On Friday, in a forum sponsored by state Rep. Kerry Wood, six national and local experts gave legislators specific policy tools to help with health care market consolidation and rising drug prices that are driving up health insurance premiums. Legislators also got specific tools used by Rhode Island to avoid private equity abuses experienced in other states. Private equity takeovers have raised prices, lowered health outcomes, and closed vital hospitals saddled with debt.
Health insurance is expensive in Connecticut. Last year, premiums for single coverage here were the eighth highest in the nation and seventh highest for families. Legislators heard this loud and clear from voters in the last election campaign. Most options for lowering premiums stalled this year in the legislature. None of them addressed the underlying drivers of skyrocketing premiums. Consolidation in Connecticut’s healthcare markets and profiteering by drug companies are driving costs up, leaving legislators looking for solutions.
• Links to resources and documents discussed during the forum
At the forum, Kate Gudiksen, Ph.D., of The Source on Healthcare Price and Competition at the University of California Hastings School of Law, noted that if the price of milk had risen as much as healthcare since World War II, a gallon would cost $160 now.
A lack of regulation has allowed mergers creating huge health systems that then force people to pay prices 20% to 47% higher than what was charged previously for the same services. Dr. Gudiksen offered policymakers 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 being used in other states to support competition, including restricting or banning anti-competitive contract clauses. These clauses allow large health systems to use their market power to force insurers to include them and pay them more, regardless of price or quality.
Laura Alexander, J.D., of the American Antitrust Institute, described the serious dangers of rising private equity (PE) hospital ownership. PE firms’ acquisitions are largely hidden and unregulated. PE firms typically purchase hospitals, and other entities, expecting to sell them again in 10 years. Despite the name, PE purchases are mainly funded with bank loans, leveraging the hospital as an asset. After a purchase, PE partners generally don’t use the funds they borrow to invest in the hospitals, but often pull out millions in profits/dividends and lease back the facility to a new management company that then extracts fees.
Profits are generated by cutting costs, generating new revenue, consolidating markets, and collecting “management” fees. PE purchases typically result in higher prices, less competition, lower health outcomes, and unstable hospitals that close. Policy solutions include tighter regulation of healthcare mergers, closing regulatory loopholes, banning sale-leasebacks of facilities, banning anti-tiering and anti-steering contract clauses (as recommended by Dr. Gudiksen), and banning or restricting private equity acquisitions of healthcare facilities completely.
Miriam Weizenbaum, J.D., Civil Division Chief in the Rhode Island Attorney General’s Office, described their work as a national leader in protecting hospitals and communities from PE abuses. Unlike other states, including Connecticut, when PE firm Prospect Medical Holdings, wanted to change ownership and allow one partner to take millions of dollars in assets from two RI hospitals, the Rhode Island Attorney General’s office placed important conditions on the approval. After the initial purchase in 2017, Prospect significantly undermined the hospitals’ finances by borrowing $1.12 billion and paying $457 million in dividends to the PE partners. By 2020, Prospect was over $1 billion in debt.
Rhode Island has strong protections for hospitals and communities in state law. The Attorney General’s conditions on the change required that Prospect create an $80 million escrow account that could be used for operating expenses, planned capital improvements, and to pay back federal relief funds. For the next five years, Prospect must keep the hospitals open and provide essential services and charity care. If Prospect declares bankruptcy, the escrow account does not go to creditors, but back to the hospitals. Monitors were hired by the Attorney General’s office, paid for by Prospect, to enforce the conditions.
Prospect also owns Waterbury, Rockville, and Manchester Memorial hospitals in Connecticut.
Rachel Davis, J.D., a Connecticut Assistant Attorney General, described their current antitrust enforcement authority and activities.
Legislators also heard from experts on rising prescription drug prices and the impact on health insurance premiums. Between 2014 and 2018, Connecticut insurance plan spending on prescription drugs rose twice as fast as the growth in our state’s economy. Drew Gattine, J.D., from the National Academy for State Health Policy, and Sarah Emond, MPP, of the Institute for Clinical and Economic Review, described possible solutions for policymakers.
Options included insurance standards for fair patient access to prescription drugs, international reference rates, taxing unsupported price increases, anti-price gouging legislation, and evidence-based benchmark prices used by most health insurance plans, the Veterans’ Administration, and nearly half of state Medicaid programs.
