Confronting the State of Healthcare Legislation & 340B Misinformation, Part 2 with Elizabeth Kutter

Jeremiah Hodshire (Host): So, you know, I know we could spend forever on these types of issues. I do want to tackle two other major issues right now. Number one, there are looming Medicaid cuts coming to hospitals. Now, what I want to do is I want to focus on rural hospitals specifically. So obviously the Medicaid cuts to hospitals will have a dramatic impact on access for patients. It’s not just Medicaid patients. When you cut a service, it’s cutting that service for commercial insurers as well. And so, I guess at the end of the day, give us some good and bad perspectives of what these cuts are going to mean and what can hospitals do to help rebound from this? I think the train’s left the station.

Elizabeth Kutter (Guest): I mean the bill is law. So, to some extent for sure. I mean, that being said, the really beautiful thing about politics is the way that our system in this country and in the state is designed, is that you do have the opportunity to fix stuff. You can make changes if you need to. But to your point, some of that is really making sure that you’re telling your story, that you’re talking to your elected officials that you’re sharing with them the issues that are happening and the things that are going on so they do have what they need then to be empowered and say to they’re colleagues, “We can’t do this. These cuts are going to be really serious. What we really want and what I really want all the time is for a legislator to go into a caucus room or go into a committee hearing and say, “I talked to my local hospital and this is going to cost jobs” you know, be really specific, “It’s going to cost 64 jobs in my community.”

JH: Right. We’re going to shut down service X, Y, and Z.

EK: Right, and now people are going to have to drive two hours to have a baby and that means that the few young people that I’ve got in my community that want to stay here aren’t going to stay. I mean, I think when you’re really looking at HR1, when you’re looking at some of these big, looming cuts; positive outlook I think there are people still there that are fantastic champions for healthcare. I mean we see that at the state level, I think you see it at the federal level and I think there’s glimpses of things occurring where people are demonstrating that they are in fact very interested in making sure that healthcare’s affordable, but not at the loss of major coverage opportunities, or access, or at the loss of rural hospitals.

People really recognize rural healthcare looks different. The people that you’re serving are experiencing different things. They are coming from communities that have different assets and they’re traveling more. They have different experiences and they want different things out of their healthcare experience too. And I think there is a really, really deep desire on both sides of the aisle of the politics space and at every level of government to really protect rural healthcare. That being said people don’t always do it perfectly. But that’s not to say that I think that endeavor isn’t real, I do in fact think that there are a lot of people in Michigan especially because Michigan is the seventh most rural state in the country. So, I think people get it in Michigan in particular. We’ve got a really unique structure to how our state looks.

JH: And it is a lot to lose.

EK: It is a lot to lose and I mean we continue to see those losses mount and the big benefit I think of this time and space is it’s an election year.

JH: It is an election year, which is to our advantage I believe. Wouldn’t you agree.

EK: I think its hugely to our advantage and I will use my soapbox moment here; please vote. Tell your listeners please vote. Tuesdays are no longer inconvenient in Michigan you can vote absentee. You can do a million different things. It is not inconvenient to go vote. You have to vote, and you’ve got to vote for folks that are going to care about the issues you care about, right?

The other thing I would say is if you love this work and you love your community run for office. We need people who care about healthcare in the elected positions. But I do think because it’s an election year, because people are more engaged than they’ve ever been before and because our own folks here in Michigan our hospital folks, and you included in this are very focused on building those relationships with legislators that we do have really strong opportunities for success. I’m not going to sit here and be like, oh my God, woe is us. This is terrible. What are we going to do?

JH: Yeah. We get that enough, right? I mean, that’s every minute of our lives in rural America.

EK: Well, and healthcare is really challenging, you get that in healthcare. People don’t come to the hospital because they feel like lunch. I think if you look, historically, hospitals have always been gathering spaces. That’s very common and we have an opportunity to get back there and I think people want that but we’ve got to protect the asset first. People that come into the hospital are having arguably the most challenging day of their life. So being able to tell the story about what rural healthcare needs, what people in the community need to keep having that access point so that they’re not traveling far or moving out of the community is really big.

And I do think we have those champions I truly do and maybe that’s my own optimistic nature. I’m a firm believer that if you talk to people really honestly about what’s going on. Share with them the good and the bad and the truth about it, and let them come to the conclusion that makes the most sense for them they’re going to come to the conclusion that local health, local community assets, local employers, are the ones you’re going to rely on when making decisions. Politics is local.

