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Teaching Hospital Update – January 5–9, 2009


Email Alert

By Reesa N. Benkoff*

January 9, 2009

President-Elect Obama Says Overhauling Entitlement Programs is 'a Central Part' of Administration Spending Control Efforts

During a speech in Washington, DC, on January 7, President-Elect Barack Obama said overhauling entitlement programs such as Medicare and Social Security will be "a central part" of his administration's efforts to curb federal spending. Obama said, "We are beginning consultations with members of Congress around how we expect to approach the deficit," adding, "We expect that discussion around entitlements will be a part, a central part, of those plans." Obama said, "If we do nothing, then we will continue to see red ink as far as the eye can see," and "at the same time, we have an economic situation that is dire, and we're going to have to jump-start this economy with my economic recovery plan, creating three million jobs. That's going to cost some money." Obama said he plans to unveil more details about his approach to rein in entitlement spending when he releases his budget next month.

Obama also created the new position of White House chief performance officer and named Nancy Killefer to the post. Killefer is a senior director at the management consulting firm McKinsey. Obama said Killefer will "scour this budget, line by line, eliminating what we don't need, or what doesn't work, and improving the things that do."

Despite the record deficit, Obama emphasized the need for an economic stimulus package. Obama on Wednesday gave his first estimate of the cost of the package, which he expects to be around $775 billion over two years. Senate Budget Committee Chair Kent Conrad and House Budget Committee Chair John Spratt said they have warned Obama to limit the stimulus to temporary measures that will not increase the deficit in the future. The package is expected to include a temporary increase in the Federal Medical Assistance Percentage for states' Medicaid programs and funds for health information technology. The lawmakers also urged Obama to find offsets for other initiatives, such as efforts to expand access to healthcare for the uninsured.

In related news, Obama and Vice President-Elect Joe Biden have proposed creating an exemption in bankruptcy law for individuals who can prove they filed for bankruptcy because of medical expenses. The exemption would establish a process to forgive the debt and help individuals regain financial stability. According to Melissa Jacoby, a professor at the University of North Carolina Law School who has researched medical debt and bankruptcy, Obama's proposal appears to be a reaction to revisions of bankruptcy law made several years ago that made it more difficult for some consumers to eliminate their debts under bankruptcy. According to Jacoby, those revisions "were geared toward people who had been irresponsible spenders." She added, "People with serious medical problems do not fit that model."

Kaiser Daily Health Policy Report, President-Elect Obama Says Overhauling Entitlement Programs 'a Central Part' of Administration Spending Control Efforts, Henry J. Kaiser Fam. Fdn. (Jan. 8, 2009).

Crozer-Keystone Health System to Eliminate 400 Positions

Earlier this week, Crozer-Keystone Health System became one of the latest hospital operators to announce job cuts. The two-hospital system based in Springfield, PA, will eliminate 400 positions, though it's unclear how many employees will be laid off, said Crozer-Keystone spokeswoman Kathy Scullin. Employees in jobs affected by the cuts will be offered vacant positions, when qualified, or retraining, Scullin said. The worsening recession and rising unemployment have increased Crozer-Keystone's bad debt from patients who do not pay their bills, she said. Also contributing to the system's financial stress are cuts to state reimbursement and a reduced number of patients. The system's weaker cash flow from operations in fiscal 2007 and 2008, and a drop in its liquidity prompted Moody's Investors Service to downgrade the system to Baa3 in November from Baa2.

Crozer-Keystone said other cost-cutting measures include wage adjustments, decreased capacity to meet lower volume, and consolidation of its hospice and home-care services. Unions will be asked to accept wage adjustments, Scullin said. The system has also cut or left vacant three executive-level positions.

Melanie Evans, Crozer-Keystone to eliminate 400 positions, Modern Healthcare's Daily Dose (Jan. 8, 2009) (note: registration is required to view this content).

BNA's Health Law Reporter Ranks Top Ten Health Law Issues for 2009

The economy and its effect on national politics will dictate the health law landscape in the coming year, according to BNA's Health Law Reporter advisory board members. Asked to rank the Top Ten issues facing healthcare providers over the coming year, board members overwhelmingly selected healthcare reform as the top health law issue for 2009, followed by fraud and abuse and taxation issues.

As a result of many economic pressures, and even though reforming the healthcare system and covering the forty-six million uninsured is a top priority of the incoming administration, few said they expect 2009 to bring major change. This assessment led several board members to count health reform among their topics to watch over the next three-to-five years. Reforming a system as large and complex as the U.S. healthcare system implicates if not subsumes, fully half the topics rated in Health Law Reporter's 2008 Top Ten survey—the previously top-ranked quality of care as well as taxation, antitrust, Medicare/Medicaid, and health information technology, advisers said.