Connecticut policymakers now have a wealth of options to control the drivers of rising health costs. None will be easy; affected industries are spending heavily on lobbyists. But the alternative, continuing extreme premium increases, isn’t sustainable for Connecticut families, employers, or government budgets.
Ellen Andrews, Ph.D., is the executive director of the CT Health Policy Project. 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.
More from Ellen Andrews
OP-ED | This Is Why Connecticut Can’t Lower Healthcare Costs
Healthcare analyst Ellen Andrews breaks down latest meeting of the Office of Health Strategy’s Steering Committee and says they are still leaning toward a status…Keep reading
Analysis | How Brain Shortcuts Undermine Policymaking
Health care analyst Ellen Andrews says researchers have identified over 100 cognitives biases – but some are more common in state policymaking.Keep reading
OP-ED | Artificial Intelligence Can Be The Solution When It Isn’t The Problem
Health care analyst Ellen Andrews says artificial intelligence, badly done, can deny appropriate access to healthcare. But done right, AI tools have the potential to…Keep reading
ANALYSIS | Are Connecticut Hospitals Losing Money? It Depends
Health policy analyst Ellen Andrews, Ph.D, takes a look at the last report on Connecticut hospital finances.Keep reading
OP-ED | HUSKY Coverage For Immigrants Is The Right Thing, And The Smart Thing To Do
Opinion writer and health care analyst Ellen Andrews says that we’re all safer, healthier, and richer when everyone – including every immigrant – has health…Keep reading
OP-ED | Things To Like In The Governor’s Budget Proposal
Opinion writer and healthcare analyst Ellen Andrews says she has found a lot to like in Governor’s budget with respect to reforms, cost controls, and…Keep reading
ANALYSIS | Life-saving Innovation At Alarming Prices
Health care analyst Ellen Andrews says the new gene therapies that can modify a malfunctioning gene to cure, not just treat, genetic diseases are going…Keep reading
Analysis | Good News On Health Care Costs, But It Won’t Last
Tuesday’s eagerly anticipated inflation report from the Bureau of Labor Statistics had good news for our battered economy – inflation is down for the fifth…Keep reading
OP-ED | Health Insurance Affordability Review is Good, But It’s No Silver Bullet
A movement to include affordability in the Insurance Department’s review of health insurance premiums is gaining champions. That’s a good thing. The best care is…Keep reading
ANALYSIS | Yale-New Haven Health Announces Layoffs While Planning To Buy 3 Hospitals, And Why It Matters
It’s puzzling. Yale-New Haven Health System recently announced 72 layoffs and eliminated 155 positions among their managers, but they scored large profits last year and…Keep reading
ANALYSIS | New study Finds 1 in 5 Households Has Medical Debt That Averages $21,687
Having health insurance is no longer the protection it used to be. A pair of new studies shine a bright light on inadequate insurance and…Keep reading
OP-ED | Governor’s Healthcare Record Misses Opportunities
Last week, Connecticut Gov. Ned Lamont and his administration held a press conference nominally to promote their efforts to lower healthcare costs, but mostly for…Keep reading
OP-ED | Be Careful In Making Changes When The Glass Is Half Full
There is good news on Connecticut health spending – and we can use it. Analysis of new data has found, not surprisingly, that Connecticut residents…Keep reading
ANALYSIS | Another CT Healthcare Story of Wasted Money and Missed Opportunities
An excellent investigation by C-HIT published Tuesday found that the Connecticut Office of Health Strategy has squandered $20 million in federal funds and delayed for…Keep reading
Analysis | Connecticut Is 23rd In Public Health Funding
Connecticut has a chronic problem with underfunding public health. We aren’t alone, but we’ve done little to fix the problem. The pandemic should’ve made crystal…Keep reading
OP-ED | Insurers’ Explanations For Extreme Rate Increases Don’t Make Sense
Connecticut’s health insurers are asking state regulators to let them increase premiums an average of 20.4%, far more than last year’s 8.6% request. Insurers in…Keep reading
OP-ED | We Need Better, Smarter Solutions
To solve hard problems we need upstream solutions, not downstream fixes. There’s a lot of news about the Supreme Court’s decision on abortion and the…Keep reading
OP-ED | Advice From An Advocate To The Next OHS Director
This week the Lamont administration announced that Vicki Veltri will be leaving state service in a few weeks. She will be missed. Director of the…Keep reading
OP-ED | Policymakers Did Little to Lower Healthcare Costs This Session
