DoJ goes after Mich. Blue Cross on antitrust
Detroit Free Press reporters David Ashenfelter and Todd Spangler report that the Justice Department has filed an antitrust suit against state insurance titan Blue Cross Blue Shield of Michigan, charging that it’s been including clauses in its contracts with hospitals that give the insurer significant anticompetitive leverage.
The provisions being challenged are known as “most-favored nation” clauses or MFN. In the health care realm, they generally refer to contractual clauses between health insurance plans and health care providers that – according to the Justice Department – “essentially guarantee that no other plan can obtain a better rate than the plan wielding the MFN.”
For background on MFN clauses in health care, I recommend a 2007 American Medical News column by Steven Harris. Apparently, the DoJ has had such practices in its sights since 2004.
Why California hospitals can charge so much
Filed under: Health data, Health journalism, Public records
California hospitals, especially those in the Bay Area, seem to be able to set prices with impunity, a fact we know in part because the state requires an unusual level of hospital finance disclosure. This week, Kaiser Health News reporter Jordan Rau took advantage of the available records and dug through hospital spending databases and a long list of sources to figure out just what gave certain hospitals the leverage to charge so much more than competitors offering equivalent services. For a quick review of the data unleashed by this law, I recommend reviewing the map and charts that ran alongside the story.
As you might expect, the underlying explanation is complicated. When Rau asked the hospitals why prices were rising, he got a familiar refrain. They blamed it on the need to make up for low Medicare and Medicaid reimbursements, as well as charity care, and reminded him that technology is expensive and that their particular patient populations were unusual in ways that naturally obliged them to charge extra.
Those are certainly all part of the equation, but Rau investigation seems to point in another direction: Garden variety economic clout.
State laws have inadvertently given hospitals even more leverage. California requires health maintenance organizations to have “adequate networks” that offer all major specialties reasonably close to where patients live. Lisa Rubino, president of Molina Healthcare of California, an insurer, says the law makes it difficult for insurers to drop big hospitals from their networks.
“You have to work with them or make a strategic decision to get out of the area because they can dig in,” says Rubino.
Rau elaborates on this idea in a companion piece on NPR’s health blog, in which he points out how the industry has deftly squashed two different efforts to increase transparency in their pricing practices.
ProPublica investigates pharma payments to doctors
Filed under: Conflicts of interest, Health care reform, Health data, Health journalism, Hot Health Headline, Pharmaceuticals, Public records, Tools
ProPublica’s massive investigation into the hefty fees pharmaceutical companies have paid doctors with dubious track records stamps an exclamation point on what has been a banner year for high-profile assaults on pharma-paid physician/marketers.
Books like Daniel Carlat’s Unhinged and Carl Elliot’s White Coat, Black Hat, and the promotional tours that came with them, led the charge and raised awareness of an issue that reporters Charles Ornstein (you may know him as AHCJ’s president), Tracy Weber and Dan Nguyen have driven home with tens of thousands of carefully researched data points and one flagship story.
The ProPublica database is built upon the voluntary disclosures of seven drug manufacturers (Eli Lilly, Cephalon, AstraZeneca, GlaxoSmithKline, Johnson & Johnson, Merck & Co. and Pfizer) which represent about 36 percent of the market. Reform law requires the other manufacturers to make similar disclosures by 2013. The package uncovered a bucket of horror stories — that mug shot of high-earner Dr. Donald Ray Taylor next to the paragraph describing why he was disciplined is the very definition of “disturbing” — yet also distinguished itself by giving doctors who rep pharma the opportunity to explain both their work and their motivation.
In its examination of pharma payments, the investigation goes beyond a simple database match with disciplinary records. Some physician/marketers had clearly earned their stripes and displayed impressive resumes and relevant research records, the reporters found, but others had disciplinary records, lacked any board certification or publications or appeared to have been manufactured by the drug-makers themselves.
“It’s sort of like American Idol,” said sociologist Susan Chimonas, who studies doctor-pharma relationships at the Institute on Medicine as a Profession in New York City.
“Nobody will have necessarily heard of you before — but after you’ve been around the country speaking 100 times a year, people will begin to know your name and think, ‘This guy is important.’ It creates an opinion leader who wasn’t necessarily an expert before.”
