By Sabrina Willmer
Los Angeles Times, March 24, 2021

Healthcare companies are taking on more debt to pay dividends to their private equity owners, just a year after the start of a pandemic that plunged the industry into crisis.

Healthcare firms have already borrowed about $3.7 billion in 2021, partly to fund payments to private equity owners, more than double the amount issued all of last year, according to data from S&P Global Market Intelligence.

Dividend recapitalization is one reason wealthy investors are drawn to private equity, as they don’t have to wait years for a payout.

But critics including the Private Equity Stakeholder Project say the strategy destroys value.

“By saddling companies with debt to extract cash for themselves, private equity firms put those companies at risk for restructuring, bankruptcy, or cost cutting to make up the interest payments and pay off that debt,” said Eileen O’Grady, a coordinator at the nonprofit.

https://www.latimes.com…

Comment:

By Don McCanne, M.D.

Borrowing money to pay out dividends. That is distributing profits that never existed. And in health care, who ultimately pays those dividends? The patient, usually indirectly through private insurance premiums.

With single payer Medicare for All the private insurers would be removed from the equation, and our own government program presumably would pay based on legitimate costs and fair profits. It would not pay for funds borrowed to create artificial profits.

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By Noam N. Levey
Kaiser Health News, March 24, 2021

When Democrats pushed through a two-year expansion of the Affordable Care Act in the covid-relief bill this month, many people celebrated the part that will make health insurance more affordable for more Americans.

But health care researchers consider this move a short-term fix for a long-term crisis, one that avoids confronting an uncomfortable truth: The only clear path to expanding health insurance remains yet more government subsidies for commercial health plans, which are the most costly form of coverage.

The reliance on private plans — a hard-fought compromise in the 2010 health law that was designed to win over industry — already costs taxpayers tens of billions of dollars each year, as the federal government picks up a share of the insurance premiums for about 9 million Americans.

The ACA’s price tag will now rise higher because of the recently enacted $1.9 trillion covid relief bill. The legislation will direct some $20 billion more to insurance companies by making larger premium subsidies available to consumers who buy qualified plans.

And if Democrats want to continue the aid beyond 2022, when the relief bill’s added assistance runs out, the tab is sure to balloon further.

“The expansion of coverage is the path of least resistance,” said Paul Starr, a Princeton University sociologist and leading authority on the history of U.S. health care who has termed this dynamic a “health policy trap.”

“Insurers don’t have much to lose. Hospitals don’t have much to lose. Pharmaceutical companies don’t have much to lose,” Starr observed. “But the result is you end up adding on to an incredibly expensive system.”

The large new government commitment underscores the disparity between the high price of private health insurance and lower-cost government plans such as Medicare and Medicaid.

The main reason commercial health plans cost more and saddle patients with higher medical bills is because they typically pay hospitals, doctors and other medical providers more than public programs such as Medicaid.

https://khn.org…

Comment:

By Don McCanne, M.D.

This article makes an important point. President Biden and his staff, along with Congress, chose the most expensive method of expanding health care – giving more taxpayer funds to the private insurers. There is a bit of sleight of hand here since it is us – the taxpayers – who are paying these higher prices for a health care financing system heavily dependent on private insurers.

Why are costs higher when we use private insurers? The author indicates that private commercial insurers pay more for health care services than government programs, and, by and large, that is correct. But that is a relatively small portion of the higher spending by private insurance, and it does not take into consideration that public programs are more effective at setting appropriate prices – costs plus fair margins – not to mention that they use more efficient financing methods such as global budgeting of hospitals.

But what has been ignored in this article is the major reason that private insurers are more expensive, and that is administrative costs. Those extra taxpayer funds going to private insurers include costs such as marketing of their plans, costs of contracting for restrictive provider networks, administering prior authorization requirements, complex systems of processing claims including denial of benefits, simple administrative costs of operating large corporate entities, and distributing generous profits to their executives and passive investors. Which of these administrative services do you want to continue to pay for through increased taxes?

So these increased costs that the taxpayers are bearing are not just for more health care, but they are a gift to the most expensive and inefficient financing system on earth. Particularly galling is the fact that the administration is presenting this as if it were a gift from the government to the patients, but that government money is provided by us – the taxpayers. Much of it is hidden from view since a large portion of these taxes we pay are disassociated from health care spending. Keep in mind that funds moved into the health care financing system are not available for other important needs such as food, housing, transportation, education, environment, infrastructure, and so on.

