Catholic Health Initiatives Third Quarter Financial Report, FY 2017

Is it good enough to turn the tide for CHI?

Catholic Health Initiatives released today its most recent quarterly report covering the first 9 months ending March 31, 2017. Making sense out of the raw financial numbers is for me probably like having a banker decipher a complicated clinical trial or biochemical research paper. I will leave it to the financial experts to explain it to us. To my first pass and naive evaluation, it looks like CHI is hanging on, but not improving to the extent needed to deal with its $8.8 Billion dept. I suspect this is not going to help their bond rating very much. This report reveals much about why CHI is taking the drastic downsizing actions in Kentucky that we are now seeing unroll. This may be an existential move for the company.

At the end of this article, I show extracted verbatim text from the report that I think will be of interest to us here in Louisville and Kentucky. You can read the full report yourself here.

In summary:

• It is very clear that KentuckyOne Health is the weak sister of the CHI regions.

•In Louisville, University Medical Center (UMC) making a profit. (This is not the same as University of Louisville Hospital, is it?) On dissolution of the UofL partnership. CHI expects to incur a loss of $279.4 million, but I have no understanding what that means. Who can help us?

•CHI hopes to close on its facilities that have been designated for sale by the end of 2017. Those facilities lost $61 million in the first three quarters. The estimated total assets for the KentuckyOne operations being divested as of March 31 2017 is $534.9 million. KentuckyOne/CHI hopes to complete the sale(s) by the end of the year.

•The possible merger with Dignity is not a sure thing.

•CHI has been selling other of its physical assets to raise money to the tune of over $1 billion in gross proceeds. (Does this go to its current bottom line and make matters look better in the current year?) It now must pay rent to the new owners of $52.7 million yearly.

•KentuckyOne Health won its first few cases in the litigation over unnecessary angioplasties in St. Joseph London, but began to lose the most recent cases with high monetary verdicts. Settlements are now being made for at least some cases. I suspect this is not going to be cheap.

What does the statement say to you? I expect many others in the business world are going to help us tomorrow. If I have made mistakes in reading this report, help me fix them.

Peter Hasselbacher, MD
President, KHPI
Emeritus Professor of Medicine, UofL
May 19, 2017 Continue reading “Catholic Health Initiatives Third Quarter Financial Report, FY 2017”

KentuckyOne Health To Sell Its Major Assets In Louisville.

Beginning last Thursday, word began trickling out to journalists and the public that KentuckyOne Health, a major regional unit of Catholic Health Initiatives (CHI), was preparing to announce plans to sell almost all its hospitals and medical centers in Louisville and a handful elsewhere in the state. I had been told earlier in the week that the announcement would be made today, Monday, but there were so many leaks that KentuckyOne sent an email to its employees outlining its plans.  I presume KentuckyOne wanted take control of the message before the reportage dam broke. The email can be read here.

For those of us in Louisville, the only major facility not being sold is Our Lady of Peace, a psychiatric hospital.  Both of KentuckyOne’s acute care hospitals, (Jewish Hospital and Sts. Mary and Elizabeth Hospital), the Frazier Rehabilitation Institute, and all four outpatient Medical Centers (Jewish East, South, Southwest, and Northeast) are on the chopping block. Nearby Jewish Hospital Shelbyville, which recently underwent a critical review by the Inspector General for an EMTALA violation, is also for sale.  KentuckyOne employs many physicians. The fate of individual owned- or contracted medical practices in Louisville and elsewhere is not clear to me from the email. Continue reading “KentuckyOne Health To Sell Its Major Assets In Louisville.”

FDA Panel Finds Opana-ER Not Worth The Risk!

Opana ER is the brand name of the specific extended release preparation of oxymorphone HCL marketed by Endo Pharmaceuticals, Inc.  This was the drug of choice that underlay the explosion of opioid addiction and of HIV/AIDS and hepatitis infections in intravenous users in nearby Scott County, Indiana.  Opana is back in the news, but not in a good way for Endo.  The FDA assembled an expert review panel last week to opine on whether the benefits of Opana ER outweighed its risk to its users.  The short summary of its findings and recommendations is that the benefits do not outweigh the risks, and that the drug’s continued marketing should be controlled in a variety of possible ways including removal from the market, or restrictions on who can prescribe it and under what conditions.

