Tagged Cost and Quality

Some Hospitals Frustrated With CMS Rule Requiring Them To Post Prices As Experts Say It Won’t Help Cut Consumers’ Costs

“The unfortunate thing is that for most consumers, because it’s standard charges not related to their coverage, it’s not that helpful,” Rick Gundling, senior vice president of the Healthcare Financial Management Association, told Modern Healthcare. “It was an exercise that doesn’t add a lot of value to the consumer.”

Will I Always Face The Threat Of A Peanut-Laden Kiss Of Death?

Whenever I see a report touting possible new peanut allergy treatments, I devour it. I can’t help it. It’s an occupational hazard for any health journalist whose reporting specialty and medical history intertwine.

I write about the business of health care, focusing on how consumers interact with the system — what we pay, what we get and why American care costs so much. But in this particular instance, I have another kind of authority: 26 years of life-threatening allergies to nuts and peanuts.

So last month, when California-based Aimmune Therapeutics sparked optimistic headlines after releasing clinical trial results that its allergy product, AR101, would reduce the risks linked to an accidental exposure to peanuts, I received the usual wave of questions from friends, co-workers and my parents: Would you try it? Could this help?

Aimmune is just one company eyeing the prize. Childhood peanut allergy diagnoses increased more than 20 percent in the United States from 2010 to 2017. The global market for relief is worth as much as $2 billion. The French drugmaker DBV Technologies is also working to commercialize a peanut allergy patch. Other companies, including industry giant Sanofi, are following their lead.

If any one of them succeeds, it could change my life.

My friends call nuts “Shefali poison.” My allergies first surfaced when, as a 15-month-old, I picked Thai noodles off an aunt’s plate and developed hives on my face, and then a few months later when I tasted my mom’s kaju barfi – an Indian dessert with cashews – and ended up in the hospital. Nobody in my family had ever heard of peanut allergies.

I’ve carried epinephrine since I was 7 years old. My friends are trained to inject it in my leg, the standard procedure for an emergency allergen exposure. though I luckily haven’t had to take a shot of it since I was 4. (Another child in my Montessori class had a peanut butter sandwich for lunch.)

My mom also recalls another incident when she had to pick me up early from day care because the class was making peanut butter bird feeders. And I spent too many years of pre-adolescence eating lunch at the designated “peanut-free table.” Now, I can only dream of flying to visit my parents for Christmas without worrying about whether my seatmate’s snacks might induce anaphylaxis. And yes, kissing someone who has just eaten peanut butter would put my life in danger.

But are these pills and patches a true breakthrough for people like me?

I approached the question as I would any other assignment. I read the research, called immunologists, and spoke with economists and drug pricing experts about whether these treatments offer meaningful benefit.

One of the first things I heard: “We are still in the infancy of these treatments,” said Dr. Corinne Keet, a pediatric allergist at Johns Hopkins University.

Shefali Luthra (second from right), pictured in the seventh grade with her school math team, carried epinephrine in a fanny pack as a child, in case she had an allergic reaction. (The fanny pack, thankfully, has since been replaced with a purse.)(Courtesy of the Luthra family)

Medically, there’s a lot we don’t know about the risks, how much these drugs could help and how long any effects would last.

“None of these treatments have been shown to prevent fatal reaction,” Keet emphasized.

The idea behind them is to desensitize people. Aimmune’s “peanut pill” is modeled on the oral therapies some specialists use to wean allergic kids back on to nuts. This approach has gained popularity in recent years, especially for children with multiple allergies, or when it’s a substance particularly hard to avoid.

A colleague’s young daughter, who was born with multiple allergies, used that very treatment, as did a younger cousin of mine who, for the first several years of her life, was allergic to — not joking — almost everything but fruits and vegetables. In my case, this therapy came into vogue after I was too old to have a good chance of it weakening my sensitivities.

How it works: Kids ingest tiny, escalating doses of peanut protein. They then stay on peanut protein — Aimmune recommends the pill, though other doctors I spoke to suggested a little bit of peanut — as a maintenance drug.

But it’s unclear how much the new therapies would improve upon that ad hoc oral immunotherapy allergists are already offering. Instead of drugs, they use store-bought peanut protein, usually de-fatted peanut flour available online for as little as $1 a pound. This method isn’t approved by the Food and Drug Administration, and often isn’t covered by insurance — though doctors’ visits can be billed as “food challenges” or other visits that are typically covered.

In contrast, Aimmune’s product is expected to cost between $5,000 and $10,000 for the first six months of use, and $300 to $400 per month after. Analysts predict DBV’s will cost more than $6,000 for a year’s supply, though the company says it has not yet determined a price. DBV, Aimmune’s chief rival, has come up with a wearable skin patch that would transmit tiny, desensitizing protein doses. It declined to estimate a price, but it does not view oral immunotherapy as a competitor, said Joseph Becker, a company spokesman.

“There’s excitement, there’s caution and a lot of unanswered questions,” warned Dr. Erwin Gelfand, a pediatrics and immunology professor at the University of Colorado.

According to Aimmune’s results, published in the prestigious New England Journal of Medicine, two-thirds of allergic children could ingest 600 milligrams of peanut without harm after going through treatment.

To be clear, even with Aimmune’s help, someone like me still couldn’t safely eat PB&J. But it would desensitize me enough that I could taste a friend’s wine even if he recently ate pad thai.

Still, the treatment comes with caveats.

While 496 children started the trial, only 372 completed it. Of the 20 percent who backed out, half did so because of adverse events. About 14 percent of kids getting treatment still had to take epinephrine, and one experienced anaphylaxis, a severe reaction that can involve rashes, vomiting, a tightening throat and difficulty breathing. (For an allergic kid, even the possibility is maybe one of the most terrifying things you can imagine.)

Children who completed the regimen still had to take small doses of peanut protein daily, either the Aimmune drug or a controlled peanut serving. Statistically significant benefits were clear only in patients through age 17, though Dr. Daniel Adelman, the company’s chief medical officer, said Aimmune plans to do a follow-up trial for adults.

And the results don’t indicate who is likely to benefit, or how long improvements would last. That’s impossible to know, Adelman said, though he suggested accidental peanut exposure is scary enough — and pure avoidance ineffective enough — that the treatment is still worth it.

But all this means that anyone who has gone through Aimmune’s regimen would still want to carry epinephrine, and try to avoid peanuts.

“Not everybody responds well,” Gelfand said. When you factor in those details, the results are “not all that impressive,” he argued.

Dr. Tina Sindher, a pediatric allergist at Stanford University, pointed out that the Aimmune pill is a repackaged, clinically tested version of that homegrown oral therapy many allergists have already been using. DBV’s peanut patch, Viaskin, to a lesser extent, is the same — more convenient, perhaps, and more regulated, but still a variation on the existing medical approach.

“This concept has been around for a long time,” she said.

What’s new is the addition of labor, standardization and federal oversight — which companies then say demonstrates increased value.

It highlights a pattern I’ve noticed from my reporting: Drugmakers develop medication that refines a low-tech remedy, run a clinical trial to secure FDA approval, and then sell it at a higher price. For pharma, it’s a logical way to profit. But it puts patients in a bind.

“The hard outcome is we have these new products and they’re just about as good or slightly better than what we have,” said Nicholson Price, an assistant professor at the University of Michigan Law School, who studies drug pricing. “And they’re a lot more expensive.” He noted: “That’s when the choices get hard, and we’re not good at making hard choices.”

Also skeptical? The closest authority I know: my mother, who raised me with peanut allergies when they were more or less unheard of, and is now doing it all over again for my 10-year-old brother. (My other brother, my twin, was allergy-free until about a year ago.)

“It’s not worth it,” my mom told me. Her concern? Getting any of us to maintain a peanut dose — without knowing how long that reduced sensitivity would last — could induce what she called “a false sense of security.”

