Daily Industry Report - April 18

Your summary of the Voluntary and Healthcare Industry’s most relevant and breaking news; brought to you by the Health & Voluntary Benefits Association®

Jake Velie, CPT
Vice Chairman, President & COO
Health & Voluntary Benefits Association® (HVBA)
Daily Industry Report (DIR)

Robert S. Shestack, CCSS, CVBS, CFF
Chairman & CEO
Health & Voluntary Benefits Association® (HVBA)
Daily Industry Report (DIR)

Providers pitch their post-Change cybersecurity policy fixes to sympathetic Congress

By Dave Muio - Healthcare providers held the receptive ears of lawmakers during a congressional hearing Tuesday morning exploring cybersecurity and related policy changes to be made in the wake of the Change Healthcare attack. Read Full Article…

VBA Article Summary

  1. Impact on Healthcare and Congressional Response: Members of the House Energy and Commerce Committee’s Subcommittee on Health voiced concerns over the widespread disruptions faced by healthcare organizations due to interrupted cash flows and fragmented care coordination. These issues were exacerbated by high interest loans and a significant administrative burden. Rep. Anna Eshoo emphasized the severity of the situation, deeming it crucial enough to warrant a robust response from Congress, highlighting the sector’s critical importance.

  2. Concerns over Cybersecurity and Provider Protection: The discussion during the hearing also focused on cybersecurity vulnerabilities that had severely impacted healthcare providers. Legislators expressed sympathy for healthcare providers like orthopedic surgeon Adam Bruggeman, who described significant disruptions in his practice. The lawmakers criticized the lack of adequate support from the government and private entities like Change Healthcare and its parent company, UnitedHealth Group. There was a strong sentiment towards shifting liability from providers to third parties such as software and device manufacturers, with suggestions to improve cybersecurity practices and establish minimum standards.

  3. Corporate Absence and Future Policy Directions: The absence of UnitedHealth Group from the hearing was noted with significant disappointment by the lawmakers, especially given the company’s decision to release its quarterly earnings on the same day. Moving forward, there was a consensus among the representatives and witnesses on the need for more stringent regulatory oversight on mergers and acquisitions in the healthcare sector to prevent further consolidation, which could increase risks and reduce competition. This stance was reinforced by concerns that events like the Change Healthcare disruption could push smaller providers into the arms of larger corporations, thus undermining the integrity and resilience of the healthcare system.

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ACOs led by independent physicians save Medicare ‘substantially’ more money, CBO says

By Rebecca Pifer - ACOs are groups of providers that assume responsibility — and occasionally, financial risk — to care for a group of patients. ACO programs in Medicare have been operating for more than a decade. Some models produce small net savings, but the organizations haven’t been a major contributor to slowing growth in per-person Medicare spending, according to past CBO research. Read Full Article…

VBA Article Summary

  1. Independent Physician-Led ACOs Yield Greater Medicare Savings: According to the Congressional Budget Office (CBO), accountable care organizations (ACOs) led by independent physicians demonstrate superior cost-saving outcomes for Medicare compared to other ACO models. These independent physician-led ACOs exhibit strong financial incentives to minimize hospital care, resulting in reduced spending for Medicare.

  2. Primary Care Provider Proportion Correlates with Savings: A significant finding from the CBO review is that ACOs with a higher proportion of primary care providers achieve greater savings for Medicare. This underscores the pivotal role of primary care in managing patient health and reducing costly hospital admissions.

  3. Challenges and Recommendations for ACO Improvement: Despite the successes of certain ACO models, challenges persist, including weak financial incentives and limited risk-sharing. The CBO suggests various strategies for enhancing ACO performance, such as enhancing incentive payments, adjusting benchmark methodologies, and leveraging regulatory measures to encourage participation and accountability among providers. Regulators have already taken steps to revitalize ACO interest, including recent updates to the Medicare Shared Savings Program aimed at broadening eligibility criteria and incentivizing care for medically complex patients.

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of Daily Industry Report readers who responded to our last polling question “strongly disagree” with “RWJBarnabas’ decision to drop coverage of medications for weight loss among employees, as reported in the article referenced below*.”

