Category Archives: Health Insurance Industry

CVSHealth Eyes Breakup: A Reckoning for Corporate Health Care’s Vertical Empire

Posted on by • Posted in Antitrust, Complex, CVS Health, Federal Trade Commission, Federal Trade Commission (FTC), Health Insurance Industry, Healthcare Economics, Market Consolidation, Market Power, Market Trends, Retail Clinic, Retail Healthcare, Retail Pharmacy, Unwind, Vertical Consolidation, Vertical Integration, Vertical Merger, Vertical Mergers, Wall Street • Leave a comment
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In a surprising turn of events, sources say that CVS Health is exploring the possibility of breaking up its business empire — a move that could unravel years of aggressive vertical integration, including its $70 billion acquisition of health insurer Aetna back in 2017.

While details are still slim, such a move signals just how dire the situation has become for CVSHealth as it navigates mounting financial and regulatory pressures on multiple fronts.

It’s yet another chapter in a story that has seen CVSHealth evolve from a retail pharmacy chain into a health care behemoth — but perhaps one that grew too big, too fast. And to be honest, I’m not surprised. I’ve seen this movie before. In fact, I saw it many times – although each time with different stars – during my 20 years in the health insurance business. One of the most memorable featured Aetna, which in the late 1990s and early 2000s had to retrench, at Wall Street’s insistence, after a buying spree of smaller health insurers that brought the company a ton of unprofitable accounts and disappointing bottom lines. Aetna followed its buying spree with a purging spree, dumping as many as eight million health plan enrollees in short order to get back into Wall Street’s good graces.

It seems that CVSHealth also bought too much too fast. The results? Rising expenses, frustrated patients, and now potential cracks in the corporate structure itself.

CVS: A Cautionary Tale of Vertical Integration

Large corporations like CVS and its peers have used their size to dominate various aspects of health care—whether it’s insurance, retail pharmacy, physician practices and clinics, and controlling the drug supply chain. But as these mega-corporations continue to grow, they also become harder to manage, and their inefficiencies start to become evident. 

CVS’s acquisition of Aetna was hailed at the time as a strategic masterstroke — a way to streamline health care by bringing together the different parts of the system under one corporate umbrella. It was supposed to deliver “efficiencies” that would benefit both the company and patients. 

But it’s not just the purchase of Aetna. From pharmacy benefit manager Caremark to Aetna to health care providers Signify Health and Oak Street Health — CVS’s business model has become increasingly complex, making it difficult to navigate regulatory scrutiny, rising costs and fierce competition in the retail pharmacy space.

The latest reports suggest that CVS’s board is trying to figure out where Caremark would land in the event of a breakup. Would it stay with the retail side or with the insurance arm?

This isn’t just an internal debate; it’s emblematic of the broader issue—CVS has built a vertically integrated structure that was supposed to work together to improve care, but investors are now questioning how and even if these pieces should fit together. 

It’s Been a Hard Few Years for CVS

Federal Trade Commission’s Legal Action Against CVS’s Caremark and Other PBMs

Instead, those supposed efficiencies have largely translated into higher costs for consumers and increased scrutiny from regulators, especially with CVS’s Caremark at the center of anti-competitive practices allegations by the Federal Trade Commission (FTC). PBMs like Caremark control the drug pricing landscape in ways that lack transparency and disproportionately affect patients and independent pharmacies.

Now, as CVS grapples with rising medical costs within its Aetna business — just like its biggest competitors, UnitedHealth and Humana —the company’s management appears to be in damage control mode. While nothing is certain, discussions about splitting the business have reached the boardroom level, according to sources familiar with the matter. This comes as activist investors, like Glenview Capital, push for structural changes to improve CVS’s declining financial performance.

CVS’s Aetna Medicare Advantage Loss in New York City

New York City Mayor Eric Adams had a plan to force city municipal retirees out of traditional Medicare and into a corporate Aetna Medicare Advantage plan. The NYC Organization of Public Service Retirees vehemently opposed the move and spent months fighting it.

In August, a Manhattan Supreme Court judge permanently halted the mayor and Aetna’s attempts.

Wall Street Woes

For CVS Health, 2024 started off bad. CVS missed Wall Street financial analyst’s earnings-per-share expectations for the first quarter of 2024 by several cents. Shareholders’ furor sent CVS’ stock price tumbling from $67.71 to a 15-year low of $54 at one point. 

An astonishing 65.7 million shares of CVS stock were traded that day. The company’s sin: paying too many claims for seniors and people with disabilities enrolled in its Medicare Advantage plans. 

Also in August, CVS Health cut its 2024 forecast for a third time, citing troubles covering seniors via the company’s private Medicare Advantage business. Operating income for CVS Health’s insurance arm, Aetna, dropped a whopping 39% in Q3, which forced the company to shake up its leadership – moving CEO Karen Lynch into the role of managing insurance and publicly firing one of her lieutenants, Executive Vice President Brian Kane.

What’s Next?

The notion that CVS could split its operations would effectively unwind one of the most high-profile health care mergers in recent memory. A split up of the company would mark the end of an era in which health care conglomerates could grow unchecked. CVS’s struggle isn’t happening in isolation—other companies, like Walgreens and Rite Aid, are facing similar financial difficulties and structural questions.

CVS’s potential breakup could signal a broader industry trend toward unwinding massive, vertically integrated health care corporations. 

Whether CVS breaks up or not, it’s clear that the model of health care mega-mergers, designed to consolidate power and increase corporate profits, is facing serious headwinds. Cigna recently announced that it is getting out of the Medicare Advantage business and Humana is getting out of the commercial insurance market. UnitedHealth, meanwhile, so far seems to be weathering those headwinds, but it, too, will be facing even more scrutiny by lawmakers and regulators in the months and years ahead.