This thinking isn’t out of line, Sindher suggested. The way these studies are touted, she said, often “gloss over the fact that there’s a lot we don’t know.”

So for now, I’ll have to maintain my distance from the newsroom stash of Reese’s Pieces. My epinephrine and I aren’t parting ways anytime soon.


KHN’s coverage of children’s health care issues is supported in part by the Heising-Simons Foundation.

Hospitals Now Have To List Prices For Medical Procedures, But Experts Question The Usefulness For Consumers

“The only people for whom these list prices are remotely relevant are those among us who don’t have any health insurance at all,” said Martin Gaynor, professor of economics and health policy at Carnegie Mellon University. Even just knowing the difference between what one hospital charges versus another won’t mean much in practice for consumers.

Hospitals Now Have To List Prices For Medical Procedures, But Experts Question The Usefulness For Consumers

“The only people for whom these list prices are remotely relevant are those among us who don’t have any health insurance at all,” said Martin Gaynor, professor of economics and health policy at Carnegie Mellon University. Even just knowing the difference between what one hospital charges versus another won’t mean much in practice for consumers.

After Bitter Closure, Rural Texas Hospital Defies The Norm And Reopens

Five months ago, the 6,500 residents of Crockett, Texas, witnessed a bit of a resurrection — at least in rural hospital terms.

A little more than a year after the local hospital shut its doors, the 25-bed facility reopened its emergency department, inpatient beds and some related services, albeit on a smaller scale.

Without a hospital, residents of Crockett, located 120 miles north of Houston, were 35 miles away along rural roads from the next closest hospital when a medical crisis struck, said Dr. Bob Grier, board president of the Houston County Hospital District, which is the county’s governmental authority that oversees Crockett, a public hospital. “Someone falls off the roof. A heart attack. A stroke. A diabetic coma. Start naming these rather serious things and health care is known for its golden hour,” he said.

The late-July reopening of the newly named Crockett Medical Center makes it a bit of a unicorn in a state that has led nationally in rural hospital closures. Since January 2010, 17 of the 94 shuttered hospitals have been in Texas, including two that closed in December, according to data from the University of North Carolina’s Cecil G. Sheps Center for Health Services Research.

But Crockett’s story also reflects some of the challenges faced by rural hospitals everywhere. Board members frequently have limited background in health care management and yet are responsible for making financial decisions. Add to that mix a Lone Star State resistance to raising local property taxes. An effort to increase the county’s 15 cents per $100 property valuation for the hospital district has been defeated twice since the hospital closed.

And a small rural hospital like Crockett’s has “no leverage” when negotiating reimbursement rates with insurers, Grier repeatedly points out.

The tough reality is that too many rural hospitals in Texas and elsewhere, when negotiating with insurers and other financial players, “are almost always negotiating from weakness and sometimes from literally leaning out over the edge of the [survival] cliff,” agreed Dr. Nancy Dickey, executive director of the A&M Rural and Community Health Institute at Texas A&M Health Science Center.

Rural communities must think more creatively about how to meet at least some of their health needs without a traditional hospital, whether it’s forming partnerships with nearby towns or expanding telemedicine, Dickey said. “There is little doubt in my mind that many of these communities are going to see their hospitals close,” she said, “and are not going to be able to make an economic case to reopen them.”

The A&M institute, which in December published a report looking at these challenges for three Texas communities, recently landed a $4 million, five-year federal grant to help rural hospitals nationwide keep their doors open or find other ways to maintain local health care.

Demographics And Decisions

The financial headwinds have been particularly fierce in Texas, one of 14 states that has not expanded Medicaid eligibility after the passage of the Affordable Care Act. “That makes a huge difference,” said John Henderson, chief executive officer of the Texas Organization of Rural & Community Hospitals, known in Texas rural circles as TORCH. “But that doesn’t change the reality that we aren’t going to do it.”

Leading up to the state’s biennial legislative session, which begins in January, rural leaders are making the case that state legislators need to take steps to bolster the state’s 161 rural hospitals, starting with rectifying underpayments for Medicaid patients. As the state’s program has transitioned to managed care, over time reimbursements have shrunk to the point that rural hospitals are losing as much as $60 million annually, according to TORCH officials, who cite state data.

They also support a congressional bill, HR 5678, that would make it easier for rural hospitals to close their inpatient beds but retain some services, such as an emergency room and primary care clinic. Under current federal regulations, facilities that make such a move are no longer considered a hospital and can’t be reimbursed by Medicare and Medicaid at hospital rates, which are often higher than payments to clinics or individual doctors. Those lower rates make it harder for stripped-down facilities to keep up their operations, said Don McBeath, TORCH’s director of government relations.

Crockett’s hospital, then called Timberlands Healthcare, abruptly shut down in summer 2017 after just a few weeks’ notice from its management company, Texas-based Little River Healthcare. Little River, which was also the subject of an analysis by Modern Healthcare that showed several of its hospitals engaged in unusually high laboratory billing for out-of-state patients, has since filed for bankruptcy. Two other rural hospitals affiliated with Little River closed their doors in December

As it struggled to stay open, Crockett’s hospital had been treating a population that was increasingly poor and aging, according to Texas A&M’s report. The researchers describe in the report — Crockett is “community 1” among three communities featured — that the hospital was overstaffed with more than 200 employees given its daily average census of three hospitalized patients. Also, they wrote, board members should have more closely questioned the management company. The board said they were given data at each meeting, “but that data did not suggest the imminent demise of the hospital,” the report’s authors wrote.

Fighting The Closure Tide

Leaders in Crockett tried to capture the interest of other hospital systems to reopen and manage the facility, without success, Grier said. Along with staffers losing their jobs, the community knew it would be more difficult to persuade people to relocate or retire to the area without a hospital nearby, he said.

Every weekday at noon for weeks on end, a small group of two to 20 people gathered beneath the hospital’s front portico to pray for some avenue to reopen, Grier said. Then, as the odds looked increasingly long, they got a call out of the blue from two Austin-based doctors. “I feel God was involved,” Grier said. “They have told us that they were looking for some kind of a larger investment.”

Those initial conversations resulted in a five-year lease arrangement between the hospital district and the management company, operating as Crockett Medical Center LLC.

The two physicians, Dr. Kelly Tjelmeland and Dr. Subir Chhikara, are listed on Crockett Medical Center’s website as chairman and president, respectively. They failed to respond to requests for comment about their plans for the hospital. But in a presentation to the board before the lease was signed, they said that one of their goals was to get the facility classified as a critical access hospital, which enables a higher reimbursement for Medicare patients.

Along with operating a primary care clinic and 24/7 emergency room, Crockett Medical Center staffs a handful of hospital beds for patients who need more limited medical treatment, such as heart monitoring or intravenous antibiotics, Grier said. But when the Crockett hospital reopened, it didn’t resume delivering babies. Only 66 of Texas rural hospitals still provide obstetrics services, according to McBeath.

Eliminating baby deliveries was one possibility on the table at another rural hospital if that hospital CEO hadn’t pulled off the sort of Texas miracle that Crockett has yet to achieve — persuading local voters to support a tax increase. Adam Willmann, CEO of 25-bed Goodall-Witcher Hospital Authority, northwest of Waco, said that he and others made the case in dozens of meetings that a hospital property tax was needed to support the financially struggling hospital.

In November, 58 percent of the county’s voters backed the new tax, despite the community’s political leanings. During that same election, 80 percent voted to re-elect Republican Sen. Ted Cruz.

“They want to be 5 minutes, 15 minutes from an ER and not 35 miles down the road,” Willmann said, referring to the nearest hospitals in Waco. “And they’re willing to pay a little more for it.”

Must-Reads Of The Week From Brianna Labuskes

Happy New Year! Welcome to 2019 and the 116th Congress! I hope everyone had a wonderful and restful break, because now the fun (or something in that neighborhood) starts again.

