Although the Trump administration has already declared a political victory by standing up to the hospital lobby, there's still a lot that could happen between now and the rule's effective date.
President Donald Trump declared "a major victory" when his administration issued a final rule last November that requires hospitals to begin publishing troves of pricing data online next year, including the rates they negotiate with insurers.
"I don't know if the hospitals are going to like me too much anymore with this, but that's OK," he said at the White House when the rule was announced.
The policy is undoubtedly a daring move by an administration that has pushed aggressively to revamp the U.S. healthcare system. But there are good reasons to believe the mission-accomplished implication of Trump's speech was premature.
Hospitals have sued to block the rule. Politics could interrupt the process. And, even if the policy survives to implementation, its enforcement mechanisms could be too weak to ensure thorough compliance across the industry. Any of these three could prevent the final rule from delivering its purported benefits and could open the door to further reforms—which means industry leaders may still have time to shape the future of transparent pricing in healthcare.
Barry H. Ostrowsky, president and CEO of RWJBarnabas Health, based in West Orange, New Jersey, says the price transparency rule, as finalized, takes "probably a bit of a sledgehammer approach." But the immediate reaction to block the rule through litigation won't grapple with the fact that consumers and lawmakers will keep demanding transparency, he says.
"Sometimes we react because a rule or a policy isn't written as it was intended to perform, and that's fair. But I don't think you're going to, through litigation, remove or erase the desire for price transparency," Ostrowsky says.
It would be preferable, he says, for the industry to devise its own plan to satisfy demands for price transparency, then tweak that plan over time. The industry just might get another chance to do so, if any of these three threats undermine the final rule.
1. Biggest threat: Hospitals' lawsuit
A lawsuit filed in December 2019 by four major hospital groups is arguably the biggest and most pressing threat to the final rule. It accuses the administration of overstepping its legal authority by finalizing an arbitrary and capricious policy that violates the First Amendment.
"Absent a prompt ruling, the hospital and health system field will need to immediately begin to expend substantial resources to prepare to come into compliance with the Final Rule, which will mean diverting significant personnel and financial resources from other pressing health care needs," the complaint states.
The hospitals made a motion for summary judgment just five days after filing their complaint. A ruling on that motion isn't expected until mid-March at the earliest.
Are negotiated rates 'standard charges'?
The government claims it already has the legal authority it needs to impose the new requirements. The final rule cites three statutes, including a provision that requires each hospital to publish a list of its "standard charges for items and services."
Matthew Fiedler, PhD, a fellow at the USC-Brookings Schaeffer Initiative for Health Policy, says the administration is interpreting "standard charges" as including the prices hospitals negotiate with insurers.
"This provision is the main basis for the rule on hospital prices that the Administration recently finalized," Fiedler says.
The plaintiff hospitals contend, however, that the administration's take on "standard charges" contradicts both the healthcare industry's well-established understanding of the phrase and the straightforward definitions listed in dictionaries.
The relevant statute gives the Centers for Medicare & Medicaid Services limited authority to require hospitals to publish their chargemasters, the plaintiffs argue. Negotiated rates are, by definition, non-standard; therefore, the hospitals argue, it makes no sense to say "standard charges" include negotiated rates.
"An agency cannot purport to reverse the plain meaning of statutory language by engaging in creative definitions of otherwise clear terms, such that black means white and yes means no," the complaint states.
Thomas P. Miller, JD, a fellow at the American Enterprise Institute, says the final rule incorporates a broad interpretation of the underlying statutory provisions. How the courts read those provisions, either affirming the administration's interpretation or insisting on a narrower approach, will ultimately determine whether the mandate survives, he says.
The lawsuit claims also that the final rule violates hospitals' First Amendment rights by seeking to compel speech. It argues that the rule is arbitrary and capricious, too, because the data hospitals must publish won't actually help patients make cost-informed decisions about their care.
"When comparing options for healthcare services, patients' prime consideration when it comes to pricing is their own out-of-pocket costs—that is, the amounts patients pay directly," the complaint states.
Keep an eye on the ACA case
Of the three statutes cited by the final rule, the first and second are provisions of the Public Health Service (PHS) Act. It's ironic, Fiedler says, that the rule cites those two provisions, since they were added to the law by the Affordable Care Act (ACA)—which the administration argues should be invalidated in its entirety.
In other words, the Trump administration argues both that the ACA is completely invalid and that the ACA is a sound legal basis for the hospital price transparency final rule. (Major hospital groups disagree on both counts.)
An appellate court decision kicked the dispute over the ACA's constitutionality back down to a federal district court in Texas in December 2019, but the case is widely expected to reach the Supreme Court eventually.
Although it's unclear exactly what would happen to the price transparency rule and related lawsuit if the Supreme Court were to invalidate the entire ACA, the administration would likely have a tougher time defending its rule if those two provisions of the PHS Act were removed. That would leave only the third statutory citation: a provision of the Social Security Act that gives the Health and Human Services secretary general authority to establish rules and regulations as necessary.
