PNHP

A Transatlantic Review of the NHS at 60

A Transatlantic Review of the NHS at 60

By Donald M. Berwick, MD, MPP, FRCP
President and CEO, Institute for Healthcare Improvement, Cambridge, MA
NHS Live:  Wembley:  1 July 2008

Let me begin with thanks – twice.  First, thanks for letting me work with you for almost 15 years; this has been one of the most satisfying journeys of my entire career.  My colleagues in the Institute for Healthcare Improvement feel the same.  Second, thanks for what the NHS does as an example for health care worldwide.

If you’re a cynic, you’ll want to go get a cup of tea about now.  I am going to annoy you, because I am not a cynic. I am romantic about the NHS; I love it.  All I need to do to rediscover the romance is to look at health care in my own country. 

A towering bridge

The National Health Service is one of the truly astounding human endeavors of modern times.  Just look at what you are trying to be: comprehensive, equitable, available to all, free at the point of care, and – more and more – aiming for excellence by world-class standards.  And, because you have chosen to use a nation as the scale and taxation as the funding, the NHS isn’t just technical – it’s political.  It is an arena where the tectonic plates of a society meet: technology, professionalism, macroeconomics, social diversity, and political ambition.  It is a stage on which the polarizing debates of modern social theory play out: between market theorists and social planning, between enlightenment science and post-modern skeptics of science, between utilitarianism and individualism, between the premise that we are all responsible for each other and the premise that we are each responsible for ourselves, between those for whom government is a source of hope and those for whom government is hopeless.  But, even in these debates, you have agreed hold in trust a commons. You are unified, movingly and most nobly, by your nation’s promise to make good on an idea: the idea that health care is a human right.  The NHS is a bridge – a towering bridge – between the rhetoric of justice and the fact of justice.

No one in their right mind would expect that to be easy.  No one should wonder that, as the NHS celebrates its 60th birthday this week – an age at which humans recognize maturity, it seems still immature, adolescent, still searching.

You could have chosen an easier route. My nation did.  It’s easier in the United States because we do not promise health care as human right.  Most of my countrymen think that’s unrealistic. In America, they ask, “Who would assure such a right?”  Here, you answer, “We do, through our government.”  In America, people ask, “How can health care be a human right?  We can’t afford it.”  We spend 17% of our Gross Domestic Product on health care – compared with your 9%.  And, yet we have almost 50 million Americans, one in seven, who do not have health insurance.  Here, you make it harder for yourselves, because you don’t make that excuse.  You cap your health care budget, and you make the political and economic choices you need to make to keep affordability within reach.  And, you leave no one out.

Fragments

In the United States, our care is in fragments.  Providers of care, whether for-profit or not-for-profit, are entrepreneurs.  Each seeks to increase his share of the pie, at the expense of others.  And so we don’t have a rational structure of inter-related components; we have a collection of pieces – a caravan site.  These disconnected, self-referential pieces cost us dearly.  The entrepreneurial fragments create what the great health services researchers, Elliott Fisher and Jack Wennberg, call “supply-driven care.”  In America, the best predictor of cost is supply – the more we make, the more we use – hospital beds, consultancy services, procedures, diagnostic tests.  Fisher and Wennberg find absolutely no relationship – none – between the supply and use, on the one hand, and the quality and outcomes of care, on the other hand.  The least expensive fifth of hospital service areas in the US have better care and better outcomes than the most expensive fifth.  Here, you choose a harder path. You plan the supply; you aim a bit low; historically, you prefer slightly too little of a technology or service to much too much; and then you search for care bottlenecks, and try to relieve them. 

In the US, we favor specialty services and hospitals over primary care and community-based services.  Americans are not guaranteed a medical home, as you are, and we face a serious shortage of primary care physicians.  Hospitals, on the other hand, are abundant, with many communities vastly over-bedded – an invitation to supply-driven care.  Coordinated care – care that keeps people from having to use hospitals – is rare; so are adequate home health care, hospice services, school-based clinics. Community social services and our mental health services are undefended, isolated, and insufficient.  Public health and prevention are but stepchildren.  Here, in the NHS, you have historically put primary care – general practice – where it belongs: at the forefront.   

In the US, we can hold no one accountable for our problems.  Accountability is as fragmented as care, itself; each, separate piece tries to craft excellence, but only within its own walls. Meanwhile, patients and carers wander among the fragments. No one manages their journey, and they are too often lost, forgotten, bewildered.  Here, in England, accountability for the NHS is ultimately clear. Ultimately, the buck stops in the voting booth.  You place the politicians between the public served and the people serving them.  That is why Tony Blair commissioned new investment and modernization in the NHS when he took office, it is why government has repeatedly modified policies in a search for traction, and it is why your new government chartered the report by Lord Darzi.  Government action on the NHS is not mere restlessness or recreation; it is accountability at work through the maddening, majestic machinery of politics.

In the United States, we fund health care through hundreds of insurance companies.  Any American doctor or hospital interacts with a zoo of payment streams.  Administrative costs for this zoo approach 20% of our total health care bill, at least three times as much as in England.   

In the United States, those hundreds of insurance companies have a strong interest in not selling health insurance to people who are likely to need health care.  Our insurance companies try to predict who will need care, and to find ways to exclude them from coverage through underwriting and selective marketing. That increases their profits.  Here, you know that that isn’t just crazy; it is immoral.

Equitable, civilized and humane

So, you could have had a simpler, less ambitious plan than the NHS.  You could have had the American plan.  You could have been spending 17% of your GDP and made health care unaffordable as a human right instead of spending 9% and guaranteeing it as a human right.  You could have kept your system in fragments and encouraged supply-driven demand, instead of making tough choices and planning your supply.  You could have made hospitals and specialists, not general practice, your mainstay.  You could have obscured – obliterated – accountability, or left it to the invisible hand of the market, instead of holding your politicians ultimately accountable for getting the NHS sorted.  You could have let an unaccountable
system play out in the darkness of private enterprise instead of accepting that a politically accountable system must act in the harsh and, admittedly, sometimes unfair, daylight of the press, public debate, and political campaigning.  You could have a monstrous insurance industry of claims, rules, and paper-pushing, instead of using your tax base to provide a single route of finance.  You could have protected the wealthy and the well, instead of recognizing that sick people tend to be poorer and that poor people tend to be sicker, and that any health care funding plan that is just, equitable, civilized, and humane must – must – redistribute wealth from the richer among us to the poorer and less fortunate.

Britain, you chose well.  As troubled as you may believe the NHS to be, as uncertain its future, as controversial its plans, as negative its press, as contentious its politics, as beleaguered as it sometimes feels, please lift your eyes and behold the mess – the far bigger, costlier, unfair mess – that a less ambitious nation could have chosen.

Is the NHS perfect?  Far, far from it.  I know that as well as anyone in this room.  From front line to Whitehall, I have had the privilege to observe its performance and even to help to measure it.  The large scale facts are most recently summarized in the magisterial report by Sheila Leatherman and Kim Sutherland sponsored by The Nuffield Trust called The Quest for Quality: Refining the NHS Reforms.  They find some good news.  For example, after ten years of reinvestment and redesign, the NHS has more evidence-based care, lower mortality rates for major disease groups (especially cardiovascular diseases), lower waiting times for hospital, outpatient, and cancer care, more staff and technologies available, in some places better community-based mental health care, and falling rates of hospital infection.  An important, large scale patient safety campaign has begun in England, as well as among your cousins in Wales, Scotland, and Northern Ireland. There is less progress in some areas, especially by comparison with other European systems, such as in specialty access, cancer outcomes, patient-centeredness, life expectancy and infant mortality for socially deprived populations. In other words, in improving its quality, two facts are true: the NHS is en route, and the NHS has a lot more work ahead.

