Aug 30, 2018

Axios Vitals

By Caitlin Owens
Caitlin Owens

Good morning. I received some great news yesterday: Dairy products like cheese and yogurt have recently been found to protect against death from any cause. Turns out that I've been making some very good health decisions.

1 big thing: Hospital prices are all over the board
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Data: Centers for Medicare & Medicaid Services; Chart: Chris Canipe/Axios

More than 9 out of 10 hospitals charge at least $30,000 for joint replacement surgery — one of the most common inpatient procedures — and 1 out of 6 hospitals charges $90,000 or more, according to an Axios analysis of 2016 federal health care data. 

The bottom line: Hospitals set prices for any test or procedure at whatever level they want. While those prices often aren't what patients pay, they still help dictate what society at large pays for health care, my colleague Bob Herman reports.

The other side: Hospitals have argued that charges are misleading because private and public health insurers don't pay those amounts, which is true.

Yes, but: List prices still matter a lot. They often are starting points, with no relation to cost, that are used in negotiations with private insurers. They also are the baseline for uninsured patients and people who have to deal with out-of-network bills — like this week's infamous case of a teacher in Texas.

What we found: Good luck finding a standard price for a hip or knee replacement.

  • For-profit companies own (or used to own in 2016) 9 out of the 10 hospitals with the highest list prices for joint replacement surgeries. 
  • Each of those 10 hospitals charged at least $200,000 for the procedure.
  • Medicare pays less than $13,000 on average for a joint replacement. 
  • Many hospitals also heavily increased prices from 2015 to 2016 — including two hospitals that hiked joint replacement charges by more than 70%.
  • More than 400 hospitals raised prices by at least 10% in 2016.

Go deeper: Read the rest of Bob’s piece.

2. A promising opioid alternative in the works

A team of scientists may have developed a new opioid alternative that kills pain while muting the addictive components, according to a new study of animal models in Science Translational Medicine published yesterday.

Why it matters: From 1999 to 2016, more than 200,000 Americans died from overdoses related to prescription opioids, my colleague Eileen Drage O'Reilly reports. Yet, these drugs remain the most effective options for treating many cases of acute or chronic pain.

  • Several of the authors who are claiming success are employees of Astraea Therapeutics, which is developing the potential drug.
  • Read the whole thing to understand how the science of the new compound works.

Meanwhile, the Food and Drug Administration announced yesterday that it's replacing 2014 guidance on developing new pain drugs with a more efficient, focused approach.

  • Commissioner Scott Gottlieb told the Washington Post that the 2014 guidance is overly broad and that the new agency guidance should lead to smaller clinical trials, faster approvals and quicker launches of new therapies.
3. California Assembly passes dialysis bill

The California Assembly late Wednesday passed dialysis legislation SB 1156 by a 44-19 tally after it originally didn't have the votes. California's Senate still has to vote it through again, but it's "pretty much pro forma at this point" and will head to Gov. Jerry Brown's desk, a lobbyist familiar with the bill tells Bob.

The bottom line: This is a giant win for the SEIU, health insurers and employers and a huge blow to dialysis companies and the American Kidney Fund; the bill would cap payments at lower Medicare rates for providers that have financial ties to charities that subsidize patients' commercial insurance.

  • Yes, but: Brown has until Sept. 30 to ignore the bill, sign it into law, or veto it. And the governor's office has not tipped its hand about what it will do, so there will be a fierce lobbying blitz from dialysis companies to get this killed.

Looking ahead: The stock prices of the major dialysis chains — DaVita, Fresenius and American Renal Associates — will almost certainly trade lower today.

4. CMS takes another baby step on drug prices

The Centers for Medicare and Medicaid Services announced yesterday that insurers participating in Medicare Part D will have more flexibility in creating their drug formularies.

The details:

  • Currently, plans that offer a particular drug on their formulary have to cover every approved use — or indication — of that drug.
  • Beginning in 2020, plans will be allowed to exclude coverage of one of a drug's uses in favor of a competitor.
  • This "indication-based formulary design" is common in the private sector.

What they're saying: "It enables pharmacy benefit managers to negotiate more aggressively with pharmaceutical companies — specifically in cases where competition can be leveraged by indication," says Dan Mendelson of Avalere.

  • "The goal is ultimately to reduce aggregate cost, and the specific prices of drugs for the consumer."
  • "The downside — which must be managed very carefully — is patient access.  If approval processes become burdensome and complex, patients can have trouble getting the drugs they need," he adds.

Our thought bubble, per Bob: It's another measure that nibbles along the fringes of drug prices, and gives more flexibility to the pharmacy benefit managers that run Part D.

5. So many mergers = prices on the rise

Were you hoping for some relief from rising health care prices? That’s adorable, Axios' David Nather reports.

According to PwC’s Health Research Institute, what we can actually expect is more cost increases for medical services — thanks to what it calls “provider megamergers.”

What PwC found:

  • In a report yesterday, the research group says it expects 93% of metropolitan hospital markets to be “highly concentrated” by 2019 — leading to short-term increases in medical prices.
  • That’s partly because they’ll have more bargaining power with insurers, and partly because the provider that buys out the other one may have higher reimbursement rates.
  • In the long run, “economies of scale and efficiencies may be achieved.”
  • The overall medical cost increase trend should be 6% in 2019.

Between the lines: It’s a good reminder that competition in the health care markets could help restrain prices — if we were headed in that direction. But we’re not.

Caitlin Owens

Some readers kindly reminded Bob yesterday that Virginia expanded Medicaid, which goes into effect next year. It'll be worth seeing if that has any effect on the national uninsured rate.

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