2. Significant threat: Political state of play
When the hospital price transparency rule was first proposed, the administration had slated it to take effect January 1, 2020. The final version, however, bumped the timeline back a full year. That gave President Trump the political benefit of taking on the hospital lobby in an ostensibly consumer-friendly way, without having to deal with most of the rule's impact until after the 2020 election.
Mike Strazzella, head of federal government relations at Buchanan Ingersoll & Rooney in Washington, D.C., says President Trump has made healthcare price transparency an important piece of his campaign.
"I think the president has made it very clear that, regardless of the threat of a lawsuit, he's going to move forward with that agenda," he says.
Strazzella, who worked previously for The Hospital & Healthsystem Association of Pennsylvania and whose current clients include hospitals and insurers, says consumers need information about their out-of-pocket costs, not a confusing dump of price data that won't make sense without an intimate understanding of the industry's complicated price negotiations.
"The reality is that it is a convoluted system," he says.
Even if the hospitals' lawsuit doesn't block or even delay the rule, there's still a lot that could happen politically in 2020 to interrupt the process, especially since the Trump administration is still working on a proposed rule for price transparency that applies to health insurers, who have responded with a war cry of their own.
The industry could pressure the administration into delaying or modifying its plans; another round of major legislation to replace the ACA could affect the statutory authority for this rule; or the Democratic presidential nominee could win in November, enter the Oval Office just three weeks after the rule's effective date, and take the policy in another direction.
After the hospitals filed their lawsuit, HHS spokesperson Caitlin Oakley released a statement chastising hospitals for their resistance to the Trump administration's plan.
"Hospitals should be ashamed that they aren't willing to provide American patients the cost of a service before they purchase it," Oakley said, reiterating the commitments President Trump and HHS Secretary Alex Azar have made to price transparency.
Hospital groups have said they are ready and willing to collaborate on a solution that brings meaningful price transparency to the healthcare industry. They just don't think this administration's current plan is the way to go.
3. Lingering threat: Lax enforcement
Even if the final rule on hospital price transparency survives the legal challenge and election-year politicking, there's a chance its enforcement mechanism won't put enough pressure on hospitals to achieve its stated objective.
The rule allows CMS to impose civil monetary penalties for hospitals that fail to comply. But some proponents of the policy's central concept worry that these relatively minor fines may be insufficient. In other words, the mandate has teeth, but they may be mere baby teeth.
That could lead to a situation in which healthcare price data remains spotty and convoluted across the industry, even as hospitals take steps toward full compliance.
A hospital that fails to comply with the final rule faces a maximum fine of $300 per day, even if the hospital is violating multiple requirements of the policy.
"The technical term for that is 'chump change,' " said Kaiser Family Foundation Executive Vice President for Health Policy Larry Levitt. "I wonder how many hospitals will just pay the fine."
Although the scope of the final rule has broad implications, this enforcement mechanism "is quite weak," Levitt said.
If a hospital were to be assessed the maximum $300 penalty for an entire year, it would owe the government $109,500 for failing to comply with the final rule during that year. (The amount will be updated annually with a cost-of-living adjustment multiplier, according to the rule.)
In HCCI's comment on the proposed rule (which included the same $300 maximum daily penalty), Brennan praised the rule's monitoring methods and enforcement actions as "appropriately varied and iterative," but he said typical hospitals may see $100,000 as a small piece of their total revenue.
"We worry that many stakeholders will view the noncompliance penalty as a new business expense rather than an incentive to comply with the transparency requirements," Brennan wrote.
For its part, CMS acknowledged in the rule that stakeholders had expressed concerns about the penalty amount. While some comments on the proposal called for higher penalties, others pushed for lower penalties or no penalties at all.
Paying more than $100,000 in fines might be chump change for large hospitals, but some commenters argued that such penalties could prove overly burdensome for small hospitals, especially critical access hospitals, according to the CMS summary of the comments. Officials rejected some commenters' calls for a sliding fee scale, as cited in the summary, but said they will continue to consider the topic and may revisit a scaling methodology in future rulemaking.
After considering higher and lower dollar amounts, CMS officials settled on the $300 maximum, figuring they had struck an appropriate balance, according to the rule.
"We believe this amount to be sufficient to prompt hospitals to timely and properly display standard charges in both machine-readable and consumer-friendly formats in accordance with the requirements of this final rule," the document states.
Furthermore, the rule's regulatory impact analysis estimates that its provisions will cost each hospital about $11,900 to implement in the first year, then about $3,600 to maintain compliance in subsequent years—so the maximum penalty for noncompliance is steeper than the total estimated cost of compliance, giving hospitals an adequate incentive to comply, the rule states.
But the administration may be underestimating the burden this rule places on providers.