UnitedHealth Group Has Made $24.5 Billion in Profits This Year (So Far) But Still Takes Beating on Wall Street

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UnitedHealth Group has taken a beating on Wall Street this week after admitting that its Medicare Advantage plans had to pay out more in medical claims in the third quarter of this year than investors had expected. As I’ve noted many times, Wall Street can’t stand it and gets very spiteful when Big Insurance uses more of our premium dollars paying for patients’ care because that means there’s less money left over to enrich shareholders. 

At the end of trading at the New York Stock Exchange Tuesday, UnitedHealth’s share price was down 8.11% — almost $50 a share — falling like a rock from $605.40 to $556.29 as soon as the market opened. It had reached a 52-week high just the day before but fell off a cliff Tuesday morning. This despite the fact that the company still made $8.7 billion in operating profits during the third quarter.

What investors didn’t like at all was the fact that UnitedHealthcare’s medical loss ratio (MLR) climbed to 85.2% from 82.3% for the same period last year.

By other measures, the company did just fine, especially when you look at how much money it made during the first nine months of this year: a whopping $24.5 billion in profits.

Enrollment in both the company’s commercial and Medicare Advantage plans increased, but it posted a significant decline in the number of people enrolled in the Medicaid plans its administers for several states. That’s because of the Medicaid “unwinding” that has been going on since the official end of the pandemic.  

And here is another couple of numbers of note from the third quarter:

UnitedHealth’s Optum division, which encompasses its massive pharmacy benefit manager, Optum Rx, made more money for the parent company than the health plan division: $4.5 billion in profits vs. $4.2 billion for UnitedHealthcare.

PBMs have become even more of a cash cow for Big Insurance than Medicare Advantage, which despite the higher MLRs of late is still a reliable money-gushing ATM for the industry. 

The Presidential Debate will Frustrate Healthcare Voters

Posted on by • Posted in 2024 Election Issues, ACA, Antitrust, Competition, Health Insurance Industry, Health Policy, Healthcare Reform, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Market Consolidation, Market Power, Monopoly, Monopoly Behavior, Pharmaceutical Industry, State of the Union • Leave a comment
The Presidential Debate will Frustrate Healthcare Voters

Tomorrow night, the Presidential candidates square off in Philadelphia. Per polling from last week by the New York Times-Siena, NBC News-Wall Street Journal, Ipsos-ABC News and CBS News, the two head into the debate neck and neck in what is being called the “chaos election.”

Polls also show the economy, abortion and immigration are the issues of most concern to voters. And large majorities express dissatisfaction with the direction the country is heading and concern about their household finances.

The healthcare system per se is not a major concern to voters this year, but its affordability is. Out-of-pocket costs for prescription drugs, insurance premiums and co-pays and deductibles for hospitals and physician services are considered unreasonable and inexplicably high. They contribute to public anxiety about their financial security alongside housing and food costs. And majorities think the government should do more by imposing price controls and limiting corporate consolidation.

That’s where we are heading into this debate. And here’s what we know for sure about the 90-minute production as it relates to health issues and policies:

  • Each candidate will rail against healthcare prices, costs, and consolidation taking special aim at price gouging by drug companies and corporate monopolies that limit competition for consumers.
  • Each will promise protections for abortion services: Trump will defer to states to arbitrate those rights while Harris will assert federal protection is necessary.
  • Each will opine to the Affordable Care Act’s future: Trump will promise its repeal replacing it “with something better” and Harris will promise its protection and expansion.
  • Each will promise increased access to behavioral health services as memories of last week’s 26-minute shooting tirade at Apalachee High School fade and the circumstances of Colt Gray’s mental collapse are studied.
  • And each will promise adequate funding for their health priorities based on the effectiveness of their proposed economic plans for which specifics are unavailable.

That’s it in all likelihood. They’re unlikely to wade into root causes of declining life expectancy in the U.S. or the complicated supply-chain and workforce dynamics of the industry. And the moderators are unlikely to ask probative questions like these to discover the candidate’s forethought on matters of significant long-term gravity…

  • What are the most important features of health systems in the world that deliver better results at lower costs to their citizens that could be effectively implemented in the U.S. system?
  • How should the U.S. allocate its spending to improve the overall health and well-being of the entire population?
  • How should the system be funded?

My take:

I will be watching along with an audience likely to exceed 60 million. Invariably, I will be frustrated by well-rehearsed “gotcha” lines used by each candidate to spark reaction from the other. And I will hope for more attention to healthcare and likely be disappointed.

Misinformation, disinformation and AI derived social media messaging are standard fare in winner-take-all politics.

When used in addressing health issues and policies, they’re effective because the public’s basic level of understanding of the health system is embarrassingly low: studies show 4 in 5 American’s confess to confusion citing the system’s complexity and, regrettably, the inadequacy of efforts to mitigate their ignorance is widely acknowledged.

Thus, terms like affordability, value, quality, not-for-profit healthcare and many others can be used liberally by politicians, trade groups and journalists without fear of challenge since they’re defined differently by every user.

Given the significance of healthcare to the economy (17.6% of the GDP),

the total workforce (18.6 million of the 164 million) and individual consumers and households (41% have outstanding medical debt and all fear financial ruin from surprise medical bills or an expensive health issue), it’s incumbent that health policy for the long-term sustainability of the health system be developed before the system collapses. The impetus for that effort must come from trade groups and policymakers willing to invest in meaningful deliberation.

The dust from this election cycle will settle for healthcare later this year and in early 2025. States are certain to play a bigger role in policymaking: the likely partisan impasse in Congress coupled with uncertainty about federal agency authority due to SCOTUS; Chevron ruling will disable major policy changes and leave much in limbo for the near-term.

Long-term, the system will proceed incrementally. Bigger players will fare OK and others will fail. I remain hopeful thoughtful leaders will address the near and long-term future with equal energy and attention.

Regrettably, the tyranny of the urgent owns the U.S. health system’s attention these days: its long-term destination is out-of-sight, out-of-mind to most. And the complexity of its short-term issues lend to magnification of misinformation, disinformation and public ignorance.