How can you do even better?  I have ten suggestions:

1.  First, put the patient at the center – at the absolute center of your system of care. Put the patient at the center for everything that you do.  In its most helpful and authentic form, this rule is bold; it is subversive.  It feels very risky to both professionals and managers, especially at first.  It is not focus groups or surveys or token representation.  It is the active presence of patients, families, and communities in the design, management, assessment, and improvement of care, itself.  It means customizing care literally to the level of the individual.  It means asking, “How would you like this done?” It means equipping every patient for self-care as much as each wants.  It means total transparency – broad daylight.  It means that patients have their own medical records, and that restricted visiting hours are eliminated.  It means, “Nothing about me without me.”  It means that we who offer health care stop acting like hosts to patients and families, and start acting like guests in their lives.  For professionals made anxious by this extreme image, let me simply remind you how you probably begin every encounter when you are following your best instincts; you ask, “How can I help you?” and then you fall silent and you listen.

2.  Second, stop restructuring.  In good faith and with sound logic, the leaders of the NHS and government have sorted and resorted local, regional, and national structures into a continual parade of new aggregates and agencies.  Each change made sense, but the parade doesn’t make sense.  It drains energy and confidence from the workforce and middle managers, who learn not to take risks, but rather to hold their breaths and wait for the next change.  It is, I think, time to stop.  No structure in a complex management system is ever perfect.  There comes a time, and the time has come, for stability, on the basis of which, paradoxically, productive change becomes easier and faster, as the good, smart, committed people of the NHS – the one million wonderful people who can carry you into the future – find the confidence to try improvements without fearing the next earthquake.

3.  Third, strengthen the local health care systems – community care systems – as a whole.  What you call “health economies” should become the core of design: the core of leadership, management, inter-professional coordination, and goals for the NHS.  This should be the natural unit of action for the Service, but it is as yet unrealized. The alternative, like in the US, is to have elements – hospitals, clinics, surgeries, and so on – but not a system of care.  Our patients need integrated journeys; and they need us to tend and defend those journeys.  I believe that the NHS has gone too far in the past decade toward optimizing hospital care – a fragment – and has not yet optimized the processes of care for communities.  You can do that.  It is, I think, your destiny.

4. Fourth, to help do that, reinvest in general practice and primary care.  These, not hospital care, are the soul of a proper, community-oriented, health-preserving care system.  General practice, not the hospital, is the jewel in the crown of the NHS.  It always has been.  Save it.  Build it. 

5.  Fifth, please don’t put your faith in market forces.  It’s a popular idea: that Adam Smith’s invisible hand would do a better job of designing care than leaders with plans can.  I do not agree.  I find little evidence anywhere that market forces, bluntly used, that is, consumer choice among an array of products with competitors’ fighting it out, leads to the health care system you want and need.  In the US, competition has become toxic; it is a major reason for our duplicative, supply-driven, fragmented care system.  Trust transparency; trust the wisdom of the informed public; but, do not trust market forces to give you the system you need.  I favor total transparency, strong managerial skills, and accountability for improvement.  I favor expanding choices. But, I cannot believe that the individual health care consumer can enforce through choice the proper configurations of a system as massive and complex as health care. That is for leaders to do.

6.  Sixth, avoid supply-driven care like the plague.  Unfettered growth and pursuit of institutional self-interest has been the engine of low value for the US health care system.  It has made it unaffordable, and hasn’t helped patients at all.

7.  Seventh, develop an integrated approach to the assessment, assurance, and improvement of quality.  This is a major recommendation of Leatherman and Sutherland’s report, and I totally concur.  England now has many governmental and quasi-governmental organizations concerned with assessing, assuring, and improving the performance of the NHS.   But they do not work well with each other.  The nation lacks a consistent, agreed map of roles and responsibilities that amount, in aggregate, to a coherent system of aim-setting, oversight, and assistance.  Leatherman and Sutherland call this an “NHS National Quality Programme,” and i
t is one violation of my proposed rule against restructuring that I have no trouble endorsing.

8.  Eighth, heal the divide among the professions, the managers, and the government.  Since at least the mid-1980’s, a rift developed that has not yet healed between the professions of medicine formally organized and the reform projects of government and the executive.  I assume there is plenty of blame to go around, and that the rift grew despite the best efforts of many leaders on both sides.  But, the toll has been heavy:  resistance, divided leadership, demoralization, confusion, frustration, excess economic costs, and occasional technical mistakes in the design of care.  The NHS and the people it serves can ill afford another decade of misunderstanding and suspicion between the professions, on the one hand, and the managers and public servants, on the other hand.  It is the duty of both to set it aside.

9.  Ninth, train your health care workforce for the future, not the past.  That workforce needs to master a whole new set of skills relevant to the leadership of and citizenship in the improvement of health care as a system – patient safety, continual improvement, teamwork, measurement, and patient-centered care, to name a few.  Scotland announced last week that all its health professionals in training will master safety and quality improvement as part of their qualification.  Far be it for me to suggest copying Scotland, but there you have it.  I am pleased that Lord Darzi’s Next Stage report suggests such standards for the preparation of health care professionals in England.

10.  Tenth, and finally, aim for health.  I suppose your forebears could have called it the NHCS, the “National Health Care Service,” but they didn’t.  They called it the “National Health Service.”  Maybe they meant it.  Maybe they meant to create an enterprise whose product – whose purpose – was not care, but health.  Maybe they knew then, as we surely know now, even before Sir Douglas Black and Sir Derek Wanless and Sir Michael Marmot, that great health care, technically delimited, cannot alone produce great health.  Developed nations that forget that suffer the embarrassment of growing investments in health care with declining indices of health.  The charismatic epidemics of SARS, mad cow, and influenza cannot hold a candle to the damage of the durable ones of obesity, violence, depression, substance abuse, and physical inactivity.  Would it not be thrilling in the next decade for the NHS – the National Health Service – to live fully up to its middle name?

Those are my observations from far away – from an American fan, distant and starry-eyed about the glimpses I have had of your remarkable social project.  The only sentiment that exceeds my admiration for the NHS is my hope for the NHS.  I hope that you will never, never give up on what you have begun.  I hope that you realize and reaffirm how badly you need, how badly the world needs, an example at scale of a health system that is universal, accessible, excellent, and free at the point of care – a health system that is, at its core, like the world we wish we had: generous, hopeful, confident, joyous, and just.  Happy birthday!

http://www2.wales.nhs.uk/sites3/page.cfm?orgId=781&pid=32953

Will the temporary high-risk pool meet the needs for those who are uninsurable?