JH: You know, it is absolutely. You know, I was with Rick Pollack, the American Hospital Association president, a few months ago. You know, Rick shared with us that Washington today is very transactional. He said he’s never seen it like this before. You know, we find that same sentiment reaching in different states of the union. And so, we find that sometimes it’s just frustrating and disheartening for people. But I think it’s important to remind our listeners that they have to continue to lift their voice. It’s the only way we’re going to resolve these issues today.

And there’s some significant issues that they have to lift their voice. And, among those are, issues of affordability, access, and another area that we don’t think about, as consumers, but hospital executives do that you’re an expert at because I’ve heard you speak about this and I’m very excited to jump into this. It’s 340 B, okay. Someone listening today who might say, what in the world is that? I thought that was a retirement plan. No, that is not a retirement plan. I want you to take us through a very quick journey of what it is, what’s at stake today.

EK: So, 340B is a really great topic area, it’s one that I love to talk to people about because it’s really fun. And it’s one of the few spaces in particular in the states that you can have an impact as state legislator on drug prices, affordability, and access. 340B itself can feel really weird and tangential. It’s a drug pricing program. So back in the 90s, the Congress was like, wow, we need to take care of some really specific community assets, critical access hospitals, rural referral centers, sole community hospitals, cancer hospitals, children’s hospitals, and hospitals that are serving a disproportionately large share of Medicaid patients. So collectively safety net hospitals and safety net healthcare providers like FQHC, community health centers, hemophilia clinics, those kinds of things. Things that if it goes away, people are really, really in deep trouble.

And the Congress was like, okay, what can we do? What is a revenue stream that we can create. What is something that we can offer. How do we do this? And as we already talked about like moving things through Congress is really challenging and it takes a really long time. There are a ton of people on with a ton of different mindsets representing states from all over the country with different approaches to how they think things should get done.

So, they thought really creatively and they created a program which essentially says that if pharmaceutical manufacturers participate in Medicaid and Medicare which is a benefit for you you’re going to offer these certain safety net providers pretty deep discounts on drugs. Great tradeoff for them. They get a massive opportunity to participate in Medicaid and Medicare. And that is their only ability to participate in Medicaid and Medicare its conditional on their participation.

JH: Which is again, enroll community, 70% of our population.

EK: And I think really when you’re thinking about who are consumers and drug purchasers, its hospitals and the government are two of the biggest ones. So, for them this was a massive opportunity and a massive investment to be able to participate in that program. And for us, it was a really, really special opportunity to be able to deliver affordable drugs, access to care, loss leader programing, and service lines that otherwise we’re not going to get to keep. So, 340B allows hospitals to purchase certain outpatient drugs. So not the drugs that are administered onsite; Drugs you would pick up at your local pharmacy. You’re able to then purchase those drugs for a pretty good reduced discount.

What people are familiar with is the rebate side of things where the hospitals essentially see a rebate, but upfront instead of on the back end. Which is great because most especially in rural hospitals and hospitals globally are not operating with a ton of cash on hand. So, you’re not able to purchase these drugs. When you’re looking at it right now the median cost of a new drug on the market in 2024 is $370,000. I mean, the 340B program covers drugs that are cancer drugs, that are million-dollar drugs. And if you’re an individual receiving cancer care in a small community in rural communities, and you’re a Medicaid, or even if you’re in commercial insurance, paying for that care is really expensive.

340B means that your hospital was able to purchase that drug at a discount receive the reimbursement for it at the normal rate, and the revenue generated from that space in between those savings means that they can invest in someone’s care. 340B means for a lot of our members that you can go in and get cancer care $0 copay. I mean for some of our members it means that they were able to fill over 21,000 prescriptions in their community at a $4 copay. If 340B wasn’t in existence we wouldn’t be able to do that. That program generates an opportunity in the community to say we know what our community members are experiencing. And we want to give care to them. We want to make sure that you have access.

I think for lots of folks; and I would ask you really what does 340B look like for Hillsdale? For lots of our members, it’s the way that we keep OB services in our community. That’s the way that we have inpatient psych in our community. We see people that are in crisis and we want to be able to offer them that service. We would not be able to offer it if we did not have 340B. Or discount drug discharge programs are a real common one which I think is a really cool example of how this program hits individual patients.

