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Hospices Have Become Big Business for Private Equity Firms, Raising Concerns About End-of-Life Care

Hospice care, once provided primarily by nonprofit agencies, has seen a remarkable shift over the past decade, with more than two-thirds of hospices nationwide now operating as for-profit entities. The ability to turn a quick profit in caring for people in their last days of life is attracting a new breed of hospice owners: private equity firms.

That rapid growth has many hospice veterans worried that the original hospice vision may be fading, as those capital investment companies’ demand for return on investment and the debt load they force hospices to bear are hurting patients and their families.

“Many of these transactions are driven by the motive of a quick profit,” said Dr. Joan Teno, an adjunct professor at Brown University School of Public Health, whose work has focused on end-of-life care. “I’m very concerned that you’re harming not only the dying patient, but the family whose memory will be of a loved one suffering because they didn’t get adequate care.”

According to a 2021 analysis, the number of hospice agencies owned by private equity firms soared from 106 in 2011 to 409 in 2019, out of a total of 5,615 hospices. Over that time, 72% of hospices acquired by private equity were nonprofits. And those trends have only accelerated into 2022.

Hospice is an easy business to start, with most care provided at home and using lower-cost health workers. That allowed the entry of smaller hospices, many launched with the intent of selling within a few years. Private equity firms, backed by deep-pocketed investors, could then snatch up handfuls of smaller hospices, cobble together a chain, and profit from economies of scale in administrative and supply costs, before selling to an even larger chain or another private equity firm.

Private equity-owned hospice companies counter that their model supports growth through investment, which benefits the people in their care.

“Private equity sees a huge opportunity to take smaller businesses that lack sophistication, lack the ability to grow, lack the capital investment, and private equity says, ‘We can come in there, cobble these things together, get standardization, get visibility and be able to create a better footprint, better access, and more opportunities,’” said Steve Larkin, CEO of Charter Healthcare, a hospice chain owned by the private equity firm Pharos Capital Group.

But he acknowledged that not all of those entering the hospice market have the best intentions.

“It is a little scary,” he said. “There are people that have no business being in health care” looking to invest in hospice.

A Boom Industry

With the U.S. population rapidly aging, hospice has become a boom industry. Medicare — the federal insurance program for people 65 and older, which pays for the vast majority of end-of-life care — spent $22.4 billion on hospice in 2020, according to a Medicare Payment Advisory Commission report to Congress. That’s up from $12.9 billion just a decade earlier. The number of hospices billing Medicare over that time grew from less than 3,500 to more than 5,000, according to the report.

But with limited oversight and generous payment, the industry is at high risk for exploitation. Agencies are paid a daily rate for each patient — this year, about $200 — which encourages for-profit hospices to limit spending to boost their bottom lines. For-profit hospices tend to hire fewer employees than nonprofits and expect them to see more patients.

Many hospice nurses and social workers are booked for 30-minute appointment slots throughout the day, unable to spend more time with patients if needed. For-profit hospices hire more licensed practical nurses than registered nurses, who are more skilled, and rely more on nurse’s aides to further cut costs. One study found patients in for-profit hospices see doctors or nurse practitioners one-third as often as those in nonprofit hospices. The U.S. Government Accountability Office found in an analysis of federal data from 2014 to 2017 that patients in for-profit hospices were less likely than patients in nonprofit hospices to have received any hospice visits in the last three days of life.

“The main way of making the bottom line look good is decreasing visits,” Teno said.

According to the Medicare Payment Advisory Commission, for-profit hospices had Medicare profit margins of 19% in 2019, compared with 6% for nonprofit hospices.

For-profit hospices also enroll a different set of patients, preferring those likely to remain in hospice longer. Most costs are incurred in the first and last week of hospice care. Patients who enroll in hospice must undergo several assessments to develop a care plan and set their medications. In their final days, as the body begins to shut down, patients often need additional services or medications to stay comfortable.

“So the sweet spot is kind of in the middle,” said Robert Tyler Braun, an assistant professor of population health sciences at Weill Cornell Medical College.

That makes dementia patients particularly profitable. Doctors have a harder time predicting whether a patient with Alzheimer’s disease or another form of dementia has less than six months to live, the eligibility criterion for enrollment. For-profit hospices enroll those patients anyway, Teno said, and stand to profit the longer those patients live. They tend to enroll fewer cancer patients, whose prognosis is generally more predictable but who usually die sooner.

“It is a very simple business model,” Teno said. “Go to assisted living facilities and nursing homes, and it’s one-stop shopping.”

Nonprofit vs. For-Profit

The Rev. Ken Dugger has worked as a chaplain in Denver for 13 years at both for-profit and nonprofit hospices.

At one for-profit hospice, “the word on the street was [that] we were the dementia hospice because we had so many dementia patients,” Dugger said. “We wound up discharging a lot of patients because they had long lengths of stay and no longer met criteria.”

He said about a third of a hospice’s patients die each week, so agencies need to market heavily to replace them. That leads to some hospices making promises to families — such as daily visits from a nurse’s aide — that they can’t keep.

“Some people see dollars and they go, ‘Wow! It’s a great chance to make some money here,’ and they don’t understand that hospice isn’t easy,” Dugger said.

For-profit agencies counter that their nonprofit counterparts have cornered the market on cancer patients and that they are expanding access by serving patients with other diagnoses.

But if patients become too costly, requiring expensive care or medicines, hospice providers can discharge them, and take them to a hospital emergency room to get services the agencies don’t want to pay for themselves, said Christy Whitney, former CEO of HopeWest, a nonprofit hospice serving five western Colorado counties.

A 2019 report by the Milliman consulting firm found that 31% of patients in nonprofits had cancer, while 15% had dementia. At for-profit hospices, 22% of patients had cancer, and 22% had dementia, said the report, funded by the National Partnership of Hospice Innovation, a trade group of nonprofit hospices.

Patients in nonprofits had more nursing, social worker, and therapy visits. For-profit hospices, the report found, had longer lengths of stay by patients, discharged more patients before death, and had profit margins nearly seven times higher.

Other studies have found that for-profit hospices have higher rates of complaints and deficiencies, provide fewer community benefits, and have higher rates of emergency room and other hospital use.

Braun said financial pressures are worse for private equity-backed hospices than for other for-profit hospices, partly because of the way hospice acquisitions are financed. A private equity firm will typically put up only 10% to 30% of the acquisition cost itself, borrowing the rest. The acquired hospice not only has to generate profits to satisfy its private equity owners but is stuck with the costs of the loan as well.

Private equity firms typically look to flip their hospice investments in three to seven years.

In 2017, Webster Equity Partners bought Bristol Hospice, with 45 locations in 13 states, for $70 million. Last year, the firm reportedly entertained purchase offers for the hospice chain as high as $1 billion.

Because hospices are inspected every three years, some are bought and sold without a state or federal inspection — and sometimes without regulators even knowing about the sale.

And quality oversight is weak. Hospices have a financial interest in reporting quality metrics to the Centers for Medicare & Medicaid Services, but there is no penalty for poor performance tied to those metrics.

Cordt Kassner, CEO of the Colorado-based consulting firm National Hospice Analytics, said 17% of Colorado hospices are now owned by private equity, higher than the 13% rate he found nationally. When he looked at metrics reported to Medicare, he found that private equity-backed firms scored lower than average on self-reported quality metrics.

“It’s not a huge difference,” Kassner said. “Because nationally scores are also tight and there’s not a lot of variation, we look at any kind of difference even if it’s a percentage point less.”

Many nonprofits believe private equity-backed and other for-profit hospices are giving the industry a bad name.

“They get paid the same as us, but they don’t take the same patients. They don’t provide the covered services that are supposed to be covered to be paid a per diem,” said Whitney, the former HopeWest CEO, who spoke with KHN before she retired in June. “They’ve developed kind of a shadow business that really has very little to do with the business that I run. But they’re called the same name.”