Health Coverage for the High-Risk Uninsured: Policy Options for Design of the Temporary High-Risk Pool

By Mark Merlis
National Institute for Health Care Reform
May 27, 2010
Among the first tasks required by the recently enacted health reform law is creation of a temporary national high-risk pool program to provide subsidized health coverage to people who are uninsured because of pre-existing medical conditions. While as many as 5.6-million to 7-million Americans may qualify for the program, the $5 billion allocated over four years will allow coverage of only a small fraction of those in need, potentially as few as 200,000 people a year. Policy makers will need to tailor eligibility rules, benefits and premiums to stretch the dollars as far as possible. Another consideration is how the new pool will fit with existing state high-risk pools or other state interventions in the private nongroup, or individual, health insurance market. Policy makers also will need to consider how to manage the transition of enrollees from high-risk pools to the new health insurance exchanges scheduled to be operational in 2014 to prevent adverse selection and encourage insurer participation.
http://www.nihcr.org/High-RiskPools.pdf

The Patient Protection and Affordable Care Act (PPACA) allocates $5 billion over four years for a temporary high-risk pool to insure those individuals who have problems obtaining coverage because of preexisting conditions. Although about 7 million Americans fall into this category, this report indicates that only about 200,000 people will be covered by this program, thereby meeting only about 3 percent of the need.
You need to read the full 14 page report to understand the multitude of policy interactions that will result in the failure of this one program. It serves as a proxy for the multitude of other policies contained in PPACA. We haven’t seen anything yet.
This is what happens when members of Congress insist on building health care reform on our dysfunctional, inefficient, highly fragmented system of health care financing. By insisting that we give first priority to protecting and enhancing the role of private insurers, the policy compromises have resulted in a system that will cost more while leaving far too many with inadequate coverage or no coverage at all.
Again, it doesn’t have to be this way. We can still enact a single payer national health program, ensuring all essential health care for everyone.

What will employers do under PPACA?

The Impact of Health Care Reform on Employers

Towers Watson
May 25, 2010

Although U.S. employers view controlling health care costs as their highest health care reform priority, few believe that the recently enacted Patient Protection and Affordable Care Act (PPACA) will stem the tide of rising costs, according to a May 2010 survey by Towers Watson.

In order to cope with anticipated cost increases, many employers plan on:

* Passing on increases to employees (88%)
* Reducing health benefits and programs (74% )
* Absorbing costs in the business (33%)
* Passing on increases to customers (20%)

More than three in four employers (85%) believe that health care reform will reduce the number of large organizations offering employer-sponsored retiree medical benefits. And 43% of employers that currently offer retiree medical plans plan to reduce or eliminate them.

Fifty-eight percent of employers surveyed believe health care reform will drive large employers to adopt total replacement consumer-driven health plans (CDHP) for their active employees.

Press release:
http://www.towerswatson.com/press/1936

Key findings:
http://www.towerswatson.com/research/1935

Report (8 pages):
http://www.towerswatson.com/assets/pdf/1935/Post-HCR_Flash_survey_bulletin_5_25_10(1).pdf

Comment:

By Don McCanne, MD

Although we have seen many employer surveys in the past, this one is especially important because it represents the views of employers’ human resources professionals who face the reality that the Patient Protection and Affordable Care Act (PPACA) is now law. Since PPACA was designed to perpetuate the role of employer-sponsored health plans, we need to look at the likely responses of employers.

Most employers (90 percent) believe that PPACA will increase their organization’s health care benefit costs. What is alarming is that employers do not intend to pass those cost increases on to their customers as they would with any other overhead increases, but instead they intend to pass them on to their employees in the form of increased premiums and cost sharing, and a reduction in benefits (which also results in higher out-of-pocket expenses for the employees).

More specifically, 58 percent of employers believe that large employers will adopt total replacement consumer-driven health plans (CDHP) for their active employees. “Total replacement” means that employees would be offered no option other then the high-deductible consumer-driven health plans. That could be disastrous for employees with modest incomes who develop significant health problems.

And future retirees can pretty much forget about receiving any retiree health benefits. Employers indicate that they are likely to take advantage of the fact that retirees under age 65 will be able to purchase plans in the exchanges without being excluded because of preexisting conditions.

This is the insurance that President Obama, during his campaign, promised that you could keep if you wanted to. What he didn’t tell you is that, in most instances, you will not be permitted to drop that plan and select another one in the state insurance exchanges. As long as the employer’s plan has an actuarial value of 60 percent (you pay an average of 40 percent of the medical bills), you are prohibited from selecting a better plan in the exchanges.

Once again, we can still fix this. We can enact a single payer national health program – health care for everyone, without financial barriers.

What will employers do under PPACA?

The Impact of Health Care Reform on Employers

Towers Watson
May 25, 2010
Although U.S. employers view controlling health care costs as their highest health care reform priority, few believe that the recently enacted Patient Protection and Affordable Care Act (PPACA) will stem the tide of rising costs, according to a May 2010 survey by Towers Watson.
In order to cope with anticipated cost increases, many employers plan on:
* Passing on increases to employees (88%)
* Reducing health benefits and programs (74% )
* Absorbing costs in the business (33%)
* Passing on increases to customers (20%)
More than three in four employers (85%) believe that health care reform will reduce the number of large organizations offering employer-sponsored retiree medical benefits. And 43% of employers that currently offer retiree medical plans plan to reduce or eliminate them.
Fifty-eight percent of employers surveyed believe health care reform will drive large employers to adopt total replacement consumer-driven health plans (CDHP) for their active employees.
Press release:
http://www.towerswatson.com/press/1936
Key findings:
http://www.towerswatson.com/research/1935
Report (8 pages):
http://www.towerswatson.com/assets/pdf/1935/Post-HCR_Flash_survey_bulletin_5_25_10(1).pdf

Although we have seen many employer surveys in the past, this one is especially important because it represents the views of employers’ human resources professionals who face the reality that the Patient Protection and Affordable Care Act (PPACA) is now law. Since PPACA was designed to perpetuate the role of employer-sponsored health plans, we need to look at the likely responses of employers.
Most employers (90 percent) believe that PPACA will increase their organization’s health care benefit costs. What is alarming is that employers do not intend to pass those cost increases on to their customers as they would with any other overhead increases, but instead they intend to pass them on to their employees in the form of increased premiums and cost sharing, and a reduction in benefits (which also results in higher out-of-pocket expenses for the employees).
More specifically, 58 percent of employers believe that large employers will adopt total replacement consumer-driven health plans (CDHP) for their active employees. “Total replacement” means that employees would be offered no option other then the high-deductible consumer-driven health plans. That could be disastrous for employees with modest incomes who develop significant health problems.
And future retirees can pretty much forget about receiving any retiree health benefits. Employers indicate that they are likely to take advantage of the fact that retirees under age 65 will be able to purchase plans in the exchanges without being excluded because of preexisting conditions.
This is the insurance that President Obama, during his campaign, promised that you could keep if you wanted to. What he didn’t tell you is that, in most instances, you will not be permitted to drop that plan and select another one in the state insurance exchanges. As long as the employer’s plan has an actuarial value of 60 percent (you pay an average of 40 percent of the medical bills), you are prohibited from selecting a better plan in the exchanges.
Once again, we can still fix this. We can enact a single payer national health program – health care for everyone, without financial barriers.

Bust trusts or bust phony competition?

Antitrust and Healthcare

Remarks by Christine A. Varney, Assistant Attorney General, Antitrust Division, U.S. Department of Justice
American Bar Association/American Health Lawyers Association
May 24, 2010

(Excerpts)

The Patient Protection and Affordable Care Act (the Affordable Care Act), called for by the President and enacted by Congress on March 21, relies, in part, on the belief that robust competition and expanded choice will expand coverage while containing cost.