Board members clearly expect 2009 to be an especially challenging year for health lawyers dealing with legal issues facing all segments of the healthcare system. The economic crisis and the pressures it exerts on policy makers and regulators should be on every reader's mind in reviewing board members' following rankings of the Top Ten health law issues for 2009.

Overall, the board members ranked these as the most important health law issues for 2009, in order: (1) healthcare reform, (2) enforcement of fraud and abuse laws, (3) taxation issues involving exempt healthcare organizations, (4) health information technology, (5) quality concerns and issues, (6) medical staff issues, (7) antitrust enforcement, (8) Medicare, (9) labor and employment, and (10) corporate governance.

Health Care Reform Top Health Law Issue As Economy, New Leadership Drive Change, BNA'S HEALTH L. REP. (Jan. 8, 2009) (note: registration is required to view this content).

Teen Birth Rate in U.S. Rises

The birth rate among girls ages fifteen to nineteen jumped 3% in 2006, increasing for the first time in fifteen years, according to the CDC's National Center for Health Statistics. The 2006 rate was 41.9 per 1,000 girls in that age group, up from 40.5 in 2005, Stephanie Ventura, MA, of the CDC, and colleagues reported in the January 7, 2009, issue of National Vital Statistics Reports. Significant increases in teen births were observed in twenty-six states, the researchers said, with the highest rates in the South and Southwest.

"The fact that we have 26 states with an increase in one year is noteworthy because it takes a lot for state-specific rates to change in one year," Ventura said. "Those changes are not usually statistically significant." The highest teen birth rates occurred in Mississippi (68.4 per 1,000 girls), followed by New Mexico (64.1), and Texas (63.1). The lowest rates occurred in the Northeast, led by New Hampshire (18.7 per 1,000 girls), Vermont (20.8), and Massachusetts (21.3). Only North Dakota, Rhode Island, and New York saw a decrease in teen birth rates between 2005 and 2006.

Researchers said the teen birth rate declined 34% between 1991 and 2005, with steeper decreases between 1994 and 2003. Decreases were about 1% a year in 2004 and 2005. "[The slowdown] might have been an early warning sign that the decrease was coming to a halt, at least temporarily," Ventura said. "This year's increase might be just a further reflection of that." Ventura said the data imply that previous messages about teen pregnancy may "need to be fine-tuned," as "today's youth have different attitudes towards pregnancy," pointing to examples such as the Massachusetts high school students who took part in a "pregnancy pact" and an increasing number of young celebrities becoming mothers.

Birth rates did decrease among the youngest teens—those ages ten to fourteen—falling to 0.6 births per 1,000 in 2006 from 0.7 per 1,000 in 2005. The greatest increase was seen among the oldest teens, ages eighteen to nineteen, with a 4% jump over last year. In the fifteen- to seventeen-year-old group, there was a 3% increase. When broken down by demographics, rates of teen births were highest among non-Hispanic black teens, with a 5% increase from 2005.

Teenagers may be mirroring to a degree what's going on in the rest of the population. Birth rates increased among women in nearly all age groups, especially among those ages twenty to twenty-four and forty to forty-four, the researchers said. The total number of births in the U.S. was 3% higher in 2006 than in 2005—the largest single-year increase since 1989-90. And the number of births in 2006 (approximately
4.3 million) was the largest since 1961, according to the researchers.

Kristina Fiore, Teen Birth Rate in U.S. Rises, MedPage Today (Jan. 7, 2009).

CNN Medical Correspondent Could Be Next U.S. Surgeon General, Serve in White House Office of Health Reform

On January 6, CNN confirmed that its chief medical correspondent and neurosurgeon Sanjay Gupta has been chosen by President-Elect Barack Obama to be the next U.S. Surgeon General, pending Senate approval. The surgeon general serves as the nation's "chief health educator" by providing the public with medical information on how to improve health and reduce risk of injury and illness. The position also is responsible for commanding the 6,000-member U.S. Public Health Service Commissioned Corps, a group of scientists and emergency responders who address a broad range of health emergencies.

In addition to responsibilities with CNN, which include hosting a weekend program called "House Call with Dr. Sanjay Gupta," Gupta is an assistant professor of neurosurgery at Emory University School of Medicine, as well as a neurosurgeon at Emory University Hospital and associate chief of neurosurgery at Grady Health System.

