With both Republicans and Democrats taking on these Goliaths individually, this could be a watershed moment for bi-partisan action.
The push and pull between providers and insurance companies is as old as our health payment system. Doctors have long argued insurers pay too little and that they too often interfere in patient care.
Dramatic increases in prior authorization, aggressive payment negotiations and less-generous reimbursement to doctors by Medicare Advantage plans show there’s little question the balance of power in this equation has swung toward payers.
These practices have led some doctors to look for outside investment, namely private equity, to keep their cash flow healthy and their operations functional. The trend of private equity acquisitions of physician practices is worthy of the federal scrutiny it has attracted. Insurers have noticed this trend, too, and appear ready to propose a profitable partnership.
Bloomberg recently reported that CVS/Aetna is looking for a private equity partner to invest in Oak Street Health, the primary care business CVS acquired for $9.5 billion last year. Oak Street is a significant player in primary care delivery, particularly for Americans on Medicare, with more than 100 clinics nationwide. CVS is said to be exploring a joint venture with a private equity firm to significantly expand Oak Street’s footprint and therefore also expand the parent corporation’s direct control over care for millions of seniors and disabled Americans across hundreds of communities.
Republicans have led scrutiny of pharmacy benefit managers on Capitol Hill. And Democratic attacks on private equity in health care have recently intensified. I hope, then, that both parties would find common ground in being watchful of a joint venture between private equity and one of the country’s largest PBMs, Caremark, also owned by CVS/Aetna.
The combination of health insurers and PBMs over the last decade – United Healthcare and Optum; CVS/Aetna and Caremark, and Cigna and Express Scripts – has increasingly handed a few large corporations the ability to approve or deny claims, set payment rates for care, choose what prescriptions to dispense, what prescriptions should cost, and how much patients must pay out-of-pocket for their medications before their coverage kicks in.
As enrollment in Medicare Advantage plans has grown to include a majority of the nation’s elderly and disabled people, we have seen insurers source record profits off the backs of the taxpayer-funded program. But in recent months, insurers have told investors they have had higher than expected Medicare Advantage claims – in particular CVS/Aetna, which took a hammering on Wall Street recently because its Medicare Advantage enrollees were using more health care services than company executives had expected.
It is natural, then, that one of the largest insurer-owned PBMs is looking to expand its hold on primary care for older Americans. Primary care is often the gateway to our health care system, driving referrals to specialists and procedures that lead to the largest claims insurers and their employer customers have to pay. By employing a growing number of primary care providers, CVS/Aetna can increasingly influence referrals to specialists and therefore the care or pharmacy benefit costs those patients may incur.
Control of primary care doctors holds another benefit for insurers: determination of what primary care doctor a patient sees.
People enrolled in an Aetna Medicare Advantage or employer-sponsored plan may find that care is easier to access at Oak Street clinics. Unfortunately, while that feels monopolistic and ethically alarming, this vertical integration has received relatively little scrutiny by lawmakers and regulators.
No law prevents an insurance company or PBM from kicking doctors it does not own out of network while creating preferential treatment for doctors directly employed by or closely affiliated with the corporate mothership.
In fact, the system largely incentivizes this. And shareholders expect insurers to keep up with their peers. As UnitedHealth Group has become increasingly aggressive in its acquisitions of physician practices – now employing or affiliated with about one in ten of the nation’s doctors – it has also become increasingly aggressive in its contract negotiations with physicians it does not control, particularly the specialists who depend on the referrals that come from primary care physicians.
That’s another area where looking to expand Oak Street Health makes smart business sense for CVS/Aetna. Specialist physicians are historically accustomed to higher compensation than primary care doctors and are used to striking hard-fought deals with insurers to stay in-network.
By controlling the flow of primary care referrals to specialists, CVS/Aetna can control what insurers have long-desired greater influence over: patient utilization. As a key driver of referrals to specialists in a specific market, CVS/Aetna will have even more power in contract negotiations with specialists.
As Oak Street’s clinics grow market share in the communities they serve, specialists in that market will feel even more pressured to stay in-network with Aetna and to refer prescriptions to CVS pharmacies. That has the dual benefit for CVS/Aetna of helping to predict what patients will be treated for once they go to a specialist and control over what the insurer will have to pay that specialist.
