Hospitals twist prescription assistance program for their own benefit

By Adam J. Fein, president, Pembroke Consulting, Philadelphia - 04/29/13 03:00 PM ET

In 1992, Congress acted to help indigent and uninsured patients gain better access to prescription drugs. It authorized the 340B drug discount program, which lets eligible hospitals and other providers purchase outpatient drugs and receive discounts from pharmaceutical manufacturers.

But today, 340B discounts have left needy patients behind. Health Resources and Services Administration (HRSA), the government agency that oversees the 340B program, has developed the program with a tangle of regulations, non-public private letters, clarifications, and “Frequently Asked Questions.” Aggressive hospital strategies, all technically legal, have stretched the program’s goals beyond recognition. Hidden rebates from pharmaceutical manufacturers are instead subsidizing the operations of highly profitable, multi-billion dollar health systems.

The limited government oversight and foggy regulations let a 340B hospital profit from everyday outpatient prescriptions — drugs that are dispensed by your local pharmacy and are already fully paid by your insurance company. Thus, economic status and degree of need are irrelevant to a hospital’s ability to profit from a 340B prescription.

Hospitals grab these 340B rebates through a convoluted process. First, the hospital and its software vendors secretly match personal information from your retail prescription to their internal patient databases. If it is profitable, they convert the prescription to a 340B claim. Then, the retail pharmacy turns over its third-party and consumer payments to a 340B hospital. The hospital pays a fee to the pharmacy and submits a rebate claim for the retail prescription.

What’s more, the hospital benefits without your or your payer’s knowledge. Under existing regulations, the process is entirely permissible. However, it certainly wasn’t considered or intended in the original legislation.

This behavior sharply accelerated after a 2010 regulatory change, which lets hospitals build external networks of community pharmacies. HRSA projects that nearly one-quarter of the country’s 60,000 retail community pharmacies will be part of a 340B network. The biggest player is Walgreens. More than 4,000 of its drugstores act as 340B contract pharmacies.

Unfortunately, we can’t even detect the full scope of this practice. The National Council for Prescription Drug Programs (NCPDP), which set electronic communication standards for pharmacy care, allows easy identification of an individual prescription’s status under the 340B drug pricing program. This voluntary standard is purposely ignored by most hospitals and pharmacies.

Senator Charles Grassley (R-Iowa) has requested that the largest North Carolina hospitals provide details about their use of the 340B program. His work has exposed the small fraction of hospital 340B profits that now target indigent and uninsured patients.

Consider Duke University Health System, which has annual revenues of $2.5 billion and operating profits (revenues minus expenses) exceeding $500 million. Responding to Senator Grassley, Duke disclosed 340B pharmacy profits of $292 million — a 53 percent gross profit margin. Without these discounts, Duke's pharmacy profit margin would drop to 24 percent — comparable to that of a typical outpatient pharmacy. Only 1 in 20 patients served by Duke’s 340B pharmacy is uninsured. The remaining 95% have prescription costs paid by Medicare, Medicaid, or private insurance.

Today’s Congress should improve oversight and tighten 340B participation requirements.

To ensure that the program’s funds are being used appropriately, Congress should require that hospitals fully disclose how they use their 340B pharmacy profits. By allowing hospital’s to retain and then spend all 340B pharmacy profits, neither Medicare nor patients benefit from 340B drug discounts.

To limit abuse and increase transparency, hospitals and pharmacies should also be required to comply with established industry standards for identifying 340B prescription claims. Hospitals’ use of contract pharmacy networks should be scrutinized to be consistent with the program’s true intent.

It’s time to modernize the 340B program and help the neediest patients access valuable medicines.

Fein is president of Philadelphia-based Pembroke Consulting, Inc. He blogs at Drug Channels.

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Hospitals Serving The Uninsured Face Challenge Under Obamacare

Hospitals that treat the most vulnerable patients may have the toughest time weathering spending cuts under President Obama’s health-care law.

Approximately 1,500 hospitals nationwide are known as “safety net” providers because they care for a larger portion of uninsured patients than their competitors.