Yet, like many reforms driven by the power of competition to create consumer welfare, the success of these legislative and regulatory efforts will depend as much upon healthy competitive markets free from undue concentration and anticompetitive behavior as it will upon regulatory change. In short, enactment of the Affordable Care Act makes effective antitrust policy more important than ever.

The repeal of the antitrust exemption in the McCarran-Ferguson Act as it applies to the health insurance industry would give American families and businesses, big and small, more control over their own health care choices by promoting greater insurance competition and outlawing anticompetitive health insurance practices like price fixing, bid rigging, and market allocation that drive up costs for all Americans.

Two significant aspects of the Affordable Care Act are the establishment of new competitive marketplaces — known as Exchanges — for individuals and small employers to purchase health insurance, and the formation of Accountable Care Organizations (ACOs) and other initiatives to provide for more efficient delivery and payment of Medicare services and Medicaid pediatric services. There can be no doubt that the success of the Exchanges and the ACOs will depend, in large part, on effective competition, both among health care insurers and providers.

The ultimate goal of health care reform is to harness the power of competition, together with regulation, to expand coverage, improve quality, and control the cost of health care for all Americans. The role of antitrust is to ensure that competition is preserved and protected, so that it is there to be harnessed.

I. Enforcement

The goals of health care reform cannot be achieved if mergers between significant insurers in a particular market substantially reduce competition; nor can those goals be realized if dominant insurers use exclusionary practices to blockade entry or expansion by alternative insurers. The same is true if health care providers use supposedly quality-improving or cost-reducing measures simply to raise prices.

Over the last ten years in numerous investigations across the country, the Division has found that many providers give the best discounts only to insurers with significant market share. Thus, new entrants cannot negotiate for competitive provider discounts because they have few enrollees, and they cannot win new enrollees because they do not have competitive discounts. This situation makes it difficult for insurers to enter new geographic areas or for insurers with small enrollment to expand within existing markets.

The Division is committed to vigorously, but responsibly, scrutinizing mergers in the health care industry that appear to present a competitive concern. If we determine that our initial concerns were well founded, we will not hesitate to block the merger or to require the settlement concessions necessary to protect consumers. On the other hand, if we find that the merger may not substantially lessen competition, we will promptly close the investigation and allow the parties to try to show, through the competitive process, that better business methods can deliver more efficient medical care and medical insurance to American consumers.

II. Competition Advocacy

It is important to keep in mind that successful antitrust enforcement also includes effective competition advocacy. (Examples of DOJ competition advocacy are given for Michigan and California.)

III. Entry Project

First, and foremost, we confirmed that the biggest obstacle to an insurer’s entry or expansion in the small- or mid-sized-employer market is scale.  New insurers cannot compete with incumbents for enrollees without provider discounts, but they cannot negotiate for discounts without a large number of enrollees. This circularity problem makes entry risky and difficult, helping to secure the position of existing incumbents.

Second, we concluded that it may be easier to enter less concentrated markets, with competition between several large but relatively equal-sized insurers, than it is to enter a market with one or two dominant plans. This is a vitally important finding because it illustrates that a critical economic assumption in antitrust analysis — namely, that the higher profits often associated with concentrated markets will attract new entrants who will help restore competitive pricing — is sometimes made without an adequate evidentiary basis. Indeed, this assumption fails to account for barriers to entry, including barriers based on the inability of entrants to achieve economies of scale that will allow them to compete with incumbents.

One partial explanation for the presence of this phenomenon in health insurance markets comes from our third finding, which is that new entrants or niche players are more likely to receive provider discounts comparable to their competitors’ in less concentrated markets than they are in markets dominated by one or two plans.

Finally, our interviews reconfirmed that brokers typically are reluctant to sell new health insurance plans, even if those plans have substantially reduced premiums, unless the plan has strong brand recognition or a good reputation in the geographic area where the broker operates.

IV. Innovation and Efficiency in Health Care Delivery

It is important to keep in mind that not all provider networks involve sufficient financial, clinical, or other economic integration to apply the rule of reason to joint price negotiations with payers. For example, an arrangement among competing providers simply to engage in joint billing, joint collection services, or even joint purchasing of medical supplies or services is generally not the type of economic integration needed to allow providers jointly to set their reimbursement rates under the rule of reason. Rather, such steps simply reflect an effort to coordinate and share some administrative expenses or to receive volume purchasing discounts.

The economic integration that justifies application of the rule of reason to joint price negotiations with payers requires the sharing of some form of financial risk, such as an agreement by providers to accept a capitated rate, a predetermined percentage of revenue from a health plan, or sufficient clinical integration to induce the group’s members to improve the quality and efficiency of the care they provide. While there is no particular formula that can cover all types of legitimate clinical integration, the key is that there must be sufficient clinical integration to motivate the kinds of changes that can achieve real cost-containment or other performance benchmarks.

The Affordable Care Act’s development of ACOs is a good example of how providers might work together to deliver more efficient, high-quality care without inhibiting competition, so long as their collaborations are properly constructed. For example, the ACO encourages competing physicians, and possibly other providers, to coordinate care for a defined Medicare population through redesigning care protocols, utilizing health IT, investing in infrastructure, and meeting quality targets. If the ACO meets quality-of-care and cost targets, it can share the savings with HHS.

Properly constructed, ACOs have the potential to improve health care d
elivery and drive down costs. Thus, as reform moves forward, the Justice Department will work closely with HHS and providers to offer whatever guidance may be needed to ensure that providers pursue beneficial integrated ACOs without running afoul of the antitrust laws.

In conclusion, let me say that I hope I have made clear that the Justice Department believes that antitrust has — and will continue to have — an essential role to play in health care. If health care reform is to harness the power of competitive markets to produce more and more efficient systems, then we must be up to the challenge of ensuring that our health care markets are, in fact, as competitive as possible — protected from undue concentration or anticompetitive conduct with vigorous but responsible enforcement and effective competition advocacy. In this dynamic environment, a successful effort will require more than “business as usual.” It will require that we provide clear and accessible guidance to health care consumers, providers, and payers so that there is the predictability needed for health care reform to succeed. I think you will find the Department of Justice generally, and the Antitrust Division specifically, up to the task of ensuring that reform is achieved, competition is maintained, and consumers are benefited.

http://www.justice.gov/atr/public/speeches/258898.htm

Comment: 

By Don McCanne, MD

According to Christine Varney, “The Patient Protection and Affordable Care Act (the Affordable Care Act), called for by the President and enacted by Congress on March 21, relies, in part, on the belief that robust competition and expanded choice will expand coverage while containing cost.”

This is a remarkable statement. Think about it. The President and Congress believe that competition between private health plans will contain costs when decades of experience with the private insurance industry has proven that this is a false belief. Competing private plans have failed miserably in controlling costs.

And the promise of competition within the state insurance exchanges? Private insurers currently have free rein of the markets with virtual unlimited ability to compete. Yet we’ve seen consolidation and concentration within markets, as less dominant companies withdraw. It is likely that only a few major players will be interested in participating in the exchanges. A small player would be unlikely to attract an adequate number of physicians and hospitals to be included in their networks, and consequently would be unable to attract enough individuals to sign up with a plan with such sparse networks. The belief that the state exchanges will promote robust competition between private insurers, which the free market hasn’t done, is a pipe dream.

Now think about costs under the Medicare program. Although a non-competitive government program, Medicare has been far more effective in controlling costs than have the private insurance plans. In fact, the private insurance industry has often followed Medicare’s lead in innovations in the financing of health care.