That’s why this debate will frustrate healthcare voters.

PS: Congress returns this week to tackle the October 1 deadline for passing 12 FY2025 appropriations bills thus avoiding a shutdown. It’s election season, so a continuing resolution to fund the government into 2025 will pass at the last minute so politicians can play partisan brinksmanship and enjoy media coverage through September. In the same period, the Fed will announce its much anticipated interest rate cut decision on the heals of growing fear of an economic slowdown. It’s a serious time for healthcare!

Corporate Takeover Has Not Been Good for Healthcare

Posted on by • Posted in Health Insurance Industry, Healthcare Sector, Market Consolidation, Market Power, Pharmaceutical Industry, Private Equity, Profit Margin, Profit Motive, Value-Based Healthcare • Leave a comment

Click to access 4sightHealth.Ken-Terry-PE-Healthcare-8.13.24-1.pdf

Four decades ago, Paul Starr noted in his landmark history of U.S. healthcare, “The Social Transformation of American Medicine,” that the industry had taken a decisive turn toward corporate ownership. “Medical care in America now appears to be in the early stages of a major transformation in its institutional structure,” he wrote. “Corporations have begun to integrate a hitherto decentralized hospital system, enter a variety of other health care businesses, and consolidate ownership and control in what may eventually become an industry dominated by huge healthcare conglomerates.”

Forty years later, Starr’s prediction has come true. The vast majority of hospitals (other than critical access facilities) are now part of health systems, and some of those belong to giant for-profit or not-for-profit corporations. Nearly 80% of physicians are now employed by hospitals or private companies, including health insurers like United Healthcare. Most community pharmacies have been displaced by enormous chains like CVS, Walgreens and Walmart. Nursing home chains have taken over two-thirds of skilled nursing facilities. A handful of huge firms dominate health insurance, and a dozen drug manufacturers produce and set the prices of the most common prescription medicines.

Private equity (PE) investors focus like a laser beam on generating profits. There can be an amoral quality to PE investing, seeking returns whether or not they create value for customers in the marketplace.

Steward Healthcare, a large hospital chain initially created with PE investment has become, whether fair or not, a poster child for what can go wrong with private investment in healthcare. Steward went bankrupt after aggressively expanding into new markets beyond Massachusetts with funding generated from sales-leaseback arrangements with Real Estate Investment Trusts (REITs).

But many of the PE firms that now own over 200 acute care hospitals take a similar approach. According to a recent study of PE-owned hospitals, two years after they were purchased, 61% of them had reduced capital assets, compared to 15.5% of control hospitals. Assets decreased by a mean of 15% for acquired hospitals and increased by 9.2% for controls during that period.

Corporate Goals Vs. Value-Based Care
The consolidation of the industry by large corporate entities has received a fair amount of media attention. What has been less noticed is the incompatibility between corporate goals and value-based care. One reason for this is that many big healthcare systems pretend to be interested in population health management. For example, they may operate accountable care organizations (ACOs) that seek to improve the quality of care and reduce costs through better prevention and care coordination. They may also try to reduce readmissions, which helps them avoid Medicare penalties.

Don’t be fooled. There are exceptions — including the few integrated systems like Kaiser and Geisinger that take financial responsibility for care — but most healthcare systems have no intention of turning their business model upside down by using population health management to decrease admissions and empty their beds. When for-profit chains deliver reports to stock analysts, or not-for-profits seek to sell bonds, the metric they most often use to show their financial health is their occupancy rate, not their success in value-based care.

Meanwhile, the healthcare behemoths are continuing to grow larger. While the Department of Justice has ramped up its antitrust activity under the Biden Administration and has discouraged some mergers, this has had relatively little impact on healthcare consolidation. Academic medical centers are acquiring more community hospitals as referral sources, and some large systems like Risant Health, a nonprofit entity created by Kaiser Permanente, are doing interstate deals that help them escape the oversight of state laws.

Physicians have been largely a football in the matches between giant healthcare systems and equally massive insurers. Many independent practices have been forced to sell out to hospitals because Medicare pays hospital outpatient departments more than independent practices for the same services. (That this remains the case nearly 10 years after Congress passed its first “site-neutral” payment law is a testament to the power of regulatory capture.) While there are some sizable independent groups and physician-led ACOs, it is difficult for doctors to determine their own destinies today. And, because of how their corporate overlords affect the practice of medicine, many employed physicians are unhappy with their working conditions and its impact on patients. We’re even starting to see the beginnings of unionization in some systems.

Saving Primary Care
A variety of reforms have been tried to shore up primary care, the cornerstone of value-based care. For example, some primary-care-driven ACOs with value-based contracts generate significant savings that they have shared with their doctors. But the percentage of all payments made in these kinds of arrangements is still fairly small. The risk-taking portion of the healthcare business will not grow substantially as long as hospitals and specialists continue to make good money doing the same old fee-for-service thing.

Insurers have also taken the lead in some efforts to fortify primary care. United, which employs about 10% of the nation’s physicians, has been training them to practice evidence-based medicine and reduce waste. Elevance Health recently struck a deal with PE firm Clayton, Dubilier & Rice to create a new primary care model in Elevance’s Millenium Physician Group and Carelon Health. This “whole-person health” model will emphasize the patient-doctor relationship, along with care coordination, referral management and health coaching within “value-based care” financial arrangements.

This is all to the good. But health insurers don’t make their profits by encouraging primary care doctors to take better care of patients. They use provider networks, prior authorization, high deductibles and other tools to limit access and the cost of services. In Medicare Advantage, carriers like United and Humana have used diagnostic coding to inflate their Medicare payments by an estimated $88 billion just this year. Efforts to infuse value-based care into healthcare delivery have not been a major priority for insurance companies.

