Remarks to America’s Essential Hospitals

As Prepared for Delivery

Thank you, Joe [Scott], for that introduction.

I’m so glad to be here to speak with you all, because America’s safety net hospitals represent a unique piece of what’s great about American healthcare: the way that we combine public and private resources to meet the healthcare needs of our local communities in ways that work for them.

It’s also fitting to be here as I come up on the end of my first year as HHS secretary, which I’ll mark in January.

The very first public event I did as secretary was at a member of America’s Essential Hospitals: Eskenazi Hospital in Indianapolis, which has such a proud, long tradition of caring for the vulnerable in what became my adopted hometown. It also happens that, before Dr. Jerome Adams became America’s surgeon general, he was an anesthesiologist as Eskenazi.

But our connection runs deeper than that: The mission of HHS is to improve the health and well-being of every American. Part of that is ensuring that all Americans, regardless of their circumstances, have access to healthcare that meets their needs—we share that goal with all of you.

Today, I want to talk about how the work of America’s safety net hospitals intersects with some of the priorities I have laid down for HHS, including efforts to lower the price of prescription drugs, the movement toward value-based care, and the opioid crisis.

First, I want to address a couple ways in which we are looking to lower the cost of prescription drugs that particularly matter to providers who serve vulnerable Americans. This includes the 340B program. I know that just about every hospital represented here is a 340B covered entity.

We are strongly committed to the original intent of the 340B program, to offer vulnerable Americans the drugs they need at a discounted price. The provision of discounted drugs to underinsured or low-income patients at America’s safety net hospitals is exactly what 340B was supposed to accomplish.

Our concerns about 340B are driven by the rapid expansion of the program, beyond the populations it was intended to help.

When a program is set up to aid specific, vulnerable populations, expanding it to less-needy populations or populations with robust insurance coverage doesn’t strengthen the program—it risks undermining it.

Any 340B reforms we undertake will be solely focused on strengthening and targeting the program to the populations it was intended to serve.

For instance, last year, CMS changed its payment rules for 340B drugs administered to Medicare beneficiaries in outpatient clinics. Some of the savings reduced patients’ out-of-pocket costs, and some went back into the Medicare program, treating all hospitals equally.

The President’s 2019 budget called for more of Medicare’s portion of these savings to be distributed to hospitals providing more charity care, and less to those who provide less.

We are not just committed to ensuring the 340B program is serving the populations it was intended to. We also have always been and will continue to be committed to vigorous enforcement of the program’s rules. You saw that with our recent issuance of the civil monetary penalty rule, which will penalize drug companies for overcharging 340B entities.

In this case, it took some time to ensure we got the rule right, but we are moving as quickly as we can to begin enforcing it.

If you have other ideas about how to help the 340B program work better, we want to hear them—my door is always open.

We are also attentive to the way that other drug pricing reforms in Medicare may interact with 340B.

One example is the International Pricing Index model, which we put forth earlier this year. 

In rolling out the IPI model, we solicited input from stakeholders, and that includes our safety net hospitals. We want to make sure these reforms will help, and never harm, our most vulnerable populations, and there are a lot of savings to be shared here.

We are also eager to ensure that the Medicaid program is getting the best deals possible on prescription drugs.

One tool for this was weakened by the Affordable Care Act, which capped the rebates that drug companies must pay to the Medicaid program when they raise drug prices faster than inflation.

We think this was a wrongheaded giveaway to the pharmaceutical industry, and we have been pleased to see interest from Congress in fixing it.

We were also heartened to see a bill introduced earlier this week in the Senate by Chairman Chuck Grassley and Sen. Ron Wyden, to give HHS new powers to ensure drug companies aren’t misclassifying drugs to skip out on the rebates they owe.

The President’s 2019 budget proposed a similar measure, which was conservatively estimated to generate $300 million for the Medicaid program over the next 10 years.