If you can’t get enough of the investigation, see the work by ProPublica’s partners at The Boston Globe, Consumer Reports, the Chicago Tribune, Nightly Business Report and NPR.
Finally, don’t miss the comments on the article, headlined by a lengthy response from the leading pharmaceutical industry group.
Medicare competitive bidding ramps up
Filed under: Health care reform, Health journalism, Hot Health Headline
The California HealthCare Foundation Center for Health Reporting and the San Bernardino County (Calif.) Sun teamed up for a package of stories explaining the local roll-out of a Medicare program that’s testing a competitive bid process for medical devices and equipment.
On Jan. 1, 2011, Medicare will implement the program in nine metropolitan areas nationwide. Bids are already underway. In the series’ flagship story, Deborah Schoch, of the Center for Health Reporting, and the Sun’s Monica Rodriguez looked into the program’s potential for controlling costs and cutting down on fraud. For an illustration of potential savings and payment amounts, see the graphic that ran alongside their work.
The potential savings of going from a set fee schedule to a competitive one should be fairly evident. The anti-fraud measures, on the other hand, require a bit of explaining. According to Schoch and Rodriguez, the system promises to prevent fraud by requiring vendors to be bonded and insured, and to have legitimate storefronts for their durable goods. It will be harder for vendors to upsell seniors into buying needlessly elaborate equipment, and the smaller community of suppliers will be easier to police overall.
Local reporters can refer to the CMS site for precise zip code maps of the round one bidding areas.
Competitive bidding is nothing new to government agencies, and the duo’s sources believe that they’re ready to make it work in Medicare as well.
After working for Medicare for 32 years, (regional Medicare administrator David Sayen) believes the new plan contains the elements to make it work, Sayen, 57, said in a recent telephone interview. “It’s got the three legs - a mechanism to set pricing, a mechanism to provide quality assurance, and one to prevent waste and fraud.”
The ambitious program has, of course not gone unchallenged, though officials seem confident they will be able to resist the last-minute push from vested interests this time. Some, they write, were inefficient enterprises that were sustained only by Medicare’s generous fee schedule. They will probably not survive in a competitive environment.
Industry groups are pointing to a Sept. 26 letter signed by 166 economists, including two Nobel Prize winners, addressed to California Rep. Pete Stark, Democratic chairman of the powerful health subcommittee of the House Ways and Means Committee.
The signers lambaste what they call four key problems with the program: a lack of binding commitments, the use of composite bids, and what they call flawed pricing and a lack of transparency.
The program could degenerate if vendors become unreliable, product and service quality lags and supplies dwindle, they wrote.
Medicare recipients will be advised of the changes by mail, and through a series of educational sessions.
And, for the record, here’s a list of items up for bids in this first round:
- Oxygen supplies and equipment
- Standard power wheelchairs, scooters, and related accessories
- Complex rehabilitative power wheelchairs and related accessories
- Mail-order diabetic supplies
- Enteral nutrients, equipment and supplies
- Continuous positive airway pressure (CPAP), respiratory assist devices (RADS) and related supplies and accessories
- Hospital beds and related accessories
- Walkers and related accessories
- Support surfaces (Miami only)
If you work in one of the nine bidding areas and have written something about the process, let us know in the comments! We’re hoping to feature more local stories on the program as the new year draws nearer.
A new wave of hospital consolidation looms
Nationally, the hospital consolidation craze has leveled off since its 2006 peak, but Kaiser Health News senior correspondent Julie Appleby, an AHCJ board member, reports that acquisitions are on the march again, especially in the mid-Atlantic region. Appleby found that this rising wave is due, in part at least, to health care reform and its emphasis on integrated care and Accountable Care Organizations.
Hospital leaders from Baltimore to Seattle say the health law approved by Congress in March gives them even more reason to merge with or buy rivals because of its emphasis on integrated systems where hospitals and doctors better coordinate care.
Also fueling the trend: More doctors want to be employed directly by hospitals, allowing them more job security without the hassles of running a business. But hiring groups of doctors can be an “expensive and daunting proposition” for a stand-alone facility, says Steven Thompson, senior vice president for Johns Hopkins Medicine.
Nationally and locally, he says, “it’s fair to say that (independent) hospitals are talking with everyone, feeling that they don’t want to be the last one standing.”
