UnitedHealth Group, both the nation’s largest health insurer and largest employer of physicians, just announced plans to continue to rapidly grow the number of physicians in its Optum division.
This week CEO Dave Wichmann told investors in the company’s fourth quarter earnings call that Optum entered 2021 with over 50,000 employed or affiliated physicians, and expects to add at least 10,000 more across the year.(For context,HCA Healthcare, the largest for-profit US health system, employs or affiliates with roughly 46,000 physicians, and Kaiser Permanente employs about 23,300.) Optum is already making progress toward its ambitious goal with the announcement last week that the company is in talks to acquire Atrius Health, a 715-physician practice in the Boston area.
As was the case with other health plans, United’s health insurance business took an expected hit last quarter due to increased costs from COVID testing and treatment, combined with rebounding healthcare utilization. Optum, however, saw revenue up over 20 percent, which drove much of the company’s overall fourth quarter growth.
Expect United, and other large insurers, flush with record profits from last year, to continue to expand their portfolio of care, digital and analytics assets(see also Optum’s recently announced plan to acquire Change Healthcare for $13B) as they looks to grow integrated insurance and care delivery offerings.
It’s part of what we expect to be a 2021 “land grab” for strategic advantage in healthcare, as providers, health plans, and disruptors look to create comprehensive platforms to secure long-term consumer loyalty.
Beyond the initiatives directly tied to COVID relief, President Biden’s healthcare agenda includes a broader bolstering of the protections and coverage mechanisms in the Affordable Care Act (ACA), as well as the rollback of several of the previous administration’s regulatory changes. We’ve outlined that agenda in the graphic below, as well as highlighting key members of the Biden healthcare team.
While much will depend on how the COVID pandemic continues to unfold, and how successful Biden is at striking bipartisan compromises with a closely divided Congress, we’re watching closely for the answers to several key questions:
(1) how aggressive can and will the new administration be in unwinding Trump-era reforms, particularly regarding Medicaid work requirements;
(2) what will be the thrust of Biden’s antitrust policyin the healthcare space;
(3) how hard will Biden be willing to push for expanded subsidies for individuals purchasing insurance on the ACA exchanges;
(4) how will the Biden team build on the transparency measures implemented by the Trump administration; and
(5) how will the new administration use payment reforms and other regulations to address racial and other disparities in healthcare?
All of that preceded by one burning question that has us holding our breath: who will Biden pick to run the all-important Centers for Medicare and Medicaid Services?
The FTC wants to figure out how hospitals’ acquisitions of physician practices has affected competition.
The agency sent orders to some of the nation’s largest insurance companies, including UnitedHealthcare, Anthem, Aetna, Cigna, Florida Blue and Health Care Service Corporation.
This action is part of a larger effort underway at the agency to consider new questions and areas of study to help it understand the ultimate impact of mergers. The hope is that those studies will yield evidence to better equip the agency to legally challenge mergers in the future.
Health economists cheered the news online following the FTC’s Thursday’s announcement about studying physician practice buy-ups.
Martin Gaynor, former director of FTC’s Bureau of Economics, tweeted: “This is a big deal – a huge # of physician practices are now owned by hospitals.” Gaynor is a health economist at Carnegie Mellon.
In the orders, the FTC asks the insurers for data such as the total billed charges of all health providers, total deductibles, copays and coinsurance paid by the patient. It also asks for data tied to each inpatient admission and outpatient and physician episodes during the time period in question, which will likely result in a barrage of data for the agency to review.
“The study results should aid the FTC’s enforcement mission by providing much more detailed information than is currently available about how physician practice mergers and healthcare facility mergers affect competition,” the agency said in a statement.
This area of study expands the agency’s current work. One area already of interest within this broader retrospective merger review program is the scrutiny of labor markets.
One area of concern for the FTC is states’ willingness to greenlight COPAs, or certificates of public advantage (COPAs), which essentially shield mergers from federal antitrust regulators in exchange for prolonged state oversight.
Congress passed a bill that would end an antitrust exemption for health insurers, and the legislation is expected to be signed by President Donald Trump, according to The National Law Review.
On Sept. 21, 2020, the U.S. House of Representatives passed the Competitive Health Insurance Reform Act of 2020, with the Senate passing the Act on Dec. 22, 2020.
The bill would repeal parts of the McCarran-Ferguson Act that exempt insurance businesses from most federal regulation, including antitrust regulation. When the bill passed the House, Rep. Peter DeFazio, D-Ore., who introduced the bill, said, “As long as this exemption is still on the books, health insurance companies legally can, and do, collude to drive up prices, limit competition, conspire to underpay doctors and hospitals, and overcharge consumers.”
Proponents of the McCarran-Ferguson Act have said it sets up important state authorities. The National Association of Insurance Commissioners has said, “The McCarran-Ferguson Act is as relevant today as it was when it was adopted. It contains the basic delegation of authority from Congress to the states with respect to the regulation and taxation of the business of insurance. It has been affirmed as the law of the land in the Gramm-Leach-Bliley Act and in the Dodd-Frank Act.”