14.06% of respondents “disagree,” 11.68% strongly agree,” 10.19% agree” while 10.11% are “neutral.” 

*Article Reference: States clamping down on coverage of weight-loss drugs

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Over 20% of healthcare bankruptcies last year were linked to private equity: report

By Susanna Vogel - Healthcare bankruptcies reached a five-year peak in 2023, according to restructuring firm Gibbins Advisors. Bankruptcies can cause care disruptions, facility closures and layoffs, according to the PESP. They can also stress broader healthcare infrastructure if patients have to travel to neighboring facilities to receive care during service disruptions. Read Full Article…

VBA Article Summary

  1. Significant Bankruptcy Rates Among PE-Backed Companies: Over 20% of healthcare companies that filed for bankruptcy in 2023 were owned by private equity firms, revealing a troubling trend. A new report from the Private Equity Stakeholder Project highlights that almost all U.S. healthcare companies at high risk of default this year are backed by private equity, indicating a potential continuation of this trend.

  2. Debt-Driven Financial Struggles: The report criticizes private equity firms for employing "aggressive debt-funded growth strategies" that contribute significantly to the bankruptcies. These firms often engage in transactions like dividend recapitalizations, where they use debt to finance initial investments and pay investors, adding substantial debt to the companies' balance sheets. This has resulted in healthcare companies backed by private equity carrying among the highest debt loads in the industry.

  3. Regulatory and Public Scrutiny: The concerning pattern of private equity-backed bankruptcies has caught the attention of state and federal lawmakers, leading to multiple inquiries into the role of private equity in healthcare. These investigations aim to understand the impact of private equity on healthcare companies and patient care, with a focus on the operations of hospitals and emergency departments funded by private equity.

Executive compensation at HCA, CHS, Tenet and UHS: 7 things to know

By Alan Condon - Most of the top-earning executives, including CEOs and CFOs, at four of the largest for-profit health systems in the U.S. saw their overall compensation increase in 2023, according to proxy statements recently filed with the Securities and Exchange Commission. Read Full Article…

VBA Article Summary

  1. Executive Compensation Trends: Despite fluctuations in individual earnings, the CEOs of HCA, Tenet, UHS, and CHS saw their overall compensation rise in 2023, reflecting improved financial performance. Notably, HCA's Sam Hazen led with a compensation of $21.3 million, followed by Tenet's Saum Sutaria, MD, UHS's Marc Miller, and CHS's Tim Hingtgen.

  2. Financial Rebound: After experiencing drops in compensation packages in 2022, CEOs and CFOs across the four healthcare systems witnessed a rebound in 2023. This resurgence correlated with improved financial results. However, while the total compensation rebounded, it didn't fully recover to 2021 levels.

  3. Revenue and Net Income: Collectively, the four healthcare systems reported significant revenue of over $112 billion in 2023, reflecting growth for most organizations. However, net income varied, with HCA experiencing a slight decrease, CHS and UHS facing declines, and Tenet witnessing a rise, indicating diverse financial performances among the systems despite robust revenue figures.

Lilly obesity drug shows benefit in sleep disorder study, pointing to new use

By Jonathan Gardner - Fresh clinical trial results for Eli Lilly’s drug Zepbound point to a new use for the weight loss medicine in treating a common sleep disorder, adding to evidence the benefits of so-called GLP-1 agonists could extend across a range of conditions. Read Full Article…

VBA Article Summary

  1. Efficacy in Sleep Apnea Treatment: Zepbound (tirzepatide) has demonstrated significant effectiveness in reducing obstructive sleep apnea symptoms in overweight or obese individuals in two separate Phase 3 trials conducted by Lilly. In participants not using continuous positive airway pressure (CPAP) machines, Zepbound decreased the average hourly number of sleep apnea events by 55%, while in those using CPAP machines, it achieved a reduction of 63%.

  2. Impact on Weight Loss: The drug not only improved sleep apnea outcomes but also led to notable weight loss among the study participants. Individuals treated with Zepbound in the non-CPAP trial experienced an 18% reduction in body weight, and those in the CPAP trial saw a 20% decrease. This compares to only a 1% to 2% weight loss in placebo groups, highlighting Zepbound's dual benefits for sleep apnea and weight management.