Other causes include increasingly contentious negotiations with insurers, more direct employment of doctors and access to the capital needed to adopt things like electronic medical records.
We were pointed to the KHN story by AHCJ Immediate Past President Trudy Lieberman’s cjr.org column, in which she compares hospital consolidation to HMOs and insurance consolidation.
It was good to see Appleby’s story, because the media pretty much gave hospitals a bye during the reform debate, instead making insurance companies the saga’s primary villains. Quietly, though, it seems the hospitals were up to the same thing as the insurers—organizing themselves into larger and larger groups with tons of market power to keep insurance premiums in the stratosphere.
Mass. reform, cost-cutting crush safety net hospital
Filed under: Government, Health care reform, Health policy, Hospitals
Boston Medical Center has been pushed to the financial brink by a mix of politics, economics and expanded health coverage. In Boston Magazine, Eileen McNamara examines the forces that are dragging down the commonwealth’s largest safety net hospital, in the process painting a cautionary tale of what happens when universal health care and cost-cutting collide. If it keeps eating through its financial reserves at the current rate, the hospital will become insolvent next year.
Photo by Wade Roush via Flickr
BMC is in a unique position, thanks to a legal mandate (not shared by its wealthier, Harvard-affiliated competitors) that it “consistently provide excellent and accessible health care services to all in need of care, regardless of status or ability to pay,” McNamara writes. In return, the state is supposed to compensate for its disproportionate load of low-income patients. Instead, the state’s clamping down on Medicare reimbursement.
BMC is locked in a battle with the Patrick administration over dramatic cuts in how the state pays for treating the poor. Barring a last-minute settlement, a Suffolk Superior Court hearing on September 29 will consider the state’s motion to dismiss a BMC lawsuit that challenges Massachusetts’ reimbursement rate. (The state currently pays the hospital 64 cents for every dollar it spends on patients with Medicaid.)
BMC says the new reimbursement formula violates state and federal law, and will sound the death knell for the state’s largest safety-net hospital. The commonwealth says it has the power to set any rate it wants; if BMC finds the payments inadequate, it can simply stop taking Medicaid patients. The state’s argument might have some merit in the case of doctors being free to choose their patients, but it’s a ludicrous posture to adopt toward an inner-city hospital that is required — by state law — to serve all comers.
On MedpageToday, Kevin “@kevinMD” Pho, who trained at BMC, pulls no punches as he riffs on McNamara’s article.
Universal coverage makes great headlines, helps get politicians elected, and, to be fair, is something that needed happen. But doing so without adequately addressing its cost is going to bankrupt hospitals, especially inner-city ones like BMC. That will hurt the Medicaid and Medicare patients dependent on them.
And that’s a goddamn shame.
GAO examines competition in hospital purchasing
Group purchasing organizations are intermediaries which theoretically group hospitals together to give them more leverage in purchasing negotiations. In 2009, they accounted for an average of 73 percent of hospitals’ non-labor purchases and were used by 98 percent of American hospitals. There are more than 600 of them in the United States, but the six largest account for 90 percent of the business.
In 2002, they came under fire for anti-competitive practices such as product bundling, excessive administrative fees and sole-source contracting. These practices also may limit access to innovative devices, a problem Washington Monthly’s Mariah Blake investigated earlier this year.
Photo by House of Sims via Flickr
At the time, the GPOs promised to institute codes of conduct to prevent such practices. A new GAO report (24-page PDF) aimed to see how much of a difference such codes had made, among other things (pages 18-22, all page numbers are based on the PDF). It also sought to answer questions like “what exactly do GPOs do, anyway?” (page 12), and “how do they make money?” (page 13).
The report relies heavily on interviews and self-reporting, all of which seem to indicate that the industry has voluntarily made progress toward curbing exclusive contracts and conflicts of interest, though a deeper independent investigation would be needed to produce any truly conclusive answers.
The industry’s primary trade group, the Health Industry Group Purchasing Association (HIGPA), heralded the GAO’s findings.
“The GAO report clearly demonstrates the group purchasing industry’s firm commitment to remaining the most transparent industry in health care. The report affirms that our aggressive efforts have yielded increased transparency and low administrative fees in health care contracting, the second largest expense for hospitals after the cost of labor,” HIGPA President Curtis Rooney said in a press release.