Drug Company Profits
Whole books have been written about how the pharmaceutical industry has ripped off the American consumer. Following notorious, out-of-whack price increases over the years for drugs like insulin, Humira and Truvada, in 2022 net prices jumped 6.2% for Darzalex, 6% for Prolia, 7.2% for Xgeva, 6% for Perjeta, and 8.9% for Adcetris, among others. These price hikes, which were unsupported by new clinical evidence of the drugs’ effectiveness, netted from $63 million to $248 million in additional revenue for their manufacturers. Drug companies can get away with it because nothing in U.S. law prevents them from raising prices for patented medications by however much they want to. How they price their drugs can also have a strong impact on health costs as a whole, especially when a lot of people take a particular medication. Current examples include Wegovy, Ozempic and the other high-priced GLP-1 weight-loss drugs, which eventually could cost the health system as much as $1 trillion a year — five times as much as could be saved in lower costs for other conditions — if prescribed to all obese Americans.

The kicker is that we spend nearly three times as much per person on prescription medicines as other leading countries do, because their governments bargain with pharmaceutical companies and ours doesn’t. Yet the drug makers complain that any limitations on their U.S. profits will make it impossible for them to develop more lifesaving medicines.

Overall, it’s clear that the corporatization of our healthcare system is not good for our health. In Portugal, for example, health spending per capita is one-fifth that of the U.S., yet life expectancy there is six years longer, on average, than in our country. The difference is largely rooted in the fact that Portugal has a national health service that guarantees access to healthcare, regardless of ability to pay. In other words, health takes precedence over profits in Portugal.

If we really want good healthcare at an affordable cost — the definition of value-based care — we have to move away from our profit-driven, corporatized healthcare model. As long as corporations are allowed to profit from healthcare, they will maximize those profits, regardless of the impact on consumers. It doesn’t matter how much we talk about value-based care or reforms that merely nip at corporate profits. Until Americans demand the same kind of healthcare that every Portuguese has, and insist that our government rein in the corporate owners of healthcare entities, we will get poorer healthcare and die sooner than citizens of other advanced countries.
Outcomes Matter. Customers Count. Value Rules.

While Cigna Saddles Patients with Increasing Out-of-Pocket Requirements, the Company Bought Back $5 Billion of Its Own Stock

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Cigna, my former employer, disclosed this morning that during the first seven months of this year, it spent $5 billion of the money it took from its health plan and pharmacy benefit customers to buy back shares of its own stock, a gimmick that rewards shareholders at the expense of those customers. 

Cigna also disclosed that its revenues increased a stunning 25% – to $60.5 billion – during the second quarter of this year compared to the same period in 2023. Profits also grew, from $1.8 billion to $1.9 billion. 

One of the ways Cigna made so much money was by purging health plan enrollees it decided were not profitable enough to meet Wall Street’s profit expectations.

Enrollment in its U.S. health plans fell by nearly half a million people – from 17.9 million to 17.4 million – over the past year. The company signaled to investors that it was more than OK with that decline, noting that it ran off those customers through “targeted pricing actions in certain geographies.” What that means is that Cigna increased premiums so much for those folks that they either found other insurers or joined the ranks of the uninsured. 

It was an entirely different story in Cigna’s pharmacy benefit (PBM) business, which saw a 24% increase in total pharmacy customers. The vast majority of Cigna’s revenues now come from its role as one of the country’s largest middlemen in the pharmacy supply chain. Revenue from Cigna’s pharmacy operations totaled nearly $50 billion in the second quarter of this year, up from $38.2 billion last year. By contrast, revenue from its health plan business increased modestly, from $12.7 billion to $13.1 billion.

But by purging 478,000 men, women and children from its rolls, Cigna reported a profit margin of 9.2% for its health plan operations. That, folks, is exceedingly high in the health insurance business.  

One way Cigna and the other industry giants can reward their shareholders so handsomely is by making their health plan and pharmacy customers pay more and more out of their own pockets before the insurers pay a dime.

The Affordable Care Act made it illegal for insurers to refuse to sell coverage to people with preexisting conditions or to set premiums based on someone’s health status.

But that law kept open a big back door that enables insurers like Cigna to make people with health problems pay huge sums of money for their care through deductibles and copayments. As a consequence, millions of Americans are walking away from the pharmacy counter without their medications, and many others who simply cannot live without their meds often wind up buried under a mountain of medical debt.  

Aware of this, President Biden in his State of the Union address called on Congress to limit out-of-pocket requirements for prescription drugs to $2,000 a year. Such a limit will go into effect next year for people enrolled in Medicare’s prescription drug program. Biden said that limit should apply to all Americans enrolled in private health care plans, like Cigna’s. 

A growing number of bills have been or soon will be introduced by members of Congress to fulfill Biden’s pledge, but you can expect Cigna and other big insurers to insist that doing so will mean premiums will have to go up.

That’s bullshit.

It might mean that Cigna and the other giants might have to curtail their stock buyback programs and accept slimmer profit margins, but it does not mean premiums will have to go up.

Wall Street will howl if one of the tools insurers use to gouge their customers is taken away – just as investors are punishing Cigna today for the sin of not predicting even higher profits for the rest of the year –

but reducing out-of-pocket requirements would put a significant dent in the enormous and ongoing transfer of wealth by middlemen like Cigna from middle-class Americans, especially those struggling with health issues, to fat cat investors and corporate executives.

ACA premiums set to rise in 2025

Posted on by • Posted in ACA, Health Insurance Coverage Adequacy, Health Insurance Denial, Health Insurance Industry, Health Insurance Premiums, Health Spending Growth, Inflation • Leave a comment

https://www.axios.com/2024/08/06/aca-plan-2025-premium-increases

Growing demand for GLP-1 drugs like Ozempic and Wegovy and hospital consolidation could help drive up the cost of Affordable Care Act coverage next year by 9% or more, according to a preliminary review by the Peterson Center on Healthcare and KFF.

Why it matters: 

While most enrollees in the market get subsidies and won’t have to foot the added bill, premium increases generally result in higher federal spending on subsidies, the analysis notes.