Under the Affordable Care Act, the safety-net hospitals will gain a new source of revenue when millions of the uninsured gain coverage. At the same time, the law’s spending cuts could prove challenging for hospitals that tend to operate with relatively small profit margins.

“This is a time of uncertainty for them,” said Stu Guterman, vice president of the Commonwealth Fund. “On the one hand, they should be thrilled because a lot of the patients they treat will have payment attached to them. On the other, they’re losing some of the funding they rely on.”

A report released Tuesday by the private consulting firm Alvarez & Marsal warned that the health-care law “may actually worsen the status of many safety net hospitals.”

The Affordable Care Act layers three big spending cuts on top of reductions that states have made during the recession.

First, the law slows the rate of regularly scheduled pay bumps from the federal government, meant to help hospitals keep pace with growing health-care costs.

Safety-net hospitals also will  bear the brunt of cuts in “disproportionate share payments,” money that the federal government sends hospitals that cover a high level of uninsured patients. These payments, which come from the Medicaid and Medicare programs, will fall by more than $30 billion over the next decade.

Health experts initially thought that those funds would become unnecessary as the expanded access to health coverage lessened demand for uncompensated care. After the Supreme Court declared the Medicaid expansion optional, several Republican governors declined to move forward, leaving hospitals worried that they will still see high numbers of uninsured patients.

Last, the health-care law tethers a small portion of hospitals’ Medicare payments to the quality of care they provide and to patient satisfaction rankings. If hospitals don’t hit certain targets, they stand to lose 1 percent of their Medicare income.

Safety-net hospitals, separate research suggests, may have a tough time hitting the goals, because they tend to receive lower patient satisfaction ratings than competitors who treat fewer uninsured people.

“The challenge for a lot of these institutions are that they rely heavily on federal subsidies,” study author David Gruber said. “Now it’s like a tsunami of cuts hitting at the same time.”

Researchers who have studied the safety-net hospitals echo some of the report’s concerns but note that the health law offers many benefits for these providers.

“What the Affordable Care Act really means for the hospitals is going to vary,” said Teresa Coughlin, a health policy researcher at the Urban Institute. “It will depend on whether their states take the Medicaid expansion, how many people are left uninsured, and what happens with state and local funding.”

Coughlin recently published a study looking at how five large safety-net systems were  adapting to the health-care law. Some, she said, are building new facilities and putting a new focus on quality, so they can compete for the patients who do gain coverage under the health law.

“It’s not all doom and gloom,” Coughlin said.

The Obama administration has responded to some of the hospitals’ concerns. In the president’s budget released last week, the White House proposed delaying some of the cuts in disproportionate share payments by one year, as states continue to debate the Medicaid expansion.

Still, safety-net hospitals remain concerned over what lies ahead under the health law.

“It’s a more challenging environment when you have all these issues colliding at once,” said John Haupert, president of Grady Health System.

The Atlanta-based hospital system estimates that 30 percent of its patients lack insurance coverage and an additional 30 percent receive Medicaid, which tends to pay lower rates than private health plans.

When Grady ran the numbers, it found that it would lose $45 million annually under the health law’s Medicaid cuts to disproportionate share payments. That works out to be about 7 percent of the hospital’s $670 million budget. If those cuts go through, Haupert said, he has thought about cutting back on some of the clinical services the hospital system provides. However, many of its uninsured patients will become eligible for coverage next year.

“Clearly we’re faced with lots of decisions,” Haupert said. “We’ve done some brainstorming. None of it will be an easy decision.”

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Insurers Limit Doctors, Hospitals In State-Run Exchange Plans

California's health insurance rates for a new state-run marketplace came in lower than expected this week, but one downside for many consumers will be far fewer doctors and hospitals to choose from.

People who want UCLA Medical Center and its doctors in their health plan network next year, for instance, may have only one choice in California's exchange: Anthem Blue Cross. Another major insurer in the state-run market, Blue Shield of California, said its exchange customers will be restricted to 36% of its regular physician network statewide.

