AHA, hospital executive support for hospital mergers, despite antitrust concerns

Hospital mergers have reduced annual operating expenses at acquired hospitals, and evidence from a study cited by the American Hospital Association shows quality and service improvements stemming from mergers. According to Charles River Associates, despite antitrust concerns from the Federal Trade Commission (FTC), hospital leaders believe that mergers are a better tool for achieving better care coordination and population health management than looser affiliations between parties.

Cost savings

An analysis of non-federal short-term acute care hospital mergers between 2009 and 2014 revealed a 2.5 percent reduction in operating expense per admission at the acquired hospitals, implying annual savings of about $5.8 million (derived from average annual operating expenses). Net patient revenue per admission also declined relative to non-merging hospitals, suggesting that mergers may reduce health care costs.

Interviews with hospital executives placed savings into three categories: scale-related savings from allocating fixed costs over a larger volume of patients, reductions in cost of capital, and standardized clinical processes. In particular, supply chain savings from group purchasing and reduced overhead following consolidation of back office services were cited as important cost-saving benefits of merging.

Quality improvement 

While the study was able to quantify some cost savings related to mergers, positive effects on quality were less obvious, despite executives stressing the impact of quality improvements following clinical standardization after a merger. Small improvements were observed in a decrease in the composite indices of 30-day readmission rates, 30-day mortality rates, and overall outcome, but the only statistically significant result was a 10 percent change in the readmission rate result. The authors admitted that the modest results may partially stem from difficulty in quantifying hospital quality.

Merger specificity

The FTC asserts that improved care coordination and other benefits touted by merger supporters are not merger-specific and can be achieved through other means of association. Hospital leaders disagree based on experience showing that “looser affiliations” between parties fail to provide the necessary level of commitment and accountability to achieve the necessary cost savings and quality benefits to effectuate health reform. The interviewees opined that alliances between parties are not able to overcome the divide of being part of different systems, resulting in unwillingness to invest capital, reluctance to share intellectual property, inability to align incentives and create a common culture, and regulatory roadblocks on information sharing. The authors noted that successful loose affiliations are usually narrow in scope, limiting the cooperation to combining supply chain efforts or developing joint back office function collaborations (without sharing data between affiliates). If clinical areas are involved, they are usually limited to support services.

FTC staffs encourage telehealth regulations for Delaware speech pathologists, audiologists

Staffs of the FTC’s Office of Policy Planning, Bureau of Economics, and Bureau of Competition have applauded the Delaware Board of Speech/Language Pathologists, Audiologists and Hearing Aid Dispensers’ proposed revisions to its telecommunication and telehealth regulations, which would eliminate the current restriction on evaluation and treatment by telecommunication.

The Board’s new regulation would allow licensed speech/language pathologists, audiologists, and hearing aid dispensers to determine whether telepractice is an appropriate level of care for a patient. Before practitioners could provide telepractice services, however, the proposed regulation would require an in-person initial evaluation.

The proposed removal of existing restrictions on service by telecommunication is a significant and positive step, according to the FTC staffs’ comment. In particular, the changes could enhance consumer choice by providing an alternative to in-person care, potentially reducing travel expenditures, increasing access to care, and increasing competition.

Nevertheless, the FTC staffs are encouraging the Board to consider the potential effects on competition and access of the proposed prohibition on initial evaluations delivered by telepractice, as well as any potential health and safety consequences of the proposed regulation. The benefits of the telepractice provision could be enhanced by allowing practitioners to determine on a case-by-case basis whether telepractice is appropriate for an initial evaluation, according to the FTC staffs, instead of requiring that all initial evaluations be carried out in person.

FTC reports pull back smoke on 2014 tobacco product advertising

While the amount spent on cigarette advertising and promotion decreased from $8.95 billion in 2013 to $8.49 billion in 2014, spending on advertising and promotion of smokeless tobacco products in the U.S. increased from $503.2 million in 2013 to $600.8 million in 2014, according to reports released by the Federal Trade Commission (FTC) on cigarette and smokeless tobacco marketing expenditures for 2014. The FTC reports also indicated a drop in the number of cigarettes sold by large cigarette companies to wholesalers and retailers—256.7 billion in 2013 to 253.8 billion in 2014.