What they found: 

Rate filings by 61 insurers across 10 states and D.C. show ongoing hospital consolidation and workforce shortages are having an inflationary effect on premiums.

  • So, too, is the explosion in demand for drugs used for diabetes treatment and weight loss.
  • Though few ACA plans cover drugs that are approved only for weight loss, several insurers singled out GLP-1s as a driving force behind premium increases for 2025.
  • The analysis notes insurers are using strategies like prior authorization, step therapy and limiting quantities to control demand of Ozempic and other GLP-1s that are approved for diabetes but have potential for off-label use to lose weight.
  • Specialty drugs and biologics, including pricey gene therapies, are also becoming more prevalent and driving premiums upward.

Most insurers say ongoing state Medicaid redeterminations, COVID-19 treatment and tests and the federal surprise billing ban are not having a major effect on 2025 premiums.

Context: 

Last year, insurers proposed rate increases for 2024 coverage that were between 2% and 10%, with a median increase of 6%, Peterson-KFF notes.

  • This year’s detailed review of factors driving premium changes for 2025 found insurers have somewhat higher proposed rate increases, with a median of 9%.
  • The basis for the federal subsidies is the percent change in the benchmark ACA silver plan.

The bottom line: 

Medical inflation has picked up and now exceeds the growth of non-medical prices — a big change from 2021 to 2023. ACA plans are adjusting to keep pace and reflect their higher costs and overhead.

Walmart Health’s Demise is Emblematic of the Nation’s Primary Care Conundrum

Posted on by • Posted in Cost Management, Cost Reduction, Health Insurance Industry, Health System, Primary Care, Primary Care Delivery Model, Primary Care Strategy, Private Equity, Retail Clinic, Retail Healthcare, Walmart, Whole-Person Health • Leave a comment
Walmart Health’s Demise is Emblematic of the Nation’s Primary Care Conundrum

Walmart’s announcement on April 30 that it was pulling the plug on Walmart Health stunned the healthcare ecosystem. [1] Few saw it coming.

Launched amid much fanfare in 2019, Walmart Health has operated 51 health centers in five states, with a robust virtual care platform. Walmart’s news release noted that “the challenging reimbursement environment and escalating operating costs create a lack of profitability that make the care business unsustainable for us at this time.” Despite its legendary supply-chain capabilities, expansive market presence and sizable consumer demand for affordable primary care services, Walmart couldn’t make its business model work in healthcare.

Just two weeks earlier with much less fanfare, and in stark contrast to Walmart, the big health insurer Elevance announced it was doubling-down on primary care. On April 15, Elevance issued a news release detailing a new strategic partnership with the private-equity firm Clayton, Dubilier & Rice (CD&R) to “accelerate innovation in primary care delivery, enhance the healthcare experience and improve health outcomes.” [2]

What gives? Why is Elevance expanding its primary care footprint when the retail behemoth Walmart believes investing in primary care is unprofitable? The answer lies at the heart of the debate over the future of U.S. healthcare. As a nation, the United States overinvests in healthcare delivery while underinvesting in preventive care and health promotion.

Enlightened healthcare companies, like Elevance, are attacking this imbalance aggressively.

Elevance isn’t alone. Other large health insurers — including UnitedHealthcare, CVS/Aetna and Humana — and some large health systems (e.g., AdventHealth, Corewell Health and Intermountain Healthcare) are investing in primary care services to support what I refer to as 3D-WPH, shorthand for “democratized and decentralized distribution of whole-person health.”

3D-WPH is the disruptive innovation that is rewiring U.S. healthcare to improve outcomes, lower costs, personalize care delivery and promote community wellbeing. It is an unstoppable force.

Transactional Versus Integrated Primary Care

Across multiple retail product and service categories — including groceries, clothing, electronics, financial services, generic drugs and vision care — Walmart applies ruthless efficiency management to increase consumer selection and lower prices. Consistent with the company’s mission of helping its customers to “save money and live better,”

Walmart Health provided routine, standalone primary care services at low, transparent prices. Despite scale and superior logistics, Walmart could not deliver these routine care services profitably.

Here’s the problem with applying Walmart’s retailing expertise to healthcare:

While exceptional primary care services are rarely profitable in their own right, they can reduce total care costs by limiting the need for subsequent acute care services. Preventive care works. Companies that invest in primary care can benefit by reducing total cost of care.

Unfortunately, few providers and payers practice this integrated approach to care delivery. Most providers rely on their primary care networks to refer patients for profitable specialty care services. Most payers use their primary care networks to deny access to these same specialty care services.

This competition between using primary care networks as referral and denial machines dramatically increases the intermediary costs of U.S. healthcare delivery. Patients get lost as these titanic payer-provider battles unfold, even as costs continue to rise, and health status continues to decline.

Whole-Person Health Works

A growing number of payers and providers, however, are recalibrating their business models to lower total care costs by integrating primary care services into a whole-person health delivery model.

In its news release, Elevance described its strategic partnership with CD&R as follows:

The strategic partnership’s advanced primary care models take a whole-health approach to address the physical, social and behavioral health of every person. The foundation of the new advanced primary care offering will be stronger patient-provider relationships supported by data-driven insights, care coordination and referral management, and integrated health coaching. It will also leverage realigned incentives through value-based care agreements that enable care providers, assist individuals in leading healthier lives, and make care more affordable.

“We know that when primary care providers are resourced and empowered, they guide consumers through some of life’s most vulnerable moments, while helping people to take control of their own health,” said Bryony Winn, president of health solutions at Elevance Health, in the news release. “By bringing a new model of advanced primary care to markets across the country, our partnership with CD&R will create a win-win for consumers and care providers alike.”

Whole health personalizes and integrates care delivery. I would suggest that transactional and fragmented primary care service provision cannot compete with 3D-WPH.

For all its strengths, Walmart Health is not positioned to advance whole-person health. Primary care service provision without connection to whole-person health is a recipe for financial disaster. Walmart Health’s demise confirms this market reality.

