Ben Barnes Unplugged

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This article was published on December 13, 2018 on CT News Junkie, written by Jack Kramer. Photo Source: CT News Junkie.

HARTFORD, CT — Outgoing Office of Policy and Management Secretary Ben Barnes believes two powerful groups — hospitals and municipalities — are the biggest obstacles to Connecticut’s fiscal stability.

Barnes made that statement during a far-ranging discussion Thursday at the Connecticut Voices for Children 18th Annual State Budget Forum.

Barnes joked that he could be so candid because he is resigning his position in a few weeks when Governor-elect Ned Lamont replaces his boss, Dannel P. Malloy.

“It’s the kind of thing you can say when you are two weeks away from the end of service.”

Acute care hospitals, Barnes said, “have used their virtuous status to somehow strengthen their demand for resources that the state cannot afford.”

He said hospitals are a “group that gets what they want virtually all the time.” He said they are the only group he knows of that is able to dedicate all the taxes they pay “right back to their own bottom line.”

He said if the state loses the lawsuit filed against it by most of Connecticut’s hospitals, it will cost the state $4 billion. The lawsuit, which was filed in 2016, challenges the taxing structure the state created for the hospitals. It’s still making its way through the court system and no decisions have been made.

As far as municipalities are concerned, Barnes was just as direct, stating legislators need a change of attitude.

Barnes, who once worked for the Connecticut Conference of Municipalities, the city of Stamford, and the schools in Bridgeport, said he knows that won’t be easy — “I used to work in local government.” But he said until legislators look at the bigger picture of the entire state and not just their own town, Connecticut will have budget problems.

Right now, Barnes said, “no town can ever get less than what they got the year before.”

“We are spending a lot of money on communities that have plenty of money,” he went on.

He cited the Teachers Retirement System as the best example of a system that needs to be fixed.

Currently, the state funds the teacher retirement program. Attempts by the Malloy administration to have the towns pick up some of that cost was met with a huge backlash.

The annual contribution to the Teachers’ Retirement System is about $1.3 billion, but could top $3.25 billion to $6.2 billion by 2032, depending on various experts, because of years of underfunding. Connecticut didn’t start setting aside money to pay for teachers’ retirements until around 1982.

Barnes said the state, sooner or later, has to deal more directly with the fact that more affluent communities such as Greenwich, Weston, and Westport need less state funding than poorer communities such as Hartford, New Haven, and Bridgeport.

“We tried to re-stack the deck to put more resources into neediest communities but it was dead on arrival,” Barnes said. “My parting hope is that majority of legislators will look at this issue again. There is enough money but we are currently spending it on people who don’t need it as much.”

In answer to a question from the audience about the issue of how municipalities could find savings, Barnes said the state needs to get serious about regionalization.

He said the legislature should “compel mergers” perhaps offering incentives to do so. He called that the “kind of big idea” that Connecticut needs to be thinking about, having municipalities with hundreds of thousands instead of a few thousand people with regional police, health, and school districts.

Barnes also talked at length about the issue of state pensions. He said he felt that state workers were unfairly “scapegoated” for the problem.

He said while there are some examples of very high pensions being paid to state employees, the average state pension is about $38,000.

“Local government pensions are way better,” the OPM secretary said. He said those who work in the private sector also retire with much better pensions than the average state worker.

Besides, Barnes said, there is a moral obligation involved.

“The law of the land is that when somebody retires with a pension they have a right to that pension,” Barnes said. “We can’t renege on our deal to employees.”

He said even if there was a legal way found to tear up state pension agreements, “Why on earth would we want to do that? These are folks who are cleaning up after our elderly parents or our grandparents. The idea that we would walk away from that is reprehensible.”

Barnes said while he believes that the budget will be in good hands with Lamont in charge and the newly-elected legislature, he also said he’s worried that the 2019 budget was built with what he termed “one-time sweeps” that will create a $630 million hole that will need to be filled in next year’s budget.

“It’s going to create a huge problem for 2020,” Barnes said.

Barnes did say there was some good news, too.

He said the state has seen a 10 percent increase in the withholding portion of the income tax over the past few months — much higher than has been budgeted.

The state is on track “to see some of the most robust growth” in revenue than it’s seen in the past decade, he said.