To summarize the findings of the article below, Opana ER is not a big player in the prescription opioid market in any event.  Its active ingredient, oxymorphone,  is manufactured or distributed in the US by at least 19 different companies but fills less than 1% of opioid prescriptions.  (I must admit up front that have no idea who actually makes what pills or where the active ingredient in the various preparations comes from.) A detailed list of individual versions of oxymorphone by NDC from the labelers below is available here. (or here as Excel file.) It occurs to me as I see such long lists of labeler names, that with so many ways for a drug to enter the community, opportunities for diversion from supervised distribution become correspondingly more numerous. Given all the apparent distributors, is it even possible for an Endo or a Mallinckrodt to know where the drugs they might manufacture end up? Mallinckrodt in particular has been accused of not keeping very good track at all, at least in Florida. Continue reading “FDA Panel Finds Opana-ER Not Worth The Risk!”

Newest Proposed Treatment for Duchenne Muscular Dystrophy Abruptly Changes Hands.

Less than one month after our exploration of the recent colossal price markup of a simple drug used by a vulnerable and desperate group of children and their families, a dramatic turn of events occurred which may make things better or worse. In February, the pharmaceutical company Marathon announced its marketing plans for Emflaza, its brand name for deflazacort, a simple corticosteroid widely available in other countries but not in the United States. Emflaza had recently been approved by the FDA for the treatment of symptoms of Duchenne muscular dystrophy (Duchenne MD) in the United States.   Duchenne MD is a usually fatal genetic muscular disorder of young boys for which no curative therapy is currently available, but for which corticosteroids such as deflazacort and prednisone slow the progression of weakness.  Deflazacort– the most commonly prescribed all-purpose steroid in some countries– has been used in Canada and elsewhere for the treatment of Duchenne MD for some time.  The wrinkle in Marathon’s release was that it declared an annual charge of $89,000 per child for a drug sold in many other countries for a price a measured in pennies instead of dollars.

I have already expressed my puzzlement that the FDA gave its approval to Marathon based on clinical data collected many years old by another drug company that for undisclosed reasons walked away from FDA approval. I am still looking for reliable studies that confirm that deflazacort is superior to, or safer than prednisone to treat Duchenne MD. [Prednisone is the most prescribed corticosteroid in the United States. To say that it is inexpensive would be an exaggeration!]  Perhaps a clinician without ties to the pharmaceutical industry will provide us with evidence-based data that Emflaza is an essential or even a better drug for Duchenne MD, or worth the monumental cost for any incremental benefit.

Continue reading “Newest Proposed Treatment for Duchenne Muscular Dystrophy Abruptly Changes Hands.”

Is Emflaza the Latest Drug Pricing Rip-off or Not?

New Money from Old Drugs.  Are children with muscular dystrophy being served by the free market or taken advantage of?

I suspect that it is just because people are paying attention, but reports of unexplainably excessive pricing of both new and old drugs keep coming too fast to keep up with. I recently published a list of 447 drugs whose prices doubled or more between 2011 to 2015. Even that list was incomplete!  This week’s prize winner is Emflaza, a drug that was recently approved by the Food and Drug Administration (FDA) to treat Duchenne Muscular Dystrophy (DMD).

The price proposed by Marathon Pharmaceutical, LLC is $89,000 per patient per year. We may be getting desensitized to such patient-bankrupting offerings, but what makes Emflaza stand out from the offending crowd is that in Canada, where some of the original research appears to have been done, the same drug for the same disorder costs a dollar a pill or less.  As noted in the Wall Street Journal, the price set by Marathon is 50 to 70 times what most U.S. patients currently pay to buy the drug (illegally?) from on-line pharmacies in the United Kingdom.  The more I learned about Emflaza, the more troubled I became.  Allow me to share some of my discomfiture with you. Continue reading “Is Emflaza the Latest Drug Pricing Rip-off or Not?”