"I believe that their estimate of time, hours, and cost is incorrect. I don't believe there is any organization that has their [chargemaster] data also formatted by payer to show contracted rates for easy review and comparison, so just putting that together is another large ask," said Debra May, executive partner at Bluetree Network in Reno, Nevada.
"All hospitals use some variation of a tool, or manual work, for their insurance contracts, so I don't know that it's as easy as 'print out your rates for XX codes and publish them,' " May added. "This is an extremely heavy lift for hospitals that are already buried with administrative burden to just get paid for the services they provide."
Compiling the pricing data could result in a spreadsheet with hundreds of thousands of rows and columns, the hospitals argued in their lawsuit.
"Hospitals and health systems report that a file of this size could easily crash most standard computer systems," the complaint states, "and some members worry about the ability of their websites to function at all with such a large file."
Ostrowsky, from RWJBarnabas Health, says hospitals want to be seen as consumer-friendly, so they will take steps to comply with the rule. Practical limitations, however, may make full and immediate compliance impossible for some, he says.
The public shouldn't assume, then, that hospitals are flouting the rule if they fall short of full compliance, even as inconsistent price data might impede consumers' ability to comparison-shop, Ostrowsky adds.
"If the intent was to empower consumers to make informed decisions," he says, "then we ought to be able to comply in a way where that actually results."
Ostrowsky says he's not entirely certain whether this rule will lead to its stated aim.
Editor's note: HealthLeaders news editor John Commins and HCPro's Revenue Cycle Advisor editor Nicole Votta contributed to this report.
Physicians and clinicians want a sense of purpose, accomplishment, and both collaboration and autonomy.
When it comes to recruiting and keeping physicians and clinicians, health systems are largely fighting for the same limited resources, said Scott W. Rathgaber, MD, the CEO of Gundersen Health System in La Crosse, Wisconsin.
To keep medical staff from leaving for another potential employer, Rathgaber recommends focusing on engagement with a four-point framework. He shared his thoughts on the matter with fellow senior strategy leaders at a recent HealthLeaders CEO Exchangegathering.
Here are the four factors Rathgaber sees as key to Gundersen's recruitment and retention efforts:
1. Purpose
Gundersen has sought to define a sense of purpose to which employees can contribute, Rathgaber said.
"I would argue that, not my generation, but the millennial generation, really resonates with that," he said. "They want to make a difference. And that's not to say that baby boomers didn't want to make a difference, but I think [the sentiment is] a lot stronger with millennials, and that connection is great."
2. Teamwork
A lot of people, especially members of younger generations, are driven by a sense of teamwork, too, which is counterintuitive for some established physicians, Rathgaber said.
"I wasn't trained in that," he said. "It was more the cowboy rather than the pit crew, but we're so complex now that we really have to work together in order to provide the best care. A lot of people appreciate that teamwork."
3. Mastery
Gundersen also strives to have clinicians work at the top of their licenses, Rathgaber said.
"If you're going to do something, we want to make sure we support you so you can be the absolute best you can possibly be and you go home saying, 'I did a great job today. I can really do the job you hired me to do,' " Rathgaber said.
4. Autonomy
This idea of promoting autonomy works only when teams are aligned with the organizational mission, Rathgaber said. He likes to compare the leadership team's broad vision to the Mississippi River, which is wide but has banks.
"As long as you're going in the right direction and you stay within our aligned boundaries, we're going to be good," he said.
When you can connect employees with a sense of purpose, teamwork, mastery, and autonomy, you are more likely to get an engaged and motivated workforce committed to the organization's success, Rathgaber said.
The HealthLeaders CEO Exchange annually gathers leading hospital and health system CEOs for a custom dialogue on the critical issues facing the future of their organizations. For more information on this and future events, please email exchange@healthleadersmedia.com.
The question now is whether emerging reimbursement models will shift things into high gear or maintain the unhurried status quo.
At the dawn of a new year in which healthcare is sure to be among the most politically charged topics ahead of this fall's presidential election, industry leaders are doing their best to anticipate what trends and twists may impact their mission.
If the past few years are any indication of what to expect, then 2020 will likely see an increased focus on the relationship between traditional healthcare service providers and the nonmedical needs that influence a patient's health outcomes.
"I think the healthcare industry, from a standpoint of mission and delivery, will increasingly acknowledge that you can't make people healthier simply by providing the conventional healthcare service. You're going to have to get involved in a broader array of social programs," says Barry H. Ostrowsky, president and CEO of RWJBarnabas Health, based in West Orange, New Jersey.
"You're going to have to invest in other services, such as housing, and chronic unemployment, and food insecurity, and safer streets, and things of that nature," he says.
The lingering question, though, is whether emerging reimbursement models will accelerate investments in these social determinants of health.
"I think the discussion around doing those social programs and how they get financed will be a dominant issue as we go through 2020," Ostrowsky says.