  3. Regulatory and Future Plans: Following these promising results, Lilly plans to submit the data for Zepbound to the Food and Drug Administration (FDA), which has already granted the drug Fast Track designation for treating sleep apnea and obesity. Fuller results from the studies are expected to be disclosed at the upcoming American Diabetes Association annual meeting in June and published in a medical journal. These developments are part of broader efforts by Lilly and competitors like Novo Nordisk to expand the application of their weight loss drugs to treat complications arising from obesity and metabolic disorders.

Medicare's push to improve chronic care attracts businesses, but not many doctors

By Phil Galewitz and Holly K. Hacker - Carrie Lester looks forward to the phone call every Thursday from her doctors' medical assistant, who asks how she's doing and if she needs prescription refills. The assistant counsels her on dealing with anxiety and her other health issues. Read Full Article…

VBA Article Summary

  1. Effectiveness and Comfort for Patients: Carrie Lester, a 73-year-old resident of Independence, Kansas, credits the Chronic Care Management (CCM) program for significantly reducing her hospital and clinic visits for managing her chronic conditions, which include depression, fibromyalgia, and hypertension. Lester finds comfort in knowing that someone regularly checks on her, which underscores the impact of regular communication and monitoring on patient well-being.

  2. Challenges in Adoption and Utilization: Despite the proven benefits of the CCM program in reducing emergency room visits and overall health expenditure, the uptake has been slow among eligible Medicare enrollees. As of 2023, only 4% of those eligible participated, with approximately 12,000 physicians actively billing under this program. This slow adoption rate is attributed to several factors, including the program's reliance on both doctor and patient opt-in, the intensive nature of the required documentation, and potential copayments for patients without supplemental policies.

  3. Financial Incentives and Systemic Barriers: The CCM program offers financial incentives to physicians, paying an average of $62 per patient per month for 20 minutes of care coordination. However, the administrative burden and upfront costs deter some doctors from participating. Despite these challenges, the program has shown potential savings for Medicare—$74 per patient per month, according to a 2017 study by Mathematica—and offers a significant opportunity for primary care and specialist providers to enhance patient care outside traditional office visits.

Change Healthcare’s New Ransomware Nightmare Goes From Bad to Worse

By Eric Geller - Change Healthcare is facing a new cybersecurity nightmare after a ransomware group began selling what it claims is Americans’ sensitive medical and financial records stolen from the health care giant. Read Full Article…

VBA Article Summary

  1. Scope of Data Breach: RansomHub, the group responsible for the recent cyberattack on Change Healthcare, claims to have acquired extensive personal data of US individuals, including medical and dental records, payment claims, insurance details, Social Security numbers, and email addresses. The group alleges possession of health care data even pertaining to active-duty US military personnel, indicating the severity and breadth of the breach.

  2. Implications for Change Healthcare: The breach underscores Change Healthcare's pivotal role as an intermediary in the US health care system, facilitating payments between insurers and health care providers. The compromised data highlights the company's vast collection of sensitive patient information, amplifying the fallout from the February cyberattack and exacerbating the crisis within the health care system as hospitals struggled to function without regular funding.

  3. Escalating Pressure and Fallout: In the wake of the breach, Change Healthcare faces escalating pressure from both financial and regulatory fronts. The company reportedly paid a $22 million ransom to the attackers, leading to significant financial losses, with expenses related to incident response reaching $872 million as of March 31. Furthermore, lawmakers and regulators are demanding accountability and transparency regarding the cybersecurity lapse, with investigations underway to determine if federal data-security rules were violated, reflecting the growing scrutiny and consequences faced by organizations in the aftermath of cyberattacks.

Welfare Plan Class Action Litigation Underscores Importance of Minding Your Fiduciary Duties

By Bass, Berry & Sims PLC - As mentioned in our recent blog post, the recently filed class action lawsuit against Johnson & Johnson (Lewandowski v. Johnson & Johnson et. al., D.N.J., No. 1:24-cv-00671 (Feb. 5, 2024)) over alleged excessive prescription drug costs takes a new approach with respect to familiar claims of breach of fiduciary duty for failure to monitor plan costs. Read Full Article…

VBA Article Summary

  1. Shift in Legal Focus: The Lewandowski plaintiffs’ litigation marks a notable departure from the prevalent excessive fee lawsuits targeting retirement plan fiduciaries. Instead, they direct attention towards welfare plan fiduciaries, highlighting a shifting landscape in ERISA litigation priorities.