Accomplishments over the past eight years that he is particularly proud of include Medicaid and criminal justice reform.

“Crime is down, prison population is down,” Barnes said. He added that the state has also made strides in having greater civil rights and eliminating the death penalty.

Connecticut has also had the best results in the nation when it comes to controlling the per member, per month costs of Medicaid recipients.

“We are a national model,” Barnes said.

He referred to Connecticut as a place “I’m proud to call home.”

Barnes recently landed a new job as chief financial officer for the Connecticut State Colleges and Universities.

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Price Transparency In Medicine Faces Stiff Opposition — From Hospitals And Doctors

The article below was published on July 25, 2017 by Kaiser Health News, written by Rachel Bluth.

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Photo Source: Kaiser Health News

COLUMBUS, Ohio — Two years after it passed unanimously in Ohio’s state Legislature, a law meant to inform patients what health care procedures will cost is in a state of suspended animation.

One of the most stringent in a group of similar state laws being proposed across the country, Ohio’s Healthcare Price Transparency Law stipulated that providers had to give patients a “good faith” estimate of what non-emergency services would cost individuals after insurance before they commenced treatment.

But the law didn’t go into force on Jan. 1 as scheduled. And its troubled odyssey illustrates the political and business forces opposing a common-sense but controversial solution to rein in high health care costs for patients: Let patients see prices.

Many patient advocates say such transparency would be helpful for patients, allowing them to shop around for some services to hold down out-of-pocket costs, as well as adjust their household budgets for upcoming health-related outlays at a time of high-deductible plans.

At the Ohio Statehouse, the law’s greatest champion in state government has been Rep. Jim Butler, a Republican and former Navy fighter pilot whose wife is a physician. He authored the legislation and has beat the drum for it since he got the idea in 2013, as he waited for a garage mechanic to repair his car and absorbed the shop’s posted rates for brake jobs, oil changes and tuneups.

Opposition has been formidable, led by the goliath Ohio Hospital Association. It has filed a court injunction that is currently delaying enactment, peppered local news media with editorials, and lobbied Republican Gov. John Kasich, who has eliminated funding that would allow implementation from the latest state budget.

Joining the hospital association in its legal action are a wide range of provider groups including the Ohio State Medical Association, the Ohio Psychological Association, the Ohio Physical Therapy Association, and the Ohio chapters of the American Academy of Pediatrics, the American College of Surgeons, and the American Osteopathic Association.

These groups say that the law, which applies only to elective procedures, is too broad and that forcing providers to create estimates before procedures would slow down patient care. “The only way to even try to comply with the law is to delay care to patients in order to track down information from insurance companies, who may or may not provide the requested information,” wrote Mike Abrams, the president and CEO of the Ohio Hospital Association, in an op-ed in The Columbus Dispatch in January.

But Jerry Friedman, a retired health policy adviser for the Ohio State University Wexner Medical Center, said the opposition doesn’t stem from genuine concern about patients but from a desire to keep the secret rates that providers have negotiated with insurers under wraps. Transparency would mean explaining to consumers why the hospital charged them $1,000 for a test, he said, adding that providers “don’t want to expose this house of cards they’ve built between hospital physician industry and the insurance industry.”

Said Butler on his quest to see the law enacted: “The health care industry has a lot of political power and lots of money. It’s hard to fight on behalf of people against this kind of force.”

The law’s next test will come in August, when the first court hearing on the association’s lawsuit is scheduled. The Kasich administration said it couldn’t comment on the law because of the pending litigation.

Greater price transparency has been a popular policy prescription for America’s high health costs, especially at a time when many patients have high-deductible insurance plans and face larger copayments. Upfront estimates exist in other countries, such as Australia and, for patients facing out-of-pocket expenses, in France.

In Massachusetts, patients can get an estimate within two days of admission if they ask for it. Nebraska requires hospitals and surgical centers to provide a list of the average charges for services. New Hampshire has a website where consumers can compare costs.

Hospitals and doctors often oppose such measures. The American Hospital Association’s position is that health plans — not hospitals — are responsible for telling insured patients about their out-of-pocket costs, according to its website.

