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Monday, December 2, 2019

3 different communities, many reasons why Medicare payments are higher

How much the Medicare program pays hospitals for their services varies widely, driven by a host of factors.
Academic medical centers receive much higher payments because they provide graduate medical education. Safety-net hospitals receive higher payments for treating indigent patients. Patients’ acuity, the area wage index, outlier payments and patient migration patterns also play a role.
Modern Healthcare identified three Census Bureau statistical areas of interest based on Medicare data that indicate they receive some of the highest payments in the Eastern U.S.: Baltimore, Burlington, Vt., and Charlottesville, Va. They’re decidedly different communities treating very different patient populations with different socio-economic factors to consider, underscoring the reasons for their higher-than-usual Medicare rates.
Baltimore’s place on the list is likely explained by the fact that Maryland hospitals operate under a unique, global budgeting system in which the rates they receive from all payers are established by a state commission. Unlike in other states, Medicare payments to Maryland hospitals are more on par with those of commercial insurers.
Burlington and Charlottesville are similar to each other in that large academic medical centers dominate their inpatient care and draw patients from expansive rural areas that surround the cities. Medicare pays teaching hospitals more to cover expenses related to staffing residents and interns.
“The academic impact on rates from a Medicare perspective is pretty significant and likely one of the drivers pushing Vermont and Charlottesville to the top of the list,” said Jeff Leiback, a director with Navigant.
Baltimore-Columbia-
Towson, Md.