Lyndean Brick, JD, president and CEO of healthcare consultancy Advis, says hospital leaders generally believe social programs can deliver a significant return on investment. But there are two problems, she says: hospitals lack capital to make major investments on their own in social determinants of health, and the financial ROI for such programs doesn't accrue to the hospitals.
"Hospitals are asked to provide more service, and they want to do it, but the incentive system or the financial system hasn't been realigned to allow them to do it," Brick says.
Models Worth Watching
Although the financial incentives are misaligned, there have been some small shifts, Brick says, toward a system that more appropriately covers the costs of nonmedical social programs. "That's very, very important," she says.
Medicare Advantage: One area worth watching is the Trump administration's approach to Medicare Advantage (MA). While many value-based and risk-based contracts reimburse for nonmedical needs indirectly, the government's evolving approach to MA plans has begun allowing direct reimbursement in 2020 for supplemental benefits, such as meals and transportation, for chronically ill patients—which Brick sees as a positive development that could catch on.
"Ensuring that there is direct reimbursement is going to allow hospitals to understand that there is an ROI for addressing social determinants of healthcare, and it's that kind of direct top-line revenue impact that is going to make all the difference in the world," Brick says.
Medicare Direct Contracting: Also during 2020, healthcare providers are expected to finalize their applications and lay the groundwork for their participation in the new Direct Contracting model options being piloted by the Centers for Medicare & Medicaid Services. The agency released details in November about the new model, which is slated to begin issuing capitated reimbursement next year.
Although this particular initiative won't transform the industry overnight, it's the type of program that Ostrowsky expects to prevail.
"Medicare is trying in small dollars to introduce this idea of value and introduce this idea of seamlessness and introduce the idea of integration of various levels of healthcare," Ostrowsky says. "I think that's a very good start."
On the commercial side, Ostrowsky says, this kind of at-risk arrangement will increasingly include direct-to-employer contracts, in which providers address the overall health of a company's workforce, rather than simply treating acute medical needs.
'Medicare for All' (sort of): Democrats jockeying for a chance to challenge President Donald Trump in the general election have talked a lot about pushing toward universal healthcare, with many adopting the slogan "Medicare for All." Since voters have cited healthcare as among their top concerns—as the Trump administration continues to urge federal courts to invalidate the entire Affordable Care Act, including its protections for consumers with preexisting conditions—debate over whether and how to enact a Medicare for All system will likely continue all year long.
That's not to say, however, that such proposals are poised to be terribly consequential in the near term. Ostrowsky says the Medicare program works pretty well, but he's skeptical that Medicare for All could ever be implemented. The concept includes several political and policy considerations that will be debated fiercely, he says. His priority for now is to advocate for a policy direction that enables effective capitation.
These are some of the highlights from our 2019 coverage of news, topics, and trends that matter to CEOs and other senior strategy leaders at healthcare payer and provider organizations.
It has been my pleasure as HealthLeaders Strategy editor to cover the challenges and opportunities facing healthcare CEOs and other senior decision-makers throughout 2019. It's no doubt an interesting time to lead payer and provider organizations.
As I reflected on the best Strategy stories we at HealthLeaders have published in the past year, I thought about assembling a Top 10 list of my favorites. (I tried pretty hard to put together a Top 10 list, in fact, but I couldn't bring myself to nix any of these 11 below, so I settled for a prime number.)
Here are the 11 HealthLeaders Strategy stories of 2019—some written by me and others written by my colleagues—that I think are worth reading (or re-reading):
The two nonprofit health systems had announced about seven months ago that they would explore a potential "merger of equals." But both leadership teams decided getting hitched wouldn't be the best path forward, the top executives for each organization said in a joint statement.
"This was an opportunity we had to explore. Yet, we have to make the right decision for our patients and for our organizations," said Gundersen CEO Scott Rathgaber, MD, in the statement.
"We each still have a commitment to delivering the best care possible to those we serve," Rathgaber added. "We will continue to improve the health of our communities, while working to reduce the cost of care and offering an outstanding experience for those in our care."
Marshfield Clinic CEO Susan Turney, MD, FACP, thanked Gundersen for engaging in the merger talks.
"Bringing two entities together of our size and scope is an incredibly complex process, and first and foremost in that process is making sure it was the best path forward for our patients, staff and communities," Turney said in the statement.
"While we mutually decided to remain independent, we will continue to execute our strategy of smart growth as we look for opportunities to ensure residents across rural Wisconsin have access to excellent health care close to home," she added.
Combining the two organizations would have formed a 13-hospital system with more than 100 clinics and more than 19,000 employees serving patients across Wisconsin, northeast Iowa, and southeastern Minnesota, the organizations said last May when they announced their potential merger. Although the markets served are contiguous, the geographic overlap is minimal, the CEOs said.
The joint statement released Thursday described the discussions as "productive" and "collaborative," and it noted that the two will continue to partner on current and future projects.