So, like if you have great insurance, you know, fantastic. Say I had surgery, and my surgery is covered but I am a busy mom. I’ve got four kids. And so, the hospital said, hey, I’m going to send you home with your prescription right now. We know you’re busy. Getting to the store can be really challenging. You should just take this right now? I paid a $4 copay because 340B covered it for me. And I was like sweet that is money for diapers. And I go home and my outcome is fantastic because I had easy medication adherence.

I didn’t show up at my local pharmacy and find out that my copay for that drug was $50.  I didn’t find out that it was something I couldn’t pay. Now say that it did, so then I went, okay I’m going to put this off and when I get home, I get an infection and then instead of having paid $50, I’m readmitted to the hospital because I have something terrible happen, and now ‘m really struggling. 340B prevents those types of things from happening.

JH: But Elizabeth, the pharmaceutical did not get their $300.

EK: I’m so sad for them. They’re doing so poorly. Have you seen how much money they make?

JH: So that is the point I think we have to be real in our discussions, don’t you? That they’re not mealy-mouthed poor folks running around. This is huge.

EK: I mean, and this is a big substantive difference. The hospitals that participate in 340B are nonprofit, mission-based organizations. The best Margins we see in healthcare right now are like two to three percent. And that’s, you know, national. I mean, just a couple years ago, Michigan was one of the few states that had hospitals with negative margins overall.

Again, because we’re an aging population, we have a lot of folks that are really complex to care for. It’s really expensive to provide that care. And then on top of that, we are maintaining this really cool thing in Michigan where we’re still third from the bottom when it comes to overall cost. We’re like 189% of Medicare in Michigan when the national average is 244%. We’re Doing a good job doing a job but 340B is how we keep doing that good job.

JH: But it’s on the chopping block right now in many cases. Right now, you’ve got, states that are looking into it. The federal government, is having conversations and the courts now are weighting in. And so, you got three rungs. Everybody’s looking at 340B, and you hear a variety of conversations happening at the state houses. You hear it at the federal government level and now the courts about what is the impact of 340B. So, at the heart of the matter today, what is being debated in terms of how this program should look, look at it from the lens of the pharmaceuticals pushing one thing. They want rebate models that it pays afterwards. And all of those challenges.

EK: It’s a ludicrous monocle. When you’re looking again at pharmaceutical manufacturers who have, 20-30% operating margins trying to make this nexus between themselves and a nonprofit, 0% margin hospital, largely in Michigan and again a local community small independent hospital. Who in the argument you should believe, I think is pretty easy.

But for whatever reason, because of their ability to translate this, it’s made it a very challenging environment to try and talk to people about the impact of 340B. Which again is funny because it’s coming from folks who on shareholder calls are like, well, we did really great this quarter because we were able to reduce 340B the even further. And so, our margins are up even more. I mean, that’s the mindset that when you’re looking at pharmaceuticals and the manufacturers and adversaries in this space, the mindset is if we can make 340B go away, we’re going to make more money so that’s what we should do. From our perspective, if 340B goes away, we’re in a big set of problems. I mean, for a lot of hospitals and especially rural hospitals, it is the difference between being opened or closed.

We had a hospital in the UP close not too long ago and a huge reason for that was they lost their 340B status. They wanted to move over to being just sort of like a very specific type of rural hospital. But in order to do that, they had to let go of 340B. That type of hospital is not yet qualified as a 340B entity. Certainly, were advocating at the federal level to make sure those are recognized. Because if you’re converting, you’re already in a space where you’re financial vulnerable, the community is vulnerable your patients are very vulnerable. Why would we not do everything in our power to make sure you could have every asset at your fingertips to serve your community. And to provide them affordable access and quality access. So, we’re advocating for things like that or advocating for legislation that would just ban the rebate model. You know we’re working on spaces there.

JH: But Elizabeth, what happens if the courts get involved at the federal level? This this could foil all of the respective states, right? I mean, once a federal order comes out.

EK: That’s I mean, that’s one of the wildest things that we’re watching right now. There’s definitely an endeavor. And manufacturers are very well-funded. They’ve got a lot of very well-funded legal teams. That go out and sue in every state has contract pharmacy laws. We’ve got a lawsuit from one of the manufacturers on the definition of patient, and whether that’s too broad. We’ve now got the federal government engaging in some of these lawsuits and submitting briefs saying we think the federal law pre-emps these state laws.

I mean this is a 180 shift from, you know, a couple of years ago where the federal government was saying it’s absolutely a state’s rights thing. States have the right to regulate the health and welfare of their residents. This is absolutely within the purview of the states. This is not within the purview of the federal law. Like we say that you can contract pharmacy, we don’t say anything about how many, so if the state wants to say you can contract unlimited then that is the state’s purview. I mean that’s what we’re going to continue to push at the state level. We’re monitoring those legal issues.

