Denial of Orphan Drugs in 340B Program Could Cost Owner Hospitals $109 Million in Potential Savings
July 25, 2010
Posted by chcablogadmin in : Group Purchasing, Healthcare Reform
Please read and consider John’s important call-to-action regarding 340B and orphan drugs vital to our children’s hospitals. — Don
- John VanEeckhout, VP, Clinical Services, CHCA
As you will recall, a significant amount of potential savings for children’s hospitals in the 340B outpatient program is derived from a group of drugs known as orphan drugs. These drugs are developed for treatment of small populations of patients with diseases requiring very expensive therapeutic interventions. These drugs have patent protection, meaning that they are not offered under contracts with GPOs. For example, Nitric Oxide, used exclusively in inpatient treatment, is designated as an orphan drug and has the highest profile among CHCA hospitals. Current Health Care Reform (HCR) reconciliation legislation excludes orphan drugs from the 340B program for children’s hospitals. According to CHCA analyses, of the total $545 million pharmacy spend, orphan drugs represent $211 million (39%). If orphan drugs were to be included in the 340B program, the $211M spend would be approximately $102M; excluding them denies CHCA children’s hospitals the opportunity to save $109M.
CHCA and NACHRI continue to work cooperatively to overturn this unfavorable legislative action. Keep in mind that prior to March 30, 2010 when HCR reconciliation was passed by Congress, children’s hospitals were eligible to unrestricted access to orphan drugs through 340B. This very negative outcome from HCR legislation has resulted in children’s hospitals being denied access to this drug class. CHCA and NACHRI have been in discussions with the Office of Pharmacy Affairs (OPA) of the Health Resource and Service Administration (HRSA) that oversee the 340B program. To date, OPA and HRSA have offered no meaningful direction concerning children’s hospitals’ claims that we are being denied access now even though we were provided access to the orphan drugs with original legislation. As a result, drug manufacturers are beginning to deny access to 340B pricing on products based upon the new legislation. Several legislative initiatives to address this issue have failed to make it out of committee. If CHCA Owner Hospitals cannot make a meaningful lobbying effort to change current legislation, we will never realize these critical savings opportunities.
Call-to-Action of CHCA Owner Hospitals
- Mobilize your government affairs departments to solicit support for change in 340B legislation with your congressional representation from your states and districts.
- Implore NACHRI and other lobbying entities to redouble their efforts to contact key congressional Committee Chairs such as Representative Henry Waxman (D-CA), House Energy and Commerce Committee, and Senator Max Baucus (D-MT), Senate Committee on Finance, to remedy the change created by HCR reconciliation.
- Ask your congressional representatives to send letters to HHS Secretary Kathleen Sebelius to delay HRSA implementation of any action or promulgation of rules surrounding the 340B changes because of HCR reconciliation.
- Contact local and national advocates who work in promoting children’s health issues since this legislation may deny some children the therapy they need to maintain health and wellness.
Please keep me informed of your efforts in this area, or contact me directly with questions: john.vaneeckhout@chca.com.
add a commentTexas Children’s Shares Financial Successes from Goldman Sachs Report
July 25, 2010
Posted by chcablogadmin in : Financial Viability
The final Goldman Sach’s financial comparison report was sent to your CFO early last week-if you haven’t already discussed this, please do. As a follow up, Ben Melson and Weldon Gage offer their thoughts on how Texas Children’s Hospital increased 2009 revenue by 20% with a combination of net patient service revenue growth, adding a physician group practice, growing health plan premium revenue and DSH payments. They also discuss their status in 2010 and future strategies. Anyone else care to comment on their hospital’s revenue building or cost savings practices? — Don
by Ben Melson, Executive Vice President and Chief Financial Officer
and Weldon Gage, Vice President, Finance
Texas Children’s Hospital
- Ben Melson
Our strong revenue growth at Texas Children’s Hospital (TCH) in FY 2009 was the result of four main drivers:
1. Net patient revenue in the hospital:
Our inpatient growth was relatively small in ’09. A 9% growth in net patient revenue was primarily driven by an increase in outpatient activity. We believe this increased activity was at least partially a result of our Texas Children’s Physician Services Organization (PSO), which began operations at the beginning of FY ’09 (see #4 below). We also had positive results from our patient throughput initiatives in our outpatient clinics.