Major deals that were ditched this year include Baylor Scott & White Health's plans to join forces with Memorial Hermann Health System, Sanford Health's plans to link up with UnityPoint Health to create an $11 billion system, and the on-again, off-again talks involving Partners HealthCare and Care New England.
Here are three lessons we unpacked in our HealthLeaders Strategy coverage this year about the industry's M&A transactions:
1. Just because a dual CEO model was temporary doesn't mean it failed.
The news that Advocate Aurora Health ditched its dual CEO model last summer might be viewed by some as the inevitable outcome of what was always an unworkable model. But others contend the dissolution of this particular leadership dyad says nothing about the viability of dual CEO models in principle.
"Each consolidation agreement is unique," says Sarah E. Wilson, principal analyst of market access insights at Decision Resources Group in Nashville. "For mergers between a larger system and smaller system, I don't think a dual CEO model makes sense. But I think in the case of large and/or multistate mergers, a dual CEO model can certainly help ease the transition of combining entities."
"Eventually, though, a dual CEO model will cease to make sense," Wilson adds. "There may be too many cooks in the kitchen, so to speak. You could have a situation where there are conflicting strategies or visions, which may do more harm than good to the organization."
Advocate Health Care and Aurora Health Care merged in 2018, bringing together 27 hospitals and hundreds of other facilities. But the post-merger health system maintained both CEOs and both of its legacy headquarters: one in Downers Grove, Illinois, and the other in Milwaukee, Wisconsin.
After maintaining a dual CEO model for about 15 months, the Advocate Aurora Health board picked Jim Skogsbergh to serve as the system's sole president and CEO moving forward, releasing former co-president and co-CEO Nick Turkal, MD, to "pursue other interests."
Advocate Aurora Health isn't the only major health system to keep both CEOs after a merger. CommonSpirit Health similarly kept both Lloyd H. Dean and Kevin E. Lofton on board after its 2018 merger. So news of Advocate Aurora's C-suite drama prompted questions about CommonSpirit.
"It would not surprise me if, eventually, one of CommonSpirit's CEOs leaves," Wilson says.
A spokesperson for CommonSpirit confirmed that this is, in fact, what the system has planned.
"Ultimately, we anticipate that there will be a single CEO for the organization," the spokesperson says, describing the dual CEO model as a practical and temporary tool to ease the massive organization through its post-merger integration. It will be up to the board to determine whether, when, and how CommonSpirit's dyadic structure will end.
When a health system like Advocate Aurora or CommonSpirit abandons its post-merger dual CEO model, then, the question isn't whether the dyad ever had potential. The question is whether the CEOs accomplished their plans.
2. You should think twice before criticizing a potential M&A partner that walked away.
Sanford Health President and CEO Kelby Krabbenhoft found himself in an uncomfortable position in November: rejected by a potential M&A partner near the end of an extensive due diligence process.
The Sioux Falls, South Dakota–based health system had been in merger talks with UnityPoint Health, based in Des Moines, Iowa, to form an $11 billion enterprise with 76 hospitals—then UnityPoint backed out.
The news prompted some finger-pointing from Krabbenhoft, who had been expected to serve as president and CEO of the post-merger organization. Krabbenhoft expressed disappointment that UnityPoint's board "failed to embrace the vision."
In most cases, when a deal falls through, the parties say respectful things about each other and indicate a willingness to explore other opportunities in the future, but Krabbenhoft apparently didn't feel obligated to take that kind of approach, says Allan Baumgarten, a consultant and long-term observer of healthcare industry trends in the Midwest.
The fact that Krabbenhoft publicly expressed disappointment in UnityPoint's board may give other health system CEOs a reason to hesitate if he approaches them to initiate an M&A dialogue because there may be a perception that those who don't let Krabbenhoft have his way will get "smacked around in the newspapers" for it, Baumgarten says.
"I think interpersonal relationships are important," he says. "It's not unlike divorces or engagements that end up being broken up before the wedding takes place. What do you say about the other person? Do you burn bridges? Do you try and make it look like you were the good guy and the other was the bad guy?"
"There is something to be said for a communications strategy that is respectful and cordial and that is all positive, rather than remarks of disdain and disrespect," he adds.
3. Even as you pursue scale through M&A deals, you need to keep a local-market mindset.
As mergers and acquisitions among healthcare providers continue at a frenzied pace in certain markets, some healthcare executives are prodding their peers to scrutinize their own M&A motivations more thoroughly.
The prospect of gaining an upper hand at the negotiating table across from insurers is a tantalizing reason to pursue scale. But getting bigger for the simple sake of protecting your business interests is a questionable rationale for mission-minded healthcare organizations, according to several senior strategy leaders who attended this year's HealthLeaders CEO Exchange gathering.