JH: Do you think, looking at the federal court intervention, do you think there’s any potential risk there soon?

EK: Soon is a really loose term in the legal world. Much like the Congress, the courts are not particularly snappy. They move at a pace that they feel is comfortable to them. There’s a huge risk and we’re seeing this sort of snowball effect. There’s a couple district court opinions and appeals court opinions that are starting to get into that space a little bit more and more. I think probably if I am putting my lawyer hat on, the endeavor is to try to create a split circuit setup. Where you’ve got two federal circuits that have made two different decisions which then gives you the opportunity to take it to the supreme court and say it’s your turn to weigh in.

Our circuits are not agreeing in this space. We’ve got one set of folks who think that the states could do this. And we’ve got one side that think federal law pre-emps it. Which is why you’re seeing this. That’s why you’re seeing these, these legal arguments. Because if there’s two different sets of opinions exist and we can’t align then the supreme court has to come in and actually decide.

JH: So where does the public come in on this. Where, where does the consumer, you know, encouraging their state representative and state senator that these are important programs.

EK: Start there. The other thing to start by spending just a little bit of time, when you see those ads, when you see things come up view them with a grain of salt. If somebody’s being really aggressive in an attack there’s got to be a reason behind it. And you know maybe it’s the lawyer in me again who thinks that would be curious.

JH: I received a call from one of our state legislators that said, a third party, sent him a message that the 340B pricing, drug program is supporting abortions at hospitals. True story. And that had been the first time I had heard of that type of rhetoric. But they are they are using whatever means necessary to target individual legislators and their political positions and their personal convictions. And I’m like that is not true. You know, it’s not happening. There are very few hospitals that I know of in Michigan that even do elective abortions.

But at the end of the day, to tie that in there, this shows how desperate they are. And the shift has come from how greedy and, you know, tens of billions of dollars that they’re making in this industry. And, you know, tens of millions of dollars those executives are making to the bad guys are hospitals. And that’s really what’s sad is their ability to do that. But I think to your point, voice of the patient, talk to your legislator. Tell him, you know, I benefited from that $4 script, because that’s how that works. If that goes away, that’s done.

EK: Or you can say I am a young person and I love living in my community. And if they don’t have OB anymore, I’m going to have to drive two hours. And even just from a, you know, like a personal story convenience space. Where am I getting my care? I’m spending four hours back and forth. Prenatal visits, the whole nine yards. Do I have to take PTO? Am I going to be able to schedule it for a time that I can get the time off? Do I have a reliable vehicle? Do I have money for gas? I mean there’s an incredible array of other things that go into those decisions. And keeping that service local, A, means that you’re serving your community and showing what your community wants to see.

But from the rural health perspective too. I mean, you’re also really looking at keeping high quality access and outcomes that are really good for your community members. When I’m thinking about this, I’m thinking about the people sitting next to me at church or the people I see at the grocery store. I don’t want something bad to happen to any of those people they’re people that I like. I want them to easily be able to go within 15-20 minutes to their local provider or local hospital and get care. Not to be in a space where they weren’t prepared and the hospital wasn’t there. 340B is a huge reason why we have those programs as community benefit.

JH: We’re not going to prop up a program like that without the support. It doesn’t exist.

EK: None of my children were born in a pharmaceutical manufacturer, they were all born at a hospital.

JH: I could talk to you for hours about these issues. It’s very clear about your passion. I want to thank you as a rural hospital. The work that you do in Lansing and then some of your team members in DC. I think your focus is a lot in Lansing. But, you know, you, Adam, Laura, and the team do such a great job at advocating for hospitals. And the beauty of it is it’s not just a big system it’s when we go to the table, it’s everybody. And so, when you lift your voice for one,

you’re lifting it for all of us. And I just want to thank you for that. The work that you do is truly incredible.

And, we could talk for a very long time about the progress that’s happened, in advancement that MHA has made for hospitals like Hillsdale and others around the state in areas of, nurse staffing ratios and, disproportionate share and average commercial rate and the list goes on and on. Interstate compact, the work that you’re doing is incredible. Michigan has 100% participation from all hospitals. So that’s great. Not all states do it. We’ve interviewed just about every state office of rural Health, and we’re hearing stories about there’s not always that cohesiveness in each of the states, respectively. And Michigan is one that has 100% participation.