And Cedars-Sinai Medical Center, one of Southern California's most prestigious and expensive hospitals, said it's not included in any exchange plans at the moment.

Those types of exclusive arrangements, increasingly tight networks and outright exclusions are becoming more common as insurers and government officials search for ways to hold down rising medical costs.

The vast majority of Californians get their health coverage through their employers and won't be immediately affected by these limitations in the state-run market. But private companies are pursuing similar changes to shave costs. More employers have been adopting these narrower networks and the government's overhaul of the individual insurance market is accelerating the trend.

Some consumer advocates express concern that insurers will go too far and deprive patients of meaningful choices. State officials sought to blunt that criticism this week, pointing out that the 13 health insurers selected will offer access to about 80% of California's practicing physicians and hospitals.

"If we want to keep costs down, something has to give," said Betsy Imholz, special projects director for Consumers Union. "At first blush, it seems like Covered California has negotiated some good deals, but in any given community we will see how this network issue plays out."

Covered California, the state agency implementing the federal healthcare law, said these trade-offs are necessary in many cases to keep premiums reasonable for California's families. Officials said they took steps to ensure that health plans offer an adequate number of quality medical providers and have measures in place for expanding their networks in the event that more people than expected sign up.

More than 5 million Californians are expected to be eligible for coverage in the exchange, and about half of them could qualify for federal premium subsidies.

Details on these insurance networks aren't known yet as insurers and providers wrap up their contracts and await regulators' review in the coming weeks. It's possible some medical groups and hospitals could be added.

Health Net Inc., another exchange option in Southern California, said it expects to seek state approval to use its existing network, which includes both UCLA and Cedars-Sinai, for one of its exchange plans.

Once all those decisions are finalized by early July, Covered California said it will help consumers find out online whether particular doctors and hospitals are in a health plan's network. Enrollment in the exchange opens Oct. 1 for policies that take effect in January, when most Americans must have health insurance or pay a penalty.

"When people come to choose their plan, we will have a directory so they can make sure Dr. Ramirez is in these three plans, for instance," said Peter Lee, executive director of Covered California. "Consumers care about that information."

Meanwhile, some insurance agents said it's hard to judge these proposed prices in the state exchange without knowing what's on the menu in terms of available providers.

"Trying to determine whether these rates are low or high without knowing the provider networks is like trying to tell the value of a car when you can only see the tires — you don't know if you are looking at a Ferrari or a Yugo," said Bruce Jugan, an insurance agent in Montebello and president of Benefitscafe.com, which sells health insurance to individuals and businesses.

Paul Markovich, chief executive of Blue Shield, said renegotiating with hospitals and physician groups for lower reimbursements was a key factor for insurers in holding down rates. Medical providers are sometimes willing to accept lower payments in return for higher patient volume from these narrow networks.

Markovich said premiums for Blue Shield's existing individual policyholders will rise 13% next year on average for coverage under exchange plans.

That marked an improvement from earlier predictions of even bigger rate hikes. The state issued a report in March that estimated premiums for many consumers could go up 30%, on average.

Premiums are generally rising to reflect the federal law's requirements for richer benefits and guaranteed coverage regardless of people's medical history.

"The physicians and hospitals that signed up for our network have agreed to accept lower reimbursement specifically to make the exchange more affordable," Markovich said.

Blue Shield's exchange network in the Los Angeles area doesn't include UCLA or Cedars-Sinai. Instead, it features hospitals such as Keck Hospital of USC, Long Beach Memorial and St. John's Health Center. Blue Shield said its statewide network for exchange policies will include about 24,000 physicians, compared with 66,000 doctors in its full preferred provider organization roster.

In Los Angeles County, state officials expect 1.6 million people to be eligible for coverage in the exchange. Premiums will vary based on a person's age, location and level of coverage.

For instance, in the north Los Angeles County region, the rates for a 40-year-old purchasing a Silver plan range from $222 a month for Health Net to $294 a month for Kaiser Permanente. There will still be other individual policies for sale outside those offered through Covered California, but federal subsidies can be used only inside the exchange.