Now, one of the reasons we’re so intently focused on bringing down the cost of prescription drugs is that they are vital to helping American patients with complex health needs or chronic conditions.

I know your hospitals serve many of these patients, so you also know that helping them stay healthy is often a much more complicated question than just getting them the healthcare they need.

So much of what drives expensive, chronic health conditions, especially in the patients you deal with, is not health issues at all, but what are often called “social determinants of health.”

Social determinants of health is, like value-based care, an abstract term.

I like the term “social risk factors,” because it better illustrates how, for millions of Americans, our lives outside the doctor’s office can have major impacts on health outcomes—and the ability of providers like you to improve them.

How can someone manage diabetes if they are constantly worrying about how they’re going to afford their meals each week?

How can a mother with an asthmatic son really improve his health if it’s their living environment that’s driving his condition?

This can feel like a frustrating, almost fruitless position for a healthcare provider, who understands what is driving the health conditions they’re trying to treat, who wants to help, but can’t simply write a prescription for healthy meals, a new home or clean air.

One tool we have for testing solutions to these challenges is payment models through our Center for Medicare and Medicaid Innovation.

Last year, CMMI launched the Accountable Health Communities model.

Under the model, participating providers screen high-utilizers of healthcare services for food insecurity, domestic violence risk, and transportation, housing and utility needs. If needed, patients are set up with navigators who can help determine what resources are available in the community to meet the patient’s needs.

Like all CMMI models, this will be carefully assessed—to see whether this is an effective way to meet these non-health needs, and whether making these connections improves health and decreases health spending.

We’re pleased that two members of America’s Essential Hospitals—Care New England Hospital in Rhode Island and Oregon Health and Science University—are participating in the Accountable Health Communities model.

A model like this enables health providers not just to address the social determinants of patients’ health, but also provide resources to help individuals make the best use of human-services providers.

The diverse, decentralized nature of our American human-services system enables us to take an individualized approach.

One approach to social determinants of health would be, for instance, to say that we should identify a couple of the most common needs and really focus on how those can be addressed.

But that’s not going to be of great use to someone in, say, a rural area, where food and housing may be affordable but finding a ride to the hospital is the real challenge.

That’s why we don’t believe in a rifle-shot approach to human services—you can’t focus on one or two needs to the exclusion of others.

Just like how every patient is different in healthcare, every person has unique social service needs—and we are intent on designing models that connect them to the services they need, rather than offering a one-size-fits-all approach.

One of the most acute issues, for instance, is malnutrition, which safety net hospitals see in their patients every day.

HHS’s Agency for Healthcare Research and Quality has found that Americans with malnutrition are twice as costly to treat at the hospital as those who come in well-nourished.

In fact, malnutrition is involved in 12 percent of non-maternal, non-neonatal hospital stays—$42 billion each year in healthcare spending.

Naturally, a number of private health providers and payers have already tried addressing this issue: One ACO in Chicago, for instance, began screening high-risk patients for malnutrition and then supporting them after discharge from the hospital with follow-ups, referrals and nutrition coupons. The savings were huge: more than $3,800 per patient.

So there are encouraging innovations occurring, but we also constantly face new healthcare challenges. Consider the interconnected problems of chronic illness and non-health needs, which your hospitals see every day—and insert addiction into that picture. For someone struggling with a substance use disorder, it is that much harder to manage nagging health conditions while also securing the necessities of life.

Neglecting treatment for a chronic condition can be bad enough and risks aggravating health problems that end up requiring a hospital visit or stay. But skipping a dose of suboxone because you’re worried about where your next meal will come from could be deadly.

So through two models at CMMI, we are actively addressing how to better treat and prevent substance use disorder through a more holistic approach.

In the Maternal Opioid Misuse, or MOM model, state Medicaid agencies, front-line providers, and healthcare systems will work to coordinate clinical care and integrate support services for pregnant and postpartum women with opioid use disorder and their infants. The challenge of neonatal abstinence syndrome has likely shown up in your hospitals, and this is just one piece of a comprehensive effort at HHS to understand, prevent and treat NAS.