REIMBURSEMENT PER MEDICARE DAY: $3,266
POPULATION: 2.8 million
MEDIAN AGE: 38.5
MEDIAN HOUSEHOLD INCOME: $80,469
BELOW POVERTY LINE: 10.1% 
Sources: U.S. Census Bureau, 2018 core-based statistical area data; Modern Healthcare Metrics
It shouldn’t come as a surprise that any city in Maryland shows up as an outlier when it comes to Medicare payments to hospitals. Hospitals there have operated outside the typical payment paradigm for decades.
Maryland hospitals participate in an aggressive global budgeting system in which their total revenue is fixed, a model that’s been shown to lower volumes and mortality rates, said Bob Atlas, CEO of the Maryland Hospital Association.
In exchange for shouldering the risk of fixed revenue, Medicare and Medicaid reimburse Maryland hospitals at higher rates than in other states. As of this year, those programs pay just 7.7% less than commercial payers—a much smaller differential than in other states, Atlas said.
“That’s the bargain that’s been struck: Hospitals can get more per-unit revenue from Medicare and Medicaid in return for taking on substantial risk,” Atlas said. “We’re seen as a model for the nation.”
Like in other states, the rates Medicare pays are adjusted based on a number of factors, perhaps the biggest one being extra money for training interns and residents. Baltimore has two prominent academic medical centers: Johns Hopkins Health System and the University of Maryland Medical System.
Johns Hopkins has a large teaching program with upward of 800 interns and residents, and the cost of that is embedded into its Medicare base rates, said Ed Beranek, Johns Hopkins’ vice president of revenue management and reimbursement.
“So essentially all payers or all patients coming to our hospital have a portion built into their charges that helps pay for the teaching of those interns and residents,” he said.
In states other than Maryland, Medicare is the only entity that reimburses for graduate medical education. In Maryland, commercial payers and Medicaid contribute their fair share of that cost, Beranek said.
The University of Maryland’s and Johns Hopkins’ hospitals also tend to draw higher-acuity patients with more complex conditions, which also drives up the cost.
The University of Maryland Medical Center has a shock-trauma subhospital that treats people with serious injuries, Atlas said, and also has a helipad on its roof.
“So you get the idea of the level of capability that’s present there,” Atlas said.
Roughly 20% of Johns Hopkins’ patients come from outside of Maryland, Beranek said. That includes domestic and international patients, who often come specifically for specialty programs in pediatrics or organ transplantation, he said.
“They drive a very high case mix index and bring a high level of cost with them,” Beranek said.
Baltimore’s high socio-economic risk factors are another driver of hospitals’ higher per-patient Medicare revenue. About one-third of Baltimore households earn less than $25,000, according to a 2017 community health assessment performed by the city of Baltimore. The report also noted a high concentration of vacant buildings in certain areas, as well as lead paint exposure—conditions that have been connected to poor health outcomes. About one-quarter of the city’s residents lived in food deserts in 2015, the report found.
Tradition of price-setting
Maryland’s all-payer rate-setting system for hospitals has been in place in various forms for about 40 years, and the program has grown increasingly ambitious. A state commission sets the prices that commercial health insurers and government programs pay hospitals for services. Beginning in 2019, hospitals entered a new agreement where they will take on partial risk for the total cost of care for all Medicare fee-for-service beneficiaries statewide.
In other states, hospitals often raise their rates on commercial payers and self-pay patients to make up for lower government reimbursement. That doesn’t happen in Maryland, Beranek said.
Maryland’s system makes it so that independent hospitals can thrive, too. In Boston, Partners HealthCare gets higher rates from commercial payers than community hospitals because of its strong market power, said Dr. John Chessare, CEO of the Greater Baltimore Medical Center. In Maryland, by comparison, market share doesn’t matter as much because hospitals don’t negotiate prices with payers.
“In other states, if you’re a single hospital or a safety-net provider, you don’t have any clout with the payers,” Chessare said. “In Maryland, Greater Baltimore Medical Center is a single-hospital true system of care through the eyes of the patient. We don’t have to negotiate rates. The rate commission tells Blue Cross and Cigna and Aetna what to pay us.”
He added that the rate-setting system also contributes to Maryland hospitals’ generally strong financial positions and balance sheets. Indeed, most of the few dozen hospitals in the Baltimore area have posted strong operating results in recent years.
Modern Healthcare Metrics data show both Anne Arundel Medical Center in Annapolis and MedStar Harbor Hospital in Baltimore reported about 8% operating margins in 2018. Nationally, not-for-profit hospitals’ median operating margins were 1.7% in 2018, according to Moody’s Investors Service. Another MedStar hospital, Good Samaritan Hospital in Baltimore, posted a 6.2% operating margin in 2018.
But Atlas and others say it’s also working well for patients. Readmissions in the state dropped nearly 22% from 2013 to 2017, compared with 5.7% nationwide in that time, according to the hospital association. The percentage of Maryland Medicare beneficiaries who died within 30 days of admission dropped 12.2% from 2013 to 2017, compared with a drop of 6.4% nationwide, the report found.
Maryland had the nation’s second-lowest healthcare spending in the country in 2017, according to a Health Care Cost Institute analysis based on 40 million insurance claims. “What might look like high Medicare costs per discharge ought to be considered in light of the fact that we have much lower hospital costs for private payers and the people they insure,” Atlas said.
Charlottesville, Va., metro area
REIMBURSEMENT PER MEDICARE DAY: $3,512
POPULATION: 232,000
MEDIAN AGE: 38.4 
MEDIAN HOUSEHOLD INCOME: $71,052
BELOW POVERTY LINE: 13.9%
Sources: U.S. Census Bureau, 2018 core-based statistical area data; Modern Healthcare Metrics