Health Net sees growing acceptance of these narrower networks. The Woodland Hills insurer said enrollment among employers in California, Arizona and Oregon in those smaller networks has grown 37% in the last year.

chad.terhune@latimes.com

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German hospitals group Sana rules out large mergers

* Sana CEO says large deals complex, offer little synergies

* Says Sana owners would not sell

FRANKFURT, March 18 (Reuters) - A new round of attempted M&A in Germany's private hospital sector is unlikely because such deals are complex and offer limited scope for synergies, the head of one of the main four hospital groups said.

Michael Philippi, chief executive of unlisted Sana Kliniken AG, the fourth-largest private-sector hospitals operator in Germany, said transformative "leaps" were not likely in the foreseeable future.

"Changes are not to be expected for now," he told Reuters.

Last year, rival hospital group Fresenius tried and failed to fully take over Rhoen-Klinikum , after another competitor Asklepios bought a stake that blocked the deal which would have combined the industry's two largest players by sales.

The Fresenius/Rhoen-Klinikum deal attracted a lot of interest from international hedge funds, who placed bets on a renewed bid for Rhoen by Fresenius.

Prior to the Fresenius/Rhoen situation, Sana had considered merging with Rhoen but had abandoned the plans.

Philippi told Reuters large combinations in the hospitals sector were often too complex to handle.

"The question is which large mergers do really work? It's not something that just falls into place."

Synergies were limited because central administrative expenses were relatively insignificant, he said.

He also ruled out a sale of Sana, which is owned by 31 medical insurance groups including units of Allianz and Munich Re .

For them, Sana is a long-term, strategic investment that has become even more attractive amid the low interest rates of alternative low-risk investments, he said.

(Reporting by Andreas Kroener, Frank Siebelt and Ludwig Burger. Editing by Jane Merriman)

((ludwig.burger@thomsonreuters.com)(+49 69 7565 1311)(Reuters Messaging: ludwig.burger.thomsonreuters.com@reuters.net))

Keywords: SANA HOSPITALS/

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Hospitals, states face challenges under new health regime-Moody's

March 14 (Reuters) - Cuts in federal funds for hospitals serving low-income patients, which are set to begin later this year under the new U.S. healthcare law, will create budget challenges for both hospitals and states, Moody's Investors Service said on Thursday.

The ratings agency said it expects the cuts to federal disproportionate share hospital (DSH) payments to rise to $17 billion annually by 2019 after scheduled reductions begin on Oct. 1.

DSH adjustment payments provide additional help to hospitals that serve large numbers of low-income patients.

The DSH payments will be reduced as part of an expansion of the Medicaid health insurance program for the poor under the Patient Protection and Affordable Care Act, more commonly known as "Obamacare." As the program expands, those payments will be reduced by half.

States that choose to opt out of Medicaid expansion but have a high number of uninsured residents will feel the greatest budget impact, Moody's said, as they could face both political and economic pressure to make up for the federal funds.

The rating agency also said "large, urban safety net hospitals that typically treat large populations of Medicaid and uninsured patients are most at risk from the DSH phase-out."

Among the states with the highest uninsured rates and who are undecided, but leaning towards opting out of the Medicare expansion are Texas, Georgia, Idaho, Louisiana, North and South Carolina and Wyoming.

The law calls for DSH payments to be restored in 2022, but Moody's said that current Congressional budget battles put in doubt any return to full funding.

(Reporting by Caryn Trokie and Ed Krudy; Editing by Chizu Nomiyama)

((Caryn.Trokie@thomsonreuters.com)(+1-646-223-6318)(Reuters

Messaging: caryn.trokie.reuters.com@reuters.net))

Keywords: MUNICIPALS/HEALTHCARE

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NJ hospitals pioneer cost-cutting model

PRINCETON, N.J. -- When a patient was moved from the intensive care unit to a regular hospital bed, it used to be routine for Dr. Anthony Granato to order 24 hours of heart monitoring, just in case.