Democrats are raring to go now that the new class has been sworn in and Nancy Pelosi has retaken the House gavel. They’re setting the stage to put Republicans in the political hot seat with a vote to formally intervene in the Affordable Care Act lawsuit currently moving through the courts.

I’m pretty sure everyone at this point realizes that vowing to protect preexisting conditions was (and will be) a winning issue on the campaign trail. The Democrats’ move will (and, let’s be honest, is designed to) put the GOP in the awkward position of voting against those popular provisions.

The Washington Post: The New Congress: Pelosi Retakes House Gavel As Shutdown Continues

The Washington Post: House Democrats Vote to Defend ACA in Court — and Jam Republicans

Then on the states’ side of things, the attorneys general leading the defense of the health law have filed an appeal against the federal judge’s ruling (from December, I know it feels ages ago) that the ACA can’t stand without the individual mandate penalty. The filing was, obviously, completely expected, but it does continue to move the case down a long legal path likely to end at the Supreme Court.

The Wall Street Journal: Democratic-Led States Appeal Ruling Invalidating Affordable Care Act


Stories about excessive human waste piling up in national parks are grabbing headlines, but when it comes to the shutdown the issues go much deeper than that for Native Americans. Because of treaties, tribes receive a significant amount of the funding they need to provide basic services (like running health clinics) from the federal government. So, the shutdown cuts deeper for them than in other places in the country.

“The federal government owes us this: We prepaid with millions of acres of land. We don’t have the right to take back that land, so we expect the federal government to fulfill its treaty and trust responsibility,” said Aaron Payment, the chairman of the Sault Ste. Marie Tribe, in The New York Times’ coverage.

The New York Times: Shutdown Leaves Food, Medicine and Pay in Doubt in Indian Country

P.S. If you’re confused about the shutdown and what health programs are affected, 1) you’re not alone, and 2) read KHN’s roundup, which, without bias, is the most comprehensive health-related breakdown I’ve seen. Cliff notes, though: Most big-ticket items (like Medicaid and Medicare) were already funded by Congress earlier in the year and are insulated from the standoff’s dramatics.

Kaiser Health News: How The Government Shutdown Affects Health Programs


Bristol-Myers Squibb kicked off the year with a huge $74 billion deal with Celgene. The experts at Stat break down exactly what the acquisition means for the industry. A big takeaway is that one of the sector’s largest companies will essentially cease to exist. The deal could also spark more megamergers and further consolidation of the biotech landscape — which, as you can imagine, will not be good for drug prices.

Stat: 9 Big Takeaways From the $74 Billion Bristol-Celgene Deal

Next week, movers and shakers in the biotech industry will be flocking to San Francisco for the annual J.P. Morgan Healthcare Conference. It’s the place to see and be seen, but some attendees want to be anywhere but there. Why? The location.

Stat: Will San Francisco’s Issues Push People Away From J.P. Morgan?


Adding work requirements to Medicaid has proven to be the honey it takes to make expanding coverage more palatable to Republican states. But, in Arkansas — the testing ground for what exactly those rules look like in practice — thousands of residents are getting kicked off the Medicaid rolls. A picture of confusion, flawed technology and basic human error is emerging as advocates try to figure out what is going wrong.

Politico: Conservative Health Care Experiment Leads to Thousands Losing Coverage


If you managed to tune out a bit from the news over the holidays, here are some developments you should know about:

A second migrant child died in U.S. custody, prompting President Donald Trump to attempt to shift blame to the Democrats. The administration has been under ever-increasing scrutiny for the quality of care the young migrant children are receiving.

The New York Times: Trump Blames Democrats Over Deaths of Migrant Children in U.S. Custody

Hospitals were handed a major victory when a judge blocked cuts to the 340B drug program, which requires pharmaceutical manufacturers to sell drugs at discounts to hospitals serving large proportions of low-income and vulnerable people, such as children or cancer patients. The judge said the administration overstepped its authority in its push to try to lower drug prices.

Stat: Judge Blocks Trump Administration Cuts to 340B Hospital Payments

A damning investigation into the nation’s major hospital watchdog found that more than 100 psychiatric hospitals have remained fully accredited by the commission despite serious safety lapses, some of which were connected to the death, abuse or sexual assault of patients.

The Wall Street Journal: Psychiatric Hospitals With Safety Violations Still Get Accreditation


And in my miscellaneous file: 

• The old and powerful veteran advocacy groups — aka the “Big Six” — have been major players on Capitol Hill for years. But their power is diminishing as leaner, more efficient and more tailored groups chip away at the establishment and reflect the priorities of a new generation of veterans.

The New York Times: Their Influence Diminishing, Veterans Groups Compete With Each Other and Struggle With the V.A.

• The prominent Memorial Sloan Kettering Cancer Center has not been having a good fall. That’s in part due to the fabulous reporting done by The New York Times and ProPublica, which revealed conflicts of interest among the organization’s leaders. If you haven’t kept up with the story, this offers a great overview on how this ethical morass is playing out not only there but across the country as well.

The New York Times: Memorial Sloan Kettering’s Season of Turmoil

• Does medication-assisted treatment for opioid addiction simply replace one drug with another? Or is it necessary to stop a relentless and sweeping epidemic that has claimed far too many victims? That’s the raging debate as experts try to get their arms around the crisis.

The New York Times: In Rehab, ‘Two Warring Factions’: Abstinence Vs. Medication

• An outbreak of cancer in children is pitting families deep in Trump Country against the president’s agenda to roll back health and environmental restrictions.

The New York Times: A Trump County Confronts the Administration Amid a Rash of Child Cancers

• Between salmonella in turkeys and E. coli in romaine lettuce, the country was beset with foodborne illness outbreaks last year. But one of the biggest recalls is one you probably haven’t even heard about.

New Food Economy: The Listeria Scare That Hit Whole Foods, Trader Joe’s, and Walmart Led to 100 Million Pounds of Recalled Product — And No One Noticed


Apparently, New Year’s resolutions won’t bring you joy (whether you achieve them or not), but if one of yours is to switch up your diet, check out the newly released rankings from U.S. News & World Report.

Mergers And Acquisitions Have Been Flourishing Across Health Landscape. But What If There’s No One For Hospitals To Make A Deal With?

The solution for the oldest orthopedic hospital in the U.S.? Simply multiply. Hospital for Special Surgery is launching an expansion strategy that its leaders say is designed to match the demand of a population with a more active lifestyle. In other hospital news: master price lists, HRAs, and outpatient revenue.

When Medicine Makes Patients Sicker

ANN ARBOR, Mich. — Despite the jackhammer-like rhythm of a mechanical ventilator, Alicia Moreno had dozed off in a chair by her 1-year-old’s hospital bed, when a doctor woke her with some bad news: The common stool softener her son, Anderson, was given months earlier had been contaminated with the bacterium Burkholderia cepacia.

Suddenly, Anderson’s rocky course made medical sense. B. cepacia was the same unusual bacterium mysteriously found in the boy’s respiratory tract, temporarily taking him off the list for a heart transplant. The same bacterium resurfaced after his transplant and combined with a flu-like illness to infect his lungs. He’s been on a ventilator ever since.

The tainted over-the-counter medicine, docusate sodium, routinely prescribed to nearly every hospitalized patient to avert constipation, caused Anderson to suffer “serious and dangerous life-threatening injuries,” a lawsuit filed by his family alleges. The drug was eventually recalled, but only after a Texas hospital staff noticed an uptick in B. cepacia infections, prompting a six-month investigation that led back to the tainted drug and its Florida manufacturing plant.

“Something that was supposed to help him hurt him,” Alicia Moreno said.

