Axios Vitals

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May 21, 2019

Situational awareness: Senate Majority Leader Mitch McConnell officially introduced his bill yesterday, cosponsored by Sen. Tim Kaine, to raise the federal tobacco purchasing age to 21.

1 big thing: Hospitals are swimming in cash

A syringe in an arrow pointing to the upper-right corner of a chart.
Illustration: Rebecca Zisser/Axios

The number of hospital admissions, surgeries and other medical procedures has continued to stay flat in many parts of the country. But that hasn't prevented hospitals from retaining large sums of money and hiring more people, Axios' Bob Herman reports.

The big picture: America's rural hospitals are dying. But large not-for-profit hospital systems in cities and suburbs are doing extremely well as premiums rise and as patients struggle to afford their medical bills.

Details: Axios analyzed the financial statements of 31 prominent not-for-profit hospital systems for the first 3 months of 2019.

  • This sample collectively generated $68.5 billion of revenue in the first quarter of this year. That's $274 billion annualized, or more than one-fifth of all hospital spending.
  • The combined operating margin was 5.1%, compared with 4.5% in the first quarter of 2018.
  • The combined net margin (after factoring in investment income) was 16.4%, a large jump from 5.5% in 2018.
  • These margins are on par with some pharmaceutical and medical device companies, and well above the margins for insurers and drug distributors.

Between the lines: Hospitals are feasting on bigger investment returns, boosted by the stock market's run, but they also are profiting more from commercial and public health insurer payments.

The intrigue: Not-for-profit hospitals don't pay taxes and don't have "shareholders" like publicly traded companies, so they are required to reinvest any surplus cash into their communities.

Go deeper: Hospitals are making a fortune on Wall Street

2. Google AI successfully IDs lung cancer

A Google artificial intelligence system was better than 6 radiologists at identifying whether patients had lung cancer, according to a new Nature Medicine study reported on by Stat News.

  • When looking at a single CT scan, the algorithm detected 5% more cancers than the humans and reduced false positives by 11%. When prior images of patients were included in the evaluation, the algorithm performed the same as the radiologists.

Why it matters: Screening high-risk patients for lung cancer reduces the risk of death, but false positives can lead to unnecessary and potentially harmful surgeries.

  • About half of lung cancers are diagnosed after they have already spread.
  • "These people have a technology that will improve the precision of screening tremendously," Otis Brawley, an oncology professor at Johns Hopkins University, told Stat.

What next? The system will now be subject to further testing. Google acknowledged this, and said that it's already working with clinical partners and has had pre-submission discussions with the FDA.

3. New therapies' price tags threaten access

Gene therapies and other new treatments that have the potential to cure debilitating diseases could also end up widening the gap between the rich and the poor, former FDA commissioner Scott Gottlieb writes for CNBC.

  • That's because the expected price tag for some of these new medicines are expected to be in the millions. Insurers — which are used to pay for treatment over time — are struggling to figure out how to pay this kind of sum all at once.
  • The problem is especially acute within Medicaid, which is constrained by state budgets.

One solution is to mimic Louisiana's "Netflix model" for hepatitis C treatment, in which the state pays the drugmaker a fixed annual fee for an unlimited amount of hepatitis C medication for 5 years.

  • This kind of model, Gottlieb writes, is a win-win: Drugmakers can offer states better pricing because of the multiyear commitment, while states get to smooth out the cost of making the treatment available to a whole population.
  • "We need to make sure that access to a curative drug doesn't become a yardstick by which poverty is eventually measured," he writes.

4. Opioid addiction is drastically undertreated

A heroin addict passed out in a park in New York City.
A homeless person with heroin use disorder passd out in a park in New York City. Photo: Spencer Platt/Getty Images

Of the 2.1 million people who reported using heroin or abusing painkillers in 2017, only 680,000 sought treatment at reporting treatment facilities, according to a new USAFacts report.

  • That translates to only about 32% receiving treatment.

Details: Among those who said they needed treatment but did not receive it, cost was the most common reason.

  • In the 2017 National Survey on Drug Use and Health, 41% of respondents said they didn't have health insurance, their insurance didn't cover addiction treatment, or their cost-sharing was unaffordable even if they had coverage.

The bottom line: America's opioid problem is going to remain out of control until treatment becomes more available, and we make more of an effort to connect people with it.

5. Another health care election

Health care is already emerging as a dominant 2020 issue, crossing lines of age, party and gender, my colleague Steve LeVine reports.

  • A new poll by RealClear Opinion Research finds that 45% of Democrats, 30% of Republicans and 31% of independents ranked health care their No. 1 issue from a list of six that were shown. For Republicans, 29% said the economy was their No. 1 issue and 28% said immigration.
  • 62% said health care is their No. 1 or No. 2 most-important issue.

For all generations, the No. 1 and No. 2 issues combined are making sure that all Americans have access to health care and lowering its price, according to the poll.

  • For millennials and Generation Z: 58% ranked them the top 2 issues.
  • Gen X: 60%
  • Boomer/Silent: 67%.

Between the lines: 18 months before the presidential election, the finding suggests potential peril for President Trump should he be seen as insensitive on the issue, said John Della Volpe, RealClear Opinion Research's polling director.