CEO Power Panel: Despite expected gridlock, divided government may still be boon to hospitals

The Democrats' 40-seat majority sweep of the U.S. House of Representatives brightened hospital prospects for looming money battles with the Trump administration, Congress and Big Pharma.

But by a roughly 60%-to-40% margin, healthcare executives think the expected political gridlock will hinder needed progress in a way that hurts their organizations, according to Modern Healthcare's most recent Power Panel, a survey of 75 healthcare CEOs. A majority see gridlock as a sign of escalating polarization rather than a means to achieve bipartisanship, and less than 20% saw the federal midterm elections leading to a split government as a positive.

“To the extent that a divided Congress can lead to reasonable bipartisan health policy, (the divided government) is positive,” said Dr. Marc Harrison, CEO of Utah's Intermountain Healthcare. “Increased polarization would be negative.”

While the debate over healthcare costs will likely intensify, and likely incoming House Speaker Nancy Pelosi (D-Calif.) has said she wants to do something about them, Democrats, typically cast as hospital allies, almost exclusively focus on drug pricing when they talk about spending and potential reforms. Meanwhile, the GOP majority in the current Congress worked to shine the spotlight on providers with questions on continuing consolidations.

Health system executives told Modern Healthcare they don't think Congress or the administration will be able to accomplish much in the coming realignment on Capitol Hill, but they see pharmaceutical companies as the likely target even with gridlock.

And for the most part, the new makeup of Congress favors providers for their biggest money fights, such as the 340B drug discount program. They also expect money battles on Medicaid and Medicaid expansion, both of whose funding was targeted in the GOP's 2017 failed Obamacare repeal efforts.

The blue wave in the House and subsequent policy impasse may help the hospital interests in the 340B drug discount program.

“I do think with the Democrats winning the House it puts us in a better position to fight off some of these attacks,” said David Entwistle, CEO of Stanford Health Care in California, a system that benefits from tens of millions of dollars in 340B discounts annually.

House GOP lawmakers spooked providers last year when the influential Energy and Commerce Committee launched an oversight investigation into the 340B drug discount program and questioned the expanding involvement and profits of pharmacy benefit managers in the program, as well as its role in consolidation and buy-up of physician practices.

But hospitals say they count on the dollars brought in by drug manufacturer discounts to supplement their care for underinsured or uninsured patients.

And hospital executives view proposed overhauls to the program as more of a threat than other more publicly explosive issues—including changes to Obamacare individual market plans.

They continue to fight the administration's significant cut to 340B hospitals through slashed Medicare reimbursements for Part B drugs.

The American Hospital Association has spearheaded a lawsuit, but so far failed to notch a win in the federal courts.

Should the lawsuits reach an impasse, hospitals would have to turn to Congress for recourse.

This is where gridlock helps them. Democrats are much more likely to protect the status quo regarding the program, although they would need to compromise with the GOP-majority Senate, where reform-minded Sen. Chuck Grassley (R-Iowa) will hold the gavel for the powerful Finance Committee. A majority of hospital leaders in the survey listed changes to the program as something they don't want to see.

Entwistle said it worries him that the future of these policies lie with the courts, where he believes the nuances of the program can get lost.

“340B is a good program,” he said. “It's such a small aspect of the total spend that pharmaceutical companies see, but it makes such a huge impact on organizations.”

The Power Panel CEOs revealed themselves as restless on the status quo of healthcare as did voters for whom the issue proved galvanizing at the polls.

More than 75% of the CEOs said federal healthcare policy is going in the wrong direction even though they had different ideas of where the government should focus.

Ernie Sadau, CEO of Texas-based Christus Health, said the good news of a split Congress is an end to Obamacare repeal efforts and the possibility of working on stabilization bills and funding.

“However, the administration will continue to make changes to how the law is implemented through regulations and executive orders,” he added.

But Dr. Susan Turney of Wisconsin's Marshfield Clinic Health System believes the gridlock will block stabilization efforts.

“If there is gridlock, the positive changes we would like to see are less likely to happen,” she said.

While Turney sees an end to ACA repeal efforts as positive for her organization, she also said a political impasse will keep health policy going the wrong way.

“It's hard to see a great deal of positive momentum with the political divisiveness that is currently gripping our country and the corresponding gridlock that is likely between a Democratic House and a Republican Senate and president,” Turney said.

The consensus sentiment is that if Congress and the White House can work together on any healthcare policy, it will likely be on lowering drug prices.

And that's also what executives most want to see, even more than shoring up the ACA and more deregulation. Nearly 90% of Power Panel respondents said it's their priority for policy action from Washington.

“Pharmaceutical costs are far and away the biggest and most significant issue for us,” said Howard Kern, CEO of Virginia-based Sentara Health. “It's a huge problem on both the provider and payer side.”

On both the state and federal levels, hospitals are keenly interested in Medicaid policy, from reimbursement rates to protection of expansion.

Financially, the industry is increasingly dependent on Medicaid, which now covers 1 in 5 Americans.

For Stanford's Entwistle, the key is that 1 in 3 Californians are on Medicaid, including expansion. So the election ends the possibility that any ACA repeal-and-replace proposal could be enacted and jeopardize the future of expansion, to providers' relief.

Kern—whose state of Virginia is rolling out Medicaid expansion starting in 2019 after exhaustive negotiations between the slender GOP majorities in the Legislature and Democratic Gov. Ralph Northam— said it's essential for the governor, lawmakers of both parties and providers to keep working on Virginia's own version of an expansion program.

Enrollment launches Jan. 1, but the state is still hashing out a work requirements component.

“What we got out of Virginia with expansion is a good example of how the Legislature and the governor were able to work together,” he said, stressing that the bipartisan nature of their compromise on expansion that includes work requirements contrasts with the partisan divide in Congress.

Tangential to their Medicaid concerns, executives want more funding for substance use disorder and behavioral health treatment, even in light of the big opioids package approved recently and its grants and Medicaid tweaks.

Washington's lobbying and advocacy groups had wanted to see more federal money to combat the opioid crisis and representatives of both interests complained that despite loosening of Medicaid funding and additional state grants, Congress needed to drive more systemic change to reverse the epidemic of overdoses and addiction.

With the focus on drugmakers, will hospitals avoid scrutiny of their role in the health system's spiraling costs?

Executives think not, given Trump administration actions they don't like, such as the site-neutral payment policy announced over the summer that is estimated to be a $380 million hit for 2019. Along with the 340B cuts, that policy is top of mind.

“Those two things alone have a significant impact on us,” Entwistle said.

But while half of the CEOs surveyed said they want to see expansion of value-based care efforts, they don't want it to translate into pay cuts.

“High costs in the hospital sector make them all susceptible to CMS' determination to reduce costs to make the Medicare program more sustainable,” said the Marshfield Clinic's Turney.

She wants policymakers to focus more intensely on managing the care of the relatively few patients with chronic, complicated diseases who account for 50% of healthcare costs.

Entwistle said whenever he hears the term value-based reforms, “I hear that you will get paid less money.”

“We know we'll get paid less,” he added. “So the question is how do we best utilize the resources that we have?”

Executives are also paying attention to Capitol Hill discussions on smaller reforms, such as the effort to curb the balance-billing practices that have been making big headlines.

Sentara's Kern said patients shouldn't be caught in the middle of payer-provider squabbles over emergency treatment, and for non-emergencies all the parties, including patients, “have a mutual responsibility to understand what insurance covers and where, and provide notification when there is an inconsistency.”

“Everyone has cost pressures, so there is not a lot of give in the system,” he said.