Gupta also has been offered the lead role in the new White House Office of Health Reform, which would give him twin duties that could make him the most influential surgeon general in history. The Obama transition team refused to comment on the matter, noting its policy of not discussing appointments publicly before they are finalized. Gupta also declined to comment but did not deny plans to accept the position. According to CNN and members of the Obama transition team, Gupta likely will make a decision on whether to accept the position in the next few days. Gupta, if nominated, will be subject to confirmation hearings before the Senate Health, Education, Labor, and Pensions Committee.

Kaiser Daily Health Policy Report, CNN Medical Correspondent Could Be Next U.S. Surgeon General, Serve in White House Office of Health Reform, Henry J. Kaiser Fam. Fdn. (Jan. 7, 2009).

Healthcare Spending in 2007 Increased at Lowest Rate in Nine Years, With Prescription Drug Spending Growth Slowing to Lowest Rate Since 1963, Study Finds

U.S. healthcare spending by both the public and private sectors grew at a rate of 6.1% to $2.2 trillion in 2007, down from growth of 6.7% in 2006, according to a study by federal auditors published January 6 in the journal Health Affairs. The 2007 growth rate is the slowest recorded since 1998, according to the report, which was prepared by analysts from the CMS Office of the Actuary. However, healthcare spending consumed 16.2% of the U.S. gross domestic product in 2007, up from 16% in 2006, suggesting its share of GDP will climb as the economy remains mired in a protracted recession.

More than half of the drop-off in spending growth can be linked to decreased spending on prescription drugs, according to the report. Spending on drugs rose by 4.9% to $227.5 billion in 2007, compared with an increase of 8.6% in 2006 and a yearly average of 9.4% from 2001 to 2006. Lead study author Micah Hartman, a statistician for the CMS Office of the Actuary, said the drop in drug outlays can be attributed to increased use of lower-cost generic drugs, slower growth for drug prices, and safety concerns that have decreased sales of some drugs. FDA in 2007 issued sixty-eight black box warnings—its most severe warning—to appear on drug labels, compared with fifty-eight in 2006 and twenty-one in 2003. Insurers are encouraging the use of generics by charging lower co-payments for certain drugs and higher co-pays for others that they may want consumers to avoid for safety and financial reasons. Several grocery chains and large retailers also have contributed to the trend through generic drug discount programs. In addition, several top-selling brand-name drugs lost patent protection in 2006, allowing generic competitors to enter the market.

Prescription drugs made up 10% of all healthcare spending in 2007, according to the report. Spending on hospitals, which accounted for 31% of healthcare outlays in 2007, increased by 7.3% to $696.5 billion, compared with an increase of 6.9% in 2006, the report states. Spending on doctors, which accounted for 18% of healthcare outlays in 2007, grew by 5.9% to $393.8 billion, compared with an increase of 6.4% in 2006, according to the report. The report also showed that the government paid for a larger portion of the nation's healthcare in 2007. Spending by federal, state, and local governments made up 46.2% of total healthcare outlays, up from 45.3% in 2004 and 37.6% in 1970. Public spending on healthcare grew faster than spending by employers and other private sources in recent years, according to the report.

The increase in government healthcare outlays was partially caused by changes in Medicare, according to federal auditors. The Medicare prescription drug benefit cost $47.6 billion in 2007, up from $40.5 billion in 2006. Administrative costs for Medicare increased by 62.5% when the prescription drug benefit was launched in 2006, and Medicare's administrative costs increased by 10.7% in 2007. Overall Medicare spending increased by 7.2% to $431.2 billion in 2007, compared with an increase of 18.5% in 2006. Medicaid spending in 2007 increased by 6.4% to $329.4 billion, the report found.

Private health insurance premiums increased by 6% to $775 billion in 2007, the same rate as in 2006, but less than the 10.7% increase in 2002. The slower growth rate reflects fewer small employers offering health coverage and increasing enrollment in health savings accounts and high-deductible health plans, according to the study. Out-of-pocket spending by patients increased by 5.3% in 2007 to $268.6 billion, compared with an increase of 3.3% in 2006, the study found. The portion of household income being spent on healthcare increased to 6% in 2007, up from 5.4% in 2001.

Kaiser Daily Health Policy Report, Health Care Spending in 2007 Increased at Lowest Rate in Nine Years, With Prescription Drug Spending Growth Slowing to Lowest Rate Since 1963, Study Finds, Henry J. Kaiser Fam. Fdn. (Jan. 6, 2009).

*We would like to thank Reesa N. Benkoff, Esquire (Hall Render Killian Heath & Lyman PLLC, Troy, MI) for providing this week's Teaching Hospital Update.

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