May 22, 2023
Reporter, Health Care Inc. Writer
Hello! I’ve seen or read about a lot of messed-up health care bills. But this one cited last week by Elisabeth Rosenthal of KFF Health News might take the cake: A health insurer sent a denial to a newborn staying in a NICU. The denial — which, again, was addressed to a baby — said: “You are drinking from a bottle,” and “you are breathing on your own.” Take off your ECG leads, throw on a diaper, and get outta there, kid. Have any stories like this? Send them along:


What the MA letters are looking for
Richard Blumenthal

Patrick Semansky/AP

Senators were pretty blunt with Medicare Advantage insurers last week: You better abide by Medicare’s coverage rules and not rely on artificial intelligence and algorithms to kick people out of post-acute facilities. 

If you missed the hearing, which included some jarring testimony from the widow of a Medicare Advantage enrollee, my colleague Casey Ross and I have you covered. And if you want to reread our investigation on this issue of AI-driven denials in Medicare Advantage, it’s all right here.

A notable moment was when Sen. Richard Blumenthal (D-Conn.) said he and his subcommittee colleague Ron Johnson (R-Wis.) sent letters to the CEOs of the largest MA plans: Karen Lynch of CVS Health, Bruce Broussard of Humana, and Brian Thompson of UnitedHealthcare. STAT caught a peek at the letters, and the senators are asking for a lot of information going back as far as January 2019. 

They want to know things like the names and records of all the algorithms and AI software the MA insurers use in their denials and coverage processes, whether any outside parties help with those technologies, and how employees are trained to use algorithms and AI programs in payment determinations. The insurers have until June 7 to respond.

pharmacy benefits

Dude, where’s my Emisar?

The Federal Trade Commission is no longer just targeting pharmacy benefit managers. It’s now digging into the PBM-owned group purchasing organizations, also known as rebate aggregators. My colleague Ed Silverman has the details.

In a nutshell, the FTC is ordering two rebate aggregators, Ascent Health Services owned by Cigna/Express Scripts and Zinc Health Services owned by CVS Health, to hand over information about how they work. These companies negotiate rebates from drug companies, and then charge administrative and data fees to both the drug companies and employers that want access to those rebates. Ascent is based in Switzerland, and Zinc is in the U.S. Think of them as another nesting doll within the big PBMs. 

These shadowy subsidiaries started forming in 2019, amid the political furor over PBMs and the current drug rebate structure. It’s a big deal for the FTC to be looking into them now, but it’s also interesting the FTC isn’t probing the third major rebate aggregator: Emisar Pharma Services, an entity housed in Ireland that is owned by UnitedHealth Group, which also owns OptumRx. 

I reached out to the FTC asking why Emisar wasn’t included in its compulsory orders, and whether it would be probed later. The agency had nothing to share.


The firehose of hospital earnings

More Q1 financial statements of big tax-exempt hospital systems are rolling out. The observations from two weeks ago still stand: Many hospitals are firmly back in the black, especially when factoring in investments. Patient volumes have soared, although hospitals continue to raise employees’ wages and salaries to prevent them from jumping ship.

“Strong [volume] trends are expected to continue,” John Ransom, an analyst at Raymond James, wrote to investors last week.

  • AdventHealth: The faith-based system known for its oligopolies is, simply put, a money-making machine.
  • CommonSpirit Health: Save for 2021, operating losses have dogged CommonSpirit since Catholic Health Initiatives and Dignity Health merged to form the system in 2019. But the system reinforced in its report what CEO Wright Lassiter said at this year’s JPM: It “continues to focus on growth and investing in our strong markets,” which is code for building more negotiating power to improve its margins.
  • Johns Hopkins: The brand-name academic system stayed profitable, aided in part by Maryland’s unique structure that regulates hospital revenues. But Johns Hopkins also mentioned a major insurance logistical challenge that could apply to hospitals elsewhere: “There have been significant delays in payment processing from CareFirst (Blue Cross) and Maryland Medicaid due to staffing issues at their respective claims processing units.”
  • Ochsner Health: Wall Street gains offset Ochsner’s slim operating loss, which was driven heavily by higher wages paid to employees.
  • RWJBarnabas Health: Revenue at the dominant New Jersey system skyrocketed 15%, but it wasn’t solely because of volumes. RWJBarnabas “benefited from increases in managed care rates,” the system said in its financial filing.


Why Medicare hospital spending is down

Health policy gurus have been scratching their heads a little bit lately, because the amount of money Medicare’s trust fund has spent on hospital care in the latter half of 2022 is still well below what they expected. Now, the government’s top health care actuary has some answers.

Paul Spitalnic, the chief actuary at CMS, spoke during a webinar hosted by the American Academy of Actuaries last week and detailed three reasons for the tempered hospital spending among beneficiaries in the traditional Medicare program:  

  • The pandemic, of course. Adults who are 65 and older continue to be the most vulnerable to Covid (this demographic makes up only 13% of reported Covid cases, but 75% of Covid deaths). Medicare beneficiaries who survived Covid also are less costly.
  • People who are eligible for both Medicare and Medicaid — people who are poor, older, and often have severe disabilities or serious health conditions — increasingly are moving to Medicare Advantage.
  • Hip and knee replacements have moved to outpatient settings, which has taken pressure off Medicare’s Part A trust fund that pays for hospital care.


A small update on a juicy ERISA lawsuit

This past December, a consortium of self-insured unions in Connecticut sued Elevance Health, which we covered in this very newsletter. It’s a novel lawsuit that alleges the Blue Cross Blue Shield insurer blocked the unions from obtaining their own claims data and that Elevance overcharged the unions by willingly overpaying providers. Now, it’s going deeper.

In March, Elevance asked the judge to dismiss the suit, calling it a “garden-variety contract dispute.” But last week, the unions finally filed a response. They argued Elevance is a “fiduciary” under ERISA — the big sprawling law that governs employers and the medical benefits they offer to workers — even though Elevance is only acting as the unions’ administrator. It’s a big swing, and if successful, would overhaul relationships between self-insured employers and their health insurance carriers.

For anyone who loves ERISA, or for those who just want to learn more how self-insured medical plans work, this case is a must-watch. You can read the unions’ latest filing here. And you can read why Elevance absolutely does not think it’s a fiduciary under ERISA here.

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Industry odds and ends

  • Unions in Pennsylvania filed an antitrust complaint with the Department of Justice, alleging the health system giant UPMC has illegally used its market power to “suppress workers’ wages and benefits, drastically increase their workloads, and prevent workers from exiting or improving these working conditions.” UPMC said it offers “above-industry employee benefits.”
  • The FTC is suing to block Amgen’s $28 billion takeover of Horizon Therapeutics, and the lawsuit revolves around the drug company practice of “bundling” its drugs to health insurers and PBMs, Ed reports.
  •  Two years ago, the digital therapeutics firm Pear Therapeutics went public and was valued at $1.6 billion. It has since gone bankrupt, and last Friday, it was sold for parts at an auction for a grand total of $6 million, my colleague Mario Aguilar reports.
  • The Congressional Budget Office recently lowered its estimates of Medicare spending over the next decade by $223 billion due to the Medicare Advantage changes being implemented next year.

The Meme Ward

Health Care Inc. Meme - Issue 44-2

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