Larkin, the Charter CEO, bemoaned a lack of progress in quality metrics as the hospice industry has grown. But he said that wasn’t limited to private equity-backed or even for-profit hospice providers.

“There’s bad companies all over,” Larkin said. “There’s people who are misaligned, there’s people who have bad intentions, there’s companies that aren’t focused on the right things.”

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.

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Nursing Homes Are Suing the Friends and Family of Residents to Collect Debts

ROCHESTER, N.Y. — Lucille Brooks was stunned when she picked up the phone before Christmas two years ago and learned a nursing home was suing her.

“I thought this was crazy,” recalled Brooks, 74, a retiree who lives with her husband in a modest home in the Rochester suburbs. Brooks’ brother had been a resident of the nursing home. But she had no control over his money or authority to make decisions for him. She wondered how she could be on the hook for his nearly $8,000 bill.

Brooks would learn she wasn’t alone. Pursuing unpaid bills, nursing homes across this industrial city have been routinely suing not only residents but their friends and family, a KHN review of court records reveals. The practice has ensnared scores of children, grandchildren, neighbors, and others, many with nearly no financial ties to residents or legal responsibility for their debts.

The lawsuits illuminate a dark corner of America’s larger medical debt crisis, which a KHN-NPR investigation found has touched more than half of all U.S. adults in the past five years.

Litigation is a frequent byproduct. About 1 in 7 adults who have had health care debt say they’ve been threatened with a lawsuit or arrest, according to a nationwide KFF poll conducted for this project. Five percent say they’ve been sued.

The nursing home industry has quietly developed what consumer attorneys and patient advocates say is a pernicious strategy of pursuing family and friends of patients despite federal law that was enacted to protect them from debt collection. “The level of aggression that nursing homes are using to collect unpaid debt is severely increasing,” said Lisa Neeley, a Massachusetts elder law attorney.

In Monroe County, where Rochester is located, 24 federally licensed nursing homes filed 238 debt collection cases from 2018 to 2021 seeking almost $7.6 million, KHN found. Several nursing homes did not file any lawsuits in that period.

Nearly two-thirds of the cases targeted a friend or relative. Many were accused — often without documentation — of hiding residents’ assets, essentially stealing. The remaining cases targeted residents themselves or their spouses.

Nursing homes have gone after some families for tens of thousands of dollars. In a few cases, debts surpassed $100,000.

In Monroe County alone, one nursing home sued the daughter and granddaughter of a former resident. The daughter pleaded with the court to release the granddaughter, promising she would pay the $5,942 debt. Another home sued a woman twice, for her husband’s and her mother’s debts. Yet another claimed a woman owed $82,000 for her mother’s care. The resident was, in fact, a cousin, according to court papers.

“I get calls all the time from people who are served with these lawsuits who had no idea that this was even a remote possibility, who call me crying and frantic,” said Anna Anderson, an attorney at the nonprofit Legal Assistance of Western New York who has represented defendants in such suits, including Brooks. “They believe not only that they’re going to lose their own income and their own houses and assets, but also they’re concerned that their loved ones who are still in the nursing home may be potentially kicked out.”

The legal strategy is often rooted in admissions agreements, the piles of paperwork that family or friends sometimes sign, not realizing the financial risks. “The world of nursing facilities is a black hole for most people,” said Eric Carlson, a longtime consumer attorney at the nonprofit Justice in Aging. “This happens in the shadows.”

In most cases reviewed by KHN, the people sued didn’t have an attorney, which can be expensive. In nearly a third, the nursing homes won default judgments because the defendants never responded, a common phenomenon in debt cases. In many cases, lawsuits sought interest rates as high as 18% on top of the debt.

Long-term care officials and attorneys say they must use the courts when bills go unpaid. “It would be a disservice to the hospital’s residents, and to Monroe County’s taxpayers, to allow residents who have assets not to pay what is owed,” said Gary Walker, a spokesperson for Monroe County, which operates Rochester’s largest nursing home, Monroe Community Hospital.

From 2018 to 2021, the county filed 60 debt collection cases, including the lawsuit against Brooks, KHN found.

Nationally, Beth Martino, a spokesperson for the American Health Care Association, the largest nursing home industry group, said lawsuits against families are “not a common occurrence.”

But consumer attorneys in California, Illinois, Kentucky, Massachusetts, New York, and Ohio said they regularly see lawsuits against family and friends.

In 2020, Washington, D.C., secured an agreement with two nursing homes to stop what authorities called “deceptive billing practices.” The homes had sued at least 15 family members, the attorney general found.

Ahmad Keshavarz, an attorney who documented debt lawsuits around New York City, said nursing homes see adult children as more appealing targets than older residents. “Sons or daughters are more likely to have assets,” he said. “They have wages that can be garnished.”

In Ohio, Robyn King, a former teaching assistant from Cleveland, was sued for more than $70,000 by a nursing home where her mother had been a resident. “The lawsuit made no sense to me since I told them I would not be personally responsible for my mom’s medical expenses,” King told a U.S. Senate committee in March. “The stress was unbearable. I thought, ‘I will not be able to afford my mortgage.’”

Trapped by Paperwork

In upstate New York, Brooks faced a smaller yet shocking bill: $7,967.05.

“People like us live on a fixed income,” Brooks said. “We don’t have money to throw around, especially when you don’t see it coming.” She was so worried that she didn’t tell her husband at first.

Brooks initially thought there had been a mistake. She and her brother, James Lawson, were part of a big family that moved north from Mississippi to escape segregation in the 1960s. Lawson, who was a gifted athlete despite losing an arm as a child, spent his career at the Rochester Parks and Recreation Department. Brooks worked in insurance. They lived on opposite sides of the city. “My husband is somewhat disabled, and that keeps me pretty busy,” said Brooks, who is also active in her church. “My brother always took care of his own business.”

In summer 2019, Lawson was hospitalized after experiencing complications from a diabetes medication. The hospital released him to the county-run nursing home, and Brooks didn’t find out for a few days. She visited her brother there several times. No one talked to her about billing, she said. And she was never asked to sign anything.

After two months, Brooks’ brother went home. A year later came the lawsuit.

The county alleged that Brooks should have used her brother’s assets to pay his bills and that she was therefore personally responsible for his debt. Attached to the suit was an admissions agreement with what looked like Brooks’ signature.

View note

Such agreements, which can run multiple pages, have long been standard in the long-term care industry. They often designate whoever signs as a “responsible party” who will help the nursing home collect payments or enroll the resident in Medicaid, the government safety-net program.

Many lawyers say making a family member financially liable is unfair. “If you bring your child to a doctor, you should pay for the child’s medical care. But if your adult child brings you to a nursing home and you’re 80, the law doesn’t bind you to pay those bills,” said Paul Aloi, a Rochester attorney who has represented all sides — patients, hospitals, and nursing homes — in debt collection cases.

Federal laws and regulations prohibit homes from requiring a resident’s relatives or friends to financially guarantee the resident’s bills. Facilities cannot even request such guarantees.

But consumer advocates say nursing homes slip the admissions agreements into papers that family members sign when an older parent or sick friend is admitted. Sometimes people are told they must sign, a violation of federal law. Sometimes there is barely any discussion. “They are given a stack of forms and told, ‘Sign here, sign there. Click here, click there,’” said Miriam Sheline, managing attorney at Pro Seniors, a nonprofit law firm in Cincinnati.

When Chris Ferris helped admit his mother to Kirkhaven nursing home in Rochester in 2019, he said, he asked the staff whether any papers he had signed made him financially liable for her care. “They said ‘no,’” he said.

Ferris, who was estranged from his mother, had no legal control over her finances. She had been managing her own affairs. Nevertheless, the nursing home sued Ferris two years later for nearly $11,000. “It’s not right,” said Ferris, who is no longer speaking with his mother.

In more than a third of the cases that nursing homes filed in Monroe County against friends and relatives, the people sued had no power of attorney, limiting their access to residents’ money to pay bills.