Should Kentucky Physician Assistants Prescribe Controlled Substances?

Kentucky’s high rates of opioid prescription must be reduced before even more prescribers are added. National data suggest that adding Physician Assistants to the prescribing mix is unlikely to reduce the number of opioid prescriptions written. 

Louisville’s Courier-Journal this week featured an opinion piece by Andrew Rutherford, President of the Kentucky Academy of Physician Assistants, advocating for the passage of Kentucky Senate Bill 55 which would authorize physician assistants in Kentucky to prescribe controlled substances. Emphasizing the stakes involved in the proposal, articles later in the week reported on the latest rash of opioid overdoses in our region– presumably due to the inevitable fentanyl-enhanced “bad batch” of heroin.  Several on-line commenters to the second articles suggested that since those who overdosed had made their own risky-decisions, that they should be permitted to suffer the consequences without an intervention of attempted resuscitation. It is suggested that this Darwinian mechanism would ease the opioid abuse problem.  Unfortunately however, among the personal choices leading to opioid addiction is the choice to visit a licensed healthcare professional who, with good intentions or not, prescribes opioids.  Once an individual becomes addicted, the concept of “choice” become irrelevant.  A reasonable question to be asked is, “Do we really need to put more opioids in the hands of Kentuckians?  My answer would be an emphatic no. Continue reading “Should Kentucky Physician Assistants Prescribe Controlled Substances?”

Exorbitant Increases in Prescription Drug Prices Neither New Nor Uncommon.

At least 447 Medicare outpatient drugs had prices more than double between 2011 and 2015 and 36 increased their prices ten-fold!

In every week of recent months our attention is being called to one or another exorbitant or unexplainable increase in the price of yet another prescription drug. We have long recognized continuously rising prices for brand-name drugs, but the new business model of the pharmaceutical industry includes taking control of the distribution of traditionally generic drugs and jacking prices up even faster and higher than their brand-name cousins– if that is even possible.  It appears that the more medically-necessary or lifesaving the drug is, the higher the price increases are. This is what happens in a free market environment when an industry has its consumers over a barrel and is free to have its way with them.

Some poster-children of the trend include the anti-parasitic drug pyrimethamine (Daraprim) which is essential to treat certain infections in immunosuppressed people and whose price per tablet increased from $13.50 to $750 overnight; the EpiPen injector system used to administer epinephrine to people entering anaphylactic shock; insulin for diabetes; Plaquenil, and more recently Suboxone, the drug used to help manage opioid addiction.  As I will show below, there are many more drugs with recently inflated prices still cruising below the radar! Continue reading “Exorbitant Increases in Prescription Drug Prices Neither New Nor Uncommon.”

Gov. Bevin Reappoints His Original Ten-Person Board of Trustees for UofL

Breaking Information:

The Governor’s office released today Governor Bevin’s list of 10 appointments to a replacement Board of Trustees for the University of Louisville.  With a single exception, all 10 are the same as the Board he appointed earlier in 2016.

Newly appointed Trustees:
J. David Grissom, of Louisville, until Jan. 13, 2023.
John H. Schnatter, of Louisville, until Jan. 13, 2022.
Sandra Frazier, of Louisville, until Jan. 13, 2021.
Nitin Sahney, of Prospect, until Jan. 13, 2021.
Bonita K. Black, of Crestwood, until Jan. 13, 2020.
Brian A. Cromer, of Louisville, until Jan. 13, 2020.
Ulysses Lee Bridgeman, Jr., of Louisville, until Jan. 13, 2019.
Ronald L. Wright, MD, of Prospect, until Jan. 13, 2019.
James M. Rogers, of Prospect, until Jan. 13, 2018.
Diane B. Medley, of Ekron, until Jan. 13, 2018.

The exceptions are that James Rodgers is appointed instead of Dale Boden.    In the first set, Douglas Cobb was appointed, but resigned shortly afterwards to be replaced by Brian Cromer who is on the list above.

