🔒Lamont’s top healthcare advisor Gifford leads efforts to rein in escalating costs

When Gov. Ned Lamont seeks out advice on healthcare issues he turns to a number of advisors, but none arguably more important than Deidre Gifford.

The 64-year-old Cornell Medical College graduate is the governor’s senior advisor on healthcare policy and also runs the Office of Health Strategy, an agency with several functions like overseeing industry mergers and acquisitions — including Yale New Haven Health’s pending purchase of Manchester Memorial, Rockville General and Waterbury hospitals.

Gifford also helped lead the state’s COVID-19 response when she was named interim public health commissioner at the pandemic’s start.

With the COVID crisis now under better control, Gifford is spearheading the Lamont administration’s efforts to attack another symptom ailing the healthcare industry: escalating costs.

Lamont this legislative session has proposed multiple bills aimed at reducing healthcare costs and improving care quality and access.

Policies range from eliminating certain hospital facility fees to reining in aggressive pharmaceutical company marketing practices and restricting anti-competitive contracting practices employed by providers.

They would impact all major facets of the industry from insurers and hospitals to pharmaceutical companies, and are in response to a confluence of factors driving up healthcare costs for consumers and businesses.

Gifford said hospital inpatient and outpatient costs and pharmaceutical prices are the largest drivers of the state’s healthcare affordability problem, but she’s cautious not to lay blame on any single stakeholder.

According to the Kaiser Family Foundation, Connecticut spends approximately $12,500 per person on health care, about $2,300 more than the national average.

Coming into the year, Connecticut individual consumers and businesses faced average insurance premium rate increases of 12.9% and 7.9%, respectively.

“I have said many times, as has the governor, that this is a problem that everyone has to work together to solve,” Gifford said in a recent interview with the Hartford Business Journal. “We are trying not to vilify any particular party because all parties make a contribution to our healthcare system and have a responsibility to be part of the solution.”

Anti-competitive practices

Efforts to reform the healthcare system won’t be easy; there are no silver-bullet solutions and it requires buy-in from diverse stakeholders with, at times, competing interests.

Even issues that seem like they have a straightforward cause and effect are complicated.

For example, in announcing the Lamont administration’s proposals, Gifford said health system consolidation and lack of competition are contributing to higher healthcare costs.

There seems to be growing consensus around that thinking, with a recently published study by Harvard Medical School and the National Bureau of Economic Research concluding that consolidated health systems offer patients “marginally better care at significantly higher costs.”

Connecticut has experienced significant hospital consolidation with two major systems — Yale New Haven Health and Hartford HealthCare — now controlling about two-thirds of all statewide hospital net patient revenue.

At the same time, Connecticut hospitals earlier this month sounded the alarm on post-pandemic financial strains, issuing a report that shows they lost a collective $164 million in fiscal 2022, spurred by shrinking revenues, sicker patients and surging labor and other costs.

Hospital expenses last fiscal year were $3.5 billion higher than pre-pandemic levels, according to the Connecticut Hospital Association (CHA), primarily due to supply, drug, and labor cost increases.

Lamont’s proposals attempt to pull several cost-control levers, Gifford said, by eliminating hospital facility fees charged at free-standing offices and clinics, and capping out-of-network costs for inpatient and outpatient hospital services to 100% of the Medicare rate for the same service in the same geographic area.

The proposals also outlaw certain hospital contracting practices that Gifford said limit competition and have become more prevalent amid industry consolidation.

That includes anti-steering clauses — which prohibit insurers from using incentives to steer patients to higher-value providers — and all-or-nothing clauses that require health plans to accept all providers in a healthcare system, or none at all.

The proposals would also ban health systems from inserting anti-tiering clauses into commercial contracts.

Insurers for years have been pushing tiered networks that essentially rank hospitals and doctors by cost and quality metrics and incentivize consumers to visit providers offering the best bang for their buck. Providers, in the past, have raised concerns about how those networks are determined.

Lamont also wants Connecticut to join a multistate bulk purchasing consortium to negotiate prescription drug discounts, and create more transparency around prescription drugs experiencing major price spikes.

“Our goal is to work with the healthcare community and stakeholders to address the high costs of health care and, yes, to make sure we have access and equity in our healthcare system,” Gifford said.

Insurers vs. hospitals

There’s split opinion on Lamont’s proposals.

Providers — including hospitals and physicians — oppose some of the measures, arguing they would create potentially billions of dollars in commercial revenue losses at a time when health systems are already facing financial headwinds.

Conversely, health insurers and some consumer advocates are onboard, forming a rare alliance in favor of Lamont’s proposals.

They argue that prohibiting anti-steering and anti-tiering clauses would make it easier to align financial incentives with care cost and quality metrics — essentially awarding the best care at the lowest cost.

“As Connecticut’s market becomes more and more concentrated under just a few umbrella health systems, appropriate safeguards are warranted to assure no one party is unduly advantaged over another,” the Connecticut Association of Health Plans wrote in testimony supporting Lamont’s bills.

Some Democrats — including Sen. Saud Anwar (D-South Windsor), a practicing physician and co-chair of the Public Health Committee — raised concerns about Lamont’s proposals during a recent public hearing and questioned who they would benefit, noting consumers need to be the beneficiaries of reduced costs.

“If this bill is just going to make the insurance industry richer, I’m not going to be able to even look at this very seriously myself,” Anwar said, according to the CT Mirror.

Paul Kidwell, senior vice president for policy at the Connecticut Hospital Association, argues Lamont’s proposals would favor health insurers over hospitals in commercial contract negotiations.

Of particular concern is the cap on out-of-network payments for hospital services, he said.

That would cause hospitals to lose billions in commercial revenue, even as the government continues to underpay caregivers for services provided to Medicare and Medicaid patients.

In its recent financial report, the CHA said Connecticut hospitals in fiscal 2022 lost a combined $2.1 billion from the government-funded Medicare and Medicaid programs.

Government underpayment, he said, shifts costs to employers and individuals with commercial insurance, resulting in rising premiums and out-of-pocket costs for those patients.

Medicaid, which is funded by both the federal and state government, needs to increase its payment rates for hospital care to address those concerns, Kidwell said.

Banning contracting practices like all-or-nothing clauses can also negatively impact patients by limiting or restricting access to certain care locations within a health system, Kidwell said.

“What the proposal really does is shift the leverage to the health insurance companies,” said Kidwell, whose association in testimony has pointed out that the four national health insurers operating in Connecticut made between $4.1 billion and $20.1 billion in profits last year.

Despite those disagreements, Kidwell said CHA does have areas of agreement with the Lamont administration, including on greater investment in workforce development to help fill nursing and other healthcare position shortages.