Meanwhile, the Integrated Care for Kids model, or InCK, will help prevent and treat behavioral and mental health conditions, including substance use disorder, in children.

Under the InCK model, when mental and behavioral health challenges arise, there is a full set of crisis services available to handle the needs of kids and their families.

We know that the overall burden of our nation’s opioid crisis has fallen heavily on hospitals.

The number of opioid-related emergency room visits, for instance, doubled from 2005 to 2014.

Hospitals do lifesaving work with those struggling with substance abuse, but once someone has been stabilized after an overdose, the next step should be a link to medication-assisted treatment and appropriate psychosocial supports.

HHS has invested almost $2 billion in grants this year to support treatment and other services, but money is only one part of the picture.

Ensuring a warm handoff from the ER to treatment and recovery services is the next step to making sure a patient doesn’t return after another overdose in the future. 

Substance use disorder is a particularly acute challenge today, but it is hardly the only mental health condition that is driving higher health spending and worsening outcomes.

Another stubborn challenge is serious mental illness, which drives an extraordinary amount of spending in social services, law enforcement and our healthcare system.

Just consider the healthcare side: A study of the most common utilizers of emergency room visits in Massachusetts found that the vast majority of them were homeless, and the most common health conditions were substance use disorder and mental illness.

Nearly half of the highest ER utilizers were struggling with co-occurring serious mental illness and substance use disorder. Treating these challenges in the ER setting is not just costly, but often ineffective—the right answer is more appropriate treatment options and better connections to social supports.

Last month, we announced historic new guidance that invites states to apply for new waivers from Medicaid’s exclusion on paying for inpatient mental health treatment. These waivers will be modeled on the ones we have already given to 15 states to support treatment for substance use disorder, including opioid addiction.

For decades now, Americans with serious mental illness have been poorly served by our health system—first, by an inhumane system of institutionalization, and now, by a system that fails to provide them with what they need to live healthy lives in the community.

With these waivers and other work across the administration, we believe we can enter an era where serious mental illness is treated as effectively as our country treats any other health condition.

Addressing this challenge will mean better use of psychiatric hospitals, some of which I know are represented in this room.

Rather than coming to safety-net hospitals in crisis, Americans with serious mental illness will receive the psychiatric treatment they need, making it much easier to treat their physical health, too.

I want to close by giving you a broader sense of why your input will be so essential to building a health system that really meets the needs of complex patients.

Today, our healthcare system spends an extraordinary amount on our most costly patients: The top 5 percent of Americans by healthcare costs account for more than 50 percent of our healthcare spending.

The bottom 50 percent of Americans by healthcare costs account for just 2.8 percent of health spending. Now, of course, some of that disparity is attributable to costly care provided for patients at the end of their lives, as well as care for serious conditions like cancer.

But those are not necessarily the biggest spending categories. Medicare spends about $90 billion a year on cancer care, and $190 billion on care in the final two years of life.

Those are significant challenges—but you have to add them together to have the equivalent to the $270 billion a year we spend on patients with six complex chronic conditions, including diabetes and hypertension.

We typically think of these conditions, just like substance abuse or mental illness, as challenges that complicate the provision of healthcare.

But they are not mere complications that can be worked around—they are a daily reality for the patients your hospitals serve.

So we need to start thinking about these challenges as opportunities: opportunities to secure better outcomes for patients by treating complex, chronic conditions in innovative, effective and lower-cost ways.

A system that pays for health and outcomes rather than sickness and procedures must tackle these challenges—and it should handsomely reward those who can come up with new ways to prevent and treat them.

America’s safety net hospitals have a great deal of expertise with these challenges already.

As we build a system that offers strong incentives for providing high-value care to the most complex, challenging patients, you will be an invaluable resource—and you will have some exciting opportunities before you.

Thank you very much for having me here today, and I look forward to working with you all in the years to come.