Since the start of 2013, pharmaceutical companies based in the U.S. or abroad have recalled about 8,000 medicines, comprising billions of tablets, bottles and vials that have entered the U.S. drug supply and made their way to patients’ medicine cabinets, hospital supply closets and IV drips, a Kaiser Health News investigation shows. The recalls represent a fraction of the medicines shipped each year. But the flawed products contained everything from dangerous bacteria or tiny glass particles to mold — or too much or too little of the drug’s active ingredient.

Over the same period, 65 drug-making facilities recalled nearly 300 products within 12 months of passing a Food and Drug Administration inspection — as was the case with the stool softener, according to a KHN analysis of recall notices and inspection records kept by the FDA.

Those recalls included more than 39,000 bottles of the HIV drug Atripla laced with “red silicone rubber particulates,” nearly 37,000 generic Abilify tablets that were “superpotent,” and nearly 12,000 boxes of generic Aleve (naproxen) that were actually ibuprofen, according to the recall data KHN examined.

The medicine alleged to have sickened Anderson Moreno seriously infected at least 63 other people in 12 states, according to reports by the FDA and Centers for Disease Control and Prevention. The drug was made at a PharmaTech plant in Broward County, Fla. That same plant passed an FDA inspection even while it was making bacteria-laced products, according to a KHN review of the inspection records.

PharmaTech did not respond to KHN’s requests for comment. A lawyer for the drugmaker filed a motion to dismiss the lawsuit in April, but it was not granted. In follow-up court records, PharmaTech has denied claims against it.

Like other FDA commissioners before him, Scott Gottlieb has called his agency’s drug oversight program the “gold standard” for safety and effectiveness.

But veteran industry consultant John Avellanet, who has trained FDA inspectors, questions how effective the FDA’s drug plant inspections actually are. “It’s so easy” for FDA inspectors to miss things because they’re working with confusing regulatory terms and standards that are often decades out of date, Avellanet said.

Just how often people are sickened or die from tainted drugs is next to impossible to determine. No government agency tracks cases unless they’re linked to a major outbreak among hospital patients. And sudden, seemingly random illnesses in disparate places are notoriously hard to link to a tainted drug. That’s in part because drugmakers don’t have to divulge which products are made in which manufacturing plants, since that is regarded as proprietary information.

The result: Even someone who buys drugs for a major hospital can’t track down where a potentially dangerous product came from, said Erin Fox, who purchases medicines for University of Utah Health hospitals.

“Patient safety should come first,” she said, adding that the KHN analysis indicates “our drug quality is probably not what we think it is,” and calling it a “scary” reality. “Something does need to change if this is happening this many times and we’re having patients receiving contaminated products.”

The FDA declined to be interviewed for this story, but responded to written questions.

“While the FDA would prefer that no drug be distributed that later is recalled, we do not think that a recall indicates a failure of FDA inspection and surveillance programs,” FDA spokesman Jeremy Kahn said in an email. He said inspectors “may not uncover all issues or practices that may eventually result in a problem leading to a recall” and that “not all recalls are the result of poor manufacturing practice.”

The PharmaTech Story

“Lucky fin, lucky fin, lucky fin,” Alicia Moreno, 30, cheered as she untangled her now 3-year-old son’s stroke-weakened arm from a sweater and his portable ventilator in the back seat of the car for yet another four-hour drive to see doctors in Ann Arbor, Mich. In the Disney movie “Finding Nemo,” Nemo’s father calls the young fry’s smaller fin his “lucky fin.”

While her husband drives, Alicia pulls out a clear plastic case of syringes and watches the clock on the dashboard. Anderson needs about two dozen different medicines every 24 hours, and Alicia administers them via a port in his belly at designated times.

Alicia Moreno spends the day with her son, Anderson.(Heidi de Marco/KHN)

It wasn’t always like this. Anderson appeared healthy until his 6-month checkup in May 2016, his mother said. Partway through the exam, the Morenos rushed their baby to a nearby hospital and learned he was in heart failure and would need a transplant to survive. That’s where he received the tainted stool softener, his lawyers allege. The hospital where Anderson eventually received his transplant confirmed via email that Anderson tested positive for the same strain of B. cepacia involved in the outbreak traced back to PharmaTech’s contaminated drug.

In July, according to the family, Anderson started to have difficulty breathing and his temperature spiked to 106 degrees, which landed him in the ICU, where doctors and nurses packed him with ice and rushed to find the cause. Their tests turned up positive for B. cepacia, a bacterium found in untreated water that doesn’t typically make healthy people sick. Anderson’s status on the transplant list was put on hold, and his heart condition worsened. He was placed on a machine that transferred blood outside his body, oxygenated it and pumped it back in.

Anderson finally got a heart transplant in November 2016, but four days after doctors closed his chest, his fever was back and his lungs kept getting worse, requiring more complicated machinery. Tests came back positive for a flu-like virus and B. cepacia, according to the hospital.

“Where did he get it?” his parents pleaded. At the time, no one knew.

Anderson Moreno uses a portable ventilator because of his impaired lung capacity.(Heidi de Marco/KHN)

The Moreno family makes the four-hour drive home from C.S. Mott Children’s Hospital in Ann Arbor, Mich., where doctors checked Anderson’s lungs, kidneys and other systems in back-to-back appointments.(Sydney Lupkin/KHN)

How Tainted Drugs Slip Through the Cracks

The FDA is supposed to inspect all factories, foreign and domestic, that produce drugs for the U.S. market. But a KHN review of thousands of FDA documents — inspection records, recalls, warning letters and lawsuits — offers insight into the ways poorly manufactured or contaminated drugs reach consumers: Inspectors miss serious hazards. Drugmakers fail to meet standards even after the FDA has taken enforcement action. Hundreds of plants haven’t been inspected for years, if ever.

Last July, for example, the FDA announced the first of many voluntary recalls of the blood pressure medicine valsartan because some tablets contain a cancer-causing impurity called N-nitrosodimethylamine (NDMA). They would later find a similar carcinogen, N-nitrosodiethylamine (NDEA), in valsartan pills. Over the prior two years, investigators had detected worrisome problems in two overseas factories involved in the manufacturing of the drug.

In 2017, FDA investigators found rust, chipping paint and deteriorating equipment at a plant run by Zhejiang Huahai Pharmaceutical Co. in Zhejiang, China. Plant staffers weren’t properly testing and investigating “anomalies” in their drugs, dismissing problematic test results, the FDA said at that time. Inspectors also found “black metallic particles” and other problems in some unidentified drugs.

The FDA inspected the plant in July 2018 after complaints about NDMA from a facility further down the drug supply chain. The FDA put the facility on import alert in late September and issued a warning letter in November detailing deficiencies, including “Failure of your quality unit to ensure that quality-related complaints are investigated and resolved.”

At a facility of Hetero Labs in India, in 2016, FDA inspectors found colored and white residue in components, some of the factory’s tablets were twice as thick as others, and employees were shredding documents in the middle of the night. The FDA issued a warning letter to the company as a result of the inspection.

Plants making drugs for U.S. consumers are supposed to be inspected every few years, according to a risk-based system. However, in the past decade more than 2,500 facilities, both foreign and domestic, have gone more than five years without an FDA drug-quality inspection, a KHN analysis found. The FDA has no drug-quality inspection records over the past decade for more than 1,200 domestic plants and nearly 400 foreign plants, excluding those that make animal drug products, according to the analysis. Gottlieb said in December that he hopes to clear the backlog of uninspected drug facilities by the end of September 2019.

At best, the inspections are a snapshot in time, and involve looking at processes rather than evaluating the drugs themselves, said drug-quality specialist Dinesh Thakur, who has worked for drugmakers. The inspections might take place while the facility is making only one of a dozen or so drugs that it usually manufactures.

“The implicit assumption … is that if the [manufacturing] processes are sound, the product will be of good quality,” said Thakur, who raised the alarm about quality-control problems at generics drugmaker Ranbaxy, resulting in a 2013 guilty plea and a $500 million settlement. “Your data tells us this is not true.”