Albemarle County, Va., which includes Charlottesville, is a bustling, growing region of about 109,000 people. But neighboring Nelson County has just 15,000 residents. Buckingham County to the south has a mere 17,000 residents, and Greene County to the north has about 20,000.
“You can quickly, within a few minutes, drive out and are in sparsely populated areas,” said Dr. Denise Bonds, health director for the Thomas Jefferson Health District, a unit of the Virginia Health Department that serves five counties, including Albemarle.
The Charlottesville area’s position as a population center in the middle of a rural region is one reason its Medicare payment rates are higher than in other areas.
The census area includes just two hospitals, both in Charlottesville: the University of Virginia Medical Center, a prominent academic medical center with $1.6 billion in revenue in 2018, and Sentara Martha Jefferson Hospital, a relatively small hospital with about $314 million in revenue in 2018. Sentara Martha Jefferson accounts for one-quarter of the area’s total Medicare inpatient days, and just 14% of the total revenue, Sentara Healthcare spokeswoman Kelsea Smith wrote in an email.
UVA’s higher Medicare payments are in part because it’s the only safety-net hospital in a large area, said Doug Lischke, chief financial officer for UVA Health. Its payer mix is more than 60% government programs. “We accept all regardless of ability to pay,” he said. “So, as you can imagine, we receive a lot of transfers from hospitals that don’t accept all.”
UVA also draws a number of more complex, high-acuity patients from western and southwestern Virginia and beyond who come for specialized care, another factor that drives up costs. The hospital is a Level 1 trauma center and has extensive organ transplant and stem cell transplant programs.
“We see the sickest of the sick,” Lischke said.
And, of course, UVA is a teaching hospital with more than 800 residents and fellows. Medicare pays higher rates to support graduate medical education.
In recent years, Charlottesville has become a popular retirement destination. From 2013 to 2017, the number of people between the ages of 70 and 79 grew by 46% within the Thomas Jefferson Health District, faster than any other age group. By comparison, the number of 20- to 29-year-olds grew by just 4.5% in that time.
Elderly patients tend to be more complex cases. UVA is working to adapt to caring for an aging population by upping its focus on hips and knees, as well as cancer care, he said. It’s a delicate balance between focusing on providing those services and ensuring UVA is still meeting the unique pediatric needs of its children’s hospital, Lischke said.
The growing Medicare population also poses a challenge for UVA because Medicare payments don’t cover the cost of delivering care, which forces UVA to make it up elsewhere, Lischke said.
“It strains our operating margins, which then puts a strain on investing in our research and our education back into programs to grow the community care that we’re trying to provide,” he said.
Like other areas, Charlottesville is also dealing with a number of social factors that are negatively affecting people’s health. The urban area keeps growing and affordable housing is becoming increasingly strained, Bonds said. There’s also a severe shortage of mental health providers who treat low-income patients, especially in the rural areas, she said.
Access to transportation is another big issue.
“The issues this community is grappling with are more the social determinants of health,” Bonds said.
Burlington-South Burlington, Vt.
REIMBURSEMENT PER MEDICARE DAY: $2,440
POPULATION: 221,000
MEDIAN AGE: 37.7
MEDIAN HOUSEHOLD INCOME: $71,452
BELOW POVERTY LINE: 12%
Sources: U.S. Census Bureau, 2018 core-based statistical area data; Modern Healthcare Metrics
Burlington, Vt., is effectively a one-hospital town.
The University of Vermont Medical Center is a massive, 450-bed operation that drew $1.4 billion in revenue in 2018 and posted a healthy 4% operating margin.
The census area that includes Burlington has one other hospital, Northwestern Medical Center, a small facility that collected $111 million in operating revenue in 2018. It’s located in St. Albans, about 30 miles north of Burlington. Jonathan Billings, the hospital’s vice president of community relations, said Burlington is served almost exclusively by UVM.
“Our folks are up here in the Northwest corner, in the rural area, and we wouldn’t go that far south into Burlington,” he said.
UVM’s status as a teaching hospital is the biggest factor driving up its Medicare payments, said Lynne Winter, the hospital’s manager of reimbursement. The additional money helps compensate for the time spent teaching residents and for additional tests residents might run because they’re learning, she said.
“We need to teach our future doctors,” she said, “so it’s an aspect of the cost structure that people have recognized as being a community good.”
UVM also gets a lot of patient referrals from outside the area, which in turn drives up the hospital’s case mix, Winter said. The hospital runs transplant and dialysis programs, which drives up the acuity of the patients it sees.
Winter said the hospital also receives Medicare disproportionate-share hospital payments for treating low-income residents. Those patients often delay care until conditions become more severe, she said.
“You have people that fall through the cracks and don’t get insurance and have been delaying getting care,” Winter said.
UVM is also seeing its patient population get relatively older. From fiscal 2016 to fiscal 2018, the number of patients age 65 and older grew nearly 8% to about 61,000, according to a UVM presentation from August. At the same time, patients ages 19 to 25 dropped 5.3% to about 21,000. The proportion of patients covered under Medicare grew 5.7% in that time, while commercially insured patients remained flat.
The health system also noted that the age and complexity of its patients are growing. Other pressing issues include low unemployment and increasing wage inflation, increasing pharmaceutical costs, commercial rate increases that don’t cover the cost of inflation and a lack of mental health services.
Mental health was the No. 1 priority area identified in UVM’s 2019 community health needs assessment. Community members interviewed for the study cited funding gaps, availability of services and provider burnout as the biggest barriers to mental health delivery in the area.

