INSIDE THE ISSUE

> Supply Chain
> Assisting Tenn./N.C. Hospital Workers
> CHIA’s Hospital Finances Report
> Steward & Stewardship
> UMass-Milford Merger
> Heywood Success Story
> A Win Against Big Pharma
> Transition

MONDAY REPORT

Hurricane Helene Disrupts IV Supplies; Port Back-Ups Avoided

The nation’s supply of IV solutions has been disrupted by the closure of a Baxter International plant in Marion, North Carolina due to Hurricane Helene.

The plant employs 2,500 people and is the company’s largest manufacturing facility, making about 60% of the nation’s IV solutions supply, or 1.5 million bags daily.

In a letter to its customers on Tuesday, Baxter announced that it was imposing allocations on its various product lines, and would determine how much of its product each facility would receive based on that facility’s historical ordering from March 1 to August 31, 2024. The letter contains a full list of product codes and allocation levels. Baxter also set up this website to post updates on its re-opening progress.

Concurrently, the healthcare improvement company, ECRI, published a list of “functional equivalents” to help healthcare providers find alternatives from other manufacturers to the IV and irrigation solutions affected by the plant closure.

In Massachusetts, the Department of Public Health is working with the regional Health and Medical Coordinating Coalitions (HMCCs) that have convened to share information on management and conservation strategies as the situation unfolds. Such strategies include evaluating inventory and clinical needs, and optimizing fluid management by, among other things, switching to oral products or by reducing maintenance IV fluids in less critical patients.

MHA is coordinating with its membership, AHA and state hospital associations, the Massachusetts HMCCs, as well as with state and federal partners to manage through the challenge and share critical information. MHA’s conversations with its peers in North Carolina indicate that the Baxter plant reopening could extend into 2025.

The national supply chain dodged what could have been another serious disruption last week when the International Longshoremen’s Association on Thursday ended the strike it had begun on Tuesday at 36 port cities from Maine to Texas. The tentative labor agreement with improved wages for dock workers extends through January 15, during which time the parties will return to the bargaining table to negotiate other details of the contract.

How to Help Hospital Workers in Tennessee and North Carolina

The Tennessee Hospital Association reports that devastating Hurricane Helene floods in Eastern Tennessee have resulted in “unimaginable challenges’ for hospital workers in that state, many of whom have lost their houses, vehicles, and possessions. To help THA’s colleagues in this time of crisis, the association has established the THA Hospital Employee Disaster Relief Fund.

Donations may be made through Venmo @THA_Hospital_Employee_Relief. Every dollar raised will go directly to hospital employees affected by the floods.

The North Carolina Healthcare Association reports a “heartbreaking and apocalyptic” landscape where at one hospital alone 80 employees lost their homes. The association’s foundation has set up a fund that is available here.

CHIA Report Shows ”Deeply Troubling” Financial Trend for Hospitals

While Steward Health Care hospital sales in Massachusetts have been completed (see story below), the healthcare system that remains in Steward’s wake is unstable as it has ever been.

The state’s Center for Health Information & Analysis (CHIA) last Thursday released another damning report about hospital and health system finances, showing that 57% of hospitals in the state have negative operating margins, meaning the revenues they take in are less than what they are spending to provide care to patients. The statewide median operating margin is negative at -0.9% for the fiscal year FY2024 period through June 30, 2024. This represents a 1.1 percentage point decrease from the same period in the prior year.

Fourteen out of 21 (67%) of reporting hospital health systems – which include affiliated physician practices – experienced negative operating margins; one system had a zero margin.

Facilities that consistently experience negative operating margins have more challenges investing in their facilities, including purchasing new equipment, acquiring new technology, and upgrading their physical plant while maintaining day-to-day operations, including increased expenses for wages, supplies, and pharmaceuticals. Hospitals that consistently lose money on operations must rely on their “rainy day” funds and investments to make up the gap, which means the hospital either borrows more or scales back needed long-term investments in their facilities.