Instead, they say, health system executives have a responsibility to steer any consolidation in a way that serves the local market. That steering continues long after a deal is finalized, as C-suite leaders figure out how tightly to control each component of the post-merger system.
Toby Freier, MBA, FACHE, president of Allina Health's New Ulm Medical Center, a critical access hospital in New Ulm, Minnesota, says leaders need to consider carefully how they define success for any deal and whether that definition aligns with the community's best interests.
"It's hard to think that our communities have won over the last decade through consolidation, if our measures of success are the health outcomes and affordability of healthcare," Freier says.
That's not to suggest hospitals should abstain from M&A activity altogether. Sometimes leaders stall too long, Freier says.
"Hospitals, especially in rural communities, are waiting until financially they feel like they are out of options, rather than more proactively seeing what a system affiliation or partnership could do to extend and enhance care and services to their community or at a population health level," he says.
"When we approach it only from the economic side of it," he adds, "I think we miss what's the end game—the triple aim with better access and support to our community."
Although numerous academic studies have shown mergers among healthcare providers tend to lead to higher costs, the American Hospital Association has pushed back against that conclusion, arguing that patients have benefited from consolidation because hospitals can operate more efficiently in larger systems.
Michael Ugwueke, MPH, DHA, FACHE, president and CEO of Methodist Le Bonheur Healthcare in Memphis, Tennessee, says the actual benefits of M&A activity vary from one market to the next.
"In most markets, operating still as a holding company makes it very hard to really take costs out, take advantage of synergies brought together by an acquisition or merger," Ugwueke says.
While leaders who take a holding-company approach to running a post-merger system may preserve some degree of local autonomy, thereby remaining responsive to local-market needs, those who take more of an operating-company approach can centralize control in a way that reduces administrative redundancy, thereby capitalizing on the merger's cost-saving potential. There are tradeoffs depending upon where a given system lands on the spectrum between those two extremes.
"I think the jury is still out ultimately on what benefits accrue to patients," Ugwueke says.
Chris Woleske, JD, president and CEO of Bellin Health in Green Bay, Wisconsin, says the bottom line in this conversation is that healthcare is too expensive.
"At the end of the day, we need to find a way to reduce the total cost of care, and I don't see big systems in a position to achieve that more effectively than independent organizations that are community-based and focused on achieving quality, affordability, and improving health and well-being for the communities," Woleske says.
"That will be key, so that's what we're putting our energy and effort into."
The HealthLeaders CEO Exchange annually gathers leading hospital and health system CEOs for a custom dialogue on only the critical issues facing the future of their organizations. For more information on this and future events, please email exchange@healthleadersmedia.com.
The administration points to statutory language, including definitions amended by the ACA, as preventing that FDA from allowing states to import biologics.
A proposed rule unveiled Wednesday that lays the groundwork to allow the importation of certain drugs could help to make medicine more affordable for the American public in the foreseeable future, according to the Trump administration.
But the proposed pathway that would allow states and other non-federal government entities to ask the Food and Drug Administration to review and authorize their importation plans—perhaps with a pharmacist, wholesaler, or other entity as a cosponsor—excludes biological products.
That means any programs these entities devise won't be allowed to import a product that's vital for many diabetics: insulin.
Buyers won't be allowed to import insulin under this proposal because of the way the relevant statute is worded, an FDA spokesperson tells HealthLeaders:
The PHS Act was amended by the Affordable Care Actto include the term "protein" in the definition of a biological product; therefore,
The FDA has since 2010 considered insulins and other protein products to be biological products, the FDA spokesperson says.
Although insulin would be ineligible for the buyer-led pathway of this drug importation proposal, the administration also outlined a seller-led pathway that would allow manufacturers to import their own insulin products. That second proposed pathway, which was outlined in draft guidance released Wednesday alongside the proposed rule, would apply to insulin and certain other biologics, the FDA spokesperson confirms.
The guidance would give drug makers a procedure by which to obtain an additional National Drug Code (NDC) and use it "to basically compete against [their] own product but at a lower list price," said Health and Human Services Secretary Alex Azar.
This pathway wouldn't be the first or only way an insulin manufacturer could voluntarily undercut its own price point. Amid public outcry over price hikes, Indianapolis-based Eli Lilly & Co. announced earlier this year that it will sell a half-price "authorized generic" version of its brand-name insulin Humalog. At about $137 per vial, the generic costs roughly the same as brand-name Humalog did in 2012, as Kaiser Health News reported.
Overall, the cost of insulin has risen dramatically in recent years, fueling public outrage over price hikes and the lack of transparency around prescription drug rebates. The annual insulin cost incurred by an average patient with Type 1 diabetes nearly doubled in a recent five-year period, from $2,864 in 2012 to $5,705 in 2016, excluding rebates, according to a 2019 report by the nonprofit Health Care Cost Institute (HCCI).
That increase in gross spending on insulin was driven primarily by insulin price hikes, though rising popularity of more expensive insulin products also contributed, the HCCI researchers said, as Reuters reported.