States prepare Rx importation plans after Trump assurances

State officials are moving forward with prescription drug importation programs on President Donald Trump’s repeated assurances that he wants to allow states to import drugs from Canada, though HHS has not approved any such program. Vermont on Tuesday will become the second state to submit an importation plan to HHS behind Florida.
Facilitating drug imports is one of Trump’s favorite healthcare talking points and he reiterated his support for approving state plans on Friday. Republican Florida Gov. Ron DeSantis and Trump talked about drug imports on a phone call the day before.
HHS Secretary Alex Azar “and I will soon release a plan to let Florida and other States import prescription drugs that are MUCH CHEAPER than what we have now! Hard-working Americans don’t deserve to pay such high prices for the drugs they need. We are fighting DAILY to make sure this HAPPENS…” Trump tweeted.
Colorado, Florida, Maine and Vermont have passed laws creating Canadian importation programs.
Vermont’s plan differs in a few key ways from Florida’s. Vermont’s plan would apply to consumers in the commercial market instead of just those served by public payers. Plans would be required to pass any cost savings to consumers by lowering premiums, deductibles and co-pays for prescription drugs.
But Trump talks the most about approving Florida’s plan, which the state submitted to HHS in August. Joe Grogan, chief of the White House Domestic Policy Council , on Nov. 8 singled out Florida and Colorado by name as partners on importation programs. HHS has legal authority to approve the programs if the department certifies the move would not pose additional safety risks and would significantly reduce costs for American consumers.
Florida is important for the presidential electoral map and Sen. Cory Gardner (R-Colo.) is one of the GOP’s most vulnerable Senate incumbents up for re-election in 2020.
Despite not having approval from HHS, DeSantis on Nov. 18 asked state lawmakers to allocate $20 million to the state’s nonexistent importation program. DeSantis told reporters that pharmaceutical lobbying was responsible for the delay.
“I wish I could say that this will happen tomorrow, but I just know how Washington works and I know specifically when you get into something that is dealing with probably the most powerful industry in Washington—certainly one of the top two or three—it just is never easy,” DeSantis said, CBS Miami reported.
The Trump administration’s drug importation plan has two pathways: One would allow states to import drugs from Canada, and another would allow drugmakers to import their own products and sell them under different drug codes.
Several groups with ties to the pharmaceutical industry have met or are scheduled to meet with officials from the White House Office of Management and Budget on pending Food and Drug Administration guidance that would implement the latter pathway.
Pharmaceutical Research and Manufacturers of America, the brand-drug industry lobby, met with White House budget officials Nov. 4.
“We requested the meeting to discuss issues pertaining to the guidance under review implementing pathway 2 of HHS’s Safe Importation Action Plan. I’m not going to get into the specifics of the meeting or those in attendance,” PhRMA spokesperson Nicole Longo said.
The Pharmaceutical Distribution Security Alliance, a group that represents industry stakeholders, including drugmakers, distributors and pharmacies, is set to meet with OMB about the guidance on Tuesday. The Partnership for Safe Medicines, a not-for-profit with deep ties to PhRMA, is scheduled to meet with OMB officials Jan. 7.
However, OMB has not held any publicly disclosed meetings on a proposed rule that is expected to outline the approval process for importing drugs from Canada. The regulatory agenda released last week indicated the administration expects to release the proposed rule on drug imports in January.
A source familiar with the policy said that the administration may not have to wait for rules to be finalized to begin approving state import programs. The rulemaking process could take years and would likely extend until after the 2020 election.
Maine initiated a formal plan for its importation program on Nov. 15 and HHS Commissioner Jeanne Lambrew said Maine does not want to wait for federal rulemaking to develop a plan and submit it for approval, the Bangor Daily News reported.
Colorado officials plan to deliver the state’s importation proposal by Jan. 15.
Other states are also looking to create their own importation programs in the next legislative session.
Lawmakers in the Michigan state House and Senate have introduced bills that would create a Canadian-drug importation program for the state’s 2020 legislative session. Democrats in New Hampshire included importation in a legislative package several state senators filed on drug pricing, and Connecticut state lawmakers from both parties have expressed interest in reviving importation legislation that stalled in 2019.
Dan Feltes, the New Hampshire Senate majority leader and a Democratic gubernatorial candidate in 2020, introduced a bill that would allow the state to import Canadian drugs that is based on Vermont’s legislation. Feltes said he is hopeful for federal prospects on drug importation whether Trump wins or a Democratic challenger prevails. All of the leading Democratic presidential candidates have expressed support for drug importation and it has been a priority for Trump, though Feltes said he generally does not place much confidence in the president’s statements.
“I’m hopeful this may be one of his commitments (Trump) would follow through on, or that a new president actually moves forward on that,” Feltes said.
Trish Riley, executive director of the National Academy of State Health Policy, said many additional states are interested in importation, but are waiting to see how the four current test cases play out. The academy is helping states develop drug importation proposals and tracking drug-pricing legislation across the country.
“They don’t know what to expect. Everybody is waiting to see what happens,” Riley said.

