Politics. In 1960, as he was recruiting investors to purchase the Parkview Hospital in Nashville, TN, Dr. Thomas Frist, Sr. asked our Great-Uncle Billy Sumpter with whom he had gone to medical school, to participate. To the dismay of those of us in the younger generations, Uncle Billy responded, aghast, that no one should make money from sick people.
It seems quaint – or really, really stupid – now, but it is an attitude still maintained with some religiosity by journalists and their traveling companions, elected officials. Intellectually, most people in journalism and politics understand that no one will choose a career in health care if they cannot make money. Emotionally, especially when confronted with the always alluring populism, it is harder to maintain that same discipline. As a result, the wrong questions get asked.
Private equity rolled up certain physicians’ practices, streamlined operations and demanded higher rates from insurers. When they didn’t get them, the practices went out of network. Some practices, having no 21st c. version of Uncle Billy around, sent egregiously high bills to their completely uniformed patients.
Sarah Kliff, at the time a reporter at Vox, now The New York Times, wrote stories about the eye-popping bills. It caught the attention of John Arnold, whose foundation funded research by two hyper-Twitter active economists. Their work, which received a lot of play in the press, caught the attention of Congress, most especially the now-retired Sen. Lamar Alexander.
Voila! The No Surprises Act!
So focused on the “what” no one thought to ask about the “why.” Or perhaps they did, but only briefly, as “greed” was a response at the ready.
If someone had asked, “why” in a sincere way, they might have learned that private equity can acquire physicians because the docs need more market power to defend themselves against low reimbursement. This market dynamic is especially applicable for anesthesiologists, pathologists, emergency room physicians, neonatologists and radiologists – physicians no patient asks for by name.
They would also have learned that private equity is not alone in rolling up physicians’ practices. Not-for-profit hospitals have been acquiring and consolidating practices of oncologists, rheumatologists and ophthalmologists for years. The strategy has allowed them to capture the rich reimbursement for high priced infusion drugs while making themselves nearly immune to insurer demands.
Without asking these and other important questions, Congress passed the No Surprises Act. Unfortunately, the bill was broadly written enough to give HHS the latitude to craft rules that put the pricing power firmly in the hands of insurers. In effect, the physician practice areas enumerated in the law are in-network, just without the benefit of a negotiation with insurers.
If health care was not in the midst of a labor disruption the likes of which we have never seen, this latest policy screw-up might not matter. As insurers flex their muscles where they can – ex-urban and less concentrated urban markets – and end network agreements, aging anesthesiologists or radiologists may just decide to follow a whole lot of nurses that have already headed out the door.
Policy. The implications of the No Surprises Act on labor supply have yet to be fully felt. If they had, a few Senators that sent a letter to the White House COVID-19 Response Team Leader, Jeffery Zients, last month might have thought more about the questions they posed. Instead, their inquiry was reminiscent of a Marx Brother routine (the original version has been scrubbed from Google Search, but Bugs Bunny has a reasonable facsimile). The subtext of the letter is that nurse staffing organizations are making too much money. Specifically, the Senators are concerned about the exorbitant prices some hospitals are paying nurse staffing agencies like AMN, Trust Health, CHG Health Services, CCRN and Aya Healthcare, among others.
They asked if the nurse staffing agencies were engaged in anti-competitive and anti-consumer behavior (probably not); if nurses are benefiting from higher pay (most definitely); whether nurse staffing agencies are generating more profit (duh); whether federal relief monies have played a role in increased temporary staffing rates (another duh); and, of course, what ownership structure (read: PE) has to do with all of it.
What they did not ask is, “why?”
There are many reasons for the health care labor force shortage. It begins with its overreliance on labor brought about by a financing system that has never imposed resource constraints. From there, you can draw a line through the Affordable Care Act that poured more gas on the fire in the form of insurance mandates and poorly considered Medical Loss Ratios to regulatory requirements that discourage digital innovations and other advances in productivity.
The uncomfortable answer to “why?” requires nothing more than Congress to gaze into the reflecting pool just down The Mall from their offices.
COVID-19 has effectively exploited the health care industry’s weakness and made a lie of the presumption by policymakers of a never-ending labor supply. Retirement plans have been accelerated and alternative well-paying jobs have emerged. If it were not for AMN and others that helped rebalance the supply and demand in individual markets, health access and patient outcomes would have been significantly impacted.
But no one seems interested in that.
Power. Like oil patch workers in the early 20th century, nurses have lit out for travel positions across the country, making wages 400-500% of their original salaried positions. The "greed" Members of Congress quickly assign to private equity or for-profit operators, but never to a health care worker, has saved the day in many communities. Were it not for those astronomical rates, it seems nurse staffing agencies would have had a much more difficult time coaxing health care workers out of their hometown and into communities battered by COVID-19 and accumulated non-COVID-19 demand. The Provider Relief and FEMA funds that made those rates possible achieved their intended purpose which was to prevent the health care system from being overwhelmed.
Paying people much more than their daily lives demand has a similar effect as paying people not to work. When and if travel nurses return home after three or six months, they have earned a level of financial freedom that would have taken them years to acquire. Mortgages are being paid off; college tuition payments banked and a little extra salted away for vacations and time off.
The return of nurses on which the CEO of UHS, AMN shorts and a whole lot of policy makers are banking is probably much further off than anyone is anticipating, especially when you consider the permanent losses through retirements and relocations. Shortages, especially in highly regulated markets and in less desirable sites of services are going to persists until the supply lines can be replenished a process that can take three to five years. By then, it may be too late for some providers
That should keep AMN busy.
Have a great rest of your weekend.
Emily Evans
Managing Director – Health Policy
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