Inaccurate pricing for orthopedic and other high-end services could be pushing hospitals to expand those services.
That’s the conclusion of a recent study from the Washington, D.C.-based Center for Studying Health System Change.
The center, a nonprofit funded by the Robert Wood Johnson Foundation, visited Orange County and 11 other U.S. communities to compile its findings. The California HealthCare Foundation, which is based in Oakland, provided funding for the study.
The center found that unintentionally incorrect pricing appears to be “spurring intense competition among physicians and hospitals to expand cardiac, orthopedic and high-end imaging services.”
“In many communities, hospitals and physicians are racing to expand profitable cardiac and orthopedic care, signaling that we’re inadvertently paying too much for these services,” said Paul Ginsburg, the center’s president, in a release.
The study said that healthcare payment systems rely on Medicare and other health plan provider charges for the services, rather than the actual costs of providing care.
That system is “leading to large differences in profitability when charges and costs diverge,” the report found.
It mentioned that newer, more technologically advanced healthcare services are “likely becoming relatively more profitable.”
Financial pressures on doctor groups and hospitals were cited as a trigger for the growth in the services.
“Faced with stagnant payment rates for professional services, many physicians are growing more entrepreneurial, either by adding capacity for more profitable services in their practices or by investing in freestanding facilities,” the center said. “Hospitals often cite the ability to cross-subsidize less profitable services as a motivation for expansion of profitable services. And in some cases, hospitals are responding to perceived competitive threats from physician-owned facilities.”
The report also found that services such as magnetic resonance imaging, radiation therapy and outpatient cancer care increasingly are being provided in doctors’ practices,where restrictions on doctor referrals don’t apply.
As a potential solution to the pricing issue, the center suggested that policy-makers should consider options to improve accuracy of Medicare payment systems. But it warned that lawmakers must be willing to spend money to save money to study the problem.
Strategic Shift
Valeant Pharmaceuticals International’s most recent financial results show that the Costa Mesa drug maker is hitting a key target,boosting its North American sales.
In the June quarter, Valeant said its North American product sales were up 71% to $60.4 million, compared to $35.3 million in the year-ago quarter.
The growth primarily came from sales of acquired drugs along with “continued strong growth of promoted brands, including Efudex, Kinerase and Cesamet.”
Efudex and Kinerase are part of Valeant’s dermatology lineup,one of three areas that the company plans to focus on.
Kinerase, Valeant’s skincare line, has generated buzz after signing actress Courteney Cox Arquette as celebrity spokeswoman. Valeant also signed a deal that landed it in Sephora, the cosmetics and perfume retail chain.
Cesamet is a cannabinoid, or synthetic chemical that is based on tetrahydracannabinol, the active ingredient in marijuana known as THC, and is used to treat vomiting and nausea in chemotherapy patients.
Valeant markets Cesamet, which it acquired from Indianapolis-based Eli Lilly and Co., in Canada, and is awaiting a decision from the U.S. Food and Drug Administration. Valeant is aiming to launch Cesamet in the U.S. later this year.
Chief Executive Timothy Tyson said in past interviews that a key part of Valeant’s strategy was increasing the drug maker’s presence in the U.S. market.
Additionally, Tyson also reiterated Valeant’s research and development efforts, including its second-generation hepatitis C treatment viramidine.
He also pointed to “exciting 24-week interim results for pradefovir,” which treats hepatitis B, new trials for epilepsy drug Retigabine, and Parkinson’s disease treatment Zelapar, for which Valeant is awaiting word on the regulatory front.
Setting It Straight on Brea Hospital
We recently got some feedback on the July 18 Healthcare column item about Brea Community Hospital. Here’s a correction and clarification on the hospital’s sale and eventual closure.
The July item should have said the trustee handling the hospital’s bankruptcy claimed in a court motion, not a lawsuit, that Marc Grossman and Gaetano Zanfini tried to hide $3 million of proceeds from a planned $42 million sale of hospital-related real estate.
The trustee’s motion was rejected by the court.
Grossman is the hospital’s former chief of surgery. Zanfini is its former chief executive. They were part of a group that owned Brea Community.
Also, we should have specified that Sovereign Healthcare Inc. made an unsuccessful $26 million offer to buy the hospital and related real estate to the trustee, not the property’s owner. Another Sovereign offer to buy the hospital’s personal property was rejected by the court.
Medical Parking
W.M. Klorman Construction of Woodland Hills is building a 99,230-square-foot parking garage for Pacific Medical Plaza in Costa Mesa. The garage will have room for 291 cars. Completion is scheduled for February. Brown Associates LLC, Irvine, is developing Pacific Medical Plaza.
Brea Hospital Clarification
A couple of weeks ago, we received some feedback about the July 18 Healthcare column item detailing the Brea Community Hospital saga. A clarification on the hospital’s sale and eventual closure follows.
The main point: The item should have mentioned that the trustee handling the hospital’s bankruptcy had made a claim in a court motion that the hospital owners tried to hide proceeds from a planned $42 million sale of the hospital’s real estate. That motion was rejected by the bankruptcy court.
Also, Sovereign Healthcare’s Jeremy Hogue said that the company’s $30 million offer for the hospital and its surrounding real estate was made to the trustee.