Accused of Stealing

Court records show Rochester-area nursing homes also frequently accuse family and friends of hiding residents’ money and property to avoid paying the debts. The allegation is known in debt law as “fraudulent conveyance.” But it is commonly interpreted by those being sued as an accusation of theft, which can be very frightening, consumer attorneys say.

The practice can intimidate people with means into paying debts they may not even owe, said Anderson, the legal assistance attorney. “People see that on a lawsuit and they think they’re being accused of stealing,” she said. “It’s chilling.”

Families do sometimes prey on older relatives, taking their bank cards or selling their property, advocates for seniors say. But nursing home lawsuits in Rochester contain almost no documentation to support these claims.

Monroe County provided supporting records in only three of the 29 lawsuits it filed that included a fraudulent conveyance claim against a friend or relative of a resident. And Underberg & Kessler, a Rochester law firm that has represented the county and other nursing homes, attached documentation in only five of the 70 actions it filed with such claims. The firm has filed the most nursing home debt cases in Monroe County.

Anna Lynch, a partner, said the firm always has “factual and legal grounds” to file. “The fact that the complaint does not make reference to the specific evidence does not mean there is not evidence,” she said. “When we do institute legal action on behalf of a nursing home, the firm reviews the agreements between the parties and the facts to make sure there are grounds for claims against the persons who are legally responsible for payment.”

Barbara Robinson, an 81-year-old widow who lives alone outside Rochester, said that wasn’t her experience. She was sued by Monroe County three years ago for $21,000.

Robinson, who lives on a fixed income, signed papers for an older friend who was admitted to the county home, and she said she helped staff gather information to enroll her friend in Medicaid.

“As far as I knew, that was that,” Robinson recalled. After the friend died, however, the county accused Robinson of taking her friend’s assets. The county provided no documentation.

View note

Robinson said there was no money to take, noting that her friend “had spent every single dime.” A court ultimately dismissed the case, first reported by WHEC-TV in Rochester. Judge Debra Martin admonished the county for the lack of evidence. “Plaintiff must allege some facts to support its claims,” she wrote, noting that the county’s case “does not meet the bare minimum requirements.”

Ferris, who was sued over his estranged mother’s debts, had his case dropped by the nursing home. Valerie King Hoak, a spokesperson for the Kirkhaven nursing home, said the facility “cannot discuss private resident information or potential litigation with third parties.”

Brooks is now in the clear, too, after the county dropped its case against her. She said she thinks the signature on the admissions agreement was forged from the nursing home’s visitor log, the only thing she signed.

The experience left her shaken. She now tells anyone with a friend or relative in a nursing home not to sign anything. “It’s ridiculous,” she said. “But why would you ever think they would be coming after you?”

About This Project

“Diagnosis: Debt” is a reporting partnership between KHN and NPR exploring the scale, impact, and causes of medical debt in America.

The series draws on the “KFF Health Care Debt Survey,” a poll designed and analyzed by public opinion researchers at KFF in collaboration with KHN journalists and editors. The survey was conducted Feb. 25 through March 20, 2022, online and via telephone, in English and Spanish, among a nationally representative sample of 2,375 U.S. adults, including 1,292 adults with current health care debt and 382 adults who had health care debt in the past five years. The margin of sampling error is plus or minus 3 percentage points for the full sample and 3 percentage points for those with current debt. For results based on subgroups, the margin of sampling error may be higher.

Additional research was conducted by the Urban Institute, which analyzed credit bureau and other demographic data on poverty, race, and health status to explore where medical debt is concentrated in the U.S. and what factors are associated with high debt levels.

The JPMorgan Chase Institute analyzed records from a sampling of Chase credit card holders to look at how customers’ balances may be affected by major medical expenses.

Reporters from KHN and NPR also conducted hundreds of interviews with patients across the country; spoke with physicians, health industry leaders, consumer advocates, debt lawyers, and researchers; and reviewed scores of studies and surveys about medical debt.

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Health Insurance Price Data: It’s Out There, but It’s Not for the Faint of Heart

Data wonks with mighty computers are overjoyed. Ordinary consumers, not so much.

That’s the reaction about three weeks into a data dump of enormous proportions. Health insurers are posting their negotiated rates for just about every type of medical service they cover across all providers.

But so much data is flowing in from insurers — tens of thousands of colossal digital files from a single insurer is not unusual — that it could still be weeks before data firms put it into usable forms for its intended targets: employers, researchers, and even patients.

“There is data out there; it’s just not accessible to mere mortals,” said Sabrina Corlette, a researcher at Georgetown University’s Center on Health Insurance Reforms.

Insurers are complying with federal rules aimed at price transparency that took effect July 1, she and others said. Realistically, though, consumer use of the data may have to wait until private firms synthesize it — or additional federal requirements start to kick in next year aimed at making it easier for consumers to use the price information to shop for scheduled medical care.

So why post prices? The theory is that making public this array of prices, which are likely to vary widely for the same care, will help moderate future costs through competition or improved price negotiations, although none of that is a guarantee.

Hospitals last year came under a similar directive, which stems from the Affordable Care Act, to post what they’ve agreed to accept from insurers — and the amounts they charge patients paying cash. Yet many dragged their feet, saying the rule is costly and time-consuming. Their trade association, the American Hospital Association, sued unsuccessfully to halt it. Many hospitals just never complied and federal government enforcement has proven lax.

While government regulators have sent more than 350 warning letters to hospitals, and have increased the potential civil penalty fines from $300 a day to up to $5,500, only two hospitals have been fined so far.

The requirement for insurers is broader than that faced by hospitals, although it does not include cash prices. It includes negotiated rates paid not only to hospitals, but also to surgery centers, imaging services, laboratories, and even doctors. Amounts billed and paid for “out-of-network” care are also included.

Penalty fines for not posting can be higher than those faced by hospitals — $100 a day per violation, per affected enrollee, which quickly adds up for medium- or large-size insurers or self-insured employers.

“We’re seeing high compliance rates because of the high penalties,” said Jeff Leibach, a partner with the consulting firm Guidehouse.

The data is posted on public websites, but it can be hard to access — mainly because of size, but also because each insurer approaches it differently. Some, like Cigna, require would-be viewers to cut and paste a very long URL into a browser to get to a table of contents of the price files. Others, including UnitedHealthcare, created websites that directly list a table of contents.

Still, even the tables of contents are huge. UnitedHealthcare’s webpage warns it could take “up to 5 minutes” for the page to load. When it does, there are more than 45,000 entries, each listed by the year and name of the plan or employer for job-based policies.

For consumers, accessing any single plan would be a challenge. At the moment, it’s also difficult for employers, who want to use the information to determine how well their insurers negotiate compared with others.

Employers “really need someone to download and import the data,” which is in a format that can be read by computers but isn’t easily searchable, said Randa Deaton, vice president of purchaser engagement at the Purchaser Business Group on Health, which represents large employers.

After an initial peek, she has seen wide variation in costs.

“In one plan, I could see negotiated rates that ranged from $10,000 to $1 million for the same service,” said Deaton.

But the larger picture won’t be clear until more of the data is cleaned: “The question is what is the story this data will tell us?” she said. “I don’t think we have the answer yet.”

Congress and administration policy rule makers expected that the insurer data would be overwhelming and that private firms and researchers would step in to do the deep analysis and data production.

One of those firms is Turquoise Health, which was “overjoyed by the amount of data,” said Marcus Dorstel, vice president of operations.

The company, one of a number aiming to commercialize the data, had by mid-July downloaded more than 700,000 unique files, or about half a petabyte. For context, 1 petabyte is the equivalent of 500 billion pages of standard typed text. Its expectation, Dorstel added, is that the total download will end up in the 1- to 3-petabyte range.

Turquoise hopes to share organized data with its paying customers soon — and offer it free of charge to ordinary consumers sometime after that on its website, which already lists available hospital prices.

What’s possible right now?

Let’s say patients know they need a specific test or procedure. Can they look online at insurer data postings to choose a treatment site that will be most cost-effective, which could be helpful for those who have yet to meet their annual deductible and are on the hook for some or all of the cost?