Moreover, whole-person health is not rocket science. The Veterans Health Administration (VA) has practiced 3D-WPH for more than 15 years. [3] It achieves better outcomes at two-thirds the per capita cost of Medicare with a much sicker population. [4]

Countries with nationalized health systems practice whole-person health expansively. With one-third the per capita income and one-fifth the per capita healthcare expenditure, Portugal has a life expectancy that is more than five years longer than it is in the United States. [5] Portugal achieves better population health metrics than the United States by operating community health networks throughout the country that combine primary care and public health services.

The VA, Portugal and numerous other organizations and countries prove the thesis that investing in primary care lowers total care costs and improves health outcomes. The evidence supporting this thesis is both compelling and incontrovertible.

Solving Healthcare’s Primary Care Conundrum

Economists refer to a circumstance when individuals overuse scarce public goods as a tragedy of the commons.

Public grazing fields highlight the challenge posed by such a circumstance. [6] It is in the financial interest of individual ranchers to overgraze their herd on a public grazing field. Overgrazing by all, however, would obliterate the grazing field, which is against the public’s interest.

Societies address these “tragedies” by establishing and enforcing rules to govern public goods.

U.S. healthcare, however, reverses this type of economic tragedy. Advanced primary care services represent a public good. All acknowledge the benefits and societal returns, yet few providers and payers invest in advanced primary care services. Providers don’t invest because it leads to lower treatment volumes. Payers don’t invest because primary care’s higher costs trigger higher premiums, prompting their members to switch plans.

We can’t solve the primary care conundrum until we enable both providers and payers to benefit from investments in advanced primary care services. Fragmented, transactional medicine, even when delivered efficiently, is not cost-effective. Walmart Health discovered this economic reality the hard way and exited the business.

By contrast, Elevance is reorganizing itself to overcome healthcare’s reverse tragedy of the commons. They are betting that offering advanced primary care services within integrated delivery networks will both lower costs and improve health outcomes. Healthcare’s future belongs to the companies, like Elevance, that are striving to solve the industry’s primary care conundrum.

Campaign 2024 and US Healthcare: 7 Things we Know for Sure

Posted on by • Posted in 2024 Election Issues, Abortion, Abortion Pill, Abortion Rights, ACA, Health Insurance Coverage Adequacy, Health Insurance Industry, Health Policy, Health System, Healthcare Reform, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Hospital, Hospital Industry, Medicaid, Medicaid Eligibility, Medicaid Expansion, Medicaid Funding, Medical Debt, Medicare, Medicare Advantage, Roe v. Wade • Leave a comment
Campaign 2024 and US Healthcare: 7 Things we Know for Sure

Over the weekend, President Biden called it quits and Democrats seemingly coalesced around Vice President Harris as the Party’s candidate for the White House. While speculation about her running mate swirls, the stakes for healthcare just got higher. Here’s why:

A GOP View of U.S. Healthcare

Republicans were mute on their plans for healthcare during last week’s nominating convention in Milwaukee. The RNC healthcare platform boils down to two aims: ‘protecting Medicare’ and ‘granting states oversight of abortion services.  Promises to repeal and replace the Affordable Care Act, once the staple of GOP health policy, are long-gone as polls show the majority (even in Red states (like Texas and Florida) favor keeping it. The addition of Ohio Senator JD Vance to the ticket reinforces the party’s pro-capitalism, pro-competition, pro-states’ rights pitch.

To core Trump voters and right leaning Republicans, the healthcare industry is a juggernaut that’s over-regulated, wasteful and in need of discipline. Excesses in spending for illegal immigrant medical services ($8 billion in 2023), high priced drugs, lack of price transparency, increased out-of-pocket costs and insurer red tape stoke voter resentment. Healthcare, after all, is an industry that benefits from capitalism and market forces: its abuses and weaknesses should be corrected through private-sector innovation and pro-competition, pro-consumer policies.

A Dem View of Healthcare

By contrast, healthcare is more prominent in the Democrat’s platform as the party convenes for its convention in Chicago August 19. Women’s health and access to abortion, excess profitability by “corporate” drug manufacturers, hospitals and insurers, inadequate price transparency, uneven access and household affordability will be core themes in speeches and ads, with a promise to reverse the Dobb’s ruling by the Supreme Court punctuating every voter outreach.

Healthcare, to the Democratic-leaning voters is a right, not a privilege.

Its majority think it should be universally accessible, affordable, and comprehensive akin to Medicare. They believe the status quo isn’t working: the federal government should steward something better.

Here’s what we know for sure:

  1. Foreign policy will be a secondary focus. The campaigns will credential their teams as world-savvy diplomats who seek peace and avoid conflicts. Nationalism vs. globalism will be key differentiator for the White House aspirants but domestic policies will be more important to most voters.
  2. Healthcare reform will be a more significant theme in Campaign 2024 in races for the White House, U.S. Senate, U.S. House of Representatives and Governors. Dissatisfaction with the status quo and disappointment with its performance will be accentuated.
  3. The White House campaigns will be hyper-negative and disinformation used widely (especially on healthcare issues). A prosecutorial tone is certain.
  4. Given the consequence of the SCOTUS’ Chevron ruling limiting the role and scope of agency authority (HHS, CMS, FDA, CDC, et al), campaigns will feature proposed federal & state policy changes and potential Cabinet appointments in positioning their teams. Media speculation will swirl around ideologues mentioned as appointees while outside influencers will push for fresh faces and new ideas.
  5. Consumer prices and inflation will be hot-button issues for pocketbook voters: the health industry, especially insurers, hospitals and drug companies, will be attacked for inattention to affordability.
  6. Substantive changes in health policies and funding will be suspended until 2025 or later. Court decisions, Executive Orders from the White House/Governors, and appointments to Cabinet and health agency roles will be the stimuli for changes. Major legislative and regulatory policy shifts will become reality in 2026 and beyond. Temporary adjustments to physician pay, ‘blame and shame’ litigation and Congressional inquiries targeting high profile bad actors, excess executive compensation et al and state level referenda or executive actions (i.e. abortion coverage, price-containment councils, CON revisions et al) will increase.
  7. Total healthcare spending, its role in the economy and a long-term vision for the entire system will not be discussed beneath platitudes and promises. Per the Congressional Budget Office, healthcare as a share of the U.S. GDP will increase from 17.6% today to 19.7% in 2032. Spending is forecast to increase 5.6% annually—higher than wages and overall inflation. But it’s too risky for most politicians to opine beyond acknowledgment that “they feel their pain.”