“Once again, CHIA’s quarterly report is deeply troubling evidence of Massachusetts hospitals’ financial challenges,” said MHA’s Dan McHale, senior vice president, healthcare finance & policy. “With more than half of our hospitals operating in the negative and two-thirds of hospital health systems consistently losing money on their operations, there is a very real threat to the sustainability of care that patients deserve. It is critical to recognize the immense – and growing – cost pressures hospitals are incurring to keep services accessible for everyone who needs them.”

That “immense and growing” set of costs for hospitals includes treating sicker patients in need of longer stays; a rise in extra, unpaid care; excessive administrative burdens; and skyrocketing supply expenses, among other factors. Hospitals are bracing for even more financial pain next year as Health Safety Net shortfalls continue to hit historic highs.

New Operators Are in Control; Concern Over M.D. Practice Continues

Following the signing of purchase agreements last week, the new operators of the former Steward Health Care hospitals in Massachusetts are Boston Medical Center (BMC), Lawrence General Hospital, and the Lifespan system from Rhode Island.

BMC is operating Good Samaritan in Brockton and St. Elizabeth’s in Brighton; Lawrence General Hospital is the new operator for both campuses of Holy Family in Haverhill and Methuen; and Lifespan is the new operator of Morton in Taunton and Saint Anne’s in Fall River. In the coming months, the names of all the hospitals (with perhaps the exception of Morton) will change to remove religious traces of their former affiliation with their pre-Steward owners, the Archdiocese of Boston.

“Today, these hospitals are freed from Steward’s greed and mismanagement, and start fresh with established, reputable, and local operators,” Governor Maura Healey said last Tuesday.

But while the Steward hospitals have transitioned to new owners, its physician practice – Stewardship Health – is still going through the process of being sold. UnitedHealth Group’s Optum made a bid for Stewardship in March but walked away from the deal in June after coming under withering criticism. Optum’s control of 10% of the physicians in the U.S. caused policymakers to point out the potential for “self-dealing” among the doctors and insurers.

In August, Steward agreed to sell Stewardship for $245 million to Rural Healthcare Group (RHG), a subsidiary of the private equity fund Kinderhook. The potential for that deal last week caused Senators Elizabeth Warren and Ed Markey, along with Representatives Stephen Lynch and Jake Auchincloss – all Massachusetts Democrats – to write a critical letter to RHG’s CEO Benson Sloan expressing their concern with the purchase.

“We remain deeply concerned that this proposed transaction, if allowed to proceed, would empower yet another private equity firm to prey on Massachusetts patients and providers, sucking taxpayer dollars out of the system for the profit of a few corporate executives and shareholders,” the delegation from Massachusetts wrote. “In fact, your company is a subsidiary of private equity firm Kinderhook, which has a history of predatory practices. And it has worrisome ties to a health software company, NaviHealth, which is the subject of a class action lawsuit stemming from its work to develop algorithms used by insurers to improperly deny health care for patients. We are also concerned that RHG may employ practices to shield it from state laws that are designed to protect patients and physicians.”

RHG’s Sloan, the company’s COO and its chief of staff “spent nearly 14 years at NaviHealth building a product that put insurers’ profits over the needs of patients and the clinical judgment of their doctors,” the legislators wrote. “… We are particularly alarmed that allowing the same executives that ran NaviHealth when these dangerous tools were developed and sold to control physicians in the Commonwealth will put Stewardship’s patients and clinicians in harm’s way. And more specifically, we are concerned that you – who spent two years at NaviHealth after it was acquired by UnitedHealth – may have played a direct role in the algorithm-driven denials of care at UnitedHealth, which is now the subject of a class action lawsuit and a DOJ investigation.”

The letter outlines a series of questions that the legislators requested be answered no later than October 15.

The state’s Health Policy Commission is reviewing RHG’s proposed purchase, as are federal regulators.

UMass Memorial Health Acquires Milford Regional

Milford Regional Medical Center, inclusive of Milford Regional Physician Group, are now part of UMass Memorial Health after the two entities formalized a corporate affiliation agreement they had first announced in January.

Milford will now be known as UMass Memorial Health – Milford Regional Medical Center and its long-time president, Ed Kelly, will retain his role and join UMass Memorial Health’s senior leadership team.