A single payer Medicare for All program would fill in our health care financing needs without wasting the hundreds of billions of dollars on these superfluous administrative costs of the private insurers, plus their profits. But they are now talking about making these wasteful expenditures permanent. Maybe they might even add a public option, which would be only one more player in our profoundly inefficient system.

As the title of Noam Levey’s article indicates, the big boost was in buying health insurance rather than simply health care, and it didn’t come cheap. As Paul Starr states, we ended up adding on to an incredibly expensive system. We didn’t have to do that. We can still redirect our course toward an efficient, equitable system for all. After all, it’s our money, and yet progressive taxation makes health care affordable for all since it is simply based on the ability to pay. That is certainly more efficient than playing games with taxpayer subsidies for premiums and cost sharing for expensive, self-serving private insurers.

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By Joyce Frieden
MedPage Today, March 23, 2021

“All over this country, the American people are asking a simple question: How many people need to die before Congress is prepared to take on the greed of the pharmaceutical industry?” Sen. Bernie Sanders (I-Vt.), chairman of the Senate Health, Education, Labor & Pensions (HELP) Subcommittee on Primary Health and Retirement Security, said during a subcommittee hearing Tuesday on the high price of prescription drugs.

As to what Congress should legislate, Sanders had three ideas, embodied in bills he had introduced: Pegging U.S. drug prices to those of other industrialized countries; allowing for reimportation of prescription drugs from other countries; and allowing Medicare to negotiate drug prices. “Every other major country on earth … negotiates drug prices, and the time is long overdue for Medicare to do that as well,” he said.

https://www.medpagetoday.com…

“Why Does the US Pay the Highest Prices in the World for Prescription Drugs?”: Testimony of Dr Nav Persaud, Canada Research Chair in Health Justice and Associate Professor, University of Toronto

United States Senate Subcommittee on Primary Health and Retirement Security, March 23, 2021

Canada regulates the price of patented medicines and pays less for the same medicines

In Canada, per capita drug spending is $879 versus over $1,229 in the United States. Per capita drug spending is about 40 % higher in the United States largely because of the regulation of patented drug prices by the Canadian Patented Medicine Prices Review Board.

Posted prices for patented medicines are approximately 3 times lower in Canada. The Patented Medicines Prices Review Board is slated, in July, to drop the United States from its list of comparator countries used to set “price ceilings”, because prices are shockingly high in the United States compared with other high‐income countries including the United Kingdom.

Change is possible with political will

Pressure and lobbying by the pharmaceutical companies (and private insurers) have undermined reforms in both Canada and the United States. Multiple government reports over decades have recommended including medicines in Canada’s public single‐payer system to improve fair access and to save billions each year.vii But this has not happened, so we continue to pay higher prices than comparable countries such as New Zealand and Australia and inequities persist. America is a superpower that has not shown its strength in standing up to pharmaceutical companies that rip off Americans, as proven by the price differences for patented medicines across our border.

Three ways America – the superpower – can lower drug prices

1. Punish abusive pricing of patented medicines by creating a new Bureau. Create a new Bureau to set price ceilings for patented medicines, give that Bureau the resources and teeth to keep prices low, and empower that Bureau to issue compulsory licences when companies price patented medicines unreasonably. The new Bureau should be able to cut annual drug spending by at least $100 billion.
2. Use negotiating power and open tendering processes to secure low prices on a defined set of essential medicines as per international guidance. Negotiating power can help to ensure equitable access to needed medicines including off‐ patent or generic medicines.
3. Use existing legislation, and additional political will, to discipline the companies currently bloated by high medicine prices that illegally market products. There is a need for urgent action – Americans are getting ripped off by more than $100 billion each year and, in the wrong hands, this money is used to illegally market medicines in ways that kill Americans.

While some get rich, others die. Cost‐related non‐adherence to medicines – not taking pills as instructed due to the cost – is more common in Canada (8%) and the United States (17 %) than in comparable high‐income countries where it is typically below 5 %. The Centers for Disease Control and Prevention estimated that all‐cause mortality was 15 % to 22 % higher among Americans with chronic diseases such as diabetes who cannot afford their medicines compared with those who could afford them. Drug pricing is a life and death issue.

https://www.help.senate.gov…

Comment:

By Don McCanne, M.D.

We often look to Canada as a possible source of lower-priced pharmaceuticals. But Canada – a nation with one-tenth of our population – can hardly serve as the source of our medications that is ten times their own need. Besides, Canada continues to struggle with its need for a Pharmacare program to serve its own people. But that does not mean that they do not have good advice for us.