The proposal drew a quick rebuke from both the pharmaceutical industry and the pharmaceutical industry's critics.
Brad Woodhouse, executive director of Protect Our Care, meanwhile, said the proposal is "riddled with loopholes large enough for drug companies to drive a truck through."
The highly anticipated decision sends the dispute back to the lower court to further analyze which provisions of the law, if any, may be severed from the central mandate.
The Fifth Circuit Court of Appeals ruled in a split decision Wednesday that the Affordable Care Act's individual mandate is unconstitional, but the judges stopped short of invalidating the entire law.
Instead, they sent the case back to the District Court for further proceedings to analyze whether any of the sprawling Obama-era legislation's provisions are severable from the mandate.
Judges Jennifer Walker Elrod and Kurt Engelhardt, the two members on the three-judge panel who were appointed by Republican presidents, wrote the decision for the 2–1 majority. After a more granular review, the courts might determine that some provisions of the ACA should survive after all, they wrote.
"It may still be that none of the ACA is severable from the individual mandate, even after this inquiry is concluded. It may be that all of the ACA is severable from the individual mandate," Elrod and Engelhardt wrote. "It may also be that some of the ACA is severable from the individual mandate, and some is not."
"But it is no small thing for unelected, life-tenured judges to declare duly enacted legislation passed by the elected representatives of the American people unconstitutional," they added. "The rule of law demands a careful, precise explanation of whether the provisions of the ACA are affected by the unconstitutionality of the individual mandate as it exists today."
The appellate decision faulted the lower court—which ruled a year ago that the entire ACA is invalid because the individual mandate is invalid—for failing to dissect what lawmakers had intended to do when they zeroed out the mandate's tax penality in 2017 and for failing to explain how particular segments of the post-2017 ACA are inseverable from the mandate.
"Severability doctrine places courts between a rock and a hard place," the appellate decision states. "On the one hand, courts strive to be faithful agents of Congress, which often means refusing to create a hole in a statute in a way that creates legislation Congress never would have agreed to or passed. [...] On the other hand, courts often try to abide by the medical practitioner's maxim of 'first, do no harm,' aiming 'to limit the solution to the problem' by 'refrain[ing] from invalidating more of the statute than is necessary."
"Severability analysis is at its most demanding in the context of sprawling (and amended) statutory schemes like the one at issue here," the decision adds. "The ACA's framework of economic regulations and incentives spans over 900 pages of legislative text and is divided into ten titles."
Considering the complexity of this legislation, the courts must take a "careful, granular approach to carrying out the inherently difficult task of severability analysis in the specific context of this case," the decision states.
Nicholas Bagley, a law professor at the University of Michigan who has argued the ACA should survive this legal challenge, accused the Fifth Circuit of "a remarkable mix of hubris and cowardice."
"It's hubris to say that the *unenforceable* individual mandate is an unconstitutional *command.* And it's cowardice to remand without grappling with what that means for the rest of the law," Bagley wrote in a series of tweets.
The U.S. Supreme Court ruled in 2012 that the ACA's individual mandate was constitutional as an exercise of the congressional power to tax, but the same mandate is now unconstitutional because it no longer generates revenue for the government and cannot be justified under any other legislative power, according to the appellate decision.
The third judge, Carolyn King, wrote a dissenting opinion, reasoning that a $0 penalty doesn't render the mandate unconstitutional.
"Without any enforcement mechanism to speak of, questions about the legality of the individual 'mandate' are purely academic, and people can purchase insurance—or not—as they please. No more need be said; it has long been settled that the federal courts deal in cases and controversies, not academic curiosities," King wrote.
The full decision is below.
California: We're Ready for Supreme Court
California Attorney General Xavier Becerra, who has led a coalition of states that intervened in the lawsuit, to defend the ACA, signaled Wednesday that his office is ready to take the dispute to the nation's highest court.
"[W]e are prepared to file a cert petition with the U.S. Supreme Court to challenge this ruling to uphold the Affordable Care Act in all respects, and to continue to protect the health care that millions of Americans have received and rely on, in order to stay healthy and ensure that they, their families can move forward, knowing that they are safe," Becerra said Wednesday evening during a press conference.
Becerra declined to outline a timeframe for his next steps but said he plans to move quickly.
HealthLeaders finance editor Jack O'Brien contributed to this report.
Environmental, social, and governance (ESG) criteria have been used for years to assess a company's performance beyond the black and white lines of a profit-and-loss statement, challenging executives to measure the value their businesses create in the context of more fundamental ethical values.
For healthcare organizations, an ESG framework calls for sustainable energy and waste management systems, prods investment in community health, and demands that leaders embrace diversity and inclusion as essential duties.
These and other initiatives recognize the fact that running a good healthcare business requires a sense of communal responsibility.