The attempt to introduce private competition into the Medicare program has been a dismal failure. The care covered by the private plans (Medicare plus Choice, and then Medicare Advantage) has cost more than care provided in the traditional Medicare program for individuals with comparable health care needs. The private plans have been totally unsuccessful in their efforts to compete on a cost basis with our public program – Medicare.

Now back to that remarkable statement – the one that says that the President called for and Congress enacted the Affordable Care Act on the belief that robust competition would contain costs. What a sham! President Obama has known all along that the private insurance industry has failed and that it would take a single payer national health program to cover everyone while controlling costs. He has said as much. The members of Congress know that as well. Why else would they keep saying that if this doesn’t work (which policy science tells us it can’t) then we’ll have single payer?

The last thing we need is the Department of Justice providing antitrust oversight of a dysfunctional private insurance market when the obvious solution is to establish our own public monopsony which controls costs through global budgeting and other proven single payer mechanisms. A monopsony eliminates the need for competition to control costs. That would be detrimental in the private sector, but it would be highly beneficial when it is our own public program.

If we get rid of the private, anti-competitive insurance trusts, then we don’t even need the Department of Justice trust busters on the scene.

Bust trusts or bust phony competition?

Antitrust and Healthcare

Remarks by Christine A. Varney, Assistant Attorney General, Antitrust Division, U.S. Department of Justice
American Bar Association/American Health Lawyers Association
May 24, 2010
(Excerpts)
The Patient Protection and Affordable Care Act (the Affordable Care Act), called for by the President and enacted by Congress on March 21, relies, in part, on the belief that robust competition and expanded choice will expand coverage while containing cost.
Yet, like many reforms driven by the power of competition to create consumer welfare, the success of these legislative and regulatory efforts will depend as much upon healthy competitive markets free from undue concentration and anticompetitive behavior as it will upon regulatory change. In short, enactment of the Affordable Care Act makes effective antitrust policy more important than ever.
The repeal of the antitrust exemption in the McCarran-Ferguson Act as it applies to the health insurance industry would give American families and businesses, big and small, more control over their own health care choices by promoting greater insurance competition and outlawing anticompetitive health insurance practices like price fixing, bid rigging, and market allocation that drive up costs for all Americans.
Two significant aspects of the Affordable Care Act are the establishment of new competitive marketplaces — known as Exchanges — for individuals and small employers to purchase health insurance, and the formation of Accountable Care Organizations (ACOs) and other initiatives to provide for more efficient delivery and payment of Medicare services and Medicaid pediatric services. There can be no doubt that the success of the Exchanges and the ACOs will depend, in large part, on effective competition, both among health care insurers and providers.
The ultimate goal of health care reform is to harness the power of competition, together with regulation, to expand coverage, improve quality, and control the cost of health care for all Americans. The role of antitrust is to ensure that competition is preserved and protected, so that it is there to be harnessed.
I. Enforcement
The goals of health care reform cannot be achieved if mergers between significant insurers in a particular market substantially reduce competition; nor can those goals be realized if dominant insurers use exclusionary practices to blockade entry or expansion by alternative insurers. The same is true if health care providers use supposedly quality-improving or cost-reducing measures simply to raise prices.
Over the last ten years in numerous investigations across the country, the Division has found that many providers give the best discounts only to insurers with significant market share. Thus, new entrants cannot negotiate for competitive provider discounts because they have few enrollees, and they cannot win new enrollees because they do not have competitive discounts. This situation makes it difficult for insurers to enter new geographic areas or for insurers with small enrollment to expand within existing markets.
The Division is committed to vigorously, but responsibly, scrutinizing mergers in the health care industry that appear to present a competitive concern. If we determine that our initial concerns were well founded, we will not hesitate to block the merger or to require the settlement concessions necessary to protect consumers. On the other hand, if we find that the merger may not substantially lessen competition, we will promptly close the investigation and allow the parties to try to show, through the competitive process, that better business methods can deliver more efficient medical care and medical insurance to American consumers.
II. Competition Advocacy
It is important to keep in mind that successful antitrust enforcement also includes effective competition advocacy. (Examples of DOJ competition advocacy are given for Michigan and California.)
III. Entry Project
First, and foremost, we confirmed that the biggest obstacle to an insurer’s entry or expansion in the small- or mid-sized-employer market is scale.  New insurers cannot compete with incumbents for enrollees without provider discounts, but they cannot negotiate for discounts without a large number of enrollees. This circularity problem makes entry risky and difficult, helping to secure the position of existing incumbents.
Second, we concluded that it may be easier to enter less concentrated markets, with competition between several large but relatively equal-sized insurers, than it is to enter a market with one or two dominant plans. This is a vitally important finding because it illustrates that a critical economic assumption in antitrust analysis — namely, that the higher profits often associated with concentrated markets will attract new entrants who will help restore competitive pricing — is sometimes made without an adequate evidentiary basis. Indeed, this assumption fails to account for barriers to entry, including barriers based on the inability of entrants to achieve economies of scale that will allow them to compete with incumbents.
One partial explanation for the presence of this phenomenon in health insurance markets comes from our third finding, which is that new entrants or niche players are more likely to receive provider discounts comparable to their competitors’ in less concentrated markets than they are in markets dominated by one or two plans.
Finally, our interviews reconfirmed that brokers typically are reluctant to sell new health insurance plans, even if those plans have substantially reduced premiums, unless the plan has strong brand recognition or a good reputation in the geographic area where the broker operates.
IV. Innovation and Efficiency in Health Care Delivery
It is important to keep in mind that not all provider networks involve sufficient financial, clinical, or other economic integration to apply the rule of reason to joint price negotiations with payers. For example, an arrangement among competing providers simply to engage in joint billing, joint collection services, or even joint purchasing of medical supplies or services is generally not the type of economic integration needed to allow providers jointly to set their reimbursement rates under the rule of reason. Rather, such steps simply reflect an effort to coordinate and share some administrative expenses or to receive volume purchasing discounts.
The economic integration that justifies application of the rule of reason to joint price negotiations with payers requires the sharing of some form of financial risk, such as an agreement by providers to accept a capitated rate, a predetermined percentage of revenue from a health plan, or sufficient clinical integration to induce the group’s members to improve the quality and efficiency of the care they provide. While there is no particular formula that can cover all types of legitimate clinical integration, the key is that there must be sufficient clinical integration to motivate the kinds of changes that can achieve real cost-containment or other performance benchmarks.
The Affordable Care Act’s development of ACOs is a good example of how providers might work together to deliver more efficient, high-quality care without inhibiting competition, so long as their collaborations are properly constructed. For example, the ACO encourages competing physicians, and possibly other providers, to coordinate care for a defined Medicare population through redesigning care protocols, utilizing health IT, investing in infrastructure, and meeting quality targets. If the ACO meets quality-of-care and cost targets, it can share the savings with HHS.
Properly constructed, ACOs have the potential to improve health care delivery and drive down costs. Thus, as reform moves forward, the Justice Department will work closely with HHS and providers to offer whatever guidance may be needed to ensure that providers pursue beneficial integrated ACOs without running afoul of the antitrust laws.
In conclusion, let me say that I hope I have made clear that the Justice Department believes that antitrust has — and will continue to have — an essential role to play in health care. If health care reform is to harness the power of competitive markets to produce more and more efficient systems, then we must be up to the challenge of ensuring that our health care markets are, in fact, as competitive as possible — protected from undue concentration or anticompetitive conduct with vigorous but responsible enforcement and effective competition advocacy. In this dynamic environment, a successful effort will require more than “business as usual.” It will require that we provide clear and accessible guidance to health care consumers, providers, and payers so that there is the predictability needed for health care reform to succeed. I think you will find the Department of Justice generally, and the Antitrust Division specifically, up to the task of ensuring that reform is achieved, competition is maintained, and consumers are benefited.
http://www.justice.gov/atr/public/speeches/258898.htm