My take:

Regardless of the election outcome November 5, the U.S. healthcare industry will be under intense scrutiny in 2025 and beyond. It’s unavoidable.

Discontent is palpable. No sector in U.S. healthcare can afford complacency. And every stakeholder in the system faces threats that require new solutions and fresh voices.

Stay tuned.

15 health systems dropping Medicare Advantage plans | 2024

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https://www.beckershospitalreview.com/finance/15-health-systems-dropping-medicare-advantage-plans-2024.html?origin=PayerE&utm_source=PayerE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

Medicare Advantage provides health coverage to more than half of the nation’s seniors, but some hospitals and health systems are opting to end their contracts with MA plans over administrative challenges.

Among the most commonly cited reasons are excessive prior authorization denial rates and slow payments from insurers.

In 2023, Becker’s began reporting on hospitals and health systems nationwide that dropped some or all of their Medicare Advantage contracts.

In January, the Healthcare Financial Management Association released a survey of 135 health system CFOs, which found that 16% of systems are planning to stop accepting one or more MA plans in the next two years. Another 45% said they are considering the same but have not made a final decision. The report also found that 62% of CFOs believe collecting from MA is “significantly more difficult” than it was two years ago.

Fifteen health systems dropping Medicare Advantage plans in 2024:


1. Canton, Ohio-based Aultman Health System‘s hospitals will no longer be in network with Humana Medicare Advantage after July 1, and its physicians will no longer be in network after Aug. 1.

2. Albany (N.Y.) Med Health System stopped accepting Humana Medicare Advantage on July 1.

3. Munster, Ind.-based Powers Health (formerly Community Healthcare System) went out of network with Humana and Aetna’s Medicare Advantage plans on June 1.

4. Lawton, Okla.-based Comanche County Memorial Hospital stopped accepting UnitedHealthcare Medicare Advantage plans on May 1.

5. Houston-based Memorial Hermann Health System stopped contracting with Humana Medicare Advantage on Jan. 1.

6. York, Pa.-based WellSpan Health stopped accepting Humana Medicare Advantage and UnitedHealthcare Medicare Advantage plans on Jan. 1. UnitedHealthcare D-SNP plans in some locations are still accepted.

7. Newark, Del.-based ChristianaCare is out of network with Humana’s Medicare Advantage plans as of Jan. 1, with the exception of home health services.

8. Greenville, N.C.-based ECU Health stopped accepting Humana’s Medicare Advantage plans in January.

9. Zanesville, Ohio-based Genesis Healthcare System dropped Anthem BCBS and Humana Medicare Advantage plans in January.

10. Corvallis, Ore.-based Samaritan Health Services’ hospitals went out of network with UnitedHealthcare’s Medicare Advantage plans on Jan. 9. Samaritan’s physicians and provider services will be out of network on Nov. 1.

11. Cameron (Mo.) Regional Medical Center stopped accepting Aetna and Humana Medicare Advantage in 2024.

12. Bend, Ore.-based St. Charles Health System stopped accepting Humana Medicare Advantage on Jan. 1 and Centene MA on Feb. 1. 

13. Brookings (S.D.) Health System stopped accepting all Medicare Advantage plans in 2024.

14. Louisville, Ky.-based Baptist Health went out of network with UnitedHealthcare Medicare Advantage and Centene’s WellCare on Jan. 1.

15. San Diego-based Scripps Health ended all Medicare Advantage contracts for its integrated medical groups, effective Jan. 1.

FTC: Big Insurance’s PBMs “Profit at the Expense of Patients by Inflating Drug Costs and Squeezing Main Street Pharmacies”

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Regular readers of HEALTH CARE un-covered know that I write frequently about the huge amounts of money the health insurance industry’s pharmacy benefit managers (PBMs) extract from the prescription drug supply chain. I also submitted a comment letter to the Federal Trade Commission two and a half years ago urging it to launch an investigation into PBM business practices that have contributed to the closure of hundreds of independent pharmacies across the country and to millions of Americans walking away from the pharmacy counter without their medications. 

On a bipartisan basis, the FTC did launch an inquiry into the PBM business, and today the Commission issued a damning interim report that confirmed what industry critics, including me, have been saying:

Just six companies now control 95% of the pharmacy benefit market, and these Big Insurance-owned middlemen “profit at the expense of patients by inflating drug costs and squeezing Main Street pharmacies.” Below you’ll find the commission’s statement on its preliminary findings.

Last year, we also published a profile of one of the industry’s most vocal critics in Congress, Rep. Earl L. “Buddy” Carter (R-Ga.), a pharmacist by trade who has seen PBM’s profiteering firsthand. In a press release this morning, Carter said:

Since day one in Congress, I’ve been calling on the FTC to investigate PBMs, which use deceptive and anti-competitive practices to line their own pockets while reducing patients’ access to affordable, quality health care. I’m proud that the FTC launched a bipartisan investigation into these shadowy middlemen, and its preliminary findings prove yet again that it’s time to bust up the PBM monopoly. We are losing more than one pharmacy per day in this country, causing pharmacy deserts and taking the most accessible health care professionals in America out of people’s communities. I am calling on the FTC to promptly complete its investigation and begin enforcement actions if – and when – it uncovers illegal and anti-competitive PBM practices.