"The prosperity of our organizations is inextricably linked to the communities that we serve and the challenges that they face," said Bank of America Executive Vice President Lynn Wiatrowski, during a recent HealthLeaders executive roundtable discussion.
"This is true for healthcare and banking," Wiatrowski said. "The health of the people in our communities has a direct correlation to our ability to thrive, and there are multiple factors to consider."
During the roundtable, Wiatrowski and four senior healthcare leaders with hands-on experience in ESG-related projects discussed ways hospitals and health systems can invest strategically, boldly, and wisely in response to specific needs.
Sam Ross, MD, chief community health officer for Bon Secours Mercy Health in Baltimore, said healthcare leaders often think they have the right answers before they have finished asking the right questions about their ESG priorities.
"Health systems think we have this list of what we should prioritize, what should matter, then we actually get into true community engagement—and if we're truly committed to that practice, then we're asking what matters to you, the community," Ross said. "That's where we start to have to decide what we're going to invest in, and how we're going to address the social determinants and social influencers of health outcomes."
"The reason we at Bon Secours got into housing 20-plus years ago was because the community said the No. 1 concern they had around health was rats and trash," Ross added. "Well, what was the source of rats and trash? The source was all the vacant boarded-up housing because Baltimore used to be a city of a million people but is now a city of about 625,000 people. All that blight is there because people use vacant homes as dumps, drug havens, and stuff like that. The housing intervention was that response to what the community said was the highest priority."
The other three panelists were Rashard Johnson, president of two Advocate Aurora Health hospitals in the Chicago area; Kendra N. Smith, director of social determinants of heath for ProMedica in Toledo, Ohio; and Donald R. Lurye, MD, the CEO of the physician group Elmhurst Clinic LLC.
The two health systems in New Jersey said they have yet to decide how they might structure their affiliation, but they expect to reach a definitive agreement in the coming months.
Leaders for both organizations cited the healthcare industry's shifts as an important reason to pursue a deal.
"The rapidly changing health care landscape presents new challenges and opportunities," said RWJBarnabas Health President and CEO Barry H. Ostrowsky in a statement. "Saint Peter's is a vital resource to central New Jersey, and through this agreement we would greatly enhance our commitment in these communities with our mission of improving the health and well-being of its residents."
Saint Peter's Healthcare System President and CEO Leslie D. Hirsch, FACHE, said deepening ties would be mutually beneficial for the organizations.
"The rapid consolidation of hospitals in New Jersey and need for greater scale, as well as ongoing changes in health care delivery made it vital for us to identify a dynamic and strong strategic partner that would allow Saint Peter's to retain its Catholic mission and identity, remain competitive, and yield the best possible outcome for our patients, employees, medical staff and the communities we serve," Hirsch said. "Working in partnership with RWJBarnabas Health would give us an opportunity to enhance the unique strengths of both organizations."
Saint Peter's Healthcare System includes a 478-bed acute care teaching hospital that is sponsored by the Roman Catholic Diocese of Metuchen and that has a children's hospital. It's among relatively few independent Catholic hospitals nationwide that are sponsored by a Roman Catholic diocese, the organizations said.
Under their letter of intent, RWJBH would invest in Saint Peter's and expand its outpatient network, and Saint Peter's would maintain its Catholic identity and continue to follow the Ethical and Religious Directives for Catholic Health Care Services, according to the announcement.
"As an independent institution for the last 112 years, Saint Peter's has helped to fulfill the Church's mission of healing in an extraordinary way while making Christ's love and mercy known to people of all ages and backgrounds, from conception to natural death," said the Most Reverend James F. Checchio, JCD, MBA, Bishop of the Roman Catholic Diocese of Metuchen, in a statement.
"Through this proposed strategic partnership, Saint Peter's will be strengthened to continue to serve those who are in need of—and greatly benefit from—the excellent, accessible, and life-affirming care intrinsic to Saint Peter's Catholic identity and mission," Bishop Checchio added. "This partnership will also position Saint Peter's to continue caring for the whole person with a compassionate response and to greater inform the wider community to the full range of human needs, hallmarks of our Catholic faith."
Bishop Checchio thanked John Haas, PhD, STL, president emeritus of the National Catholic Bioethics Center, for "ongoing oversight and guidance" to assure "that any transaction is structured such that Saint Peter's will remain stalwart in its fidelity to the Catholic health care tradition."
Any deal must be approved by state and federal authorities, as well as the Catholic Church.
RWJBarnabas Health has also signed a letter of intent to acquire Trinitas Regional Medical Center, a 554-bed acute care Catholic teaching hospital in Elizabeth, New Jersey. Ostrowsky told HealthLeaders on Monday that he expects to finalize that agreement within the next 30-45 days and consummate the deal in 2020.
RWJBarnabas Health currently includes 11 acute care hospitals, three acute care children's hospitals, and a pediatric rehabilitation hospital, among many other facilities.