Morphosys CFO says tafasitamab drug sales potential above $1 billion

German biotech company Morphosys’ tafasitamab, the group’s most advanced drug which is currently being tested, has sales potential of significantly more than $1 billion a year, its finance chief said in remarks to a magazine.
“Analysts estimate sales at between half a billion to $1 billion per year. If further indications are added, for example additional forms of leukaemia, they might be significantly higher than that,” Jens Holstein told Germany’s Euro am Sonntag.
Earlier this month, a data monitoring committee recommended an increase in the number of patients to 450 from currently 330 in the ongoing “B-MIND” trial, which tests tafasitamab against relapsed or refractory diffuse large B cell lymphoma.
Holstein said he expected tafasitamab to be approved by mid-2020 in the United States, adding it could take one more year in Europe.

‘Prediabetes’ common in U.S. teens, young adults

About one in five teens and one in four young adults in the U.S. have slightly elevated blood sugar, sometimes known as “prediabetes,” that can lead to full-blown diabetes, a study suggests.
For the study, researchers examined data on blood sugar levels for 5,786 people ages 12 to 34 who hadn’t been diagnosed with diabetes. Overall, 18% of the younger people in the study, ranging in age from 12 to 18 years old, had “prediabetes,” as did 24% of the adults 19 to 34 years old.
“Prediabetes is highly prevalent in U.S. adolescents and young adults, especially in male individuals and in people with obesity,” lead study author Linda Andes of the U.S. Centers for Disease Control and Prevention in Atlanta and colleagues write in JAMA Pediatrics.
These teens and young adults with prediabetes are at increased risk not only for developing type 2 diabetes – the common form of the disease associated with obesity and aging – but also cardiovascular problems that can lead to heart attacks and strokes, the study team writes.
“These findings together with the observed increase in the prevalence of type 2 diabetes in U.S. adolescents and in diabetes-related complications in young adults highlight the need for … prevention efforts tailored to the young segment of the U.S. population,” the study team notes.
Average blood sugar levels over the course of about three months can be estimated by measuring a form of hemoglobin that binds to glucose in blood, known as A1c. Hemoglobin A1c levels of 6.5% or above signal diabetes.
Levels between 5.7% and 6.4% are considered elevated, though not yet diabetic, while 5.7% or less is considered normal.
Overall, 5.3% of teens and 8% of young adults in the study had levels in this “prediabetic” range, the study found.

To get a more complete picture of how many young people might be at risk for developing full-blown diabetes, researchers also looked at other things including so-called insulin resistance, or the body’s failure to respond normally to the hormone insulin. Diabetes can develop when the body can’t properly use insulin to convert blood sugar into energy.
They also looked at what’s known as impaired fasting glucose, when blood sugar levels are above a normal range but not quite high enough to formally diagnose diabetes.
Both teens and young adults in the study who appeared to have prediabetes had higher cholesterol and blood pressure and more fat stored around their midsections than individuals without prediabetes.
Among teens in the study, about 23% of males had prediabetes, compared with 13% of females. Differences persisted among young adults: 29% of males and 19% of females had prediabetes.
And, less than 16% of white teens had prediabetes, compared with more than 22% of black and Hispanic adolescents. This difference also carried through to early adulthood: about 21% of white people had prediabetes compared with 27% of black individuals and 29% of Hispanic young adults.
People with obesity were also most likely to have prediabetes: 26% of teens and 37% of young adults with obesity had this condition.
The study wasn’t a controlled experiment designed to prove whether or how markers of prediabetes might directly lead to diabetes in teens or young adults.

