A teaching hospital payout, Humana flirts with Wall Street, and new dialysis incentives

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The rise of the Medicare Advantage stock

If you ever needed evidence of just how much Wall Street salivates over the profitability of Medicare Advantage, look no further than Humana’s investor day last week.

Humana executives gave investors everything they wanted: The company will enroll boatloads of seniors over the next three years; its external MA brokers are cleaning up their act so fewer people abandon their plans; it will steer more of their members to its growing division of clinics and home health services; and it will all lead to a bonanza of dividends, stock buybacks, and surplus earnings.


Those were pretty big promises. Wall Street will punish Humana’s stock at the slightest whiff of slower-than-expected enrollment, which starts in a month. But it’s worth noting that Humana — a company that is basically a pure play MA company — has blown away the stock market over the past decade. The broader S&P 500 and Dow Jones don’t even compare. That’s all powered by this taxpayer-financed alternative to traditional Medicare. And the things that Humana executives didn’t talk about, like the extremely questionable risk adjustment practices that have been called out by whistleblowers and auditors for years, also have driven a lot of its fortunes.

Read the story, which also includes details about how many physician clinics Humana is going to acquire and build every year — a clear nod that Humana is full-bore copying UnitedHealth Group to scoop up more doctors so it can keep more of that sweet, sweet MA dollar.


Cashing in from residents and fellows

Earlier this month, Brigham and Women’s Hospital sued the federal government. The famed Boston hospital that is part of Mass General Brigham said it was underpaid for training its rookie physicians. It turns out teaching hospitals across the country are soon going to get corrected sums to account for those underpayments.

Medicare is the largest funder of graduate medical education. The formula for paying teaching hospitals’ to train these doctors is complex, but it comes down to the number of residents and fellows each hospital has. A few years ago, other hospitals sued and said Medicare was shortchanging them if they had too many fellows. A court agreed, and in the most recent inpatient hospital rule, Medicare updated its formula and said it would apply that formula retroactively for “all teaching hospitals.”

Brigham and Women’s lawsuit is essentially a way for the hospital to get in the queue and “to facilitate timely payment,” a hospital spokesperson said.

“It’s a procedural necessity to keep filing these suits in order to be paid under the new regulation,” said Ron Connelly, an attorney who led the initial lawsuit from Milton S. Hershey Medical Center in Pennsylvania and which has since been consolidated to include 63 hospitals.

Medicare has already sent notices out that it is recalculating payments, and Connelly expects his hospital clients will be paid by the end of this year. Depending on how many years of underpayments a hospital appealed, payouts can be anywhere from $30,000 to $10 million. “It’s really going to vary a lot,” Connelly said.

Expensive travel nurses: the new norm?

Pay rates for travel nurses have cooled off from earlier this year, but hospitals are still paying a lot more than they were pre-pandemic. And it could stay that way indefinitely, my Health Care Inc. colleague Tara Bannow writes.

AMN Healthcare, one of the country’s largest nurse staffing companies, expects its billing rates for travel nurses to decline 30% between the first and fourth quarters of 2022, CFO Jeff Knudson said at a banking conference last week. But even that lower fourth-quarter rate is still 35% higher than the fourth quarter of 2019.

Much of today’s demand is because of a nurse shortage that preceded the pandemic, AMN’s outgoing CEO Susan Salka said at the conference. Covid-19 made the problem a lot worse because it pushed plenty of burned-out nurses to retire, change careers, or take nursing jobs outside of hospitals.

Congress is calling for an investigation into whether staffing companies like AMN used the pandemic as an excuse to price-gouge hospitals. Salka admitted that “bill rates for travelers have gone up,” but countered that some of hospitals’ biggest cost increases have been in higher wages and premium pay for their employed nurses. “And there’s demands for those wages to go up more by the nursing staff,” she said.

Medicare’s randomized trial to fix dialysis

Not enough people with kidney failure get a transplant or home dialysis, and Medicare wants to change that, my colleague Isabella Cueto reports.

A new model from the government will dole out higher payments to dialysis providers if patients use home dialysis instead of going to a clinic and if providers get more patients waitlisted for organ transplants. The interesting part of the model is it mandates 30% of dialysis companies to participate — and the other 70% will be used as a control group.

Read Isa’s full story, which includes some valid concerns about whether the dialysis duopoly of DaVita and Fresenius “could try to game the system” by promoting transplants, waitlisting, and home dialysis in facilities that have to participate, and promoting those things less in facilities where they don’t participate.

Industry odds and ends

  • Breaking news on Friday: Daniel Haller, the New York surgeon who sued the federal government to kill the new surprise billing law, fired his attorneys. It’s unclear if this means he will appeal his case, which a judge dismissed last month.
  • Have you noticed some drug websites feature a “Talk to a doctor now” button? Well, my colleague Katie Palmer did, and she reported how these telehealth prescriptions are a “dream” for pharmaceutical companies looking for an easy (and clinically questionable) boost in sales.
  • UnitedHealth won a six-year-old class-action lawsuit from doctors who argued the insurer stiffed them on facility fees, Jacklyn Wille of Bloomberg reports.
  • Catholic hospital chain Ascension posted a -3.1% operating margin in its 2022 fiscal year that ended in June, new audited financial documents show. Ascension’s net margin was -6.6%, as the down stock market continues to tank hospitals’ investments.
  • Rep. Bill Pascrell is asking the feds to investigate whether HCA Healthcare is improperly admitting people from the emergency room, my colleague Rachel Cohrs reports. Envision Healthcare also makes an appearance in Pascrell’s letter.
  • The Census Bureau put out its annual report on health insurance. The 8.3% uninsured rate was the headline number, but two other pieces of data tell a clearer story: Hispanic people are still more than twice as likely to be uninsured (18.3%), and people living in states that didn’t expand Medicaid continue to lack insurance at much higher rates (11.9%).

The Meme Ward

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