With different corporate owners, this sort of model could easily run afoul of the federal Anti-Kickback Statute and Stark Law.
No doctor or physician practice is allowed to receive anything of value for the referral of a patient. But that law only applies when there is separate ownership between the referring doctor and the specialist.
CVS/Aetna would clearly be securing value – in the form of lower patient utilization and effective reimbursement rates – under this model. But with Oak Street owned by CVS/Aetna and specialists forced to agree to lower reimbursement rates through negotiations with an insurer that appears separate from Oak Street, there’s no basis for a claim under the Stark Law. There may be antitrust implications, but those are more difficult and take longer to prove – and the fact the federal government cleared CVS/Aetna to acquire Oak Street Health last year wouldn’t help that argument.
This model is already of concern, which is why I continue to urge examination of increasing insurer control of physicians across the country. Their embrace of private equity to accelerate this model is truly alarming. And given Democrats’ recent focus on private equity in health care, they should work with their Republican colleagues who are rightly alarmed about the increasingly anti-competitive, monopolistic health insurance industry.
In the Congressional Budget Office’ latest report on the status of health insurance coverage from the 2023 National Health Interview Survey released last week, a cautiously optimistic picture of coverage is presented:
That represents the highest level of coverage in modern history. Later, it adds important context: The percentage of adults ages 18–64 who were uninsured decreased between 2019 and 2023 for all family income groups shown except for adults in families with incomes greater than 400% FPL. Notably, a period in which the Covid-19 pandemic prompted federal government’s emergency funding so households and businesses could maintain their coverage.
The New York Times noted “The drops cut significantly into gaps between ethnic groups. The uninsured rate among Black Americans, for example, was almost 8% higher than for white Americans in 2010, and was only 4%higher in 2022. The data points to the broad effects of the Affordable Care Act, the landmark law President Barack Obama signed in 2010 that created new state and federal insurance marketplaces and expanded Medicaid to millions of adults. National uninsured rates have continued to drop in recent years, hitting a record low in early 2023.”
But the report also flags a reversal of the trend: “The uninsured share of the population will rise over the course of the next decade, before settling at 8.9% in 2034, largely as a result of the end of COVID-19 pandemic–related Medicaid policies, the expiration of enhanced subsidies available through the Affordable Care Act health insurance Marketplaces, and a surge in immigration that began in 2022. The largest increase in the uninsured population will be among adults ages 19–44. Employment-based coverage will be the predominant source of health insurance, and as the population ages, Medicare enrollment will grow significantly. After greater-than-expected enrollment in 2023, Marketplace enrollment is projected to reach an all-time high of twenty-three million people in 2025.”
My take:
A close reading of this report suggests its forecast might be overly optimistic. it paints a best-case picture of health insurance coverage that under-estimates the realities of household economics and marketplace trends and over-estimates the value proposition promoted by health insurers to their customers. My conclusion is based on four trends that suggest coverage might slip more than the report suggests:
Thus, no one knows for sure what coverage will be in 2034 as presented in the CBO report. Its analysis appropriately considers medical inflation, population growth and an incremental shift to value-based purchasing in healthcare, but it fails to accommodate highly relevant changes in the capital markets, corporate insurer shareholder interests and voter sentiment.
P.S. This is an important week for healthcare: Today marks the two-year anniversary of the Supreme Court’s Dobbs decision that overturned Roe v. Wade, ending the constitutional right to an abortion that pushed reproductive rights to states.
And Thursday in Atlanta, President Joe Biden and former President Donald Trump will make history in the first presidential debate between an incumbent and a former president.
Reproductive rights will be a prominent theme along with immigration and border security as wedge issues for voters.
The economy and inflation are the issues of most consequence to most voters, so unless the campaigns directly link healthcare spending and out of pocket costs to voter angst about their household finances, not much will be said.
Notably, half of the U.S. population have unpaid medical bills and medical debt is directly related to their financial insecurity. Worth watching.
A number of hospitals and health systems are reducing their workforces or jobs due to financial and operational challenges.
Below are workforce reduction efforts or job eliminations announced this year.
June
West Monroe, La.-based Glenwood Regional Medical Center, part of Dallas-based Steward Health Care, laid off 23 employees. Affected roles included leadership, a spokesperson for the hospital said in a statement shared with Becker’s.