Aimee Winteregg, 35, of Troy, Ohio, said she would have liked such information before five miscarriages in four years left her buried in unexpected medical bills. She and her husband became first-time parents in November. Though they are well insured, tests and treatment cost the couple $4,000 out-of-pocket, demanded in bills that were sometimes no more descriptive than for “medical service.”

“We don’t want to deal with this, especially when the doctor tells you stress is bad for the pregnancy,” her husband, J.D., said. But imposing greater transparency has been controversial in both the medical industry and among some health care researchers, who say it puts patients in an untenable position.

The transparency law “was written by someone thinking about health care as a TV, and not as health care,” said Sandra Tanenbaum, a professor of health services management and policy at The Ohio State University College of Public Health.

She said people could not shop for procedures as they would for a TV or car repairs, since they often lack information on the quality of doctors and hospitals, and make health care decisions based on much more than cost.

Consumers are more likely to base their decisions on their doctors’ advice, not on cost alone, according to a report from the Health Policy Institute of Ohio.

Only around 10 percent of health care costs are even “shoppable” expenses — procedures that can be scheduled in advance, like an MRI or elective surgery — according to the HPIO.

Regardless, Butler maintains, the health care industry can give consumers better information upfront. “If you really want patients to be empowered, they really need the information,” he said.

In support of such access, Butler has written letters to the Ohio Hospital Association, the Ohio attorney general and the Dayton Daily News, all in defense of the transparency law.

The Ohio Hospital Association, along with seven other Ohio health organizations, went to court last December to block the law, a month before it was supposed to take effect.

Butler said Gov. Kasich’s administration is helping the hospital association stall by not writing regulations, eliminating funding for the law in the state budget, and declining to meet with Butler to discuss it.

State Rep. Michael Henne, also a Republican, has worked with Butler in the Ohio General Assembly on the transparency law. He called Butler a “driver” on the law, noting: “It’s frustrating. You don’t realize how much [influence] special interests have in the process.”

Will Bundled Payments Lower Costs?

bundled-costsThe Centers for Medicare and Medicaid Services (CMS) began their initiative to tie payments to quality or value earlier this year by implementing their Comprehensive Care Joint Replacement Model (CJR). The mandatory program holds hospitals accountable for all costs, processes and outcomes associated with hip and knee replacements performed on Medicare patients. Since hip and knee replacements are the most common inpatient surgeries for seniors, the CJR model is expected to serve as a critical test to determine whether bundles can help control costs and increase quality.

The quality of treatment and aggregate spending for a 90-day period, including surgery, recovery and rehabilitation will determine whether the hospital owes money or will receive additional payment from Medicare. CMS is establishing specific bundled pricing for each provider, then using data to determine regional pricing after five years.

Looking Outside the Walls

This model is forcing hospitals to evaluate overall care for joint replacements since clinical and financial success requires coordination between hospitals and post-acute care providers such as skilled nursing facilities. While joint replacements may represent only a portion of a hospital’s revenue, the Medicare Star Rating System tied to CJR will make provider performance public. Low performance will make it difficult to compete for Medicare-funded joint replacements in the future and many think that if bundling shows positive results, CMS will likely look to other areas of care.

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Study Suggests Hospitals Using ‘Chargemaster’ Markups to Maximize Revenue

Article as seen in Johns Hopkins Carey Business School on September 7, 2016

Hospitals’ CT Scan And Anesthesiology Departments On Average Charge More Than 20 Times Their Costs

Hospitals on average charged more than 20 times their own costs in 2013 in their CT scan and anesthesiology departments ― suggesting that hospitals strategically use “chargemaster” markups to maximize revenue, according to new research from Johns Hopkins University.

Appearing in the September issue of Health Affairs, the study notes that many hospital executives say the chargemaster prices determined by individual hospitals for billable items are irrelevant to patients.

However, the relation between chargemaster markups and hospital revenue and the variation in markups across hospitals and departments show that the hospitals are still using their chargemaster markups to enhance revenues, say the study’s authors, Ge Bai of the Johns Hopkins Carey Business School and Gerard F. Anderson of the Johns Hopkins Bloomberg School of Public Health.

“Hospitals apparently mark up higher in the departments with more complex services because it is more difficult for patients to compare prices in these departments,” states lead author Bai, a Carey Business School assistant professor whose expertise is in accounting issues within the health care industry.