According to Christine Varney, “The Patient Protection and Affordable Care Act (the Affordable Care Act), called for by the President and enacted by Congress on March 21, relies, in part, on the belief that robust competition and expanded choice will expand coverage while containing cost.”
This is a remarkable statement. Think about it. The President and Congress believe that competition between private health plans will contain costs when decades of experience with the private insurance industry has proven that this is a false belief. Competing private plans have failed miserably in controlling costs.
And the promise of competition within the state insurance exchanges? Private insurers currently have free rein of the markets with virtual unlimited ability to compete. Yet we’ve seen consolidation and concentration within markets, as less dominant companies withdraw. It is likely that only a few major players will be interested in participating in the exchanges. A small player would be unlikely to attract an adequate number of physicians and hospitals to be included in their networks, and consequently would be unable to attract enough individuals to sign up with a plan with such sparse networks. The belief that the state exchanges will promote robust competition between private insurers, which the free market hasn’t done, is a pipe dream.
Now think about costs under the Medicare program. Although a non-competitive government program, Medicare has been far more effective in controlling costs than have the private insurance plans. In fact, the private insurance industry has often followed Medicare’s lead in innovations in the financing of health care.
The attempt to introduce private competition into the Medicare program has been a dismal failure. The care covered by the private plans (Medicare plus Choice, and then Medicare Advantage) has cost more than care provided in the traditional Medicare program for individuals with comparable health care needs. The private plans have been totally unsuccessful in their efforts to compete on a cost basis with our public program – Medicare.
Now back to that remarkable statement – the one that says that the President called for and Congress enacted the Affordable Care Act on the belief that robust competition would contain costs. What a sham! President Obama has known all along that the private insurance industry has failed and that it would take a single payer national health program to cover everyone while controlling costs. He has said as much. The members of Congress know that as well. Why else would they keep saying that if this doesn’t work (which policy science tells us it can’t) then we’ll have single payer?
The last thing we need is the Department of Justice providing antitrust oversight of a dysfunctional private insurance market when the obvious solution is to establish our own public monopsony which controls costs through global budgeting and other proven single payer mechanisms. A monopsony eliminates the need for competition to control costs. That would be detrimental in the private sector, but it would be highly beneficial when it is our own public program.
If we get rid of the private, anti-competitive insurance trusts, then we don’t even need the Department of Justice trust busters on the scene.

UnitedHealthcare agrees to offer junk insurance to millions of restaurant workers

NRA partners with UnitedHealthcare

By Paul Frumkin
Nation’s Restaurant News
May 21, 2010

The National Restaurant Association said it has partnered with insurance giant UnitedHealthcare in an effort to make health care coverage more accessible and affordable for foodservice operators and their employees.

The initiative, called “Restaurant Health Care Alliance,” could help provide coverage for the 4 million to 6 million restaurant employees who currently are without insurance, according to Dawn Sweeney the NRA’s president and chief executive. The industry employs about 13 million people.

While details of the plans have not been hammered out, the NRA and UnitedHealthcare said they intend to provide a range of options that will be tailored to the restaurant industry.

“We’re looking at developing a continuum of products,” Sweeney said Friday during a press conference in Chicago announcing the alliance. She said plans could range from discount cards for those employees “who aren’t ready to purchase full health insurance all the way to comprehensive coverage.” Prices could start as low as $100 a month, she added.

Mike Gibbons, the NRA’s chairman of the board, noted that the partnership with UnitedHealthcare would help alleviate the financial burden that national health care reform will put on the restaurant industry.

“The cost of health care reform could be potentially devastating,” he said. “The alliance will give lower cost health care alternatives.”

http://www.nrn.com/article.aspx?menu_id=1368&id=383294

Comment: 

By Don McCanne, MD

You would think that now that the Patient Protection and Affordable Care Act (PPACA) is law, UnitedHealthcare, the nation’s largest insurer in terms of revenues, would shape up its act by offering expansions of coverage compliant with the alleged intent of the law to provide adequate health insurance for everyone. That’s what you might think, but you’d be wrong.

The National Restaurant Association (NRA) actively opposed PPACA. It’s not too difficult to understand why. There are close to a million businesses in the restaurant industry, most of which operate on fairly narrow profit margins. Because of their sensitivity to overhead expenses, they have left millions of their food services workers with out any health care coverage whatsoever.

Congress recognized that requiring small businesses to offer all employees insurance coverage would create a significant financial burden for many of them. Thus they exempted businesses with less than 50 employees from the penalty for not providing coverage. But those with 50 or more employees will have to provide “minimum essential coverage” to avoid the penalty. That is defined in the law as providing an actuarial value of 60 percent, though NRA is continuing to lobby for regulations that would keep the more specific requirements to a minimum.

With the potential of gaining millions of new insurance customers from the restaurant industry alone, UnitedHealthcare is quite willing to craft the inexpensive products that the restaurant industry is seeking in response to the requirements imposed by PPACA. But discount cards? That’s not even insurance! The other “lower cost health care alternatives” at best would be underinsurance products that will not protect restaurant employees nor their families who may develop health problems. Junk insurance is what they’re selling!

This is UnitedHealthcare in action after PPACA has become law. It is clear that they have no intent to follow any other path than business as usual. Let’s not go that route, but instead let’s blaze a path to a single payer national health program. Then all restaurant workers (and everyone else) would have the health care that they and their families might need.

UnitedHealthcare agrees to offer junk insurance to millions of restaurant workers

NRA partners with UnitedHealthcare

By Paul Frumkin
Nation’s Restaurant News
May 21, 2010
The National Restaurant Association said it has partnered with insurance giant UnitedHealthcare in an effort to make health care coverage more accessible and affordable for foodservice operators and their employees.
The initiative, called “Restaurant Health Care Alliance,” could help provide coverage for the 4 million to 6 million restaurant employees who currently are without insurance, according to Dawn Sweeney the NRA’s president and chief executive. The industry employs about 13 million people.
While details of the plans have not been hammered out, the NRA and UnitedHealthcare said they intend to provide a range of options that will be tailored to the restaurant industry.
“We’re looking at developing a continuum of products,” Sweeney said Friday during a press conference in Chicago announcing the alliance. She said plans could range from discount cards for those employees “who aren’t ready to purchase full health insurance all the way to comprehensive coverage.” Prices could start as low as $100 a month, she added.
Mike Gibbons, the NRA’s chairman of the board, noted that the partnership with UnitedHealthcare would help alleviate the financial burden that national health care reform will put on the restaurant industry.
“The cost of health care reform could be potentially devastating,” he said. “The alliance will give lower cost health care alternatives.”
http://www.nrn.com/article.aspx?menu_id=1368&id=383294

