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Good morning. Thanks to those of you who joined Axios yesterday for our pain management event, and especially to those of you who asked such thoughtful questions during and after.

1 big thing: Health care CEOs made $2.6 billion in 2018

Illustration: Rebecca Zisser/Axios

The CEOs of 177 health care companies collectively made $2.6 billion in 2018 — roughly $700 million more than what the National Institutes of Health spent researching Alzheimer's disease last year, according to a new Axios analysis of financial filings.

Why it matters: The pay packages reveal the health care system's real incentives: finding ways to boost revenue and stock value by raising prices, filling more hospital beds, and selling more drugs and devices, Axios' Bob Herman reports.

By the numbers: The median pay of a health care CEO in 2018 was $7.7 million. Fourteen CEOs made more than $46 million each.

  • The figures were calculated by using actual realized gains of stock options and awards, which are in the annual proxy disclosures companies file with the Securities and Exchange Commission.

The highest-paid health care CEO last year was Regeneron Pharmaceuticals CEO Leonard Schleifer, who made $118 million. A spokesperson said Schleifer "has built Regeneron from a start-up into a leading innovative biopharmaceutical company" and that he "generally holds his option awards until nearly the end of the full 10-year option term."

  • Pharmaceutical CEOs represented 11 of the 25 highest compensation amounts last year.
  • Executives of medical device and equipment companies that don't attract as much attention — such as Intuitive Surgical, Masimo, Hill-Rom and Exact Sciences — also were sitting at the top.

Between the lines: A vast majority of CEO pay comes from exercised and vested shares of stock. Salaries are almost an afterthought.

  • But health care executives routinely earned millions of dollars in cash bonuses, based on factors like revenue goals and financial metrics that experts say can be manipulated.
  • Quality of care is either not a factor at all in CEOs' bonuses at all, or a marginal one.

Go deeper.

2. Trump mulling more price transparency

The Trump administration is considering requiring insurers to disclose their negotiated rates for services, which could affect insurers in the private market, the WSJ scooped yesterday.

  • The White House also wants providers to tell patients the total cost of their care before they get the service, regardless of whether the provider is in the patients' insurance network.
  • The push for greater price disclosure would use existing administrative tools, including Labor Department powers.
  • This follows a proposal floated earlier this year that would require hospitals and doctors to disclose the prices they negotiate with insurers, which sparked industry backlash.

If this happened, it would be a huge change from today's secretive pricing system. But it's unclear how well this transparency would work to bring down prices.

  • "There's a natural gut instinct that price transparency will lead to more competition and lower prices, but that’s not at all clear. Where providers have monopoly power, greater transparency won’t do anything," the Kaiser Family Foundation's Larry Levitt said.
  • But there's also a risk of prices actually increasing. "With greater transparency, there's the distinct possibility that low-priced hospitals will demand higher rates once they find out what their competitors are getting paid," Levitt added.
3. Walmart's newest push for quality care

Photo: Nicholas Kamm/AFP/Getty Images

Axios health care editor Sam Baker is slightly obsessed with Walmart's extremely hands-on approach to its health care benefits, and he flagged this Kaiser Health News story about the latest frontier in that effort: imaging.

Driving the news: Walmart is already sending its employees to a specified set of high-quality health systems for surgery, and even covering their travel costs. But it figured out that about half of those surgeries were unnecessary, KHN reports, and traced those procedures back to errors in tests like MRIs and CT scans.

  • Walmart then hired the health care analytics firm Covera to figure out a network of high-quality imaging centers, and it now directs its beneficiaries to those centers — even if they're not the cheapest.
  • Employees don't have to use those centers, but Walmart pays for more of the bill if they do.

Quality ratings for imaging centers is hard to come by. Unless you work for Walmart and need a scan, it would be pretty difficult to find the highest-quality option in your area.

  • And, KHN notes, most employers are pushing their workers toward the cheapest options, rather than the best.

Our thought bubble, via Sam: Walmart seems to be doing the thing everyone else talks about — trying to save money in the long run by investing in quality up front — with rigorous metrics and research to help define it.

4. The Senate makes its surprise billing move

A bipartisan group of senators will today release the latest proposal to protect patients from surprise hospital bills, only 2 days after the House Energy and Commerce Committee leaders released theirs.

  • Like most other proposals, the bill would protect patients from receiving out-of-network bills in emergencies, or when receiving scheduled care from out-of-network doctors at in-network facilities.
  • The leaders of the committee with jurisdiction over the issue are not sponsoring the bill.

Details: Providers would be paid the difference between a patient's in-network cost-sharing requirements and the median in-network rate for their services.

  • Insurers and providers could appeal that payment formula, and determine the rate using an arbitration process.
  • It also would require the Department of Health and Human Services to study the feasibility of hospitals and doctors submitting only one bill to patients for all of the services included in a single episode of care.

What we're watching: Whether providers view this blended approach as a reasonable compromise, or whether it just makes everyone mad that they didn't get exactly what they wanted.

5. Not so fast, spread pricing

The Centers for Medicare & Medicaid Services put out a guidance document Wednesday that attempts to clarify how "spread pricing" with drugs should be accounted for in state Medicaid programs, Bob writes.

Driving the news: Several states, most notably Ohio, have railed against pharmacy benefit managers for using spread pricing in Medicaid. That's where PBMs charge health insurers more than what they pay pharmacies to dispense drugs, and keep the difference.

  • Federal law requires Medicaid insurers to spend a certain percentage of their premium dollars on medical care.
  • CMS waded through regulatory language and said the law does not allow Medicaid insurers to include the spread pricing profits of their PBM "subcontractors" in their calculations of medical care because it would lead to "artificially inflated totals." 
  • This isn't just talk. The agency will "begin working with states to conduct financial audits" to make sure insurers are in compliance.

The bottom line: Spread pricing has officially attracted federal attention. This puts a giant target on the backs of PBMs that engage in the practice and puts PBMs a little at odds with the insurers that use them.

Go deeper: The data showing drug pricing games

Happy Thursday! Keep sending me tips and feedback.