“Maybe an individual with a laptop could look at one of the files for one plan,” said Dorstel, but consumers would find it difficult to compare among insurers — or even across all the plans offered by a single insurer.

Consider, for example, what it takes to try to find the negotiated price of a particular type of brain scan, an MRI, from a specific insurer.

The first hurdle: locating the right file. Google “transparency in coverage” or “machine-readable files” with an insurer’s name and results might pop up. Self-insured employers are also supposed to post the data.

Next step: Find the exact plan, often from a table of contents that can include tens of thousands of names because insurance companies offer so many types of coverage products or have many employer clients that must be listed as well.

Downloading and deciphering the tangle of codes to pinpoint one describing a specific service is next. It helps to have the service code, something a patient may not know.

Starting Jan. 1, another rule takes effect that could provide consumers with some relief.

It involves the apps and other tools that some insurers already provide for policyholders so they can estimate costs when preparing for a visit, test, or procedure.

The new rule bolsters what information is available and requires insurers who don’t offer such tools to have them ready by Jan. 1. Insurers must make available online, or on paper, if requested, the patient’s cost for a list of 500 government-selected, common “shoppable services,” including knee replacements, mammograms, a host of types of X-rays, and, yes, MRIs.

The following year — 2024 — insurers must provide consumers with the cost sharing amount for all services, not just those initial 500.

Another regulatory layer stems from the No Surprises Act, which took effect this year. Its overarching goal is to reduce the number of insured patients who get higher-than-anticipated bills for care from out-of-network providers. Part of the law requires providers, including hospitals, to give an upfront “good faith estimate” for nonemergency care when asked. Right now, that part of the law applies only to patients who are uninsured or using cash to pay for their care, and it isn’t clear when it will kick in for insured patients using their coverage benefits.

When it does, insurers will be required to give policyholders cost information before they receive care in a format described as an advance explanation of benefits — or EOB. It would include how much the provider will charge, how much the insurer will pay — and how much the patient will owe, including any outstanding deductible.

In theory, that means there could be both an upfront EOB and a price comparison tool, which a consumer might use before deciding where or from whom to get a service, said Corlette at Georgetown.

Still, Corlette said, she remains skeptical, given all the complexities, that “these tools will be available in a usable format, in real life, for real people on anywhere near the timeline envisioned.”

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Even Well-Intended Laws Can’t Protect Us From Inaccurate Provider Directories

If you have medical insurance, chances are you’ve been utterly exasperated at some point while trying to find an available doctor or mental health practitioner in your health plan’s network.

It goes like this: You find multiple providers in your plan’s directory, and you call them. All of them. Alas, the number is wrong; or the doctor has moved, or retired, or isn’t accepting new patients; or the next available appointment is three months away. Or perhaps the provider simply is not in your network.

Despite a spate of state and federal regulations that require more accurate health plan directories, they can still contain numerous errors and are often maddeningly outdated.

Flawed directories not only impede our ability to get care but also signal that health insurers aren’t meeting requirements to provide timely care — even if they tell regulators they are.

Worse, patients who rely on erroneous directory information can end up facing inflated bills from doctors or hospitals that turn out to be outside their network.

In 2016, California implemented a law to regulate the accuracy of provider directories. The state was trying to address long-standing problems, illustrated by an embarrassing debacle in 2014, when Covered California, the insurance marketplace that the state formed after the passage of the Affordable Care Act, was forced to pull its error-riddled directory within its first year.

Also in 2016, the federal Centers for Medicare & Medicaid Services demanded more accurate directories for Medicare Advantage health plans and policies sold through the federal ACA marketplace. And the federal No Surprises Act, which took effect this year, extends similar rules to employer-based and individual health plans.

California law and the federal No Surprises Act stipulate that patients who rely on information in their provider directories and end up unwittingly seeing doctors outside their networks cannot be required to pay more than they would have paid for an in-network provider.

Unfortunately, inaccurate directories continue to plague our health care system.

A study published in June in the Journal of Health Politics, Policy and Law analyzed data from the California Department of Managed Health Care on directory accuracy and timely access to care. It found that in the best case, consumers could get timely appointments in urgent cases with just 54% of the doctors listed in a directory. In the worst case: 28%. For general care appointments, the best case was 64% and the worst case 35%.

A key takeaway, the authors write, is that “even progressive and pro-consumer legislation and regulations have effectively failed to offer substantial protection for consumers.”

Few people know this better than Dan O’Neill. The San Francisco health care executive called local primary care doctors listed in the directory of his health plan, through a major national carrier, and could not get an appointment. Nobody he talked to could tell him whether UCSF Health, one of the city’s premier health systems, was in his network.

“I spent close to a week trying to solve this problem and eventually had to give up and pay the $75 copay to go to urgent care because it was the only option,” O’Neill says. “I now live a seven- or eight-minute walk from the main UCSF buildings, and to this day, I have no idea whether they are in my network or not, which is crazy because I do this professionally.”

Consumer health advocates say insurers are not taking directory accuracy seriously. “We have health plans with millions of enrollees and hundreds of millions in reserves,” says Beth Capell, a lobbyist for Sacramento-based Health Access California. “These people have the resources to do this if they thought it was a priority.”

Industry analysts and academic researchers say it’s more complicated than that.

Health plans contract with hundreds of thousands of providers and must constantly hound them to send updates. Are they still with the same practice? At the same address? Accepting new patients?

For doctors and other practitioners, responding to such surveys — sometimes from dozens of health plans — is hardly at the top of their to-do list. Insurers typically offer multiple health plans, each with a different constellation of providers, who don’t always know which ones they’re in.

The law gives insurers some leverage to induce providers to respond, and a whole industry has sprung up around collecting provider updates through a centralized portal and selling the information to health plans. The inaccuracy problem remains, however. Health plans and providers often have outdated data systems that don’t communicate with each other.

A significant improvement in health plan directories will require “more connectivity and interoperability,” says Simon Haeder, an associate professor at Texas A&M University’s School of Public Health and a co-author of the study on directory accuracy and timely access.

Until that day comes, you will need to fend for yourself. Be diligent when using your health plan’s provider directory. You should use it as your first stop — or to check whether a doctor recommended by a friend is in your network.

Remember the laws that say you can’t be charged out-of-network rates if the doctor you visit was listed in your health plan’s directory? You’ll have to prove that was the case. So take a screenshot of the directory showing the provider’s name and save it. Then, call the doctor’s office to double-check. Take notes and get the name of the person you talked to. If there’s a discrepancy, call your health plan, too.

If you find an inaccurate entry, report it to your health plan. California law requires plans to provide instructions for consumers to do that. If you are in a commercial health plan, your policy is likely regulated by the Department of Managed Health Care. You can lodge a complaint through the department (888-466-2219 or www.healthhelp.ca.gov). Since California’s law on provider directories took effect, the department has helped resolve 279 complaints, said spokesperson Rachel Arrezola.

If your plan has a different regulator, the department can point you in the right direction.

If you are one of the roughly 6 million Californians in a federally regulated employer or union plan and you get a big out-of-network bill from a doctor who was listed in your health plan directory, you can file an appeal through the office set up for that purpose (800-985-3059 or www.cms.gov/nosurprises).

Ultimately, efforts to improve the accuracy of provider directories are part of a broader push for greater transparency of health care prices and easier access to patient records. All of that will require a more open information superhighway.

This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

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from Health Industry – Kaiser Health News

Parents Become Drug Developers to Save Their Children’s Lives

Maggie Carmichael wasn’t developing like other kids. As a toddler, she wasn’t walking and had a limited vocabulary for her age.

She was diagnosed with PMM2-CDG, potentially fatal gene mutations that cause abnormal enzyme activity — and affect fewer than 1,000 people worldwide. Her parents, Holly and Dan Carmichael, raised $250,000 for scientists to screen existing drugs to find a potential treatment, and in a single-patient trial with Maggie as the test subject, one drug showed promising results. The young girl stopped face-planting when crawling, she began using a walker instead of her wheelchair, and her lexicon expanded.