HIGPA, which cooperated with the GAO investigation and says it has helped review codes of conduct across the industry, has a membership list that might come in handy for reporters looking to localize this story.
Higher health care costs, lack of safety innovations traced to group purchasing organizations
Filed under: Health policy, Hospitals, Hot Health Headline
The Washington Monthly’s Mariah Blake writes about the ins and outs of group purchasing organizations (GPOs) and their effect on the development of newer, potentially safer, medical equipment. She reports the system has kept potentially lifesaving innovations off the market and may be contributing to the rising costs of health care.
Among the products she cites as having been created but largely kept out of the supply chain as a result of the GPO system are a syringe with a retractable needle, a syringe designed to reduce bloodstream infections and a surgical towel that can be spotted on X-rays to keep towels from being left in the body after surgery. Those products were developed by small suppliers who seem to be squeezed out of the market by the system.
Blake’s combination of narrative about the small suppliers who have been stymied by the system and her investigation into how GPOs became such a game changer will be of great interest to anyone who writes about health care costs and innovations in patient safety.
Blake explains the evolution of GPOs, “a system built on a seemingly minor provision in Medicare law that few people even know about.”
It’s a system that has stifled innovation and kept lifesaving medical devices off the market. And while it’s supposed to curb prices, it may actually be driving up the cost of medical supplies, the second largest expenditure for our nation’s hospitals and clinics and a major contributor to the ballooning cost of health care, which consumes nearly a fifth of our gross domestic product.
Through a series of court cases, one of which granted GPOs protection from antitrust actions, and their subsequent consolidation, GPOs revenues became “tied to the profits of the suppliers they were supposed to be pressing for lower prices.”
A former GPO employee explains, “But GPOs make their money by charging vendors fees. And if you get a percentage of sales, going with a lower bid from a little company just loses you money and pisses off the big vendors with multiple contracts.”
Blake reports that most small suppliers are wary of speaking out about GPOs. “Several talked to me off the record. At least a half dozen more agreed to speak, only to back out at the last minute or retract their statements after we had spoken.”
Blake points out that this incentive system has an effect on health care costs. GPOs contend that they keep costs down by pooling hospitals’ buying power, but Blake reports one company has kept data on hospital purchases and found that “bids hospitals got through their GPO contracts were substantially higher” than what could be had by negotiating directly with vendors for the same equipment.
More about GPOs
- Modern Healthcare surveys GPOs annually and a list of about 11 of them and their addresses is available.
- The Health Industry Group Purchasing Association represents 16 GPOs.
Lundberg’s list of why health care costs are rising
While people on the streets, experts and legislators debate the causes of rising health care costs, George Lundberg, M.D., editor-at-large of MedPage Today, does no such hand wringing.
He declares that a survey of the topic that was posted by his publication missed the point and did not provide the correct answers.
Lundberg, who edited the Journal of the American Medical Association for 17 years and is a member of the Institute of Medicine, lists what he sees as the “Primary Drivers of Rising Healthcare Costs.”
Health care reporting among SABEW winners
Health care reporting fared well in this year’s Society of American Business Editors and Writers Best in Business Writing competition as the business of health care took center stage in many publications and earned awards for both breaking news and in-depth packages. The health-related winners:
Breaking news
Real-time News Organizations
- Dow Jones Newswires: “Deep Coverage On Drug Deal”
- Reuters: “H1N1 Flu: The Global Story”
Enterprise
Small Publications
- Sarasota Herald-Tribune: “Contaminated Chinese drywall”
Weekly Publications
- Pittsburgh Business Times: “Eli Lilly details payments to docs”
Projects
Giant Publications
- The New York Times: “Toxic Waters”
Large Publications
- Dallas Morning News: “The Cost of Care”
Magazine Enterprise
Small
- Bloomberg Markets: “Big Pharma’s Crime Spree”
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Join us in Omaha to find untold rural health stories
New at HealthJournalism.org
- AHCJ offers financial data about nonprofit hospitals
- Diversity in aging: Putting gray in the rainbow
- Southeast journalists eligible for regional fellowship program
- AHCJ-NLM Health Journalism Fellowship offers hands-on medical research training
- AHCJ announces 2011 winners of top health journalism awards