The average charge-to-cost ratios for hospital departments vary from a low of 1.8 for inpatient general routine care to a high of 28.5 for computed tomography (CT) scan, with anesthesiology right behind at 23.5. This means that a hospital whose costs in the CT department are $100 will charge a patient without health insurance and an out-of-network privately insured patient $2,850 for a CT scan.

Anderson, a professor in the Bloomberg School’s Department of Health Policy and Management, says the impact of hospital markups is vast: “They affect uninsured and out-of-network patients, auto insurers and casualty and workers’ compensation insurers. The high charges have led to personal bankruptcy, avoidance of needed medical services, and much higher insurance premiums.” Continue reading

Study Quantifies Hospital Price Inflation

Article as seen in HHC Group Newsletter distributed from HHC Group.

A new study by Johns Hopkins University concludes that hospitals are taking exorbitant markups, mostly in markets in which they face little or no competition. The researchers found no correlation between price and care quality. Published in the journal “Health”, the study quantifies the differences in markups by hospital type as well as the range of markups by different hospitals for various tests and procedures.

Click below for a summary of the study results.

Continue reading

A Discussion on Healthcare – What Could Be the Single Greatest Threat to America

“The Silver Bullet To Solving Healthcare’s Most Vexing Problem” – Article is by Dave Chase, Contributor on Forbes.com

Astute observers have stated controlling healthcare costs is almost impossible. Ezra Klein is data-junkie journalist who drilled down on this issue — 21 graphs showing how ludicrous healthcare prices are. If the byproduct was merely hospitals having large profits, we could shrug our shoulders and move on. However, if you study the numbers, it is impossible for me to not come to the conclusion that healthcare is the single greatest threat to America. As Klein pointed out, inflated pricing is public enemy #1.

Angiogram - Price comparison by country in 2012

Here’s the good news: The problem is severe pricing failure and it’s fixable. Pricing failure is when there isn’t a correlation between cost and value/quality. In healthcare, it’s frequently the opposite. In the healthcare world, black is white and up is down. Fortunately, #5 in the list of 7 Organizations That Will Turn Healthcare Upside Down In 2016 demonstrated the way to fix this. Before we delve into how they are doing what the experts have said is impossible, let’s drill down on Tulsa, Oklahoma as representative of most cities in America to see what is happening. We’ll look at the collateral damage from pricing failure, but we’ll also see that the highest quality surgeons do the most procedures and have the fewest complications resulting in the lowest prices. The “magic” is the need to create the market for those high value centers.

Tulsa as a microcosm of America

I recently visited Tulsa to speak at a Medicare meeting. This caused me to look into some data specific to Tulsa/Oklahoma but it would be similar to most places in the U.S. In Teacher Unions On Wrong Side Of Negotiating Table, I summarized the devastating consequences to education of squandering resources on healthcare. You know it’s bad when Bill Gates devotes an entire TED talk to this issue. The graphic below is one of many that shows how it’s a Zero Sum Game — healthcare is stealing from all other budgets though it’s particularly acute in education. If you ever wondering why class sizes have gotten bigger, extracurricular and arts programs have been cut and you are being asked to donate to public schools via various fundraisers, look no further than healthcare.

Unfortunately, that hasn’t been the only cost

Traditional health insurers have been ineffective at controlling prices as Tulsa will see the largest healthcare.gov premium increases in the entire country (35.2%). Health insurers will justify mergers under the guise that it will help them negotiate with providers. However, as outlined in theses #81 and #83 of the 95 Theses for a New Health Ecosystem, health plans have strong disincentives to control costs. In reality, any employer over 100-200 employees is, in effect, a mini “insurance” company. This is why Collective Health is #2 on the list of the 7 Organizations That Will Turn Healthcare Upside Down In 2016 . They help organizations do what they should have done long ago — become self-insured and manage it well.

The good news is that even a small manufacturer can be the “David” to the healthcare Goliaths in their community. Enovation Controls only has 600 employees yet has shown they can solve the price issue (more on that below) and slay the cost beast.