Carter and several other members of Congress have introduced bipartisan bills to rein in PBMs. The House has passed PBM reform legislation but the Senate has not yet done so, but there is growing support in both chambers to enact one or more bills by the end of the year. The FTC’s interim report should make that more likely to happen.

Read the FTC’s full press release below:

FTC Releases Interim Staff Report on Prescription Drug Middlemen

Report details how prescription drug middleman profit at the expense of patients by inflating drug costs and squeezing Main Street pharmacies

The Federal Trade Commission today published an interim report on the prescription drug middleman industry that underscores the impact pharmacy benefit managers (PBMs) have on the accessibility and affordability of prescription drugs.

The interim staff report, which is part of an ongoing inquiry launched in 2022 by the FTC, details how increasing vertical integration and concentration has enabled the six largest PBMs to manage nearly 95 percent of all prescriptions filled in the United States.

This vertically integrated and concentrated market structure has allowed PBMs to profit at the expense of patients and independent pharmacists, the report details. 

“The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs—including overcharging patients for cancer drugs,” said FTC Chair Lina M. Khan. “The report also details how PBMs can squeeze independent pharmacies that many Americans—especially those in rural communities—depend on for essential care. The FTC will continue to use all our tools and authorities to scrutinize dominant players across healthcare markets and ensure that Americans can access affordable healthcare.”

The report finds that PBMs wield enormous power over patients’ ability to access and afford their prescription drugs, allowing PBMs to significantly influence what drugs are available and at what price. This can have dire consequences, with nearly 30 percent of Americans surveyed reporting rationing or even skipping doses of their prescribed medicines due to high costs, the report states.

The interim report also finds that PBMs hold substantial influence over independent pharmacies by imposing unfair, arbitrary, and harmful contractual terms that can impact independent pharmacies’ ability to stay in business and serve their communities. 

The Commission’s interim report stems from special orders the FTC issued in 2022, under Section 6(b) of the FTC Act, to the six largest PBMs—Caremark Rx, LLC; Express Scripts, Inc.; OptumRx, Inc.; Humana Pharmacy Solutions, Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems, Inc. In 2023, the FTC issued additional orders to Zinc Health Services, LLC, Ascent Health Services, LLC, and Emisar Pharma Services LLC, which are each rebate aggregating entities, also known as “group purchasing organizations,” that negotiate drug rebates on behalf of PBMs.

PBMs are part of complex vertically integrated​ health care conglomerates, and the PBM industry is highly concentrated. As shown in the below image, this concentration and integration gives them significant power over the pharmaceutical supply chain. The percentages reflect the amount of prescriptions filled in the United States.

The interim report highlights several key insights gathered from documents and data obtained from the FTC’s orders, as well as from publicly available information:

  • Concentration and vertical integration: The market for pharmacy benefit management services has become highly concentrated, and the largest PBMs are now also vertically integrated with the nation’s largest health insurers and specialty and retail pharmacies.
    • The top three PBMs processed nearly 80 percent of the approximately 6.6 billion prescriptions dispensed by U.S. pharmacies in 2023, while the top six PBMs processed more than 90 percent.
    • Pharmacies affiliated with the three largest PBMs now account for nearly 70 percent of all specialty drug revenue.
  • Significant power and influence: As a result of this high degree of consolidation and vertical integration, the leading PBMs now exercise significant power over Americans’ ability to access and afford their prescription drugs.
    • The largest PBMs often exercise significant control over what drugs are available and at what price, and which pharmacies patients can use to access their prescribed medications.
    • PBMs oversee these critical decisions about access to and affordability of life-saving medications, without transparency or accountability to the public.
  • Self-preferencing: Vertically integrated PBMs appear to have the ability and incentive to prefer their own affiliated businesses, creating conflicts of interest that can disadvantage unaffiliated pharmacies and increase prescription drug costs.
    • PBMs may be steering patients to their affiliated pharmacies and away from smaller, independent pharmacies.
    • These practices have allowed pharmacies affiliated with the three largest PBMs to retain high levels of dispensing revenue in excess of their estimated drug acquisition costs, including nearly $1.6 billion in excess revenue on just two cancer drugs in under three years.
  • Unfair contract terms: Evidence suggests that increased concentration gives the leading PBMs leverage to enter contractual relationships that disadvantage smaller, unaffiliated pharmacies.
    • The rates in PBM contracts with independent pharmacies often do not clearly reflect the ultimate total payment amounts, making it difficult or impossible for pharmacists to ascertain how much they will be compensated.
  • Efforts to limit access to low-cost competitors: PBMs and brand drug manufacturers negotiate prescription drug rebates some of which are expressly conditioned on limiting access to potentially lower-cost generic and biosimilar competitors.
    • Evidence suggests that PBMs and brand pharmaceutical manufacturers sometimes enter agreements to exclude lower-cost competitor drugs from the PBM’s formulary in exchange for increased rebates from manufacturers.

The report notes that several of the PBMs that were issued orders have not been forthcoming and timely in their responses, and they still have not completed their required submissions, which has hindered the Commission’s ability to perform its statutory mission. FTC staff have demanded that the companies finalize their productions required by the 6(b) orders promptly. If, however, any of the companies fail to fully comply with the 6(b) orders or engage in further delay tactics, the FTC can take them to district court to compel compliance.

The FTC remains committed to providing timely updates as the Commission receives and reviews additional information.

The Commission voted 4-1 to allow staff to issue the interim report, with Commissioner Melissa Holyoak voting no. Chair Lina M. Khan issued a statement joined by Commissioners Rebecca Kelly Slaughter and Alvaro Bedoya. Commissioners Andrew N. Ferguson and Melissa Holyoak each issued separate statements.  The Federal Trade Commission develops policy initiatives on issues that affect competition, consumers, and the U.S. economy. The FTC will never demand money, make threats, tell you to transfer money, or promise you a prize. Follow the FTC on social media, read consumer alerts and the business blog, and sign up to get the latest FTC news and alerts.