Many inspections, he said, are “stage-managed,” so that factories pass on the appointed day, but “once the inspectors leave, it’s a completely different story.”

David Gortler, a former FDA medical officer, said most drug plant inspections involve looking over paper records and trusting that they’re real, instead of randomly testing medicines.

“Anybody can write down anything on a piece of paper,” said Gortler, who is now a consultant at FormerFDA.com. He added that FDA inspectors aren’t reprimanded — or even told — if they’ve passed a plant that issued a recall shortly thereafter.

A sign on the Morenos’ front door asks visitors not to enter if they have recently been sick.(Heidi de Marco/KHN)

A tray of syringes sits on the kitchen countertop. Anderson needs about two dozen different medicines every 24 hours, says his mother, Alicia.(Heidi de Marco/KHN)

Alicia administers Anderson’s medicines via a port in his belly at designated times.(Heidi de Marco/KHN)

A Lucky Break Solves A Mystery

The contaminated stool softener alleged to have sickened Anderson Moreno was one of many drugs recalled by plants shortly after they passed an FDA inspection. The bacteria was detected only after an outbreak of disease — and after a good deal of medical sleuthing.

More than 1,000 miles away from Anderson’s ICU bed in Michigan, staff at Texas Children’s Hospital’s pediatric ICU in Houston had diagnosed three cases of B. cepacia in one week in February 2016, according to a 2017 medical journal article published in Infection Control and Hospital Epidemiology. It was odd because there had been no cases the previous year.

Hospital staff members embarked on a months-long investigation and by July had identified 24 victims, whose median age was under 2 years old. Patients had the same strain of the bacteria in their blood, their respiratory tracts, their urine or their stool, according to the article.

Samples matched the bacteria found in liquid docusate, the stool softener, the researchers wrote.

The hospital alerted the CDC and other public health officials of its findings. The CDC would eventually identify 63 confirmed and 45 suspected serious B. cepacia infections in 12 states tied to the contaminated drug.

A 36-day FDA inspection of PharmaTech in Davie, Fla., that ended Aug. 9, 2016, revealed that the bacteria was in water used to clean equipment and make liquid products. FDA inspectors concluded that the bacterium made it into the facility’s drugs starting in 2015 and was still present in the water.

Anderson was treated with the stool softener in May 2016. His parents filed suit in September 2017 in PharmaTech’s home of Broward Country, Fla., against the drugmaker and others in the drug supply chain, alleging the drug was contaminated and caused him grievous damage. PharmaTech, which did not return KHN’s requests for comment, unsuccessfully filed a motion to dismiss and has denied all charges in a subsequent filing.

A 9-month-old girl in Pittsburgh who had received the stool softener died on May 4, 2016, according to a lawsuit her family filed in July 2017 in the U.S. District Court for the Western District of Pennsylvania. Her mother learned about the drug recall by chance and asked the hospital whether her deceased daughter received the tainted drug, her lawyer told KHN. The family filed charges against PharmaTech and others in the drug supply chain in a wrongful death lawsuit. The court rejected PharmaTech’s motions to dismiss and strike, and the drugmaker denied liability in a subsequent filing. In November 2017, a lawyer representing PharmaTech in that wrongful death case told the Orlando (Fla.) Sun Sentinel that it will defend itself against the allegations and couldn’t comment further “because of the ongoing nature of litigation.”

According to federal records, FDA inspectors had a chance to catch the contamination during their March 2016 inspection, but the PharmaTech plant passed with no citations. PharmaTech CEO Ray Figueroa saluted the inspection results in a press release, calling it “a testimony to PharmaTech’s commitment to world-class quality.”

How Things Can Go Wrong

The FDA has issued thousands of enforcement actions against drug plants over the years, citing safety violations, issuing warning letters and blocking imports from certain foreign plants. In rare cases, the FDA can also seize drug products and has done so 23 times in the past decade. The last drug seizure was more than two years ago, according to FDA records.

In an emailed statement, FDA chief Gottlieb said the FDA is “taking new steps” to identify problems before they occur and it is “not shy” to use its powers to mitigate risks.

But the system can be stymied or gamed and the FDA’s enforcement abilities are limited. For instance, it doesn’t have the power to issue a mandatory recall, and manufacturing citations don’t come with fines.

Many cases come to light only when a whistleblower sounds an alarm.



Thakur, the Ranbaxy whistleblower, said officials in other countries sometimes tip off plants about “surprise” FDA inspections. And FDA inspectors often have to rely on translators hired by the drug companies, said Avellanet, who has been a drug facility inspection consultant for more than 20 years.

At Nippon Fine Chemical in Japan, employees stood “shoulder-to-shoulder” to keep an FDA official out in December 2015, according to an enforcement letter sent to the plant and published online.

Less than a year later, Vikshara Trading & Investments Ltd. in India allegedly faked a worker strike to block the entrance to the plant, according to an FDA enforcement document that described the manufacturer’s “false statements.” When inspectors were eventually allowed in, the lights were kept off.

“Our investigator had to perform parts of the walkthrough in the dark, using a flashlight,” the FDA warning letter reads, adding that an unidentified powder was “scattered” and “caked on the floor” in production areas and detected on finished drug products.

Two former employees have filed a whistleblower suit against Gilead Sciences, alleging it lied to the FDA about using a drug-manufacturing facility in South Korea, when it was actually using an unregistered facility in China. According to the civil complaint filed in September 2014 in U.S. District Court for the Northern District of California, the ingredient produced at Synthetics China and used in HIV drugs Truvada and Atripla contained “glass-like shards,” “black rubber-like particles,” “plastic-like particles,” “small stone or pebble-like particles” and “metal shards.”

The whistleblowers alleged Gilead’s Alberta, Canada, plant was tasked with sieving contaminants and helping to conceal where the ingredient was made.

They said one batch of the ingredient was contaminated with arsenic, chromium and nickel. Another had a dangerous bacterium called Bacillus cereus, according to the whistleblowers’ suit. Still, Gilead released the product and didn’t initiate a recall, the whistleblowers alleged.

Years after the whistleblowers stopped working for Gilead, the drugmaker issued two voluntary recalls of HIV drugs in 2014, about seven months apart. Both recalls cited contamination with red silicone rubber particulates.

Gilead declined to comment. Gilead has fought the lawsuit, alleging that since the government knew of the allegations and did not penalize it by denying drug approvals or payments, the suit could not move forward. In 2015, a federal judge dismissed the case, but a panel from the 9th District Court of Appeals reversed that decision in 2017. Now the Supreme Court may hear it; in April 2018, it invited the solicitor general to file a brief, “expressing the views of the United States.” The Justice Department filed a brief in November, saying pursuing the lawsuit is “not in the public interest.”

Since the FDA has little power to force a drugmaker to fix problems or issue recalls, FDA inspectors often flag the same violations again and again. A KHN analysis found that over the past decade 70 drug plants — most of them domestic — were penalized for the same violation at least four times. And more than a third of those plants has issued a recall at some point.

Altaire Pharmaceuticals in New York was cited five times by FDA inspectors for inadequate “procedures for sterile drug products.” In 2013, it recalled 363,746 bottles of generic eye drops sold at CVS, Target and Walmart over sterility concerns — namely mold — because the preservative in the product “may not be effective” through the expiration date. Overall, Altaire was told to correct 15 violations at least twice.

KHN attempted to contact Altaire Pharmaceuticals, but the company did not reply.

Kept In The Dark

About a year after the initial PharmaTech recall in 2016, the FDA announced another recall for the same drugs and the same bacterium: B. cepacia. When Erin Fox saw the second recall, she thought it was a mistake. The alert said to avoid drugs made by PharmaTech under several labels “and possibly [products from] other companies.” What other companies? Fox wondered. How could they not know which ones?