A few years ago, his thinking changed: If the patient was in good enough condition to be out of the ICU, he would not need the extra monitoring at a cost of more than $1,000 per day.

The main reason for the shift for Granato, a pulmonary critical care doctor, is a program introduced in a dozen New Jersey hospital in 2009. It pays doctors when they save money for the hospitals as they treat patients covered by Medicare.

"We never before looked at what our costs were in the hospitals," Granato said. "Some things we always do because we always just do them."

The New Jersey program is getting a bigger test this year as part of the federal health insurance overhaul. It's one of four new payment models hospitals can try to trim their costs. While the best-known aspects of the 2010 law are its insurance provisions, the law also aims to control the cost of care. Across the U.S. economy, about $1 of every $6 spent is for health care, for an annual total approaching $3 trillion.

Private insurers have also tried new ways to compensate doctors and hospitals to encourage efficiency.

The New Jersey program launched in 2009, known as gainsharing, seems to have helped lower costs.

After three years, hospitals were saving an average of 8 to 10 percent compared with 2007, said Sean Hopkins, the senior vice president of health economics at the New Jersey Hospital Association. At Hunterdon Medical Center in Flemington, where Granato often treats patients, the savings were even bigger.

The average cost of caring for an admitted Medicare patient last year was $9,381 there, said Dr. Robert Coates, chief medical officer. He said that if the hospital had the same mix of patients and diagnoses using its 2007 methods, the cost would have been $12,138 per patient, or nearly one-third more.

Coates said the average stay also dropped to under 5.2 days, compared with 5.9 days using the old standards.

He said it's impossible to tell just how much of the savings could be attributed to gainsharing, but he said he believes it's been a major factor in the lower costs.

Part of the trial program involves measuring the quality of care at the participating hospitals to make sure patients' health was not sacrificed. Coates said that Hunterdon's mortality rate was stable and fewer patients were brought back within either seven or 30 days of leaving the hospital since gainsharing was put into place.

The program, still a small pilot, seeks to address a fundamental contradiction in how care is paid for under Medicare, the national health insurance system for senior citizens and people with disabilities.

In places like New Jersey, where most Medicare patients are enrolled in health management organizations, or HMOs, hospitals are paid a certain amount for each diagnosis, giving them an incentive to treat patients efficiently. By contrast, doctors are paid by the treatment and get a daily rate for each day a patient is hospitalized.

Under gainsharing, doctors are given bonuses for saving the hospital money. At Hunterdon about three-fourths of the eligible doctors joined in 2009. Collectively, they received bonuses totaling $160,000 to $200,000 every six months, Coates said. Payments averaged $3,000 to $4,000.

"It's not enough to send your child to college," Hopkins said. The amounts offset some of the payments physicians may sacrifice by using lower-cost methods _ particularly shortening stays.

Coates said that at Hunterdon, some doctors practiced as they normally did and were happy to get modest checks. But the ones who received the biggest amounts _ some got more than $10,000 _ had both high volumes of admitted patients and made concerted efforts to keep costs down.

Granato said that besides cutting back on monitoring where it was not needed, he started giving oral antibiotics instead of intravenous versions and became more conscious of length of patients' stays.

Dr. Alan Pope, the chief medical officer at Lourdes Health System, based in Camden, said his hospital is not continuing with gainsharing because it's trying another new model allowed by Medicare that pays hospitals for care of patients both during and after their hospital stays.

But he said he expects that the major shifts from having the program _ having doctors become aware of the cost of treatments and adopt more standard practices _ will continue even as the incentive goes away.

The New Jersey pilot program was allowed under 2007 Medicare rules.

In the new national iteration, participating hospitals will also see small cuts in their payments from Medicare so it's not just the doctors sharing in the savings, but also the Medicare system.

Of the 32 hospitals chosen for the national program, 29 are in New Jersey. Two of the others are in San Bernardino, Calif.

