS’ new rural emergency hospital designation have submitted their applications, Kaiser Health News reported March 6.
Hospitals that convert receive a 5 percent increase in Medicare payments as well an average annual facility fee payment of about $3.2 million, according to the report. In return, the hospitals must close their inpatient beds and focus solely on outpatient and emergency care.
The hospitals showing immediate interest have three or fewer patients staying overnight at any given time and have typically given up maternity care long ago to save on expenses, according to the report.
One hospital in the Stillwater (Okla.) Medical system — an outpost in Perry, Okla. — has already applied for the designation, according to the report. Another in Blackwell, Okla., will likely do the same.
Stillwater Medical Chief Administrative Officer Steven Taylor said the switch makes sense for the two hospitals that have struggled financially, according to the report. He said the most important thing for the small communities where the hospitals are located is to keep emergency services.
Guadalupe County Hospital in Santa Rosa, N.M., is another that has already applied for the designation, according to the report. Despite the help of a tax levy, the hospital has lost more than $1 million in the past six months.
“For years, we’ve been anticipating kind of our own demise, praying that a program would come along and make us sustainable,” Guadalupe County Hospital Administrator Christina Campos told the outlet.
A two-bed facility in Crosbyton, Texas, recently became the first in the state to get approval for the new designation. John Henderson, president and chief executive of the Texas Organization of Rural & Community Hospitals, told the outlet that several more of the state’s 158 rural hospitals have applied, are applying or are considering the conversion.
21.9% increase in supply expense (not including purchased services or pharmaceuticals) for hospitals from September 2021 to September 2022.1 During this same period, Kaufman Hall reports that purchased services expenses increased 16.2%.
Hospitals have faced a $11,950 supply cost increase per bed in 2022.2 This amounts to an average increase in supply expense of about $330 per admission, and a 6.2% increase per discharge.
19% The cost decrease for patients treated at home versus an inpatient hospital setting.3
24 hospitals and health systems launched innovation centers in 2021.4 How are suppliers and supply chain going to participate?
By 2030, more than 50% of joint replacements will be performed in ambulatory Surgery Centers (ASCs)5. 21% of the typical ASC is presently for orthopedic procedures.6
0 The number of container ships waiting to dock at the Port of Los Angeles on December 2, 2022.
The number of supply shortages are now roughly 5x the number in 2019, according to a recent Premier, Inc. study.
5.8% The decrease in quarterly active drug shortages between Q1 2019 and Q3 2022.7 (276 vs. 260).
Hospitals and Health Systems joining the Health Sector Climate Pledge has reached 1,000. Meanwhile, 71% of healthcare environmental emissions come from supply chain related activities, according to Greenhealth Exchange.
Politically driven healthcare supply chain waste during COVID is monumental8
40,000 Initial estimate by the State of New York on the number of ventilators needed to fight COVID.
8,555 Actual number of ventilators purchased by NY state, for $166M along with 1,179 X-Ray machines for $86.4M. 2,141 ventilators had been deployed as of September 2022.
200,000 Ventilators ordered by the Trump administration in 2020 for $3B, but only 50% “had the capacity to support the most severely affected patients.”
$633M Cost of at-home COVID-19 tests from a political contributor to New York Governor Kathy Hochul.
1 Kaufman Hall “National Hospital Flash Report”, September, 2022
2 Computed from Kaufman Hall Op. Cit. and American Hospital Association Data.
Last year brought its share of challenges. Finding solutions is the hard work awaiting everyone in the healthcare community this year.
February 2023 – The Journal of Healthcare Contracting
2022 presented all kinds of challenges for providers, patients and public health professionals. No doubt many of those challenges will linger in 2023, and new ones will arise. However, researchers, providers, public health professionals, lawmakers – and supply chain leaders – can be expected to keep working through the tough issues facing them. In the first part of a series, JHC examines the following issues:
Respiratory season
Monkeypox
Respiratory season: In like a lion
Predictions of a tumultuous respiratory season – fueled by COVID-19, influenza and respiratory syncytial virus – appeared to be coming true at year’s end. Will any of the public-health-related measures society learned during the pandemic ease the damage?
In November, the Centers for Disease Control and Prevention (CDC) reported that early increases in seasonal influenza activity were continuing nationwide, with the Southeast and South-Central areas of the country hardest hit. The agency estimated that as of Nov. 1, influenza accounted for 1.6 million illnesses, 13,000 hospitalizations and 7,300 deaths (including two pediatric deaths), and the cumulative hospitalization rate was higher than the rate observed in week 43 during every previous season since 2010-2011.
In addition to elevated levels of flu, CDC was tracking rises in respiratory syncytial virus (RSV), Rhino viruses and animal viruses. Children’s hospitals were overflowing with RSV patients.
Long COVID
Although the incidence of COVID-19 had abated by late 2022, the healthcare community still faced a challenging after-effect – Long COVID. Between 7.7 million and 23 million people in the United States could have Long COVID, whose symptoms can linger for weeks, months and even years, according to U.S. government estimates.
The most reported symptoms include fatigue, symptoms that worsen after physical or mental effort, fever, and lung (respiratory) symptoms, including difficulty breathing or shortness of breath and cough.
People who had suffered severe illness with COVID-19 were more likely to experience organ damage affecting the heart, kidneys, skin and brain. Abnormalities of the thyroid joined the ever-growing list of side effects attributed to Long COVID, according to research presented at the American Thyroid Association 2022 Annual Meeting in October. Inflammation and problems with the immune system were also said to occur. Effects such as these could lead to the development of new conditions, such as diabetes or a heart or nervous system condition, according to Mayo Clinic.