The Carmichaels and their organization, Maggie’s Cure, could have handed off the work to a biotech company. Instead, the family from Sturgis, Michigan, formed a joint venture partnership with Perlara PBC, a San Francisco company that tries to identify new and existing drugs to treat rare diseases. The Mayo Clinic would later join as a co-owner of Maggie’s Pearl.

The company secured approval last December for a 40-patient clinical trial that could one day lead the FDA to approve the drug for PMM2-CDG. It would also defy what doctors told the Carmichaels about the prospects of a treatment when Maggie was diagnosed at 9 months:

“Not a snowball’s chance in hell.”

Half of all rare-disease patients are children, and their families have long pushed to speed up cures, usually by forming foundations that seed money for research. If there are promising findings, many hand the work off to biotech companies to develop treatments. Now, some families are forming their own biotech businesses, acting as drug developers to find treatments for ultra-rare diseases that affect 1,000 patients or fewer.

But their chances are slim.

Only about 12% of drugs in clinical trials are ever approved by the FDA. And few biotech firms focus on rare diseases given the limited size of the patient market; 12% of clinical trials are focused on rare diseases.

This means families aren’t likely to find a cure — let alone make a profit.

“If a drug should get approved for a disease with 1,000 patients, the probability that there are any material profits, I would say, is actually remote,” said James Geraghty, who is on biotech boards and is the author of “Inside the Orphan Drug Revolution: The Promise of Patient-Centered Biotechnology.”

But families say cures, not profits, motivate them.

According to the National Institutes of Health, there are roughly 7,000 rare diseases, affecting nearly 1 in 10 Americans. A rare disease is generally considered one that affects fewer than 200,000 people in the U.S. at a given time. Only 30% of children with rare diseases will live to see their 5th birthday.

Some 95% of rare diseases are without an FDA-approved treatment or therapy.

Upon a child’s diagnosis, parents will often quit their jobs and reorder their lives to find a treatment. Families will use their own money or raise funds to enter the arena. Dozens, if not hundreds, of nonprofit family foundations across the nation focus on rare-disease treatments amid the dearth of public and private funding.

Drugmakers can charge exorbitant prices for rare-disease drugs, so it can be highly profitable to target rare diseases like cystic fibrosis, which affects up to 200,000 Americans. But the market becomes much less attractive for ultra-rare diseases because of the much smaller pool of patients.

“It’s the riskiest of the risky,” said Joe Panetta, CEO of Biocom California, a life sciences trade group.

Drug regulations prohibit the Carmichaels from sharing how Maggie is doing now because of the clinical trial, but Maggie’s Pearl, assuming its drug earns FDA approval, says it aims to ensure the treatment can be accessed by all with the disease.

The Carmichael family is helping to pay for a clinical trial it estimates will cost $3 million to $5 million. The family won’t say how much it’s contributing, but $2 million is coming from a federal Small Business Innovation Research grant.

Holly Carmichael, chief operating officer of Maggie’s Pearl, says she’s motivated to shepherd a drug’s development while keeping prices lower than they might otherwise be. “We’re not a traditional biotech with shareholders that have certain profit thresholds,” she said.

The company has pledged to reinvest a portion of its profits into research and development. The rest would flow to the venture’s owners, including the Carmichael family.

In that way, Maggie’s Pearl is “just like any other business,” said Ethan Perlstein, the CEO of Maggie’s Pearl and Perlara, which counts Swiss drug giant Novartis AG and entrepreneur Mark Cuban among its early investors. Convicted pharmaceutical executive Martin Shkreli was bought out of his early stake in Perlstein’s venture.

Last month, a Boston company called Vibe Biotechnology announced a cryptocurrency-based model to raise money for rare-disease drug development. Investors will have the power to vote on rare-disease research proposals, and patients’ families have ownership stakes in promising therapies.

“The challenge for rare diseases isn’t necessarily finding a treatment — it’s funding it,” said Alok Tayi, CEO and co-founder of Vibe Biotechnology, in a statement. “For the first time, Vibe Bio is giving patients with rare and overlooked diseases access to the funding and community support they need to develop cures and ownership over the results.”

The company has launched two biotech companies in partnership with two foundations: Chelsea’s Hope, which is focused on Lafora disease, a fatal form of progressive myoclonus epilepsy, and NF2 BioSolutions, which hopes to accelerate a gene therapy for neurofibromatosis Type 2, which causes the growth of noncancerous tumors in the nervous system.

One reason more families strike out on their own is for greater control.

Typically, if research advances far enough, families entrust biotech companies to bring drugs to market. A company usually gains intellectual property rights as part of taking on the financial risks of developing such treatments. But if that company shelves the program, parents are left helpless and heartbroken.

The Cure Mito Foundation — along with other family foundations — funded research in Steven Gray’s lab at the University of Texas Southwestern Medical Center.

Taysha Gene Therapies, a company formed in 2019, pledged to accelerate Gray’s research and take financial pressure off families. In return, Taysha gained potentially lucrative research licenses and controls the rights to these programs.

In March, Taysha announced it would cut 35% of its staff and shelve much of its portfolio, reflecting an industry downturn. The pause included Cure Mito’s campaign to develop a treatment for Leigh syndrome, a neurogenerative condition that leaves some children unable to walk and breathe on their own.

Taysha’s pause has worn on Courtney Boggs, a member of the Cure Mito Foundation. Her daughter, Emma, is a cheerful 6-year-old who loves reading and playing with dolls. She eats through a feeding tube and cannot walk unassisted, and her condition will worsen without treatment.

“We need something for our kids, and not just our kids, but future generations,” said Boggs, who lives in El Paso, Texas.

Taysha, which is among a small number of companies investing in treatments for ultra-rare disease, narrowed its focus from more than 20 to four rare-drug programs.

“We share the disappointment and frustration of our patients and their families right now,” the company said, “but truly believe the tough decisions we are making today will best position us to conduct new trials in the future.”

Other families are trying to prevent that scenario by securing more favorable terms when doing business with biotech companies, such as licensing payments and the ability to claw back rights to medications if drugmakers take too long.

Craig Benson, a finance executive from Austin, Texas, and his wife, Charlotte, formed the Beyond Batten Disease Foundation to find a treatment for their 19-year-old daughter, Christiane, who suffers from Batten disease, which causes vision loss and seizures.

The Bensons’ foundation funded a therapy that the French pharmaceutical company Theranexus licensed in 2020 and is in early-stage clinical trials. As part of the deal, Theranexus shouldered development costs and paid the foundation an undisclosed upfront sum. The foundation may receive additional payments and royalties on sales if the drug wins regulatory approval. Beyond Batten is reinvesting its money to search for additional treatments that could complement the potential therapy.

“We’re not reliant on bake sales,” Benson said.

This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

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from Health Industry – Kaiser Health News

No-Bid Medicaid Contract for Kaiser Permanente Is Now California Law, but Key Details Are Missing

[Editor’s note: KHN is not affiliated with Kaiser Permanente.]

California lawmakers have approved a controversial no-bid statewide Medi-Cal contract for HMO giant Kaiser Permanente over the objection of county governments and competing health plans. But key details — including how many new patients KP will enroll — are still unclear.

On June 30, with little fanfare, Gov. Gavin Newsom signed the bill that codifies the deal, despite concerns first reported by KHN that KP was getting preferential treatment from the state that would allow it to continue enrolling a healthier pool of Medi-Cal patients, leaving other health plans with a disproportionate share of the program’s sickest and costliest patients. Medi-Cal, California’s version of Medicaid, the government-funded health insurance program for people with low incomes, covers nearly 14.6 million Californians, 84% of whom are in managed-care plans.

Now that the debate is over, opponents of the KP deal are looking ahead.

“We look forward to working with the state on implementing the statewide contract, and we will continue to advocate the value and importance of local plans in providing care to their communities,” said Linnea Koopmans, CEO of Local Health Plans of California, which spearheaded the opposition.