One limitation of the study is that researchers only had data to assess prediabetes at a single point in time, the study authors note.
SOURCE: bit.ly/37YCWKo JAMA Pediatrics, online December 2, 2019.

FDA tags psilocybin drug as clinical depression Breakthrough Therapy

The FDA has tagged psilocybin, the illegal psychoactive compound found in ‘magic mushrooms’, as a potential breakthrough treatment for major depressive disorder.
A US-based non-profit medical research organisation, the Usona Institute, is developing psilocybin to treat major depressive disorder (MDD), and has just launched a phase 2 trial.
The institute said the FDA had granted the Breakthrough Therapy status as part of an organisational commitment to promoting an efficient development programme for psilocybin in MDD.
In October last year the FDA granted COMPASS Pathways’ psilocybin-based drug the same status in treatment-resistant depression – but the indication suggested in this case is broader and would allow for earlier treatment.
The FDA gives the designation to drugs where evidence demonstrates they could be a substantial improvement over available therapies for serious or life-threatening diseases.
Drugs given the designation are hastened through the development process by the FDA, which can grant a faster six-month review if it feels the evidence is still compelling once trials are completed.
The new status follows the recent launch of Usona’s Phase 2 clinical trial, PSIL201, which will include around 80 participants at seven study sites around the US.
Two of the seven study sites are currently recruiting, with the others expected to be active by the first quarter of 2020.
Although there are several existing MDD treatments, Usona said the Breakthrough Therapy Designation recognises that psilocybin may offer a clinically significant improvement over these therapies.
According to Usona, the short-acting drug could impart profound alterations in consciousness and could enable long-term remission of depressive symptoms.
Usona is a non-profit medical research organisation that conducts and supports pre-clinical and clinical research to further the understanding of the therapeutic effects of psilocybin and other consciousness-expanding medicines.
In the UK, the Medical Research Council backed the proof-of-concept study of psilocybin for treatment-resistant depression at Imperial College London in 2015.
Notoriously used as a recreational psychoactive drug, psilocybin is deemed a highly illegal “schedule 1” drug in the US, with a potential for abuse and no currently accepted medical use.

Kamada to distribute six biosimilars in Israel

Kamada Ltd. (KMDA +0.5%) inks an agreement with Alvotech to commercialize the latter’s portfolio of six biosimilars in Israel, once approved. The first product, PF708 (branded as Bonsity), a biosimilar to Eli Lilly’s osteoporosis med Forteo (teriparatide), should be launched in 2022.
Financial terms are not disclosed.

DreamWorks co-founder ups UCLA med school scholarship fund by $46M

David Geffen, co-founder of DreamWorks Pictures, gave the David Geffen School of Medicine at UCLA an additional $46 million to extend full-ride scholarships to 120 more students, the school announced Dec. 2.
The gift ups the scholarship fund in Mr. Geffen’s name to $146 million — a sum that will enable a total of 414 students over a decade to attend UCLA’s medical school on full scholarships. Geffen Scholars receive full tuition and a living stipend through the program, which began with a $100 million gift from Mr. Geffen in 2012.
“The Geffen Scholars program is life-altering for our students and their future patients,” Kelsey Martin, MD, PhD, dean of the Geffen School of Medicine, said in a press release. “Mr. Geffen’s generosity has remarkable ripple effects.”
Since launching the scholarship fund, UCLA has tripled the percentage of students who graduate from its medical school debt-free, from 17 percent to 45 percent. Reduced debt helps students focus on patient care and pursue their specialty of choice, rather than deciding based on future income.
In addition to the $146 million scholarship fund, Mr. Geffen donated $200 million to the medical school in 2002. His gifts to UCLA total more than $450 million.