You would think that now that the Patient Protection and Affordable Care Act (PPACA) is law, UnitedHealthcare, the nation’s largest insurer in terms of revenues, would shape up its act by offering expansions of coverage compliant with the alleged intent of the law to provide adequate health insurance for everyone. That’s what you might think, but you’d be wrong.
The National Restaurant Association (NRA) actively opposed PPACA. It’s not too difficult to understand why. There are close to a million businesses in the restaurant industry, most of which operate on fairly narrow profit margins. Because of their sensitivity to overhead expenses, they have left millions of their food services workers with out any health care coverage whatsoever.
Congress recognized that requiring small businesses to offer all employees insurance coverage would create a significant financial burden for many of them. Thus they exempted businesses with less than 50 employees from the penalty for not providing coverage. But those with 50 or more employees will have to provide “minimum essential coverage” to avoid the penalty. That is defined in the law as providing an actuarial value of 60 percent, though NRA is continuing to lobby for regulations that would keep the more specific requirements to a minimum.
With the potential of gaining millions of new insurance customers from the restaurant industry alone, UnitedHealthcare is quite willing to craft the inexpensive products that the restaurant industry is seeking in response to the requirements imposed by PPACA. But discount cards? That’s not even insurance! The other “lower cost health care alternatives” at best would be underinsurance products that will not protect restaurant employees nor their families who may develop health problems. Junk insurance is what they’re selling!
This is UnitedHealthcare in action after PPACA has become law. It is clear that they have no intent to follow any other path than business as usual. Let’s not go that route, but instead let’s blaze a path to a single payer national health program. Then all restaurant workers (and everyone else) would have the health care that they and their families might need.

Complex eligibility variables create inequities

'Broad' health care tax cut for small business leaves out some companies

By Ricardo Alonso-Zaldivar
Los Angeles Times
May 19, 2010

When the administration unveiled the small business tax credit earlier this week, officials touted its “broad eligibility” for companies with fewer than 25 workers and average annual wages under $50,000 that provide health coverage.

Lost in the fine print: The credit drops off sharply once a company gets above 10 workers and $25,000 average annual wages.

It’s an example of how the early provisions of the health care law can create winners and losers among groups lawmakers intended to help — people with health problems, families with young adult children and small businesses. Because of the law’s complexity, not everyone in a broadly similar situation will benefit.

http://www.latimes.com/business/nationworld/wire/sns-ap-us-health-care-tax-cut-fact-check,0,3521831.story

Comment: 

By Don McCanne, MD

We could have had a health care financing system that automatically included everyone. Instead we enacted a complex, fragmented system with so many eligibility and payment variables for a large variety of plans and programs that it is impossible to fit everyone into a slot. Not only is this the most expensive way to pay for health care, it also ends up being inequitable since individuals with similar circumstances can end up having quite different financial obligations, or even end up with one covered and the other not.

It doesn’t have to be this way. We can still enact a single payer national health program that would cost less and actually work for everyone.

Complex eligibility variables create inequities

‘Broad’ health care tax cut for small business leaves out some companies

By Ricardo Alonso-Zaldivar
Los Angeles Times
May 19, 2010
When the administration unveiled the small business tax credit earlier this week, officials touted its “broad eligibility” for companies with fewer than 25 workers and average annual wages under $50,000 that provide health coverage.
Lost in the fine print: The credit drops off sharply once a company gets above 10 workers and $25,000 average annual wages.
It’s an example of how the early provisions of the health care law can create winners and losers among groups lawmakers intended to help — people with health problems, families with young adult children and small businesses. Because of the law’s complexity, not everyone in a broadly similar situation will benefit.
http://www.latimes.com/business/nationworld/wire/sns-ap-us-health-care-tax-cut-fact-check,0,3521831.story

We could have had a health care financing system that automatically included everyone. Instead we enacted a complex, fragmented system with so many eligibility and payment variables for a large variety of plans and programs that it is impossible to fit everyone into a slot. Not only is this the most expensive way to pay for health care, it also ends up being inequitable since individuals with similar circumstances can end up having quite different financial obligations, or even end up with one covered and the other not.
It doesn’t have to be this way. We can still enact a single payer national health program that would cost less and actually work for everyone.

Non-profit Detroit Medical Center selling out to for-profit Vanguard

Can Health Care Save Detroit?

By Noah Ovshinsky
NPR
May 20, 2010

A few weeks ago, officials with the Detroit Medical Center, the city’s largest health system, made an announcement that was as startling as it was welcome: that they intended to sell the nonprofit to an investor-owned company. As part of the deal, Nashville-based Vanguard Health Systems promised to spend $850 million on much-needed capital improvements.

The Detroit Medical Center, or the DMC as it’s called locally, is the city’s primary safety net, providing more uncompensated care than any other health system in the state. That commitment comes at a cost. While the DMC has turned a profit for six years in a row, officials say the health system’s payer mix makes raising money on Wall Street all but impossible. As a result, the facilities are showing their age.

Without selling hospitals, turning away needy patients or cutting services, experts say they don’t see how Vanguard will get a good return on its investment.

http://www.npr.org/templates/story/story.php?storyId=126283823&ft=1&f=1001

And…

Vanguard, DMC Announce Letter of Intent

Vanguard Health Systems
March 19, 2010

The Detroit Medical Center (DMC) Board of Trustees and Vanguard Health Systems Inc. announced today that they have signed a letter of intent for DMC to become part of the Vanguard system and for Vanguard to invest $850 million in capital improvements to DMC’s eight-hospital system.

Charles N. Martin, chairman and chief executive officer of Vanguard Health Systems, said… “We are very excited about entering the Detroit market and look forward to working with the DMC management team, who has an outstanding record of delivering care and managing financial challenges.”

(Do not rely on any forward-looking statements as such statements are subject to numerous factors, risks and uncertainties that could cause Vanguard’s actual outcomes, results, performance or achievements to be materially different from those projected. These factors, risks and uncertainties include, among others, Vanguard’s ability to negotiate a definitive agreement for the acquisition of the DMC System and to successfully consummate the acquisition and integrate its operations; Vanguard’s high degree of leverage and interest rate risk; Vanguard’s ability to incur substantially more debt; operating and financial restrictions in Vanguard’s debt agreements; Vanguard’s ability to generate cash to service its debt; potential liability related to disclosures of relationships between physicians and Vanguard’s hospitals; Vanguard’s ability to grow its business and successfully implement its business strategies; Vanguard’s ability to successfully integrate any future acquisitions; the potential that acquisitions could be costly, unsuccessful or subject Vanguard to unexpected liabilities; post-payment claims reviews by governmental agencies that could result in additional costs to Vanguard; conflicts of interest that may arise as a result of Vanguard’s control by a small number of stockholders; the highly competitive nature of the healthcare business; governmental regulation of the industry including Medicare and Medicaid reimbursement levels; changes in Federal, state or local regulation affecting the healthcare industry; the possible enactment of Federal or state healthcare reform; pressures to contain costs by managed care organizations and other insurers and Vanguard’s ability to negotiate acceptable terms with these third party payers; the ability to attract and retain qualified management and personnel, including physicians and nurses; claims and legal actions relating to professional liabilities or other matters; the impacts of weakened economic conditions and volatile capital markets on Vanguard’s results of operations, financial position and cash flows; Vanguard’s failure to adequately enhance its facilities with technologically advanced equipment could adversely affect its revenues and market position; Vanguard’s exposure to the increased amounts of and collection risks associated with uninsured accounts and the co-pay and deductible portions of insured accounts; Vanguard’s ability to maintain or increase patient membership and control costs of its managed healthcare plans; the geographic concentration of Vanguard’s operations; the technological and pharmaceutical improvements that increase the cost of providing healthcare services or reduce the demand for such services; the timeliness of reimbursement payments received under government programs; the potential adverse impact of known and unknown government investigations; and those factors, risks and uncertainties detailed in Vanguard’s filings from time to time with the Securities and Exchange Commission, including, among others, Vanguard’s Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q.)

http://www.vanguardhealth.com/news/article113.html

Comment: 

By Don McCanne, M.D.