I happened to have been prescribed recently a long-term medication that is priced at over $500 per month. Although I have insurance under Part D Medicare, it was designed by conservatives to be certain that the patient bears a significant portion of the costs. So I am one of those made to “feel the pain” so that maybe I’ll decline this important and perhaps life-saving medication. (Just a small example of the difference between conservative and progressive health policies – individual responsibility versus collective social good wherein individuals frequently do not have the same negotiating leverage as would our government working for us all, while still providing the medical-industrial complex with fair margins.)

The solution is simple. The United States government needs to use its negotiating power in the purchase of drugs. As part of a single payer Medicare for All, everyone could have the drugs they need in a system that is affordable for all.

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By Margot Sanger-Katz and Sarah Kliff
The New York Times, March 22, 2021

The new stimulus bill made tens of millions of Americans eligible for new health insurance subsidies. But many will have to wait to get help: It will probably take a year for the full emergency aid to reach people, because of website complications and other logistical problems.

The health law’s complex structure makes it hard to retool insurance subsidies, let alone create a new program for the unemployed. The systems that distribute the benefits depend on government coders who update websites, and marketers who help people understand the new programs and jump through various administrative hoops to collect them.

Getting those lower prices will require work: Americans who already have Obamacare insurance will have to go back to the website where they bought their insurance; make sure they don’t want to switch plans; and certify that they want the new, expanded tax credits. Those who fail to do this will keep paying their current price. They should eventually receive the additional funds as a large refund with their 2021 taxes next spring.

People who have bought their own insurance elsewhere will need to cancel their current plan and switch to an eligible one.

Another key part of the stimulus provides free health plans with a generous set of benefits to Americans who received unemployment insurance this year. Even though the coverage will be retroactive to Jan. 1, the new benefit will take months to set up, and won’t appear on Healthcare.gov until this summer. That timeline may require people to visit Healthcare.gov as many as three times: once to sign up for a plan, then to get the new income-based subsidies, and again to get the special unemployment benefit once it’s ready.

The slow rollout of government aid is partly the result of the technological challenge of updating Healthcare.gov, which is connected to a maze of federal systems to verify people’s residency, income and insurance choices.

The slowness also reflects a policy debate within the administration about how automatic the new benefits should become.

If the Biden administration automatically increases people’s tax credits, some people could face a higher risk of a large tax bill.

Research suggests that the more complex social welfare programs are to access, the more likely it is that eligible people will fall through the cracks.

Although the stimulus bill passed with overwhelming Democratic support in Congress, a substantial share of Democratic lawmakers would prefer a simpler, more universal path to wider health coverage. This month a majority of House Democrats co-sponsored a bill to create a “Medicare for all” system, which would automatically provide government health insurance to all Americans, without the current system of subsidies and signups.

https://www.nytimes.com…

Comment:

By Don McCanne, M.D.

Many are celebrating the increase in health care benefits included in the stimulus bill. Improving coverage is a good thing, but how much do we have to celebrate here? First of all, many will be left uninsured or underinsured. Structural defects such as the profound administrative excesses will be perpetuated or even increased. Much of the program is temporary and thus won’t provide long term solutions. Some will have disruptions of their current programs plus further disruptions when the programs sunset.

Many potential tweaks discussed during the presidential campaign have not been included, so some are hoping that these may be enacted in the future along with making some of the temporary changes permanent. If so, most defects in our current system will remain in place. Also, efforts to make the system universal, equitable, affordable and inefficient will cease, as Congress and the administration move on to other pressing issues.

It is sad because we already have pending legislation that would fix these problems on a permanent basis: H.R.1976 – the single payer Medicare for All bill. Why would we want to continue with the complexities and deficiencies of the current approach when we can have it all now by enacting and implementing Medicare for All?

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By Jane M. Zhu, M.D., M.P.P., M.S.H.P., and Daniel Polsky, Ph.D., M.P.P.
The New England Journal of Medicine, March 18, 2021

The ecosystem of physician-owned medical practices has been inundated with larger forces that are driving health care toward consolidation, corporatization, and administrative management. Between July 2016 and January 2018, hospitals and health systems acquired more than 8000 practices, a process that was shepherded by regulatory shifts, changes in payment and delivery models, and uncertainty in the health care market. Roughly 14,000 physicians left private practice to become hospital-affiliated employees. These structural changes have shifted competitive dynamics for medical practices in two principal ways. First, remaining independent practices must now compete against much larger entities, which benefit from economies of scale. Second, to remain competitive, independent practices increasingly require new sources of capital. During the Covid-19 pandemic, revenue losses for many smaller practices have magnified financial pressures. Amid these changes, private-equity firms have emerged as influential players, offering a lifeline to smaller groups needing a competitive edge in a consolidating market. The rapid growth of private-equity investment throughout medical specialties has generated intense interest in potential adverse effects on physicians and patients.