Cigarettes

The data on cigarette manufacturers’ expenditures comes from special reports submitted to the FTC by the largest cigarette manufacturers through a compulsory process. Those manufacturers include: Altria Group, Inc.; Commonwealth Brands, Inc.; Lorillard, Inc.; Reynolds American, Inc.; and Vector Group Ltd.The largest portion of the $8.49 billion spent on advertising and promotion of cigarettes was “price discounts” paid by manufacturers to retailers in order to reduce the “consumer price” of cigarettes. Those price discounts represented $5.56 billion or 65 percent of advertising and promotional spending for cigarettes in 2014. The FTC requires the manufacturers to report the expenditures on advertisements directed towards youth which are intended to reduce youth smoking. In 2014 the manufacturers spent $1.7 million on such advertisements.

Smokeless tobacco

The smokeless tobacco report is, like the cigarette report, comprised of data submitted to the FTC by the largest smokeless tobacco product manufacturers through a compulsory process. Those manufacturers include: Altria Group, Inc.; North Atlantic Trading Company, Inc.; Reynolds American, Inc.; Swedish Match North America, Inc.; and Swisher International Group, Inc. The total amount of smokeless tobacco sold by the manufacturers to wholesalers and retailers dropped slightly from 128.04 million pounds in 2013 to 127.81 million pounds in 2014. Over the same period, sales revenues for those manufacturers increased from $3.26 billion to $3.42 billion. According to the FTC report, the largest smokeless tobacco companies reported spending $852,000 in 2014 on advertisements intended to reduce youth use of smokeless tobacco products.

FTC sets enforcement policy for homeopathic drug labeling claims

Efficacy and safety claims made on over the counter (OTC) homeopathic drug labeling must be substantiated by reliable scientific evidence, according to an enforcement policy statement on the marketing of OTC homeopathic drugs released by the Federal Trade Commission (FTC). The policy statement notes that qualified efficacy and safety claims must clearly indicate: (1) there is no scientific evidence that the product works and (2) the product’s claims are based only on theories of homeopathy from the 1700s that are not accepted by most modern medical experts. The policy statement indicates that the FTC will enforce OTC homeopathic drug labeling no differently than it does any other health products.

Homeopathy

The homeopathic theory is premised on the belief that disease can be treated by small doses of substances, which, in larger doses, produce in healthy individuals, symptoms similar to the disease. However, homeopathic products are often diluted so that the “therapeutic” substance is below a detectable level. Homeopathic theory states the more a substance is diluted, the more potent it becomes. The theory is not accepted by most modern medical experts. As a result, marketing claims for homeopathic remedies have a tendency to be misleading, in violation of federal law.

Enforcement

Section 5 of the Federal Trade Commission Act (FTC Act) (15 U.S.C. § 45(a)(2)), which applies to both advertising and labeling, prohibits unfair or deceptive acts or practices in or affecting commerce, such as the deceptive advertising or labeling of OTC drugs. Due to the significant expansion of the homeopathic industry over the last few decades—growth from a multimillion-dollar market to a more than billion-dollar market—the FTC held a workshop in 2015 to better comprehend the homeopathic marketplace. The workshop was focused on assisting the agency with understanding its legal authority with respect to the advertising and marketing of OTC homeopathic drugs.

Disclosures

The policy statement notes that disclosures regarding the absence of scientific evidence should be prominent and in close proximity to any statement about the product’s efficacy. Depending upon the strength of the efficacy statement, the FTC indicated that the disclosure might need to be incorporated into the efficacy message, itself. Additionally, the policy statement warns marketers of homeopathic drugs not to make statements which undercut those disclosures because the FTC will scrutinize the “net impression” of OTC homeopathic marketing claims when determining whether a marketer has violated the FTC Act.