Kaiser Permanente is a huge player in California’s health insurance market, covering nearly a quarter of all Golden State residents. But its slightly less than 900,000 Medi-Cal enrollees are only about 7% of that program’s total managed-care membership.

Kaiser Permanente has long been allowed to limit its Medi-Cal membership by accepting only people who have been KP members in the recent past — primarily in employer-based or Affordable Care Act plans — and their immediate family members.

Under the new law, the number of Kaiser Permanente enrollees in the program “would be permitted to grow by 25%” over the five-year life of the contract, starting from its level on Jan. 1, 2024, when the contract takes effect, said Katharine Weir-Ebster, a spokesperson for the Department of Health Care Services, which runs Medi-Cal. But that 25% figure is not in the text of the law — and the precise magnitude of the intended enrollment increase for KP remains unclear.

Currently, most of KP’s Medi-Cal members are covered through subcontracts with local, publicly governed health plans around the state. Under the new law, those members would be covered directly by Kaiser Permanente under its statewide contract. Proponents say the change will increase efficiency, reduce confusion for consumers, and make Kaiser Permanente more accountable to the state.

Opponents have argued that having a national behemoth compete with local plans — especially in places such as Orange, Ventura, San Mateo, and Sonoma counties, where county-operated plans have been the sole Medi-Cal option — could weaken community control over health care and compromise the safety net system that serves California’s most vulnerable residents.

The new law commits KP to increasing its footprint in Medi-Cal by accepting certain categories of new enrollees, including current and former foster care youths, kids who have received services from another child welfare agency, seniors who are eligible both for Medi-Cal and Medicare, and enrollees who fail to choose a health plan and are assigned one by default.

Nearly half of Medi-Cal enrollees in counties with more than one health plan are assigned by default, Weir-Ebster said. The law, however, doesn’t specify how many default enrollees Kaiser Permanente will accept, saying only that the number will be based on KP’s “projected capacity” in each county or region.

Another significant source of enrollment growth for Kaiser Permanente will be patients — and their family members — transferring out of KP commercial plans in counties where KP will be a Medi-Cal option for the first time.

Some prominent consumer advocacy groups argue that any increase in Kaiser Permanente’s Medi-Cal population is a positive development, especially since the HMO gets high marks for the quality of its care.

“We think that system is something that more Medi-Cal members should have access to, and this bill is a step in that direction,” said Kiran Savage-Sangwan, executive director of the California Pan-Ethnic Health Network, which advocates for equity in health care.

Kaycee Velarde, head of Medi-Cal contracting for KP, said via email that the deal will give more people “access to our high-quality Medi-Cal managed care plan” and allow for better collaboration with the state “to improve quality for a broader number of Medi-Cal enrollees.”

But exactly how the new arrangement will work remains unclear.

The specifics — including the enrollment growth figure — are expected to be enshrined in a memorandum of understanding separate from the contract. That has raised some eyebrows, since MOUs are not typically binding in the same way contracts are. Nor is it clear when the details will come.

“Our expectation is that the Department of Health Care Services is developing the MOU,” Velarde said. The department doesn’t have an estimate of when a draft will be issued, Weir-Ebster said.

Many skeptics of the deal remain concerned about its impact on the safety-net population. The law says Kaiser Permanente will provide the “highest need” specialty services to non-KP members in certain areas of the state. But it does not specify which services or where they will be provided. Those details, expected to be in the MOU, have not yet been decided, Weir-Ebster said.

Leslie Conner, CEO of Santa Cruz Community Health, which runs three clinics in Santa Cruz County, said access to specialty care is a challenge for patients. “That’s going to be a remaining problem that I hope Kaiser would work with the community to address,” she said. “If we don’t all figure it out together, there’s going to be winners and losers, and, honestly, the losers are always the low-income people.”

Lawmakers did make a small number of changes to the original bill intended to address opponents’ concerns. One of them, aimed at local health plans’ fear of having a sicker pool of Medi-Cal enrollees, says all Medi-Cal managed-care plans should be paid in “an actuarially sound manner” in line with the medical risk of their enrollees.

Another one directs the state to assess, before the contract begins, whether KP is adequately complying with behavioral health coverage requirements. The health care giant has come under fire in recent years for providing inadequate mental health services, and the state Department of Managed Health Care is investigating the HMO’s mental health program after a sharp increase in complaints, said Rachel Arrezola, a department spokesperson.

Sal Rosselli, president of the National Union of Healthcare Workers, which has waged a pitched battle against KP over mental health care, said the provision in the new law to assess compliance is insufficient. The union had wanted KP to undergo an annual certification process that would have barred it from enrolling new Medi-Cal enrollees in any year it wasn’t certified.

“Can you imagine any health plan would be granted such a large expansion of its Medi-Cal contract if it couldn’t provide therapy for cancer or cardiac care?” Rosselli said.

Ultimately, KP’s contract creates more choice for the Medi-Cal population, said Linda Nguy, a lobbyist with the Western Center on Law & Poverty. But the group, which advocates for people with low incomes, pledged to keep an eye on how the new law is rolled out.

“We will be monitoring it and certainly raising issues as things come up,” Nguy said.

This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

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Biden’s FTC Has Blocked 4 Hospital Mergers and Is Poised to Thwart More Consolidation Attempts

Fresh off the Federal Trade Commission’s successful challenges to four hospital mergers, the Biden administration’s new majority on the commission is primed to more aggressively combat consolidation in the health care industry than it has in past years.

Although hospital mergers were supposed to improve cost efficiency, experts agree that the creation of huge conglomerates and hospital networks has driven up U.S. medical costs, which are by far the highest in the world. Many enjoy near-monopoly pricing power.

Last year, President Joe Biden ordered the FTC and other federal agencies to promote market competition in health care and other industries. Biden said hospital mergers and acquisitions had left the 10 largest health care systems in control of a quarter of the market and led to the closure of hospitals in rural and other underserved areas.

“We are feeling invigorated and looking to fulfill the executive order’s call to be aggressive on antitrust enforcement,” said Mark Seidman, an assistant director in the FTC’s Bureau of Competition, who chatted with KHN about the agency’s efforts on health care (see accompanying interview). The trade commissioners say this is a key way to slow health care price increases; protect patient access to and the quality of care; and prevent employee layoffs, pay cuts, and unfair labor practices.

But antitrust experts said finding the right cases to test more muscular enforcement theories will take the FTC time. And bringing such cases will almost certainly trigger pushback from Republican commissioners, the health care industry, and the courts. They argue that some mergers continue to make sense, helping lower costs while preserving access for patients, employers, and insurers.

“By overinvestigating, you are putting a tremendous burden on parties seeking to do combinations that are beneficial, potentially deterring pro-competitive behavior,” said Leigh Oliver, a veteran antitrust attorney at law firm Clifford Chance who represents health care companies.

In one of the FTC’s recent victories, RWJBarnabas Health, which operates 12 hospitals, in June scrapped its acquisition of St. Peter’s Healthcare System, which runs one hospital for adults and children in central New Jersey. The FTC had filed a federal lawsuit to block the deal, citing evidence that it would raise prices and hurt patient care.

Also in June, HCA Healthcare, which operates 182 hospitals, halted its acquisition of five Steward Health Care System hospitals in the Wasatch Front region of Utah shortly after the FTC filed a lawsuit to block the transaction, claiming it would raise prices and lower the quality of care.

“This should be a lesson learned to hospital systems all over the country and their counsel: The FTC will not hesitate to take action in enforcing the antitrust laws to protect healthcare consumers,” Holly Vedova, director of the FTC’s Bureau of Competition, said in a statement.

Barry Ostrowsky, CEO of RWJBarnabas Health, disagreed with the FTC’s challenge of his system’s merger, saying in a statement that the proposed acquisition of St. Peter’s “would have transformed quality, increased access, and decreased the overall cost of care for the people of this state.”