  2. Impact of the Consolidated Appropriations Act: The Consolidated Appropriations Act of 2021 introduced significant changes to ERISA, particularly in health and welfare plans. Provisions such as no-surprise billing and increased price transparency not only aim to reduce healthcare costs but also intensify the fiduciary burden on plan sponsors. This heightened transparency exposes plan sponsors to potential litigation risks for breaches of fiduciary duty.

  3. Proactive Measures for Fiduciaries: In response to the evolving legal landscape, employers and health plan fiduciaries must adopt proactive measures to mitigate litigation risks. Strategies include ensuring compliance with new CAA requirements, conducting thorough reviews of service provider fees and performance, and implementing robust monitoring and review policies akin to those used in retirement plans. These steps are crucial for safeguarding against potential lawsuits and maintaining fiduciary integrity.

Some Blues not reconnecting to Change Healthcare, BCBS Association says

By Rylee Wilson - Some Blue Cross Blue Shield plans are reconnecting to Change Healthcare's platforms and other plans are not, the BCBS Association told lawmakers April 16. Read Full Article…

VBA Article Summary

  1. Urgent Need for Secure Systems: David Merritt emphasizes the critical importance of "strong, independent attestations" regarding the security of Change Healthcare's systems, highlighting that payers and providers prioritize this assurance. The lack of detailed assurances has led some Blue Cross Blue Shield (BCBS) Plans to withhold reconnection to Change applications due to concerns about safety, underscoring the pressing need for transparent security measures.

  2. Impact of the Cyberattack: The cyberattack on Change Healthcare, initiated by a ransomware group on February 21, caused extensive disruptions in the healthcare system, affecting numerous hospitals and providers. More than half of hospitals reported significant financial impacts from the breach, indicating the widespread repercussions of cybersecurity vulnerabilities within the healthcare sector.

  3. Call for Enhanced Security Measures: Described as the largest cyberattack on the U.S. healthcare system, the incident serves as a stark reminder of the imperative to bolster security measures across the industry. Mr. Merritt emphasizes the need for collaborative efforts between private and public sectors to enhance communication, resilience, and redundancy in operations, aiming to prevent similar mass disruptions in the future.

Are employees getting fed up with high-deductible health plans?

By Deanna Cuadra - Every open enrollment, employees stare at a list of health plans, often only paying close attention to just how much the plan will take from their paycheck each month. It's no surprise that high-deductible health plans (HDHPs), which typically boast lower premiums and, hence, lower monthly costs, have gained popularity in the past few decades. Read Full Article…

VBA Article Summary

  1. Decline in HDHP Enrollment: According to ValuePenguin, HDHP enrollment in the United States has experienced a 2% drop, marking the first decline since 2013. In 2021, nearly 56% of American private-sector workers were enrolled in HDHPs, which decreased to just under 54% in 2022. This subtle shift suggests a potential change in U.S. healthcare dynamics, with 32 states witnessing decreased HDHP enrollment.

  2. Employer Trends and Diverse Health Plans: Large employers are increasingly diversifying their health plan offerings, with a significant reduction in the exclusivity of HDHPs. From 2018 to 2022, the proportion of employers with 20,000 or more employees offering only HDHPs dropped from 22% to 9%. This trend reflects a growing recognition among employers that HDHPs can pose financial risks for both employers and employees due to high deductibles, potentially leading to debt accumulation and decreased healthcare utilization.

  3. Employee Confidence and Financial Considerations: Exclusive research by Arizent reveals that employees with HDHPs are 30% less confident in predicting their healthcare costs compared to those with PPO plans. Moreover, 70% of HDHP users find their healthcare costs prohibitively expensive, highlighting a need for careful consideration of health plan choices beyond just premiums. Sangameshwar emphasizes the importance of evaluating personal medical needs, considering deductible thresholds, and exploring employer contributions to health savings plans to make informed decisions that align with both health and financial goals.