I would say to our listeners today, if you do not participate or belong to your rural health association, get involved. You cannot lift your voice independently or in silos. That has to be done in concert with people like Elizabeth Kutter, who are out every day knocking on doors directly impacting the lives of Hillsdale residents. Thank you for what.

EK: Well, you make it very easy, and it’s very fun to advocate on behalf of our members because it is truly one of those things where if you’re passionate about the things that are occurring around you. When you’ve got members who share that passion too, it just makes it more amplified. I’d love to do an advocacy day and have our member come to Lansing. Because they get to see what I see. Legislators as much as the environment itself, very challenging, the political environment is super challenging. If you’re watching TV and you’re taking in the news. It feels it’s heavy. But when you come to an advocacy it’s actually fun. It’s not what the media portrays. They’re just regular people.

I thank all of you guys because we couldn’t do this without our membership. I can’t talk about our programs unless you tell me what it is that matters to you. And I can’t talk about the patients impacted unless I know them. But those are the things that matter to us. And I would my only wish for all of you in every space is just get to know your local elected officials. And then run for office because we need more folks who care so deeply about rural healthcare. We need people with healthcare experience, I mean, if you’re a provider please run for office.

JH: But I mean, the burden, the task, the duties. But I think it’s just been the environment lately of the negative, that keep some folks out, but that there’s way to change it. You get involved

and you redirect the conversations. And we’re seeing that happen here locally as well where they’re redirecting conversations because it was becoming very, very nasty. So anyway, it’s been great to have you on the podcast. I’ve got one more thing for you. You’ve been to a lot of places; you’ve worked at a lot of places.

And so, what I want to ask you is we have leaders from across the country that listen to this podcast. And I want you to give them a piece of advice. Someone new, a leader that’s stepping up to, in today’s environment of healthcare, the most tumultuous of times. I mean, who wants to get involved today? There’s a huge exit, though, of leaders in healthcare. What advice would you give a young maybe they’re in in the role right now, or getting ready to assume the role of what they can do to be successful. What tips, sage advice would you give someone that struggling right now? Or that may just how to do this differently.

EK: So, in terms of advice I mean I think again it’s really very much grounded in that ‘stay curious space’. Get involved with your association. Get involved with other local entities. Get involved with the local chamber. Get involved with the business community. Get together with local leaders. Get together with folks in your community and get to know them and know them authentically. You made a point earlier that people feel like politics is the federal level super transactional? That can be applied anywhere.

Make authentic relationships be an authentic human. Because that’s how we’re going to actually change this rhetoric it’s how we’re going to change the tides around what’s happening in the political sphere. And it’s how we’re going to make sure that we can preserve what matters the most to folks and what those community assets really look like is being curious being authentic and being willing to put yourself out there. The advice I always give, especially to folks who are coming up in the political realm, is just being willing to make the call. Get coffee.

And I think people globally are like this. It’s really easy to not do it. And I think one of the negative products of pandemic is we got really comfortable just being like I don’t have to do that. I can do it do it via zoom or text somebody. But in this world right now and in this politic space, especially be willing to reach out. Grab a coffee. Tell them about yourself. It doesn’t have to be an ask. You don’t have to have an ask if you’re meeting with your legislator.

JH: Sometimes it’s nice for them not to get that.

EK: Exactly, just go in an introduce yourself. Say I just want to learn a little bit more about you or the process.  You’re going to find places where you have a lot of relatable overlap. And then you have the ability to negotiate a much better solution with somebody who sees you as a person and not a transaction. You know lobbyists get a bad rap as being park of the swamp. I’m not Shrek I’m a regular person.

JH: But at the national level that’s what has been told to our, you know, electorate is that lobbyists are bad evil. You know you’re part of the problem. But yeah, but at the end of the day, without you lifting your voice, I shudder to think where Michigan hospitals would be.

EK: Thank you!

JH: I really do; I really do. Great advice. This has truly been fun. But, you know, Elizabeth, it is always a pleasure to have you present; first time at the at the studio. I hope to have you back because I want to post budget passage, talk about what the implications are going to be for hospitals.

EK: I think that would be great. From a from a hospital perspective, our biggest, you know, our biggest fight in that space is making sure that Medicaid is fully funded. And that’s what we’re going to endeavor to do. I think were in a great spot to get that done.

JH: It is it is that’s a starting point right. Great job. So, thank you Elizabeth for your time today here on Rural Health Today.