Becker's Hospital Review

27 27 CEO/STRATEGY How Congress, Hospitals and Lobbying Inflate Healthcare Costs By Emily Rappleye L obbying and political negotiating have a surprisingly direct effect on U.S. health- care spending, according to a working paper published by the National Bureau of Economic Research and featured in e New York Times. When legislators earmark bills or steer fund- ing to specific districts to woo targeted mem- bers of Congress — such as the extra funds added to the Graham-Cassidy healthcare bill for Maine, Arizona, Alaska and Kentucky — it can add up to millions, or even billions, of dollars of added healthcare costs over time. For example, the working paper focuses on earmarks added through Section 508 of the Medicare Modernization Act of 2003, which allowed hospitals to apply for increased Medi- care funding based on location and labor costs. Of the 400 hospitals to apply for Sec- tion 508 funding, 120 succeeded in securing Medicare rate increases. Researchers found hospitals were seven times more likely to be granted funding increases under Section 508 if they were located in districts represented by a Republican who voted for the bill, accord- ing to e New York Times. ose hospitals received a 6.5 percent boost in Medicare funding, and 29 hospitals re- ceived an even larger boost of 10 percent. ese increased funds allowed the hospitals to treat more Medicare patients, grow the nurse workforce, invest in new technology, and pay employees and executives more. is increased hospital spending by more than $100 million annually, according to the paper. As e New York Times notes, the 29 high-re- cipient hospitals racked up $1.25 billion in additional spending over just five years with- out changing the quality of care. However, the spending didn't stop there. Hos- pitals that received the additional funding in turn formed a coalition and spent millions to lobby for continued funds. Ahead of the vote to reauthorize the program, healthcare workers increased donations to Congress 65 percent, and Congress members who repre- sented districts with Section 508 hospitals raked in 22 percent more in campaign fund- ing, according to the paper. n 5 Things to Know About CVS Health CEO Larry Merlo By Leo Vartorella CVS Health is reportedly in talks to purchase Aetna for $66 billion, led by their CEO and President Larry Merlo. Here are five things to know about Mr. Merlo. 1. Mr. Merlo began his career as a pharmacist and is a graduate of the University of Pittsburgh School of Pharmacy. He joined CVS Pharmacy in 1990, after the company's acquisition of People's Drug. 2. Since Mr. Merlo became CEO and president of CVS Health in 2011, the company has grown to include roughly 9,700 pharmacies and 1,100 walk-in clinics. Also a pharmacy benefits manager, CVS Health generated $177.5 billion in net revenue in 2016. 3. In 2014, CNN Money named Mr. Merlo the eighth-highest paid CEO in the U.S., with a total compensation of $22.9 million. In 2015, Fortune said Mr. Merlo maintained the highest CEO-to-worker salary ratio in the U.S., making 422 times more than the average CVS employee, who earns $28,700 per year. 4. Mr. Merlo decided to demonstrate his company's commitment to pub- lic health in 2014 when he announced CVS would stop selling tobacco products at all retail locations. "The sale of tobacco products is inconsistent with our purpose — helping people on their path to better health… Cigarettes and tobacco products have no place in a setting where healthcare is delivered. This is the right thing to do," Mr. Merlo wrote in a company blog post. 5. Mr. Merlo serves on the Board of the National Association of Chain Drug Stores and the University of Pittsburgh's Board of Trustees and is also a member of the Consumer Goods Forum Board. n Intermountain Healthcare to Restructure Internal Operations By Morgan Haefner S alt Lake City-based Intermountain Healthcare will transform its internal operations from geographically-de- fined administrative regions to two main groups, according to a press release ob- tained by Utah Business. The two groups will focus on community and specialty care. The Community Care Group comprises preventative and primary care, while the Specialty Care Group focus- es on specialist and hospital inpatient care. "Intermountain's new internal structure is based on how patients use health and healthcare services and reflects new com- munication tools and processes that allow for faster and more direct contact among patients, caregivers and organization lead- ers," the system said. "The new alignment will create more value for those Intermoun- tain serves, including the underserved to whom charity care is provided in times of need." n

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