New HHS Secretary Focus Means Opportunity, Challenges to Provider Organizations

E R D M A N Alert:

New HHS Secretary Focus Means Opportunity and Challenges to Provider Organizations

On January 24, 2018, Alex M. Azar was confirmed by the Senate as the new U.S. Secretary of Health and Human Services by a vote of 55-43.

About Secretary Azar

A graduate of Dartmouth College (1988) and Yale Law School (1991), Secretary Azar, 50, previously served as General Counsel (2001-2005) and Deputy Secretary (2005-2007) under HHS Secretaries Tommy Thompson and Mike Leavitt in the George W. Bush administration. From 2007 to 2017, he served in various roles at Eli Lilly and Company, the Indianapolis-based prescription drug manufacturer becoming President of U.S. Operations in 2012. He was a member of the Board of the National Association of Manufacturers (2008-2012), Biotechnological Innovation Organization (2013-2017), the Healthcare Leadership Council (2012-2017) and is currently a member of the HMS board.

He is no stranger to Washington and the Department of Health and Human Services. He was recommended for the position by former HHS Secretaries Leavitt and Thompson along with several industry leaders.  He is regarded a pragmatist familiar with the inner-workings of HHS which employs 79,406, oversees a budget of $1.145 trillion and includes the Office of the Inspector General, Centers for Medicare and Medicaid Services, the Centers for Disease Control and Prevention, National Institutes of Health, Food and Drug Administration and many other agencies, programs and departments.

His Priorities

In his confirmation hearings before the Senate Finance and Health, Education, Welfare and Labor Committees, Azar stated his priorities will be:

  • Lowering drug costs by encouraging more generic and branded competition and by restricting mechanisms whereby branded manufacturers use patent laws to pre-empt competitor encroachment.
  • Leveraging Medicare’s purchasing power to change how it pays for care from fee-for-service to outcomes and value. In this regard, he voiced support for expansion of bundled payment programs as a means of improving coordination of care and decreasing costs for major inpatient episodes of care.
  • Reduce opioid addiction through a multi-faceted state and federal initiative.
  • Increase access to affordable health insurance coverage through association health plans and other reforms.

He also stated his desire to give states more flexibility in oversight of their Medicaid programs.

THE ERDMAN PERSPECTIVE: IMPLICATIONS FOR PROVIDERS:
Secretary Azar is a proponent of market-based reforms to healthcare. He supports private-sector competition and expansion of alternative payment programs like bundled payment models requiring close coordination of care across acute, ambulatory and post-acute facilities. Though early in his tenure, his track record in the Bush administration, pronouncements and testimony imply he will place high priority in the following areas of importance to hospital strategists:

1- System-wide care management strategy: Azar is likely to expand emphasis on bundled payment programs and other alternative payment models as a means of reducing costs and improving outcomes via seamless care coordination. That means hospitals must revisit plans involving facilities on and off-campus, developing a comprehensive ambulatory strategy that optimizes access to primary care, post-acute and affiliated physicians.

2-Medicare payments: Secretary Azar will be under pressure to reduce the federal government’s expenditures in Medicare and Medicaid to avert budget deficits. That means lower reimbursement rates to hospitals and physicians. Centralizing facilities and support services where possible will be requisite to lower facility costs.

3-Medication management: Azar, having served as a drug industry executive, will be closely scrutinized about his efforts to reduce drug costs and address drug abuse, particularly opioid addiction. Specialized inpatient and outpatient facilities and clinical coordination are expected to be a focus of HHS attention, along with tighter formularies and more restrictive medication management protocols.

4-Connecting public health programs: Azar is likely to look for ways to eliminate redundancy in facilities and programs targeting the disadvantaged and under-insured. Community Health Centers and services for Veterans Health and the Indian Service will likely be considered. Hospitals should inventory the range of services and facilities in their markets where potential opportunity for integration/modernization present.

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