Doctors at the hospital asked Fox to remove all PharmaTech-made products from the shelves, but because of lax labeling laws, she said, she couldn’t be sure which those were. Drug labels need to include only the manufacturer, the packer or the distributor — not all three — so the doctors suggested she call PharmaTech and ask what else it manufactures and for whom.

“Of course,” Fox said, “they wouldn’t tell us.”

Methodology

To analyze the inspections and recalls of plants that manufacture drugs, KHN started with two Food and Drug Administration databases of drug recalls: one at OpenFDA, and one on the FDA’s recall data dashboard. The first provided details about drugs, dates and quantities recalled, and the second provided a recalling plant ID, called an FEI. We used them both to create a more complete recall database.

The FEIs served as a bridge between the recalls data and two inspection data tables. Both tables contained inspection dates and purposes, but one listed inspection grades and the other contained a list of citations. Combining inspection and recall databases allowed us to find the most recent inspection at each plant that preceded a recall, and to determine its grade. It also allowed us to count repeat citations and determine whether plants that received them ever initiated a recall.

To determine whether plants had not been inspected in the past decade, we compared our inspections data to the Drug Establishments Current Registration Site database, which contains all registered operating plants. We excluded plants that made products for animals and those that didn’t explicitly “manufacture” drugs, according to the database. The FDA has said there may be a delay in adding inspections to its database after they are completed.

Our data is current as of early October 2018. We included only inspections categorized as “drug quality assurance” inspections throughout the analysis.


KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.

As Hospitals Post Sticker Prices Online, Most Patients Will Remain Befuddled

As of Jan. 1, in the name of transparency, the Trump administration required that all hospitals post their list prices online. But what is popping up on medical center websites is a dog’s breakfast of medical codes, abbreviations and dollar signs — in little discernible order — that may initially serve to confuse more than illuminate.

Anyone who has ever tried to find out in advance how much a hospital test, procedure or stay will cost knows the frustration: “Nope, can’t tell you” or “It depends” are common replies from insurers and medical centers.

While more information is always welcome, the new data will fall short of providing most consumers with usable insight.

That’s because the price lists displayed this week, called chargemasters, are massive compendiums of the prices set by each hospital for every service or drug a patient might encounter. To figure out what, for example, a trip to the emergency room might cost, a patient would have to locate and piece together the price for each component of their visit — the particular blood tests, the particular medicines dispensed, the facility fee and the physician’s charge, and more.

“I don’t think it’s very helpful,” said Gerard Anderson, director of the Johns Hopkins Center for Hospital Finance and Management. “There are about 30,000 different items on a chargemaster file. As a patient, you don’t know which ones you will use.”

And there’s this: Other than the uninsured and people who are out-of-network, few actually pay full charges.

The requirement to post charges online in a machine-readable format, such as a Microsoft Excel file, came in a 2018 guidance from the Trump administration that builds on rules in the Affordable Care Act. Hospitals have some leeway in deciding how to present the information — and currently there is no penalty for failing to post.

“This is a small step” toward price transparency amid other ongoing efforts, Centers for Medicare & Medicaid Services Administrator Seema Verma said in a speech in July.

But finding the chargemaster information on a hospital’s website takes diligence. Patients can try typing the hospital’s name into a search engine, along with the keywords “billing” or “chargemaster.” That might produce a link.

Even when consumers do locate the lists, they might be stymied by seemingly incomprehensible abbreviations.

The University of California San Francisco Medical Center’s chargemaster, for example, includes a $378 charge for “Arthrocentesis Aspir&/Inj Small Jt/Bursa w/o Us,” which is basically draining fluid from the knee.

At Sentara in Hampton Roads, Va., there’s a $307 charge for something described as a LAY CLOS HND/FT=<2.5CM. What? Turns out that is the charge for a small suture in surgery.

Which services, treatments, drugs or procedures a patient will face in a hospital stay is often unknowable. And the charge listed is just one component of a total bill. Put simply, an MRI scan of the abdomen has related costs, such as the charge for the radiologist who reads the exam.

Even something as seemingly straightforward as an uncomplicated childbirth can’t easily be calculated by looking at the list.

Comparisons between hospitals for the same care can also be difficult.

An uncomplicated vaginal delivery charge at the Cleveland Clinic’s main campus is $3,466.

Looking for that same information on the Minnesota Mayo Clinic’s online chargemaster page shows two listings, one for $3,030, described as “labor and delivery level 1 short” and the other for $5,236, described as “labor and delivery level 2 long.” But, what’s a short labor? What’s a long one? How is a patient who didn’t go to med school supposed to know the difference?

Also, those are just the charges for the actual delivery. There are also per-day room charges for mom and the newborn, not to mention additional charges for medications, physicians and other treatments.

To get at the total estimated charge, California requires hospitals to report charges for a select number of such “bundles” of care, called “diagnosis-related groups,” or DRGs, in Medicare jargon.

At the University of California-San Francisco’s hospital, for example, there are two chargemaster line items for vaginal childbirth: One is $5,497 and the other is $12,632. But there’s no indication how these differ. Consumers might then turn to the “bundled” cost based on those DRGs, where the ancillary costs are included. That lists the total charge for an uncomplicated childbirth at an astounding $53,184.

A UCSF spokeswoman said no officials were available to comment on this figure.

Though chargemaster rates are quite different from the lower, negotiated rates that insurers pay, they do become the basis for what patients pay who are without insurance or who are treated at hospitals outside their insurer’s network. Out-of-network patients are often surprised when they get what are called “balance bills” for the difference between what their insurer pays toward their care and those full charges.

Still, even knowing chargemaster rates “would be entirely unhelpful” in fighting a high balance bill, said Barak Richman, a law professor at Duke University who has written extensively about balance bills and hospital charges.

“Chargemasters are enormous spreadsheets with incredibly complicated codes that no one short of a billing expert would be able to make sense of,” he said.

Nevertheless, some experts say that merely making the charges public shines a light on the often very high — and widely varying — prices set by facilities.

Even if those charges are only “what hospitals would like to receive,” posting them publicly could make hospitals “totally embarrassed by the prices,” said Anderson at Hopkins.

Billing expert George Nation, a finance professor at Lehigh University, said that rather than posting chargemaster lists, hospitals should be required to provide the average prices they accept from insurers. Hospitals generally would oppose that, saying negotiated rates are a trade secret.

It’s unclear that the lists will have much impact. “It’s been the norm here in California for over a decade,” said Jan Emerson-Shea, vice president of external affairs for the California Hospital Association. Even so, “from a practical standpoint, I’m not sure how useful this information is,” she said. “What an individual pays to [the] hospital is going to be based on what their insurer covers.”

That could include such things as the annual deductible, whether the facility or physicians involved in the care are in-network and other details.

“The hospital piece is just a small piece,” said Ariel Levin, senior associate director for state issues at the American Hospital Association.

Still, “the biggest concern is it falls short of that end goal because it really doesn’t help consumers understand what they are going to be liable for,” she said.

Podcast: KHN’s ‘What The Health?’ Ask Us Anything!

This week, KHN’s “What the Health?” panelists answered questions submitted by listeners.

Among the topics covered were why Medicare doesn’t cover most dental care, how to address high drug prices and what federal officials do with all that data they collect from health care providers.

This week’s panelists for KHN’s “What the Health?” are Julie Rovner of Kaiser Health News, Joanne Kenen of Politico, Stephanie Armour of The Wall Street Journal and Paige Winfield Cunningham of The Washington Post.