2. Increased DSH payments to the hospital:
Stimulus funding played an important role in allowing DSH funding in Texas to grow in 2009. At Texas Children’s our DSH grew by $19 million in FY’09. However, this is not the case in 2010. Our DSH has dropped and will continue to drop — the state of Texas has a $14 billion budget shortfall this year and Medicaid funding will be on the chopping block.
3. Premium revenue growth in the Texas Children’s Health Plan:
Membership in our Medicaid HMO grew by 13% in FY ’09, leading to very strong revenue growth. One of the reasons why our plan grew was a statewide initiative — Texas phased out their Primary Care Case Management (PCCM) program in urban areas. Families in Texas had to join a Medicaid managed care plan and we are the biggest one in Houston. We promoted our plan throughout the Houston area, in our primary care clinics and in the hospital. The economy also helped our plan grow as more kids became eligible for Medicaid. We are experiencing similar double-digit growth in 2010. We see several benefits of owning our own CHIP/Medicaid HMO — it has a positive margin, provides better medical management between the hospital and HMO, and we can coordinate care better and improve care to keep kids healthier. Currently, 30% of our Health Plan expenditures are happening at TCH. We continue to evaluate the right mix of HMO business at the owner hospital level.
GPO Self-Governance is Key to Deflecting Critics and Reducing Health Care Costs
July 11, 2010
Posted by chcablogadmin in : Financial Viability, Group Purchasing
Despite credible evidence that GPOs are adhering to strict codes of conduct and bringing hospitals efficacious product from both large and small device manufacturers, a single editorial can set off a flurry of debate in Washington about GPOs. A July 7, Washington Monthly article resurrected small device manufacturers’ claims that innovation is being stifled by GPOs and urged Congress to hold hearings this fall on the GPO industry. At the HIGPA meeting earlier this week, we again scrutinized member practices and the HIGPII code of conduct. Our conclusion? Self-governance works. Hopefully, another round of costly Congressional investigations is not necessary to prove that point. We’ll keep you in the loop on any new developments.
In the meantime, I want to personally assure you that CHCA and its partner Premier adhere to the strictest codes of conduct in the industry. We look to our members to bring forward innovative products which are evaluated, and subsequently approved or dismissed for consideration by clinical and supply chain experts in your hospitals. CHCA’s role is to provide the best pricing and value on the products your hospitals use. In 2009, the CHCA group purchasing team delivered savings in excess of $21 million above and beyond the Premier agreements by aggregating and negotiating additional discounts on products your experts determined best met the needs of your patients. Through our involvement with HIGPA and HIGPII, we will continue to advocate the role GPOs play in keeping health care costs down.
add a commentCHCA Explores Issues Related to Investor-Owned Entities
July 11, 2010
Posted by chcablogadmin in : Leadership
In the interest of exposing competitive threats to free-standing children’s hospitals, CHCA commissioned Dan Cain and his colleagues at Cain Brothers to analyze the implications of investor-owned involvement in children’s health care. The engagement follows closely on the heels of Vanguard’s prospective purchase of Detroit Medical Center and Children’s Hospital of Michigan.
A small group of CHCA CEOs are participating in individual discussions with Cain. We hope to use the findings to determine whether investor-owned systems are any more or less of a formidable competitive threat than nonprofit integrated delivery systems and other local nonprofit hospitals. The Cain analysis will be presented to the CHCA Board in August.
Please let us know if you have any questions to add to the list for Cain to explore:
- Are investor-owned operators specifically targeting children’s hospitals as acquisition targets?
- Are investor-owned operators pursuing strategies of expanding into higher acuity children’s services?
- Does health care reform make children’s hospitals and children’s services any more attractive to for-profit systems?
- Does tax status matter? Does it impact how hospitals operate and fulfill missions? Does it influence quality, safety and reputation? How does it influence patients’ perspectives? Does tax status matter to physicians and medical staff governance?
- How will ACOs impact hospital and physician networks, and could ACOs be a prospective consolidation accelerator?
- What influences consolidation – population base, market dilution from existing competition, need for capital or other issues?
If you have questions about this project, please contact Jacqueline Kueser at jacqueline.kueser@chca.com.
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