Last year, Connecticut policymakers accomplished little to reduce the cost of healthcare, and those costs haven’t gotten any better since then. Incumbents will be asked…Keep reading
ANALYSIS | Fact Check Shows That Raising Primary Care Spending Doesn’t Lower Total Healthcare Costs
Ellen Andrews checks the facts on HB 5042 and says it’s very appealing to think that increasing investments in prevention and care management will reduce…Keep reading
OP-ED | Children Deserve Healthcare, Regardless of Immigration Status
Last year, Connecticut policymakers made the smart and moral decision to provide HUSKY coverage to children from low-income families through age eight, regardless of immigration…Keep reading
Connecticut Officials Tackle Drug Pricing
The cost of prescription drugs is increasing, and Gov. Ned Lamont and some lawmakers are renewing their push to lower the cost by telling companies…Keep reading
OP-ED | Class Action Against Hartford Healthcare Changes the Landscape
Ellen Andrews says the new lawsuit filed last week by six brave Connecticut residents alleges that Hartford Healthcare is manipulating the market to drive out…Keep reading
OP-ED | The Governor’s Plan To Lower Healthcare Costs – What’s In It, And What’s Missing
Ellen Andrews highlights the good, the bad, and the ugly in Gov. Ned Lamont’s legislative package on healthcare.Keep reading
OP-ED | How Much Do CT Hospitals Spend On Administration? No One Knows
Ellen Andrews tried to figure what the state knows about how hospitals spend their money. As they grow & charge more, do they improve patient…Keep reading
OP-ED | Connecticut’s Healthcare Market Regulation Is Broken
Healthcare consolidations are endangering access to care and driving up prices. But the state agency that is supposed to keep Connecticut’s healthcare market competitive isn’t…Keep reading
OP-ED | The Brainard Fund Still Making A Difference After 64 Years
In 2010, I got a call that advocates only dream about.Keep reading
OP-ED | It’s A Miracle – Under New Agreement, Medicare Will Negotiate Drug Prices
Democrats in Washington have negotiated a deal to allow Medicare to negotiate prices with drug companies. Americans pay 2.56 times higher drug prices than residents…Keep reading
OP-ED | Patient-centered Or Doctor-centered? Primary Care Planning Is Off Track
Several state agencies and their committees are planning to expand primary care in Connecticut – that’s a good thing. But it’s being driven by primary…Keep reading
ANALYSIS | Covered Connecticut Is A Good Start, But Needs Tending
Covered Connecticut – the state’s alternative to a public health insurance option or the restoration of funds that were cut from HUSKY parent coverage –…Keep reading
OP-ED | Congress Wants to Lower Drug Prices to Fund Important Priorities
Economists argue that rising healthcare costs are crowding out other budget priorities. Ellen Andrews says that policymakers want to make big investments and they’re planning…Keep reading
OP-ED | Insulin – Once a Gift, Now Serving Greed
Insulin prices now bear no relation to the costs to manufacture it. While newer insulin versions cost $3.69 to $6.16 per vial to manufacture, the…Keep reading
ANALYSIS | Connecticut Needs to Focus on Real Health Reform
Making healthcare more affordable was the drumbeat from voters last year, but Connecticut policymakers have responded with weak options that kick the can down the…Keep reading
OP-ED | Controversial New Alzheimer’s Drug Could Break the Bank
Setting aside its questionable effectiveness, the price tag for the new Alzheimer’s drug is simply unaffordable.Keep reading
ANALYSIS | Who In Health Care Made Money on COVID?
Amidst the heroism of the pandemic, Ellen Andrews writes that some of the biggest winners – financially – are in health careKeep reading
OP-ED | When Data Becomes An Excuse To Prevent Change
Ellen Andrews writes that it’s one thing to look at data, but another to endlessly reexamine it as a means of avoiding making tough decisions…Keep reading
OP-ED | Remember Public Health’s Value After COVID Is Gone
The COVID-19 pandemic has focused a bright light on the weakness of the U.S. public health system. Countries with strong public health systems fared much…Keep reading
OP-ED | Drug Innovation Argument Cuts Both Ways
Ellen Andrews responds to our recent op-ed from Pfizer’s John Burkhardt and says the proposed tax on excessive drug prices increases is a good ideaKeep reading
OP-ED | Making the Public Option Better
Ellen Andrews gives her prescription to improve Connecticut’s public optionKeep reading
OP-ED | Real Conversation Would Beget Lower Health Care Costs
Why is it so hard to get people across the health care system onto the same page and working through problems together? People tend to…Keep reading