The panel addressed questions including the following:

  • “Besides your podcast, what resources, including books and journals, do you recommend people read to build basic knowledge about the U.S. payer system?”
  • “What is the likelihood that Congress will pass legislation to include full dental care in Medicare, say in the next 10 years?”
  • “CMS collects an extraordinary amount of data from its various quality reporting programs. … What does the agency do with this data and is there any evidence quality reporting improves patient outcomes or achieves other policy aims?”
  • “Do you have a view on whether Medicare paying less money for prescription drugs would lead to drug companies charging more to private insurers?”
  • “There’s been a lot of back-and-forth lately between the National Institutes of Health, the Department of Health and Human Services and the media regarding fetal tissue research. HHS is currently doing a review, and the Trump administration just posted a ban to the NIH labs to stop procuring any new fetal tissue. This jeopardizes many research studies, especially those studying HIV. What do you think the long-term consequences of this will be?”

To hear all our podcasts, click here.

And subscribe to What the Health? on iTunesStitcher or Google Play.

Podcast: KHN’s ‘What The Health?’ Ask Us Anything!

This week, KHN’s “What the Health?” panelists answered questions submitted by listeners.

Among the topics covered were why Medicare doesn’t cover most dental care, how to address high drug prices and what federal officials do with all that data they collect from health care providers.

This week’s panelists for KHN’s “What the Health?” are Julie Rovner of Kaiser Health News, Joanne Kenen of Politico, Stephanie Armour of The Wall Street Journal and Paige Winfield Cunningham of The Washington Post.

The panel addressed questions including the following:

  • “Besides your podcast, what resources, including books and journals, do you recommend people read to build basic knowledge about the U.S. payer system?”
  • “What is the likelihood that Congress will pass legislation to include full dental care in Medicare, say in the next 10 years?”
  • “CMS collects an extraordinary amount of data from its various quality reporting programs. … What does the agency do with this data and is there any evidence quality reporting improves patient outcomes or achieves other policy aims?”
  • “Do you have a view on whether Medicare paying less money for prescription drugs would lead to drug companies charging more to private insurers?”
  • “There’s been a lot of back-and-forth lately between the National Institutes of Health, the Department of Health and Human Services and the media regarding fetal tissue research. HHS is currently doing a review, and the Trump administration just posted a ban to the NIH labs to stop procuring any new fetal tissue. This jeopardizes many research studies, especially those studying HIV. What do you think the long-term consequences of this will be?”

To hear all our podcasts, click here.

And subscribe to What the Health? on iTunesStitcher or Google Play.

Pharma Is Back To Raising Drug Prices, But Increases Aren’t Quite As Eye-Popping As Industry Tries To Avoid Spotlight

“Clearly, more caution is in the air and many major multinationals such as Pfizer and Novartis, which found themselves making the headlines several months back, have yet to implement their January increases,” said Raymond James analyst Elliot Wilbur. President Donald Trump said on Wednesday that he expects drug prices to drop despite pharmaceutical companies lifting their self-imposed hiatus on price increases.

Pharma Is Back To Raising Drug Prices, But Increases Aren’t Quite As Eye-Popping As Industry Tries To Avoid Spotlight

“Clearly, more caution is in the air and many major multinationals such as Pfizer and Novartis, which found themselves making the headlines several months back, have yet to implement their January increases,” said Raymond James analyst Elliot Wilbur. President Donald Trump said on Wednesday that he expects drug prices to drop despite pharmaceutical companies lifting their self-imposed hiatus on price increases.

Coverage Denied: Medicaid Patients Suffer As Layers Of Private Companies Profit

Marcela Villa isn’t a big name in health care — but she played a crucial role in the lives of thousands of Medicaid patients in California. Her official title: denial nurse.

Each week, dozens of requests for treatment landed on her desk after preliminary rejections. Her job, with the assistance of a part-time medical director, was to conclusively determine whether the care — from doctor visits to cancer treatment — should be covered under the nation’s health insurance program for low-income Americans.

She was drowning in requests, she said, and felt pressed to uphold most of the denials she saw. “If it was a high-dollar case, they tried to deny it,” Villa said. “I told them you can’t deny it just because it’s going to cost $20,000.”

Villa, 32, did not work for the government. She did not even work for an insurer under contract with the government. She worked for a company now called Agilon Health. Owned by a private equity firm, it’s among the legion of private subcontractors looking to profit from Medicaid patients.

California’s Medicaid program, known as Medi-Cal, has determined that the Long Beach company, which was paid to coordinate care for about 400,000 patients, improperly denied or delayed care for at least 1,400 of them, state officials confirmed. The state Department of Managed Health Care is investigating further.

The state findings, along with internal company documents and a whistleblower complaint obtained by Kaiser Health News, shine a light on the potential dangers of outsourcing care for poor people. Government oversight, not rigorous to begin with, fades as taxpayer money filters down through layers of companies eager to seize on Medicaid’s substantial growth under the Affordable Care Act. Medicaid officials say they have authority only over the health plans, not their subcontractors.

In an interview, Agilon chief executive Ron Kuerbitz acknowledged that some patients experienced modest delays in care but disputed that any suffered unjustified denials. He noted that an internal investigation by the company found no evidence of “systemic” denials and that most of the problems existed before Agilon took over another firm, Primary Provider Management Co., in 2016.

“We did the right thing when it was identified,” Kuerbitz said of the problems. “We disclosed it, we investigated it, and we pursued a remedial path.”

Such concerns are not isolated to one company. Last year, KHN reported on similar irregularities at SynerMed, a Medicaid subcontractor that coordinated care for about 650,000 patients in California.

In response to a whistleblower complaint, the state Medicaid program said it found “widespread deficiencies” at SynerMed that put patients “in imminent danger of not receiving medically necessary healthcare services.” The company’s staffers had falsified documents for years to cover up improper denials of care, according to state officials.

Then SynerMed abruptly shut down, and some of its patients moved to Agilon’s medical groups.

Skimping On Services?

Nearly three-quarters of the 73 million low-income Americans on Medicaid are now in managed care, in which states pay health insurers fixed monthly amounts for each enrollee to cover the range of services they need.

Under this system, keeping patients as healthy as possible is one way to make money. Another is to deny or skimp on services.

Increasingly, Medicaid plans outsource the work of managing patients’ health and medical treatment to subcontractors like Agilon — passing along a share of the government money coupled with the financial risk posed by a fixed budget.

These firms can be powerful gatekeepers. They run physician groups, bear responsibility for forming doctor networks and judge whether a request for care is necessary.

Agilon is a big player in California — doing business with insurers such as Molina Healthcare and Blue Shield of California — and it’s now expanding in other states like Texas and Ohio.

Primary Provider Management Co. ran several medical groups, including Vantage Medical Group with more than 5,000 physicians across Southern California. By building off PPMC’s base of Medicaid enrollees in California, the New York private equity firm that owns a majority stake in Agilon — Clayton, Dubilier & Rice — sought to coordinate care in Medicaid and Medicare Advantage plans across the country. (CD&R did not respond to interview requests.)

For several years, the problems at PPMC, and then Agilon, went undetected. Then, in early 2018, Agilon disclosed to the California Department of Managed Health Care its discovery that employees had been altering records prepared for auditors, which it said was not known to top management.

According to an internal report, completed in May and obtained by KHN, staffers had been falsifying documents since at least 2014 to pass audits by health plans. Employees were changing dates, for example, to cover up delays or withholding certain files so they couldn’t be reviewed.

That same month, an anonymous whistleblower sent a letter to health plans and government officials, urging them to investigate “illegal, unethical” conduct at the firm. “Senior management delays treatments for cancer patients without any regard of patient’s well-being, to save their dollars,” the whistleblower wrote in a two-page letter reviewed by KHN. “They brag about how profitable we are.”

In response to the allegations raised by the whistleblower and state, Agilon opened another internal investigation. That second report, finished in June, found inadequate staffing to handle the volume of work, various shortcuts and practices outside industry “norms” and improperly denied claims. Both internal reports were released to the state.