Milford Regional Medical Center became the first hospital to clinically affiliate with UMass Memorial Medical Center in 1991 and since then the two facilities have had multiple points of collaboration.

UMass Memorial Health – Milford Regional Medical Center has 148 beds served by more than 300 primary care and specialty clinicians. UMass Memorial Health is the largest not-for-profit healthcare system in Central Massachusetts with nearly 19,000 employees and 2,100 physicians. Its system includes UMass Memorial Medical Center, UMass Memorial Health – Harrington, UMass Memorial Health – HealthAlliance-Clinton Hospital, UMass Memorial Health – Marlborough Hospital, UMass Memorial Health – Milford Regional Medical Center, UMass Memorial Health – Community Healthlink, and UMass Memorial Medical Group.

Heywood Healthcare Emerges from Chapter 11

It took a year and a lot of hard choices in a very challenging environment (see CHIA story above), but Heywood Healthcare has emerged from Chapter 11.

Last Thursday, Heywood brought together community and state leaders to discuss the successful steps the hospital has taken and its plans for the future.

Speaking at the event were Health and Human Services Undersecretary Chris Harding; Jake Mastrandrea, outreach director for Congresswoman Lori Trahan (D-Mass.), State Senator Peter Durant (R-Spencer), State Representative Jon Zlotnik (D-Gardner), MHA President & CEO Steve Walsh; Gardner Mayor Michael Nicholson, and Chair of the Heywood Healthcare Board Robert Chauvin.

Last October, Heywood faced $51 million in long-term debt obligations and $30 million in outstanding payables. In the past year, it reduced its debt by $10 million, eliminated more than $20 million in pre-petition obligations, and also restructured numerous commitments to achieve more than $11 million in annual savings. Heywood said it has renegotiated payer agreements that should generate an additional $16.5 million in reimbursements over the next three years, allowing it to reinvest in infrastructure.

At the same time, the system has had nearly 100 new hires over the past year, including an ENT surgeon, seven primary care physicians, 10 advanced practice providers, and two psychiatric nurse practitioners.

“Throughout this process, we optimized our operations, consolidated services where appropriate, maintained our community programs, and substantially improved employee satisfaction for the first time in five years, as evidenced by our most recent Press Ganey staff engagement survey,” said Heywood President & CEO Rozanna Penney as part of the system’s announcement last week. “Heywood’s success is a direct result of the hard work and commitment of our dedicated trustees, leaders, physicians, advanced practice providers, and employees.”

Johnson & Johnson Drops 340B Rebate Plan

Johnson & Johnson Health Systems (J&J) said it will cease implementation of its drug rebate plan at this time after the Health Resources and Services Administration (HRSA) had declared the proposal violated 340B regulations.

As reported in last week’s Monday Report, J&J planned, effective October 15, to force disproportionate share hospitals (DSH) to purchase two drugs (Stelara and Xarelto) at the commercial price, at which time J&J “may” offer rebates to them. In strongly worded letters, HRSA told J&J that 340B requires it to offer DSHs the discounts initially, and not retrospectively. HRSA threatened to remove J&J entirely from the 340B program.

In its own strongly worded letter, J&J defended its plan and its commitment to patients but said because of HRSA’s “unwarranted threats of excessive and unlawful penalties” it was nixing its rebate plan.

MHA lauded HRSA’s pressure on the drug manufacturer, saying that repeated coordinated attacks against 340B by big pharma have been destabilizing hospital finances.

Transition

Governor Healey has appointed Michael Caljouw as Division of Insurance (DOI) Commissioner, effective immediately. Caljouw most recently served as Vice President for State and Federal Government and Regulatory Affairs at Blue Cross Blue Shield of Massachusetts. Previously, he held positions as Senior Counsel at Holland and Knight; Deputy Director, Chief of Staff, and General Counsel for the Office of Consumer Affairs and Business Regulation; General Counsel for DOI; and Chief of Staff and Legal Counsel for former Massachusetts Senate Minority Leader Brian Lees. Kevin Beagan has served as Acting DOI Commissioner since June, filling the post left vacant by former Commissioner Gary Anderson, who on May 1 became CEO of the National Association of Insurance Commissioners.

John LoDico, Editor