The Competitive Health Insurance Reform Act of 2020 was presented to President Trump for his signature on Jan. 1. He was expected to sign the legislation before pro-Trump rioters stormed the Capitol Jan. 6.
The Federal Trade Commission is revamping a key tool in its arsenal to police competition across a plethora of industries, a development that could have direct implications for future healthcare deals.
One avenue it will zero in on is labor markets, including workers and their wages, and how mergers may ultimately affect them.
It’s an area that could be ripe for scrutinizing healthcare deals, and the FTC has already begun to use this argument to bolster its case against anticompetitive tie-ups. Prior to this new argument, the antitrust agency — in its legal challenges and research — has primarily focused on how healthcare mergers affect prices.
The retrospective program is hugely important to the FTC as it is a way to examine past mergers and produce research that can be used as evidence in legal challenges to block future anticompetitive deals or even challenge already consummated deals.
“I do suspect that healthcare is a significant concern underlying why they decided to expand this program,” Bill Horton, an attorney with Jones Walker LLP, said.
So far this year, the FTC has tried to block two proposed hospital mergers. The agency sued to stop a proposed tie-up in Philadelphia in February between Jefferson Health and Albert Einstein Healthcare Network.
In both cases, the agency alleges the deals will end the robust competition that exists and harm consumers in the form of higher prices, including steeper insurance premiums, and diminished quality of services.
The agency has long leaned on the price argument (and its evidence) to challenge proposed transactions. However, recent actions signal the FTC will include a new argument: depressed wages, particularly those of nurses.
In a letter to Texas regulators in September, the FTC warned that if the state allowed a health system to acquire its only other competitor in rural West Texas, it would lead to limited wage growth among registered nurses as an already consolidated market compresses further.
Last year, the agency sent orders to five health insurance companies and two health systems to provide information so it could further study the affect COPAs, or Certificates of Public Advantage, have on price and quality. The FTC also noted it was planning to study the impact on wages.
FTC turned to review after string of defeats
A number of losses in the 1990s led the agency to conduct a hospital merger retrospective, Chris Garmon, a former economist with the FTC, said. Garmon has helped conduct and author retrospective reviews.
Between 1994 and 2000, there were about 900 hospital mergers by the U.S Department of Justice’s count. The bureau lost all seven of the cases they attempted to litigate in that time period, according to the DOJ.
The defendants in those cases succeeded by employing two types of defenses. The nonprofit hospitals would argue they would not charge higher prices because as nonprofits they had the best interests of the community in mind. Second, hospitals tried to argue that their markets were much larger than the FTC’s definition, and that they compete with hospitals many miles away.
Retrospective studies found evidence that undermined these claims. That’s why the studies are so important, Garmon said.
“It really is to better understand what happens after mergers,” Garmon said. It’s an evaluation exercise, given many transaction occur prospectively or before a deal is consummated. So the reviews help the FTC answer questions like: “Did we get it right? Or did we let any mergers we shouldn’t let through?”
The Federal Trade Commission is suing to block New Jersey’s largest health system, Hackensack Meridian Health, from acquiring a close competitor, Englewood Health. That system operates Englewood Hospital, an independent hospital and one of the last in the area, according to the Star-Ledger.
After the tie-up, Hackensack would control three of the six acute care hospitals in Bergen County, the most populated county in the state.
The loss of competition between the two would leave insurers with few options and would allow Hackensack to obtain higher prices from insurers, leading to higher premiums and higher out-of-pocket costs for consumers, the FTC alleged in a statement Thursday.
In each case, the FTC has argued the deals would eliminate close competitors and lead to higher costs and lower quality of care.
At the time, Hackensack said Englewood would become a tertiary hub for Hackensack with a focus on a slew of services lines including cardiovascular care, neurosciences and oncology. Englewood said it would also benefit from the affiliations Hackensack enjoyed with Memorial Sloan Kettering Cancer Center.
As part of the announcement, Hackensack committed to invest $400 million in Englewood Health.
Hackensack operates its flagship hospital, Hackensack University Medical Center, and partially owns Pascack Valley Medical Center, which are both within 10 miles of Englewood Hospital, according to the FTC.
The Federal Trade Commission (FTC) filed a lawsuit to stop Memphis, Tennessee-based Methodist Le Bonheur Healthcare’s $250 million acquisition of two hospitals in the area owned by Tenet Healthcare.
The agency said in the federal lawsuit filed Friday that the acquisition of two Memphis-based hospitals known as Saint Francis would imperil competition in the area.
Competition would dampen for a “broad range of inpatient medical and surgical diagnostic and treatment services that require an overnight hospital stay,” the FTC said in a release Friday. “If the proposed acquisition is consummated, healthcare costs will rise.”
FTC said only four hospital systems provide general services to the area. If the deal goes through, the new health system would control approximately 60% of the Memphis market.