Cleveland-based University Hospitals is reducing its leadership structure by more than 10% as part of more than 300 layoffs. COO Paul Hinchey, MD, told Becker’s C-suite level leaders and vice presidents were included in the cuts.
Portland-based Oregon Health & Science University told staff June 6 that it plans to lay off at least 500 employees, citing financial issues. The news follows the institution and Portland-based Legacy Health signing a binding, definitive agreement to come together as one health system under OHSU Health.
May
The All of Us Research Program, a collaboration of the University of Arizona in Tucson and Phoenix-based Banner Health, plans to lay off 45 workers due to reduced federal research funding, according to an Arizona WARN notice filed May 28. The program, launched in 2018, is part of HHS’ National Institutes of Health.
Burlington, Mass.-based Tufts Medicine will lay off 174 employees due to industry challenges, the health system confirmed in a May 21 statement shared with Becker’s. The layoffs, which have varying effective dates, will primarily affect administrative and non-direct patient care roles. Some leadership roles were affected, a spokesperson told Becker’s.
Doral, Fla.-based Sanitas Medical Center laid off 56 employees between May 17 and May 20. Some of the affected roles included nine care coordinators, one care educator, and two case managers, according to a May 20 WARN notice accessed by Becker’s.
Select Specialty Hospital in Longview, Texas, will close on or about June 30, affecting 94 employees, Becker’s has confirmed. The hospital, operated by Mechanicsburg, Pa.-based Select Medical, is a 32-bed, critical illness recovery facility.
White Rock Medical Center in Dallas laid off nearly 35% of its staff. The hospital temporarily stopped taking patients transported by emergency medical services due to the layoffs, The Dallas Morning News reported. It has since resumed accepting those patients.
Oakland-based Kaiser Foundation Hospitals is laying off 76 workers in California. The layoffs primarily affect employees in IT and marketing, according to regulatory documents filed with the state May 1.
April
Pittsburgh-based UPMC will lay off approximately 1,000 employees. The layoffs, which represent more than 1% of the health system’s 100,000 workforce will primarily affect nonclinical, administrative and non-member-facing employees.
Union Springs, Ala.-based Bullock County Hospital laid off 95 employees beginning April 9, according to regulatory documents filed with the state. The layoffs occurred as Bullock seeks to become a rural emergency hospital and is ending psychiatric services as part of the shift, AL.com reported April 25.
Jackson Health System reduced compensation programs for senior leaders; laid off fewer than 25 people, including one hospital CEO; and froze many vacant positions, especially in support and nonclinical areas, a spokesperson for the Miami-based organization confirmed to Becker’s. President and CEO Carlos Migoya shared these efforts in a message to staff, citing financial challenges.
Coos Bay, Ore.-based Bay Area Hospital plans to conduct layoffs as it outsources its revenue cycle management operations, a spokesperson for the hospital confirmed to Becker’s. The transition will affect 27 positions.
Manchester, N.H.-based Catholic Medical Center plans to cut 142 positions, including 54 layoffs. An April 18 letter to employees from CMC president and CEO Alex Walker, obtained by Becker’s, said cuts would occur through the 54 staff eliminations, open position cuts, reduced hours, planned departures, and resource redeployment in satellite locations for CMC.
Marshfield (Wis.) Clinic Health System will lay off furloughed staff, effective in early May. The health system furloughed about 3% of its workforce in January, affecting positions mostly in non-patient-seeing departments, including leadership roles.
Norwalk, Ohio-based Fisher-Titus Medical Center laid off some workers in nonclinical roles and reduced hours for others. Seven employees, about 0.5% of the health system’s workforce, were laid off April 1. Work hours were reduced for another 10 positions, a hospital spokesperson told Becker’s.
March
Robbinsdale, Minn.-based North Memorial Health is laying off 103 employees in clinical and nonclinical roles, citing financial challenges. The layoffs affect several services across the two-hospital system.
AHMC’s San Gabriel (Calif.) Valley Medical Center is laying off 62 workers, according to regulatory documents filed with the state March 13. The layoffs take effect May 13.