A top official Inland Empire Health Plan, one of the largest Medicaid insurers in the country, said the plan also looked into Agilon’s conduct and found instances in which its patients were harmed.

In an interview, Inland Empire CEO Bradley Gilbert said Agilon denied a patient’s transfusions for anemia, causing the person to be hospitalized. It also improperly denied cardiac rehabilitation to a patient recovering from a heart attack, he said. Inland Empire canceled its contract with Agilon’s Vantage Medical Group in August, he said.

A ‘Manager Told Me To Do It’

Agilon’s June report depicts an operation that was often stretched thin: Nurses were handling 120 to 200 requests for care per day, on average, with no full-time medical director to review the findings.

From 2014 until May, the company relied on a family physician who was working 10 to 12 hours a day running his own medical practice, according to the report.

Dr. Reuel Gaskins was busy seeing his own patients at the Hampton Medical Clinic in Riverside, Calif., where a red neon sign flashes “Open” in the front window. In an interview, Gaskins said he reviewed cases during breaks throughout the day and after normal work hours. He said he left Agilon in April.

Ultimately, Agilon’s internal investigation found that patient care may have been denied 439 times since 2014 without a physician’s review of the medical records — a potential violation of state law. Under California law, only a licensed physician or health care professional who is “competent to evaluate the specific clinical issues involved” can determine medical necessity.

Gaskins said he was not aware of allegations that medical decisions were made without his review until he was interviewed by Agilon’s lawyers.

“That’s inappropriate and unacceptable,” he said. “It really bothered me when I heard about it.”

The June report also found that Villa helped alter 20 files at the request of a supervisor in 2014 so her employer could pass an upcoming audit by an insurer.

A “manager told me to do it,” Villa said in an interview. “They were so adamant that everything look perfect for the auditors.”

A few days after the company’s lawyers made that discovery, Agilon sent Villa home on paid leave, the nurse said. She said that when she returned to work in August, she found she had been replaced as denial nurse, and shortly after that, she was fired.

Meanwhile, in recent months, Agilon has mended its relationships with some insurers and won new Medicaid contracts.

Consumer advocates worry that the concerns surrounding Agilon and SynerMed signal a much larger problem in the burgeoning Medicaid managed-care industry.

“These private entities get very little oversight,” said Linda Nguy, a policy advocate at the Western Center on Law & Poverty in Sacramento, “and there’s real harm being done to patients.”


This story was produced by Kaiser Health News, which publishes California Healthline, a service of the California Health Care Foundation.

How Sen. Orrin Hatch Changed America’s Health Care

Sen. Orrin Hatch, the Utah Republican retiring from 42 years in the Senate as a new generation is sworn in, leaves a long list of achievements in health care. Some were more controversial than others.

Hatch played key roles in shepherding the 1983 Orphan Drug Act to promote drug development for rare diseases, and the 1984 National Organ Transplant Act, which helped create a national transplant registry. And in 1995, when many people with AIDS were still feeling marginalized by society and elected leaders, he testified before the Senate about reauthorizing funding for his Ryan White CARE Act to treat uninsured people who have HIV.

“AIDS does not play favorites,” Hatch told other senators. “It affects rich and poor, adults and children, men and women, rural communities and the inner cities. We know much, but the fear remains.”

Hatch, now 84, co-sponsored a number of bills with Democrats over the years, often with Sen. Ted Kennedy of Massachusetts. The two men were sometimes called “the odd couple,” for their politically mismatched friendship.

In 1997, the two proposed a broad new health safety net for kids — the Children’s Health Insurance Program.

“This is an area the country has made enormous progress on, and it’s something we should all feel proud of — and Senator Hatch should too,” said Joan Alker, executive director of Georgetown University’s Center for Children and Families.

Before CHIP was enacted, the number of uninsured children in America was around 10 million. Today, it’s under half that.

Hatch’s influence on American health care partly came from the sheer number of bills he sponsored — more than any other living lawmaker — and because he was chairman of several powerful Senate committees.

“History was on his side because the Republicans were in charge,” said Dr. David Sundwall, an emeritus professor in public health at the University of Utah and Hatch’s health director in the 1980s.

When Ronald Reagan was elected president in 1981, the Senate became Republican-controlled for the first time in decades. Hatch was appointed chairman of what is now known as the Health, Education, Labor and Pensions Committee. The powerful legislative group has oversight of the Food and Drug Administration, Centers for Disease Control and Prevention and the National Institutes of Health.

“He was virtually catapulted into this chairmanship role,” Sundwall said. “This is astonishing that he had chairmanship of an umbrella committee in his first term in the Senate.”

In 2011, Hatch was appointed to the influential Senate Finance Committee, where he later became chairman. There he helped oversee the national health programs Medicare, Medicaid and CHIP.

Hatch’s growing influence in Congress did not go unnoticed by health care lobbyists. According to the watchdog organization Center for Responsive Politics, in the past 25 years of political campaign funding, Hatch ranks third of all members of Congress for contributions from the pharmaceutical and health sector. (That’s behind Democratic senators who ran for higher office — President Barack Obama and presidential nominee Hillary Clinton).

“Clearly, he was PhRMA’s man on the Hill,” said Dr. Jeremy Greene, referring to the trade group that represents pharmaceutical companies. Green is a professor of the history of medicine at Johns Hopkins University School of Medicine. Though Hatch did work to lower drug prices, Greene said, the senator’s record was mixed on the regulation of drug companies.

For example, an important piece of Hatch’s legislative legacy is the 1984 Hatch-Waxman Act, drafted with then-Rep. Henry Waxman, an influential Democrat from California. While the law promoted the development of cheaper, generic drugs, it also rewarded brand-name drug companies by extending their patents on valuable medicines.

The law did spur sales of cheaper generics, Greene said. But drugmakers soon learned how to exploit the law’s weaknesses.

“The makers of brand-name drugs began to craft larger and larger webs of multiple patents around their drugs,” aiming to preserve their monopolies after the initial patent expired, Greene said.

Other brand-name drugmakers preserved their monopolies by paying makers of generics not to compete.

“These pay-for-delay deals effectively hinged on a part of the Hatch-Waxman Act,” Greene said.

Hatch also worked closely with the dietary supplement industry. The multibillion-dollar industry specializing in vitamins, minerals, herbs and other “natural” health products, is concentrated in his home state of Utah.

“There was really no place for these natural health products,” said Loren Israelsen, president of the United Natural Products Alliance and a Hatch staffer in the late 1970s.

As the industry grew, there was a debate over how to regulate it: Should it be more like food or like drugs? In 1994, Hatch sponsored the Dietary Supplement Health and Education Act, known as DSHEA, which treats supplements more like food.

“It was necessary to have someone who was a champion who would say, ‘All right, if we need to change the law, what does it look like,’ and ‘Let’s go,’” Israelsen said.

Some legislators and consumer advocacy groups wanted vitamins and other supplements to go through a tight approval process, akin to the testing the Food and Drug Administration requires of drugs. But DSHEA reined in the FDA, determining that supplements do not have to meet the same safety and efficacy standards as prescription drugs.

That legislative clamp on regulation has led to ongoing questions about whether dietary supplements actually work and concerns about how they interact with other medications patients may be taking.

DSHEA was co-sponsored by Democrat Tom Harkin, then a senator from Iowa.

While that kind of bipartisanship defined much of Hatch’s career, it has been less evident in recent years. He was strongly opposed to the Affordable Care Act, and in 2018 called supporters of the heath law among the “stupidest, dumb-ass people” he had ever met. (Hatch later characterized the remark as “a poorly worded joke.”)

In his farewell speech on the Senate floor in December, Hatch lamented the polarization that has overtaken Congress.

“Gridlock is the new norm,” he said. “Like the humidity here, partisanship permeates everything we do.”

This story is part of a partnership that includes KUER, NPR and Kaiser Health News.


KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.