“It’s clear that patients in the Memphis area have benefited from the competitive pressure that Saint Francis brings to bear on Methodist, through lower rates, more options for insurers and patients, and quality improvements,” said Daniel Francis, deputy director of the FTC’s Bureau of Competition, in a statement.
FTC is seeking a preliminary injunction to halt the deal until completion of a trial next year.
This is the latest move by the FTC to combat hospital mergers. Last year, the FTC launched a probe into the effects of health system mergers on prices and healthcare quality.
Methodist and Tenet said in a joint statement they are reviewing the lawsuit and were bewildered by the move.
“We are surprised by the FTC action given the strong support for the transaction by local stakeholders, including leading local health plans, physicians, employers and community leaders,” the statement said.
Salt Lake City-based Intermountain Healthcare and Sioux Falls, S.D.-based Sanford Health have signed a letter of intent to merge.
The boards of both nonprofit organizations unanimously approved on Oct. 23 a resolution to support moving forward with the due diligence process. Pending regulatory and state approvals, the merger is expected to close in 2021.
“We’re hoping that the actions taken … just 72 hours ago will culminate in a combined organization next summer,” Kelby Krabbenhoft, president and CEO of Sanford Health, said during an Oct. 26 news conference.
Existing boards of trustees from both systems will join to form a combined board, and Gail Miller, chair of the Intermountain board, will serve as board chair of the merged organization.
Marc Harrison, MD, president and CEO of Intermountain, will serve as president and CEO of the combined system, which will operate 70 hospitals and employ more than 89,000 people. Mr. Krabbenhoft will serve as president emeritus.
“These are two great organizations with strong histories that are economically and clinically very strong,” Dr. Harrison said during the news conference. “This is something that should happen for the future of American healthcare.”
Intermountain will be the parent company of the combined organization, and the merged system will be headquartered in Salt Lake City.
In a court filing, Einstein Healthcare Network warned that a move by the Federal Trade Commission to block its merger with Jefferson Health could lead to a “death spiral” at its Philadelphia flagship safety-net hospital, according to the Philadelphia Business Journal.
In court documents opposing an FTC analysis of the merger, Einstein said that its financial condition has deteriorated since 2017, resulting in operating losses averaging about $30 million per year.
Einstein said it will incur even greater losses, largely because of the challenging payer mix and large underinsured or uninsured population of its flagship Philadelphia medical center.
Without a merger, “Einstein [would have to] dramatically cut its services at Einstein Medical Center Philadelphia, leading to job losses and even further reductions in maintenance and needed investment, precipitating a ‘death spiral’ that would jeopardize access to health care for many of Philadelphia’s underserved residents,” Einstein wrote in the documents, according to the Philadelphia Business Journal.
The FTC announced in February its intent to sue to block the proposed merger, arguing that combining the two systems would reduce competition in Philadelphia and Montgomery counties.
“Jefferson and Einstein have a history of competing against each other to improve quality and service,” the FTC said in February. “The proposed merger would eliminate the robust competition between Jefferson and Einstein for inclusion in health insurance companies’ hospital networks to the detriment of patients.”
Einstein and Jefferson Health countered that a combined system still would face competition from other hospitals and operate in a challenging market dominated by one healthcare insurer, according to the report.
Charlotte, N.C.-based Atrium Health and Winston-Salem, N.C.-based Wake Forest Baptist Health have completed their merger, creating a 42-hospital system with more than 70,000 employees.
With the transaction complete, Wake Forest Baptist Health and Wake Forest School of Medicine will become the “academic core” of Atrium Health. The health system said it plans to build a second campus of the school of medicine in Charlotte.
“As the healthcare field goes through the most transformative period in our lifetime, in addition to a new medical school, our vision is to build a ‘Silicon Valley’ for healthcare innovation spanning from Winston-Salem to Charlotte,” Atrium President and CEO Eugene A. Woods said in a news release. “We are creating a nationally-leading environment for clinicians, scientists, investors and visionaries to collaborate on breakthrough technologies and cures. Everything we do will be focused on life changing care, for all, in urban and rural communities alike. And we will create jobs that provide inclusive opportunities to enhance the economic vitality of our entire region.”
Atrium cited an independent economic analysis that showed the direct and indirect annual employment impact of the combined system exceeds 180,000 jobs.
“The impact of the strategic combination will be far-reaching, elevating North Carolina as a clear destination of choice to receive medical care for people all across the nation,” said Julie Ann Freischlag, MD, CEO of Wake Forest Baptist Health and dean of Wake Forest School of Medicine. “Through our combined, nationally recognized clinical centers of excellence in multiple specialties, we will be able to expand our research in signature areas, such as cancer, cardiovascular, regenerative medicine and aging, and target bringing research breakthroughs to the community in less than half the time of the national average.”
Mr. Woods will serve as president and CEO of the combined system, and Dr. Freischlag was appointed chief academic officer for Atrium Health in addition to her current positions.
A 16-member board of directors appointed by the Charlotte Mecklenburg Hospital Authority and Wake Forest University Baptist Medical Center will govern the new nonprofit enterprise.