OP-ED | Lawmakers hear how RI saved 2 hospitals from private equity, other solutions to high insurance premiums

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Ellen Andrews, Ph.D.
ELLEN ANDRE

At a forum sponsored by State Representative Kerry Wood on Friday, six national and local experts gave lawmakers specific policy tools to help consolidate the healthcare market and drive up drug prices that drive up health insurance premiums. Lawmakers also obtained specific tools used by Rhode Island to prevent the private equity abuses experienced in other states. Private equity buyouts have raised prices, lowered health outcomes and shut down vital hospitals riddled with debt.

Health insurance is expensive in Connecticut. Last year, the bonuses for individual coverage here were the eighth highest in the country and the seventh highest for families. Lawmakers heard it loud and clear from voters during the last election campaign. Most of the options for lowering premiums have stalled this year in the legislature. None of them addressed the factors underlying the skyrocketing premiums. Consolidation in Connecticut’s healthcare markets and profits for pharmaceutical companies are driving up costs, leaving lawmakers to search for solutions.

At the forum, Kate Gudiksen, Ph.D., from The source on healthcare prices and competition at the University of California Hastings School of Law, noted that if the price of milk had risen as much as health care since World War II, a gallon would cost $ 160 now.

Health Forum
Image of a presentation at the Friday forum.

A lack of regulation enabled mergers creating huge healthcare systems that then force people to pay prices 20-47% higher than what was previously billed for the same services. Dr Gudiksen offered policy makers options to make Connecticut’s healthcare markets more competitive, including limiting further mergers. However, as our state’s market is already very consolidated, she offered options used in other states to compete, including restricting or prohibiting anti-competitive contract clauses. These clauses allow large healthcare systems to use their market power to force insurers to include them and pay them more, regardless of price or quality.

Laura Alexander, JD, from American Competition Institute, described the serious dangers of increasing hospital ownership in private equity (PE). The acquisitions of private equity firms are largely hidden and unregulated. PE companies typically buy hospitals and other entities, with the expectation of reselling them in 10 years. Despite the name, EP purchases are mostly funded by bank loans, making the hospital an asset. After a purchase, PE partners typically do not use the funds they borrow to invest in hospitals, but often take millions in profits / dividends and lease the facility to a new management company who then extracts the fees.

Profits are generated by reducing costs, generating new revenue, consolidating markets and collecting “management” fees. Purchases of PE generally result in higher prices, less competition, poorer health outcomes and unstable hospitals that close. Policy solutions include stricter regulation of healthcare mergers, closing regulatory loopholes, prohibiting sale and leasebacks of establishments, prohibiting anti-stagger and anti-management contractual clauses (such as recommended by Dr Gudiksen) and a complete ban or restriction of acquisitions of private capital from health facilities. .

Miriam Weizenbaum, JD, chief of the civil division of the Rhode Island attorney general’s office, described their work as a national leader in protecting hospitals and communities from PE abuse. Unlike other states, including Connecticut, when private equity firm Prospect Medical Holdings wanted to change ownership and allow a partner to take millions of dollars in assets in two Rhode Island hospitals, the office of the Rhode Island’s attorney general has placed significant conditions on the approval. After the initial purchase in 2017, Prospect significantly undermined hospital finances by borrowing $ 1.12 billion and paying out $ 457 million in dividends to PE partners. As of 2020, Prospect was in debt of over $ 1 billion.

Rhode Island has strong protections for hospitals and communities in state law. The attorney general’s conditions on the change required Prospect to create an $ 80 million escrow account that could be used for operating expenses, planned capital improvements and to repay federal relief funds. Over the next five years, Prospect is to keep hospitals open and provide essential services and charitable care. If Prospect declares bankruptcy, the escrow account does not go to the creditors, but goes to the hospitals. Monitors were hired by the attorney general’s office, paid by Prospect, to enforce the conditions.

Prospect also owns Waterbury, Rockville and Manchester Memorial Hospitals in Connecticut.

Rachel Davis, JD, Assistant Attorney General of Connecticut, described their authority and current antitrust enforcement activities.

Lawmakers have also heard from experts on the rise in prescription drug prices and its impact on health insurance premiums. Between 2014 and 2018, Connecticut’s insurance plan spending prescription drugs grew twice as fast as our state’s economy grows. Drew Gattine, JD, from National Academy for State Health Policy, and Sarah Emond, MLA, from the Institute of Clinical and Economic Review, describes possible solutions for decision makers.

Included options insurance standards for equitable patient access to prescription drugs, international benchmarks, taxation of unsupported price increases, anti-price abuse legislation, and evidence-based benchmark prices used by most health insurance plans, the veterans administration, and almost half of the state’s Medicaid programs.

Connecticut policy makers now have a plethora of options to control the drivers of rising healthcare costs. None will be easy; affected industries spend heavily on lobbyists. But the alternative, pursuing extreme premium increases, is not viable for Connecticut families, employers or government budgets.

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Ellen Andrews, Ph.D., is the Executive Director of Draft health policy CT. Follow her on Twitter @CTHealthNotes.

The views, opinions, positions or strategies expressed by the author are theirs alone and do not necessarily reflect the views, opinions or positions of CTNewsJunkie.com.



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