In March, a federal appeals court upheld a lower court’s injunction that blocked a merger between Hackensack Meridian Health and Englewood Healthcare Foundation in Bergen County, New Jersey. The FTC said it would have raised prices. That case was initiated by the Trump administration and continued under Biden.

State officials often join forces with the FTC to block mergers.

In February, a proposed merger between Rhode Island’s two largest hospital systems, Lifespan and Care New England Health System, was called off after the FTC and the Rhode Island attorney general filed a lawsuit to stop the deal.

Extensive research has found that prices rise when hospital systems acquire or merge with their competitors or when they buy a significant percentage of physician practices in their market. Highly consolidated markets, such as Northern California (dominated by Sutter Health) and western Pennsylvania (dominated by UPMC) tend to have higher prices.

The FTC has a long history, under both Democratic and Republican administrations, of antitrust enforcement actions to block so-called horizontal mergers between hospitals that could stifle competition in a market.

Under the FTC’s traditional economic theory, high prices in a region should attract new competitors and that competition will bring down prices. But regulatory hurdles and massive costs involved in setting up a health care network — which includes hospitals and doctors, as well other aspects like testing facilities — make such movement unlikely, if not impossible.

So Biden appointees at the FTC and Department of Justice have announced that they want to adopt some legal theories of antitrust enforcement that have been less frequently deployed.

In January, the two agencies launched a joint effort seeking public comment on ways to strengthen enforcement against mergers that could result in societal harm.

Last December, FTC Chair Lina Khan said the agency would scrutinize how proposed mergers might affect not only prices but also workers in the labor market. “Robust antitrust enforcement can help ensure that workers have the freedom to seek higher pay and better working conditions,” she said.

Excessive market power, she added, can allow companies to impose onerous, take-it-or-leave-it contract terms, including noncompete clauses.

Physicians and other health care professionals have said that large health care companies are increasingly pressing them to sign contracts that prevent them from going to work for competitors in the same market or even the same state. At a joint FTC-DOJ public forum in April on the effects of health care mergers, representatives of two emergency physician groups said their members were being given those types of take-it-or-leave it contracts.

In February, Khan and another Democratic commissioner, Rebecca Kelly Slaughter, said they would have liked to include such an allegation about unfair labor practices in the FTC’s challenge to the proposed Lifespan-Care New England merger.

But the two Democratic commissioners did not have a majority at that time, Oliver said, and they may not have wanted to go ahead without a consensus among the commissioners.

The commission had a 3-2 Democratic majority for part of last year after Khan joined the panel, but then another Democratic commissioner, Rohit Chopra, left in October to head a different federal agency. The Democratic commissioners did not regain the majority until the Senate confirmed Alvaro Bedoya in May.

Douglas Ross, a veteran antitrust attorney who has represented hospitals and teaches antitrust law at the University of Washington, said it’s well established that antitrust enforcers can block mergers if they harm labor market competition. “What’s new is this administration is actively looking for cases where they can make that claim,” he said.

The Democratic commissioners also want to take a tougher line in challenging so-called vertical mergers. In these deals, hospitals, insurers, or other types of health care companies seek to merge with or acquire companies that provide needed products, services, or staffing. One example is when hospitals or insurers acquire large physician practices, which studies have found leads to higher prices. Patients will visit a longtime physician only to find prices doubled or more, simply because the practice has been purchased by a hospital, which now sets the rates.

Antitrust enforcers have long viewed such mergers as promoting efficiency because the services and supplies can be obtained at a lower cost, but the FTC’s Democratic majority in September argued that the purported benefits to the public of vertical mergers are not supported by market evidence. The two Republican commissioners sharply dissented, saying the majority’s action “threatens to chill legitimate merger activity and undermine attempts to rebuild our economy in the wake of the pandemic.”

Nevertheless, in a test of more vigorous scrutiny of vertical mergers, the FTC commissioners voted unanimously last year to file an administrative complaint to block Illumina, a top producer of gene-sequencing machines, from acquiring Grail, a promising developer of a blood test for early detection of many kinds of cancer. The agency argued that Illumina could use the acquisition to prevent Grail’s emerging rivals from competing in the market.

Today, “the agencies are very suspicious of vertical acquisitions, and I think they’re willing to be extremely aggressive in investigating them,” Ross said. “But whether the courts go along or not, we’re way too early to know.”

Even so, some experts questioned whether aggressive FTC antitrust enforcement will help patients and employers who are paying high prices in areas dominated by one or two health systems. It may be time for direct regulation of prices, they said.

“There’s not a lot the FTC can do to challenge hospitals’ ability to raise prices once they have acquired market power,” said Thomas Greaney, a research professor at the University of California Hastings College of the Law in San Francisco who studies health care antitrust issues. “So there’s a natural reaction in some states to say, ‘Let’s regulate those prices.’”

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As Big Pharma Loses Interest in New Antibiotics, Infections Are Only Growing Stronger

Forget covid-19, monkeypox, and other viruses for the moment and consider another threat troubling infectious disease specialists: common urinary tract infections, or UTIs, that lead to emergency room visits and even hospitalizations because of the failure of oral antibiotics.

There’s no Operation Warp Speed charging to rescue us from the germs that cause these infections, which expanded their range during the first year of the pandemic, according to a new Centers for Disease Control and Prevention report. In the past year, the FDA declined to approve two promising oral drugs — sulopenem and tebipenem — to treat drug-resistant UTIs, saying it needed more evidence they work as well as current drugs.

In the meantime, some UTI patients “have to get admitted and get an IV treatment for a bladder infection that typically would be treated with oral antibiotics,” said Dr. Sarah Doernberg, an infectious disease specialist at the University of California-San Francisco Medical Center.

Rebecca Clausen, an office worker in Durham, North Carolina, was prescribed several courses of a cheap oral antibiotic for a persistent UTI earlier this year, but it “just seemed to keep coming back,” she said. Doctors considered a six-week treatment with an intravenous drug, ertapenem, that would have cost her about $2,000 out-of-pocket, but decided it probably wouldn’t help. For now, she’s simply hoping the infection won’t worsen.

While specialists say they are seeing more urinary tract infections that oral antibiotics can’t eliminate, the problem is still thought to be relatively rare (federal health officials don’t directly track the issue). However, it’s emblematic of a failure in the antibiotics industry that experts and even U.S. senators say can be fixed only with government intervention.

The CDC report, released July 12, showed that after mostly declining during the previous decade, the incidence rates of seven deadly antimicrobial-resistant organisms surged by an average 15% in hospitals in 2020 because of overuse in covid patients. Some of the sharpest growth occurred in bugs that cause hard-to-treat UTIs.

Although nearly 50,000 Americans — and about 1.3 million people worldwide — die of resistant bacterial infections each year, the FDA has not approved a new antibiotic since 2019. Big Pharma has mostly abandoned antibiotics development, and seven of the 12 companies that successfully brought a drug to market in the past decade went bankrupt or left the antibiotics business because of poor sales.

That’s because of a central paradox: The more an antibiotic is administered, the quicker bacteria will mutate to get around it. So practitioners are aggressively curbing use of the drugs, with 90% of U.S. hospitals setting up stewardship programs to limit the use of antibiotics, including new ones. That, in turn, has caused investors to lose interest in the antibiotics industry.

A pipeline of new drugs is vital, given the implacable capacity of bacteria to mutate and adapt. But while resistance is an ever-present danger, some 90%-95% of fatal infections involve microbes that are not multidrug-resistant but difficult to treat for other reasons, such as the delicate condition of the patient, said Dr. Sameer Kadri, head of clinical epidemiology at the National Institutes of Health Clinical Center’s Critical Care Medicine Department.

“As bad as antibiotic resistance is, it’s bad against a minority of people,” said Jason Gallagher, a professor and infectious diseases pharmacist at Temple University Hospital in Philadelphia. Since clinicians usually can’t quickly determine a bug’s resistance level, they start with the old drug most of the time. “That makes anti-infectives a pretty tough investment from a drug company perspective,” he added. “You’re going to develop your drug and people are going to do their best to not use it.”