At year’s end, researchers were still questioning whether Long COVID is a new syndrome and unique to COVID-19. That’s because some symptoms are similar to those caused by chronic fatigue syndrome and other chronic illnesses that develop after infections. Despite the questions, however, the healthcare community continued to learn more about Long COVID, how to treat it, and even how to prevent it.
For example, in November, the U.S. Department of Veterans Affairs released a study showing the medication Paxlovid can reduce the risk of symptoms of Long COVID. The study, which included more than 56,000 veterans with a positive SARS-CoV-2 test, showed that those given the oral antiviral medication in the first five days of a COVID-19 infection had a 25% decreased risk of developing 10 of 12 different Long COVID conditions studied, including heart disease, blood disorders, fatigue, liver disease, kidney disease, muscle pain, neurocognitive impairment and shortness of breath.
Monkeypox: Lessons learned about ‘stigma’ disease
Monkeypox cases were declining by year’s end, but some observers believe progress could have been swifter.
In the U.S., about 27,635 cases were reported in late October, about 85% down from the peak at the outbreak, reported Demetre Daskalakis, MD, White House National Monkeypox Response deputy coordinator. However, he added, “the outbreak is really concentrated in communities of color, specifically among Black individuals.”
The CDC reported on a clinical consultation for 57 hospitalized patients with severe manifestations of monkeypox, most of whom were Black men with AIDS. Delays had been observed in initiation of monkeypox-directed therapies. Twelve patients died, and monkeypox was a cause of death or contributing factor in five patients to date, with several other deaths still under investigation.
As a result, CDC advised clinicians to consider early treatment with available therapeutics for those at risk for severe monkeypox disease, particularly patients with AIDS. Engaging all persons with HIV in care remains a critical public health priority.
According to one U.S. epidemiologist, the monkeypox experience demonstrated that the world has made little progress since the 1980s AIDS epidemic. “As with the AIDS epidemic, sluggish responses from governments and international institutions, plus outright homophobia and bureaucratic bumbling, have hampered efforts to contain the outbreak,” wrote Gregg Gonsalves, an epidemiologist at the Yale School of Public Health in New Haven, Connecticut, in a commentary in Nature. “Very often, humanity has the ability to prevent and treat infectious disease; not doing so is a political choice.”
That said, public health officials around the world were applying lessons learned from the AIDS epidemic to monkeypox. “Local staff in the most affected states [in Nigeria] have reported that stigma, connected with commentary from across the world blaming gay people for monkeypox, is discouraging some people from seeking care,” said Dr Leo Zekeng, UNAIDS Country Director and Representative in Nigeria in August. “State Health officials are working to ensure that staff at health clinics are sensitized to break down such stigma, and not to reinforce it. State Ministry of Health officials are also embarking on community sensitization on monkeypox, emphasizing identification of symptoms, prevention and the need to get tested.”
In September, the U.S. FDA made a significant step forward in early detection of monkeypox by authorizing emergency use of in vitro diagnostics for the detection or diagnosis of monkeypox. These diagnostics may detect the monkeypox virus specifically or more generally detect non-variola orthopoxviruses, which include monkeypox virus.
Supply chain friction is here to stay, in one form or another. Recently, congestion has eased at our nation’s seaports, with fewer delays at cargo terminals. But as one set of disruptions have eased, other challenges have emerged to their place.
Labor Issues
In December, HIDA urged Congress to take steps to maintain the freight rail system and avert any rail strike. As Americans weathered a difficult flu season and a surge in pediatric RSV cases, it was no time to disrupt the medical supply chain. The consequences would have been dire, with the potential to impede the delivery of medical products needed to treat patients, protect providers, and save lives. HIDA urged President Biden to take action to avert a rail strike. Fortunately, Congress intervened in a bipartisan fashion and passed legislation to settle the labor dispute and keep the supply chains moving. However, attention will now focus on the current labor negotiations at the West Coast ports.
Fuel Shortages
Although the cost of gasoline has come down from last year’s peak, the price of diesel fuel has remained stubbornly high. This autumn, diesel fuel supplies fell to their lowest level since the U.S. government started keeping records in 1982. Limited refinery capacity and the Russian invasion of Ukraine have contributed to price increases. Separately, a directive from the International Maritime Organization two years ago to require most oceangoing ships to replace their high-sulfur bunker fuel with less polluting fuels, which has slowly increased demand for diesel. Energy analysts estimate that the global shipping fleet was now consuming half a million barrels of diesel a day, or roughly 2% of the world’s supplies.
Unpredictable and Fragile Supply Chains
According to research from The Advisory Board, healthcare providers are facing long-term shortages of medical products and greater unpredictability in the supply chain. More than 90% of provider executives report that they are still experiencing product shortages. Every link in the supply chain is potentially fragile. In the last three years, we’ve seen bottlenecks in air freight, shipping, trucking and rail. Distributors have shown great resourcefulness and resolve to overcome the multitude of challenges they have faced.
HIDA continues to work with supply chain experts among our member companies to monitor shipping and transportation trends. We facilitate meetings with port officials and federal agencies to resolve bottlenecks. We know that transportation is a healthcare issue, and continue to focus on long-term solutions to create a “fast pass” system to expedite critical products so patients and providers can get the medical supplies they need.
Linda Rouse O’Neill, Vice President, Supply Chain Policy and Executive Branch Relations, Health Industry Distributors Association