"We have one foot in the managed care world," said Steven Barron, the senior vice president of operations at Dignity Health, the company that runs the two California hospitals in the program, "and one foot in the old world." The pilot to align incentives should help bridge the gap, he said.

The Centers for Medicare and Medicaid Services plan to announce in coming weeks another window for additional facilities to apply.

___

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Arizona Bill Requires Hospitals To Screen Immigration Status Of Uninsured Patients

Hospitals would need to check the immigration status of uninsured patients under a new bill introduced by an Arizona lawmaker. Rep. Steve Smith’s (R) H.B. 2293 would require hospital staff to “reasonably confirm” patients’ status during check-in or treatment, and immediately report those who do not have the required papers to immigration officials.

Smith claimed it is a hospital’s civic duty to check immigration status:

“I would hope if you witnessed somebody who is not lawfully present in this country taking advantage of, getting, acquiring any benefit or social service or something that they’re not entitled to, or something they’re abusing or neglected, I would hope somebody would pick up the phone and go, ‘Maricopa police, Buckeye police, I think — I’m not sure — but I think this is happening.”’

The Arizona Hospital and Healthcare Association has already rejected the attempt to turn hospitals into another front for immigration enforcement: “When does this begin or end?” a spokesman said. “What other industry should be screening their customers for citizenship verification?” The National Coalition for Immigrant Women’s Rights and National Latina Institute for Reproductive Health also called the measure “unconscionable” and legalized “harassment.” With roughly 19 percent of Arizona’s population lacking health insurance, the bill could deter many immigrants and their children from seeking care, as well as burden hospitals.

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Flu outbreak felt in Ky. hospitals, workplaces

LOUISVILLE, Ky. -- The statewide flu outbreak has become bad enough to prompt a central Kentucky hospital complex to place temporary restrictions on visiting patients, while health care workers brace for the coming weeks when influenza usually hits its peak.

Responding to a flu level considered widespread in the Bluegrass state, University of Kentucky health care officials said Monday that no one under age 18 would be allowed to visit patients at UK Hospital, Kentucky Children's Hospital and UK Good Samaritan Hospital in Lexington.

Only two visitors will be allowed in a patient's room at one time, and visitors may be told to wear masks, gloves or gowns.

"We understand how important visitation is, but we also want to make sure that we are not introducing other infection ... to the patient as well, and to our health-care workers," said Kim Blanton, UK HealthCare interim director for infection prevention and control.

Exceptions for compassionate visits will be made on a case-by-case basis, officials said.

The flu surge hit Kentucky sooner than usual and its spread is being felt from health clinics to workplaces.

At UPS' worldwide air hub in Louisville, the work force has been hit by sporadic cases of the flu, said company spokesman Jeff Wafford, but illnesses among the approximately 21,000-person work force haven't slowed the processing of packages.

"People are sick and we've seen people out here and there," he said. "We've seen in it the office and out in the hub as well."

Kentucky's level of flu has been widespread for the past five weeks, which is earlier than usual, said Gwenda Bond, a spokeswoman for the state Cabinet for Health and Family Services.

"We cannot predict whether that level will increase or wane as we move forward," Bond said.

Flu season typically peaks in late January and early February, health officials said.

State health officials said they are not aware of any shortages of flu vaccines, though it's possible that individual doctors might run out of vaccine. Health officials are recommending that everyone 6 months or older receive a flu shot.

"At this time, providers continue to report high, but not overwhelming, demand at hospitals and doctor's offices," Bond said.

In eastern Kentucky, the number of flu cases has dropped in recent days at Harlan ARH hospital, following a spurt in cases about three weeks ago, spokesman Mark Bell said.

"We're expecting in another week or so to get hit by that second wave," he said.

Flu symptoms can include fever, cough, sore throat, runny or stuffy nose, body aches, headache, chills and fatigue.

Health officials in northern Kentucky say a man died recently from complications of the flu. State health officials said the victim, who was not identified, suffered from multiple chronic health conditions.

State health officials count only pediatric deaths, and say there have been none so far.

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