MacArthur Genius grant winner, Dr. Jeffrey Brenner described the dynamic in a Freakonomics episode as follows:

“So you know, the most dangerous thing in America is an empty hospital bed. In the center of New Jersey, near Princeton, a couple years ago, we built two brand-new hospitals. These are two $1 billion hospitals, 10 miles apart, very close to Princeton. So one is called Capital Health, and the other is Princeton Medical Center. I don’t remember anyone in New Jersey voting to build two brand-new hospitals. But we are all going to be paying for that the rest of our lives. We’ll pay for it in increased rates for health insurance. And, boy, you better worry if you go to one of those emergency rooms, because the chances of being admitted to the hospital when there are empty beds upstairs that they need to fill are going to be much, much higher than when all the beds are full–whether there’s medical necessity or you need it or not. So I’d be very worried if you live in Princeton that there are now two $1 billion hospitals waiting to be filled by you.”

One would think that healthcare’s perverse incentives that make it more profitable to amputate a diabetic’s leg than prevent diabetes wouldn’t impact a mission-based organization. Unfortunately, the evidence suggests otherwise with the diabetes epidemic. Oklahoma is one of the worst states for obesity and diabetes. Despite what one reads in a typical hospital mission statement, hospital CEOs act more like a hotel GM (trying to fill beds) than as careful stewards of their community’s health.

Despite all healthcare executives knowing that we are operating at roughly double the capacity of hospital beds in the U.S., too many health systems continue to build more capacity. In contrast, the smartest health system CEOs study Geisinger Health System whose CEO said, “My job ultimately is to close every one of our hospitals,” and he acts on those words.

Oklahoma has a major financial crisis looming as the price of oil, one of its primary resources, remains low. Rising state healthcare expenditures are exacerbating the shortfall. The state can no longer support some of its state parks. Walnut Creek State Park is one example and the public will no longer enjoy its beauty, seen in the picture below. Oklahoma may be in the odd situation of keeping only “profitable” parks open.  Was Walnut Creek a victim of oil or healthcare? The dots connect to both.

Hospitals should be closing, not our nation’s parks

Is it employers job to fill hospital beds or create jobs?

Enovation Controls demonstrated that it’s possible to lower per capita healthcare spending by 30% while having great benefits. Even though they don’t have thousands of employees, they were able to obtain fair prices at high quality organizations. Enovation Controls was fortunate that they were in Oklahoma where a pioneering surgical hospital said “enough” to the madness of the claims process and went fully transparent on their prices. Employers learned of this and asked their benefits consultant, Jim Millaway, if they could find an easy way to access these prices. Initially, they enabled this on a one-off basis employer by employer.

Later on, Millaway realized he was on to something and became a pioneer in Transparent Medical Networks. He created The Zero Card to make it available to any employer. With these employers, Millaway indicates they have found $1000 of pricing failure per employee just on standard surgeries (more when imaging, high cost procedures, etc. are added). That is, if they implemented a program like his, the employer could save an average of $1000 per employee per year . If they were to put that in an employee’s wallet each year, over 30 years that would compound to over $200,000 on that item alone (assuming S&P index growth rates).

[Disclosure: I have worked with the originators of The Zero Card on the open source Health Rosetta project and consulted in the past with them. As I’ve disclosed many times, the Health Rosetta is a non-commercial open source project that provides a reference model for how purchasers of healthcare should procure health services.]

Let me give one example to show how it works. An individual needed a spinal fusion. If they had stayed with their traditional PPO network (which was an option), the billed amount was $179,165.74. The “Allowed/paid amount” was $134,487.33. That is the amount the provider organization would have received between what the employer would pay and what the employee would pay. Due to the high amount, the individual would have hit their out-of-pocket maximum of $2,500. However, the individual was given the choice of going to a high quality local surgery center that agreed to do the procedure for $61,200. In other words, the “pricing failure” was $73,287.33. Because the savings were so great, the employer was more than happy to waive all charges for the employee. That’s right, they paid zero — thus the name of the card they use. Rather than the steep financial cost for an individual on a modest income, they didn’t have to pay for making the right choice. Further, rather than facing a mountain of bills and the anxiety of dealing with so-called Explanation of Benefits, bills that say they aren’t bills and so on, the individual simply received a thank you survey.

I asked The Zero Card team for the figures to back up their claims. This link goes to a Google Sheet that includes anonymized data over the course of two years in three locales — Tulsa, Seattle and Rockford, Illinois. These could have been any cities.