As antibiotics companies disappear, so does their scientific expertise, said Dr. David Shlaes, a retired pharmaceutical industry scientist. Should a particularly deadly pattern of resistance develop with no drug pipeline, it could cause destruction on a hair-raising scale, he said.

“Antibiotics are an essential part of civilization,” said Kevin Outterson, a Boston University law professor who leads a public-private fund that helps companies develop antimicrobials. “They must be renewed every generation or we will slip back into the pre-antibiotic era.”

The roadblocks to approval of the UTI drugs tebipenem and sulopenem illustrate the complexity and regulatory challenges of the antibiotics arena.

In a big clinical trial completed last year, Iterum Therapeutics’ sulopenem was far better than an older drug, ciprofloxacin, at reducing UTI symptoms, but it didn’t seem as adept at killing bacteria, which the FDA considered to be an equally important measure of success. At a June 3 workshop, FDA officials indicated they might be willing to change their standard in future trials.

Another company, Spero Therapeutics, published what looked like a successful trial for oral tebipenem in the New England Journal of Medicine in April. But FDA officials rejected Spero’s application for licensure because a species of bacteria included in the analysis was deemed irrelevant to the drug’s efficacy.

A Lifeline for Patients

Though new oral drugs against UTIs are sorely needed, IV drugs can still conquer most routine UTIs. But the broader threat of a future without new antibiotics is particularly frightening to patients with serious chronic diseases, who are permanently engaged in struggles with bacteria.

Two or three times a day, Molly Pam, a 33-year-old chef and patient advocate in San Francisco, inhales nebulized blasts of colistin or aztreonam. These are antibiotics that the typical person stays away from, but for the 30,000 U.S. cystic fibrosis patients like Pam, deadly bugs and powerful drugs are a fixture of life.

Several times a year, when fever or exhaustion signals that the bugs colonizing her damaged, mucus-clogged lungs are getting overly procreative, Pam heads to a clinic or hospital for IV treatment. In 2019, just as she was approaching resistance to all antibiotics, the drug Zerbaxa received FDA approval.

Pseudomonas and MRSA bacteria have colonized Pam’s lungs since she was a child, their mutations requiring frequent antibiotic updates. In 2018, she was struck down with a drug-resistant, tuberculosis-like bacteria that required a year of three-times-a-day IV drug treatments on top of her other drugs. Last year, she was airlifted to Stanford Medical Center after she began coughing up blood from a damaged lung.

Doctors test Pam’s sputum four times a year to determine which bugs she’s harboring and which antibiotics will work against them. She’s always only a few mutations from disaster.

“I absolutely depend on new drugs,” Pam said.

Steering Stewardship Programs

The development and testing of these new molecules is hardscrabble terrain, featuring frequent conflicts between the FDA and industry over how to measure an antibiotic’s effectiveness — is it patient survival? Symptom improvement? Bacteria count? And over how long a period?

Meanwhile, Congress has aided the industry with patent extensions, and federal agencies have poured in hundreds of millions in grants and partnerships. The World Health Organization and the drug industry in 2020 created a $1 billion venture capital fund to support worthy antibiotics companies.

Still, stewardship of antibiotics arguably has had the biggest influence in reducing the threat of resistance. A 2019 CDC report found an 18% reduction since 2013 in deaths caused by drug-resistant organisms, and a 21% decline in infections of MRSA, or methicillin-resistant Staphylococcus aureus, once a leading medical bogeyman.

But progress can make it harder to test new drugs. With highly resistant bacterial infections still relatively unusual, clinical trials for new drugs generally measure their effectiveness against all bacteria in the relevant class, rather than the most resistant bugs.

And since new drugs often gain approval simply by showing they are roughly as effective as existing drugs, infectious disease doctors generally shun them, at least initially, skeptical of their relatively high prices and questionable superiority.

“There aren’t that many people with antibiotic resistance,” said Dr. Emily Spivak, who leads stewardship programs at the University of Utah and VA Salt Lake City hospitals. “When people get these infections, it’s horrible. But there aren’t enough to make the kind of profits the companies want.”

For example, hospitalized patients with MRSA-related pneumonia often can be treated with vancomycin (starting at about $15 per day), said Spivak, who chairs the Infectious Diseases Society of America’s antimicrobial resistance committee. She sometimes turns to a newer alternative, ceftaroline ($400 a day), which can have fewer side effects. “But even so, we are not cranking through these drugs, and we never will, because luckily we can do other things to prevent MRSA, such as cleaning skin before surgery and keeping catheters clean.”

Time for ‘Warp Speed’?

In the early days of covid, many hospitals desperately threw antimicrobials at the mysterious virus, and the pandemic crisis strained stewardship teams, Spivak said. The new CDC data showed that clinicians gave antibiotics to 80% of hospitalized covid patients in the first eight months of the pandemic, although such drugs have no impact on covid infection.

But the uptake of new antibiotics has been slow. A report on 17 new antibiotics marketed in the United States over the past five years showed only three with sales over $100 million per year. The 17 averaged sales of about $44 million for the 12 months ending in June 2020.

A few of the new drugs, such as a combination antibiotic marketed in the U.S. as Avycaz, have gradually replaced colistin, a highly toxic 1950s compound that was brought back in 2000 because of its efficacy against certain resistant bacteria.

Yet even that transition, recommended by infectious disease specialists, was gradual. That’s not surprising since colistin costs about $140 for a 10-day treatment, while a course of Avycaz might set a hospital back $14,000 to $28,000, noted Dominic Chan, chief of pharmacy services at Legacy Health in Oregon.

Medicare reimbursement for treating hospital infections is low, Chan said, “so there’s no incentive for the hospitals to invest that type of capital into bringing these agents in — other than doing the right thing.”

In most cases, hospitals do appear to be doing the right thing, however. Recent CDC data shows that 90% of U.S. hospitals have stopped using colistin, said agency spokesperson Martha Sharan.

Executives from the dwindling number of antibiotics makers complain that stewardship programs are too stingy, to the detriment of patients. In part, they blame Medicare programs that pay hospitals a lump sum for treatment of a given condition. A congressional bill filed in 2019 and resubmitted last year would require Medicare to pay for new antibiotics separately. Democrats blocked the bill, but antibiotics producers argue it would incentivize hospitals to use their drugs.

Holding back on the new antibiotics allows resistance to old drugs to grow worse, and “that makes it harder and harder for a new antibiotic to do its job,” said Ted Schroeder, CEO of antibiotics maker Nabriva and leader of an industry interest group.

But the bottom line is that most patients don’t need the newest drugs, Kadri said.

In a 2020 NIH study that the FDA helped fund, Kadri and his colleagues reviewed records from 134 hospitals from 2009 to 2015 to find examples of difficult-to-treat, highly resistant bacteria of the gram-negative type — a key area of concern. Of about 139,000 gram-negative infections, only 1,352 fell into the difficult-to-treat category — roughly 1%.

“There are just not enough cases” to create an adequate market for new antibiotics, Kadri said.

Extrapolating from the study, the market for new antibiotics against highly resistant gram-negative bacteria would range from $120 million to $430 million a year, compared with the average $1 billion needed to develop a single drug, wrote Drs. Neil Clancy and Minh-Hong Nguyen of the Veterans Affairs Pittsburgh Healthcare System.

In the absence of a viable market, infectious disease experts, drug companies, and patient groups have rallied behind the PASTEUR Act, introduced by Sens. Michael Bennet (D-Colo.) and Todd Young (R-Ind.) last year. The bill would create a fund of up to $11 billion over 10 years to award promising antimicrobials that were close to or had received FDA approval. The government would guarantee payments of up to $3 billion for each drug, removing the incentive for overuse.

PASTEUR has 40 co-sponsors in the Senate. Experts think its passage is crucial.

“Even though, on a population basis, the need for new drugs is small, you don’t want to be that patient” who might need them, Kadri said. “If you are, you want to have an array of drugs that are safe and effective.”

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from Health Industry – Kaiser Health News

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