Miami-based North Shore Medical Center, part of Steward Health Care, started conducting layoffs as part of cuts to some of its programs amid the Dallas-based health system’s continued financial struggles. Around 152 workers represented by 1199SEIU were laid off, a union spokesperson confirmed. However that number could be higher as their members do not represent every employee at NSMC, the spokesperson said.
Oakland, Calif.-based Kaiser Foundation Hospitals is laying off more than 70 employees. The layoffs primarily affect those in IT roles.
February
Lion Star, the group that operates Nacogdoches (Texas) Memorial Hospital, is closing four of its clinics on March 22, which will result in fewer than 50 layoffs, a Lion Star spokesperson confirmed to Becker’s. No additional layoffs are planned.
Little Rock-based Arkansas Heart Hospital has laid off fewer than 50 employees since the beginning of 2024, citing low reimbursement rates. The layoffs affected lower-paying positions, Bruce Murphy, MD, CEO of the hospital, said, according to Arkansas Business.
Cincinnati-based Mercy Health will lay off some call center positions. The system attributed the move to its partnership with a third party to operate its enterprise contact center for primary care scheduling.
Ridgecrest (Calif.) Regional Hospital announced more layoffs to avoid closure. It is laying off 31 more employees, including seven licensed vocational nurses and four registered nurses, two months after it announced plans to lay off nearly 30 others and suspend its labor and delivery unit, Bakersfield.com reported Feb. 15.
Medford, Ore.-based Asante health system laid off about 3% of its workforce. The layoffs primarily affected administrative and support roles and were necessary to offset “financial headwinds” over the past several years, according to a report from NBC affiliate KOBI-TV, which is based on an internal memo sent to staff Feb. 9.
Oakdale, Calif.-based Oak Valley Hospital District is scaling back services and laying off workers to improve its finances. The hospital said in a Feb. 2 statement shared with Becker’s that it will close its five-bed intensive care unit, discontinue its family support network department and lay off 28 employees, including those in senior management and supervisor positions.
Chicago-based Rush University System for Health laid off an undisclosed number of workers in administrative and leadership positions, citing “financial headwinds affecting healthcare providers nationwide.” No additional information was provided about the layoffs, including the number of affected employees.
University of Chicago Medical Center laid off about 180 employees, or less than 2% of its roughly 13,000-person workforce. The majority of affected positions are not direct patient facing, the organization said in a statement shared with Becker’s.
Fountain Valley, Calif.-based MemorialCare laid off 72 workers due to restructuring efforts at its Long Beach (Calif.) Medical Center and Long Beach, Calif.-based Miller Children’s and Women’s Hospital. The layoffs include 13 positions at Long Beach Medical Center’s outpatient retail pharmacy, which is closing Feb. 2, a spokesperson for MemorialCare said in a statement shared with Becker’s.
January
George Washington University Hospital in Washington, D.C., part of King of Prussia, Pa.-based Universal Health Services, is laying off “less than 3%” of its employees. The move is attributed to restructuring efforts.
Amarillo-based Northwest Texas Healthcare System, also part of Universal Health Services, announced plans to lay off a “limited number of positions.” The move is attributed to restructuring efforts.
Lehigh Valley Health Network is cutting its chiropractic services and laying off 10 chiropractors. The layoffs are effective April 12 and due to restructuring. The Allentown, Pa.-based health system has 10 chiropractic locations, according to its website.
Central Maine Healthcare is laying off 45 employees as part of management reorganization. The Lewiston-based system, which also ended urgent care services at its Maine Urgent Care on Sabattus Street in Lewiston on Jan. 12, has 3,100 employees total.
University of Vermont Health Network, based in Burlington, is cutting 130 open positions. The move is part of the health system’s efforts to reduce expenses by $20 million.
Med-Trans, a medical transport provider based in Lewisville, Texas, closed its UF Health ShandsCair base serving Gainesville, Fla.-based UF Health Shands Hospital on Jan. 10 due to decreased transportation demands. The move also resulted in layoffs, a spokesperson for UF Health, the hospital’s parent company, told Becker’s in a statement.
RWJBarnabas Health, based in West Orange, N.J., is laying off 79 employees, according to documents filed with the state on Jan. 8. The layoffs are effective March 31 and April 5. A spokesperson for the health system told Becker’s that 74 of the positions were “time-limited information technology training job functions.” The other layoffs were due to closure of an urgent care center.
HENRY KOTULA 