Private-equity firms offer practices an alternative source of investment capital outside public ownership and distinct from hospitals and health systems, principally by allowing physicians to continue to hold equity and benefit financially from future transactions. To yield annual returns exceeding 20% on a typical investment horizon of 3 to 7 years, private-equity firms generally use a combination of expansion, establishment of new lines of business, and restructuring. For investments in physician practices, one core strategy involves acquiring and scaling up “platform” practices — usually established, brand-name companies with market reach and a good clinical reputation — before selling the practice to a larger investor.

Some of the value created by private-equity firms may be viewed in the context of a zero-sum game — one that results in winners and losers in an ecosystem serving a finite number of patients. A platform practice may roll up an entire portfolio of small practices, including regional competitors and practices in its referral networks, to be able to redirect more referrals to internal clinicians and increase its market share. Although this approach creates value for the growing practice, it may reduce competition and result in loss of patients and revenue for other practices. Acquired practices may also leverage market power in negotiations with insurers, which can lead to higher margins for the practice and potentially higher costs for patients and payers.

As in any ecosystem, however, the introduction of new forces can have unintended and undesirable consequences. An important concern is that private-equity firms’ goal of maximizing short- to medium-term profits may place undue pressure on physicians. Although a sale to a private-equity firm may yield an up-front lump sum for practice partners, changes in physician-compensation structures and professional autonomy may substantially alter performance incentives, practice conditions, career prospects, and job satisfaction, particularly for younger physicians. Each subsequent sale — to other private-equity firms, health services groups such as Optum, or large health systems — may further chip away at clinical autonomy and introduce new management influences.

From a societal standpoint, the net effect of private-equity investments in physician practices on downstream costs, value, and quality of care is unclear. The experiences of some private-equity–backed clinics suggest that there is pressure to expand certain revenue streams by conducting more elective procedures and providing more ancillary services, and to engage in “upcharging.” Practices acquired by private-equity firms may also be given incentives to prioritize care for commercially insured patients to maximize reimbursement; to deliver more streamlined, low-complexity care (e.g., perform more skin biopsies or screening colonoscopies) rather than meeting complex care needs; or to situate new offices in higher-income communities instead of in socioeconomically disadvantaged ones. These possibilities raise important questions about the implications of such investments for health equity and larger health system goals.

All states should have a comprehensive corporate practice of medicine doctrine, which prohibits medical management companies from exerting control over clinical judgment and practice. Nearly 20 states don’t have such a rule, and those that do vary substantially in the types of financial and contractual arrangements that they permit. As a result, private-equity firms frequently exploit loopholes, such as by structuring a parent company to have financial control of a practice while naming the physicians as owners.

Physicians should be aware that private equity’s growth is emblematic of broader disruptions in the physician-practice ecosystem and is a symptom of medicine’s transformation into a corporate enterprise. For some practices, outside investment may help facilitate growth and extend a lifeline that allows them to compete with larger players in an increasingly consolidated market. But this trend may also contribute to practices getting squeezed. As more investors enter health care and drive value creation, it’s worth considering for whom value is being created. How physicians respond — and the extent to which they retain core values in the service of patients — will ultimately determine the ecosystem’s resilience in the face of stressors.

https://www.nejm.org…

Comment:

By Don McCanne, M.D.

Private equity takeover of medical practices is here, and the momentum may change medicine forever. The business community may think that the changes taking place are beneficial, but traditional professional values are being buried under private equity’s steam roller.

Private capital is certainly playing a major role here. Stepping back and looking at what is happening can’t help but make you wonder if maybe public capital should be taking over that role. Maybe instead of looking up north to Canada, we should be looking across the sea to the United Kingdom. Rereading this article while substituting the term “National Health Service” for “private equity” would require substitution of the more nefarious consequences that are distributed throughout this article. We are now decades into the unsuccessful quest for a single payer version of an improved Medicare for All, and private capital seems to be making that goal more elusive.

If nothing else, perhaps discussion of a National Health Service might scare the opponents into considering a single payer system. But then it might be too late. The disruption required could be an almost insurmountable hurdle to overcome. Better take a closer look at H.R.1976 – “To establish an improved Medicare for All national health insurance program.” Its passage could not be more urgent.

https://www.congress.gov…

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