When I wrote a few years ago about surgery center that had gone fully transparent, the doctor I spoke with was proud of how people were using the prices on his website to negotiate with their local hospitals. In that article, the doctor detailed how someone across the country was able to get a 90% discount on their prostate procedure. That is how disconnected prices are from any semblance of sanity. Though The Zero Card is presently only available through employers, I was able to find The Zero Card app in the app store so doctors (who are frequently asked by a patient where they should go) and patients can get this in their pockets now. For those with high deductibles, they could similarly use this to price negotiate. Of course, employees could also ask for a Transparent Medical Network that would allow them to also pay zero.

I asked Millaway how long it takes to enter a new market. He didn’t want to disclose the details of their roll-out publicly, however what I inferred is they can “turn on” a market quicker than most employers can get a new agreement through their procurement department. That is good news for benefits consultants who like to bring innovative solutions to their clientèle. This is why I stated that benefits consultants could save America. Having spoken with dozens of employers, it’s very clear they rely on the expertise of their benefits consultants.

Sometimes when employers exert their influence not only to protect their own bottom-line but also protect their employees’ nest eggs, they get push back. This despite the fact that healthcare providers haven’t demonstrated a productivity gain in 20 years and have contributed to losing jobs that might have otherwise gone to their community as outlined in the IBM example. In a future piece, I’ll report on a public company that had a 1.9% increase in their earnings as a result of better management of  their healthcare costs (while improving the health of their employees). Small, medium and large companies have all not only shown that it is possible to slay the healthcare cost beast, it is their fiduciary responsibility to their shareholders to manage the second largest cost after wages. A development that would make corporations shudder is who I heard from due to earlier articles I wrote — a class action attorney asking for details of what corporations are doing around health benefits and the fact that they aren’t fulfilling their fiduciary responsibility. If the Cadillac Tax wasn’t scary enough for employers, this development would concern Risk Management departments throughout Corporate America.

Whatever the motivation, we have found the silver bullet to one of healthcare’s most vexing problems. My bet is it will be the “annoying”millennials demanding a better way who will catalyze a movement away from the severe pricing failure plaguing the U.S. healthcare system today.

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Some Hospitals Mark Up Prices More Than 1,000 Percent: Study

Article as seen in NBC Connecticut

Forty-nine of the 50 hospitals with the highest price markups are for-profit. Twenty of the hospitals in the report are located in Florida

Dozens of U.S. hospitals are hiking up healthcare costs more than 1,000 percent – over 10 times the costs allowed by Medicare – and for the same medical services, new findings indicate.

New research out of Johns Hopkins Bloomberg School of Public Health and Washington & Lee University revealed that the 50 U.S. hospitals with the highest price markups are inflating health care costs far above actual prices by charging uninsured and out-of-network patients over 10 times the amount permitted by Medicare. The report was published in the June issue of Health Affairs.

“We as consumers are paying for this when hospitals charge 10 times what they should,” Gerard F. Anderson, professor at the Bloomberg School’s Department of Health Policy and Management at Johns Hopkins and coauthor of the study said, according to a press release. “What other industry can you think of that marks up the price of their product by 1,000 percent and remains in business?” he said.

Forty-nine of the 50 hospitals with the highest price markups are for-profit. Twenty of the hospitals in the report are located in Florida.

The report indicated that on the whole, hospitals with high markups are not exclusively located in high-cost cities. The priciest hospital, the study says, is North Okaloosa Medical Center, about an hour outside of Pensacola, Florida, where patients are charged 12.6 times more than costs allowed by Medicare.

In the report, Anderson and Ge Bai of Washington & Lee University, revealed that poor oversight of hospital charges as well as a lack of market competition are causing the severe price gouging. Consumers both with and without insurance are bearing the exorbitant costs.

“There is no justification for these outrageous rates but no one tells hospitals they can’t charge them,” said Anderson. “For the most part, there is no regulation of hospital rates and there are no market forces that force hospitals to lower their rates. They charge these prices simply because they can,” he said.

Anderson said price transparency could help to an extent, but currently most hospitals are not required to publicly share costs for procedures.

“This system has the effect of charging the highest prices to the most vulnerable patients and those with the least market power,” Anderson says. “The result is a market failure.”

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