Non-profit Detroit Medical Center (DMC) is the city’s primary safety net, providing more uncompensated care than any other health system in Michigan. In spite of difficult economic conditions, DMC has been profitable for the past six years. Even Vanguard’s chairman states that the DMC management “has an outstanding record of delivering care and managing financial challenges.” So why is DMC selling to an out-of-state, for-profit hospital chain?

The reason given is that highly-leveraged (i.e., debt laden) Vanguard intends to infuse funds for capital improvements. But why should DMC relinquish its tax-favored status that helps to ensure that retained profits can be moved to the capital budgets, as with other non-profits? With Vanguard ownership, not only will they lose revenue in taxes, they also will have to divert more revenue to servicing Vanguard’s massive debt.

This says nothing about the fundamental business differences between non-profit hospitals with a sole mission to provide patient care and for-profit hospitals with an SEC-mandated mission to enhance investor value.

Nobody reads the fine print of the “forward-looking statements” disclaimers, but they are customized to provide the type of transparency that we clamor for today. If you think that transferring a major non-profit center that is successfully providing much needed safety-net services to a highly-leveraged, for-profit, out-of-state hospital chain is a good deal, then you should read the fine print of the “forward looking statements” above.

Congressman John Conyers’ Medicare for All bill, H.R. 676, calls for conversion of the for-profit, investor-owned components of our health care system into non-profits. It would be sad indeed if this important center in his own home city of Detroit were to undergo the opposite conversion, placing the demands of rich investors ahead of the needs of low-income patients.

Non-profit Detroit Medical Center selling out to for-profit Vanguard

Can Health Care Save Detroit?

By Noah Ovshinsky
NPR
May 20, 2010
A few weeks ago, officials with the Detroit Medical Center, the city’s largest health system, made an announcement that was as startling as it was welcome: that they intended to sell the nonprofit to an investor-owned company. As part of the deal, Nashville-based Vanguard Health Systems promised to spend $850 million on much-needed capital improvements.
The Detroit Medical Center, or the DMC as it’s called locally, is the city’s primary safety net, providing more uncompensated care than any other health system in the state. That commitment comes at a cost. While the DMC has turned a profit for six years in a row, officials say the health system’s payer mix makes raising money on Wall Street all but impossible. As a result, the facilities are showing their age.
Without selling hospitals, turning away needy patients or cutting services, experts say they don’t see how Vanguard will get a good return on its investment.
http://www.npr.org/templates/story/story.php?storyId=126283823&ft=1&f=1001

And…

Vanguard, DMC Announce Letter of Intent

Vanguard Health Systems
March 19, 2010
The Detroit Medical Center (DMC) Board of Trustees and Vanguard Health Systems Inc. announced today that they have signed a letter of intent for DMC to become part of the Vanguard system and for Vanguard to invest $850 million in capital improvements to DMC’s eight-hospital system.
Charles N. Martin, chairman and chief executive officer of Vanguard Health Systems, said… “We are very excited about entering the Detroit market and look forward to working with the DMC management team, who has an outstanding record of delivering care and managing financial challenges.”
(Do not rely on any forward-looking statements as such statements are subject to numerous factors, risks and uncertainties that could cause Vanguard’s actual outcomes, results, performance or achievements to be materially different from those projected. These factors, risks and uncertainties include, among others, Vanguard’s ability to negotiate a definitive agreement for the acquisition of the DMC System and to successfully consummate the acquisition and integrate its operations; Vanguard’s high degree of leverage and interest rate risk; Vanguard’s ability to incur substantially more debt; operating and financial restrictions in Vanguard’s debt agreements; Vanguard’s ability to generate cash to service its debt; potential liability related to disclosures of relationships between physicians and Vanguard’s hospitals; Vanguard’s ability to grow its business and successfully implement its business strategies; Vanguard’s ability to successfully integrate any future acquisitions; the potential that acquisitions could be costly, unsuccessful or subject Vanguard to unexpected liabilities; post-payment claims reviews by governmental agencies that could result in additional costs to Vanguard; conflicts of interest that may arise as a result of Vanguard’s control by a small number of stockholders; the highly competitive nature of the healthcare business; governmental regulation of the industry including Medicare and Medicaid reimbursement levels; changes in Federal, state or local regulation affecting the healthcare industry; the possible enactment of Federal or state healthcare reform; pressures to contain costs by managed care organizations and other insurers and Vanguard’s ability to negotiate acceptable terms with these third party payers; the ability to attract and retain qualified management and personnel, including physicians and nurses; claims and legal actions relating to professional liabilities or other matters; the impacts of weakened economic conditions and volatile capital markets on Vanguard’s results of operations, financial position and cash flows; Vanguard’s failure to adequately enhance its facilities with technologically advanced equipment could adversely affect its revenues and market position; Vanguard’s exposure to the increased amounts of and collection risks associated with uninsured accounts and the co-pay and deductible portions of insured accounts; Vanguard’s ability to maintain or increase patient membership and control costs of its managed healthcare plans; the geographic concentration of Vanguard’s operations; the technological and pharmaceutical improvements that increase the cost of providing healthcare services or reduce the demand for such services; the timeliness of reimbursement payments received under government programs; the potential adverse impact of known and unknown government investigations; and those factors, risks and uncertainties detailed in Vanguard’s filings from time to time with the Securities and Exchange Commission, including, among others, Vanguard’s Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q.)
http://www.vanguardhealth.com/news/article113.html

Non-profit Detroit Medical Center (DMC) is the city’s primary safety net, providing more uncompensated care than any other health system in Michigan. In spite of difficult economic conditions, DMC has been profitable for the past six years. Even Vanguard’s chairman states that the DMC management “has an outstanding record of delivering care and managing financial challenges.” So why is DMC selling to an out-of-state, for-profit hospital chain?
The reason given is that highly-leveraged (i.e., debt laden) Vanguard intends to infuse funds for capital improvements. But why should DMC relinquish its tax-favored status that helps to ensure that retained profits can be moved to the capital budgets, as with other non-profits? With Vanguard ownership, not only will they lose revenue in taxes, they also will have to divert more revenue to servicing Vanguard’s massive debt.
This says nothing about the fundamental business differences between non-profit hospitals with a sole mission to provide patient care and for-profit hospitals with an SEC-mandated mission to enhance investor value.
Nobody reads the fine print of the “forward-looking statements” disclaimers, but they are customized to provide the type of transparency that we clamor for today. If you think that transferring a major non-profit center that is successfully providing much needed safety-net services to a highly-leveraged, for-profit, out-of-state hospital chain is a good deal, then you should read the fine print of the “forward looking statements” above.
Congressman John Conyers’ Medicare for All bill, H.R. 676, calls for conversion of the for-profit, investor-owned components of our health care system into non-profits. It would be sad indeed if this important center in his own home city of Detroit were to undergo the opposite conversion, placing the demands of rich investors ahead of the needs of low-income patients.