I have commented on all of these at length, including an analysis of the application documents used for the first appointment process.  It is difficult for me to believe that the Nominating Committee that met last week, with 3 of its 7 members on that day new to the committee, had any meaningful independent influence on this intensely political appointment process.  Surely this was a done-deal from the start.

Peter Hasselbacher, MD
President, KHPI.
Emeritus Professor of Medicine, UofL
3:10 pm, Jan 17,  2017

Nomination Process for New UofL Board of Trustees Underway

Major twist in the story line!

postsecondary-educ-nominating-1The Governor’s Postsecondary Education Nominating Committee is presently in Executive Session in Frankfort selecting candidates to present to the governor for appointment to the University of Louisville Board of Trustees as described by new legislation passed by the Kentucky Legislature earlier this week.  Thirty names will be presented to  Gov. Bevin from which he is entitled to select 10, subject to approval by the Kentucky Senate.  This is a brand new process that is different from the previously uniform statutory requirement for Board appointment at Kentucky’s other major state universities.  I was told that the names of these candidates will not be released to those of us waiting in the hall when the Committee leaves its executive session. I suspect that the names that have been selected will come from the same binders used to appoint the first 10-person Board of Trustees last Spring. It remains to be seen to what extent the statutory protocols or actions of the nominating committee are different in any other way from the tightly controlled political processes used in the past by this governor or others. For example, it is not at all obvious that Governor Bevin elicited recommendations for his new Nominating Committee as required by statute.

What is newsworthy at the moment is the major change the Governor has made in the composition of his Nominating Committee. Announced just today is the replacement of three Committee members by new ones who are now in their first meeting ever.  To inspection, the new appointments to the Nominating Committee go a long way towards repairing a committee which was by statute illegally constituted by almost every parameter. There are now three women and two racial minorities on the 7-member Committee.  At least one of these is a Democrat, but the political party affiliation of all the rest is not yet known to me.

Obviously the Governor has been sensitive to criticism by me and others that his own committee was more “illegally” constituted than the UofL Board he sought to replace for the same reason.  That contradictory logic belied any other motives that might have been or still are operational.  Nonetheless, what is going on now represents a major deviation from past practices, and the product of the committee meeting remains to be analyzed.

This article has been amended.

Peter Hasselbacher, MD
Emeritus Professor of Medicine, UofL
January 13, 2017.  12:55 pm

postsecondary-educ-nominating-2

Additional Details About Separation of UofL and KentuckyOne Health Emerge.

Much remains to be worked out.  University of Louisville Hospital Profitable but CHI and KentuckyOne Health suffering major financial losses.

Claimed to be effective as of Dec 14, an initial document initiating the separation and anticipated divorce of the University of Louisville and KentuckyOne Health became available today, December 22.  Given the complexity of the existing contractual partnership and some earlier hints of marital conflict, the 3-page document submitted as an amendment to the original Joint Operating Agreement (JOA) is surprisingly both short and bland.  The principal function of the amendment is to change the term length of the original agreement from 20 years to an ending date 6 months away on June 30, 2017 at which time University Medical Center, Inc. (UMC) resumes its pre-marital control of the entirety of University of Louisville Hospital and the James Graham Brown Cancer.  It is obvious that many consequent details remain to be revealed or worked out. Indeed, the document anticipates that additional counterparts to the amendment will be added.

A 6-month wind-down period for one spouse to leave the house in an orderly manner is specified by the conflict resolution agreements of the JOA.  Although not specifically mentioned in the amendment, the change of termination date triggers a cascade of other important actions of which the most important is that the complex interlocking operational Academic Affiliation Agreement (AAA) also becomes void on June 30.  A new AAA has been prepared well ahead of schedule.  It has reverted to a traditional Affiliation Agreement used between UofL and its hospital partners and returns control of all academic, clinical, educational, research, financial, and hopefully ethical matters back to the University where such belongs.  Hooray! Continue reading “Additional Details About Separation of UofL and KentuckyOne Health Emerge.”