Category Archives: Medicare Advantage

Has U.S. Healthcare Reached its Tipping Point?

Posted on by • Posted in Board, Board Competency, Board Structure, Board Weakness, Health Policy, Health System, High Drug Prices, Hospital, Hospital Industry, Leadership, Leadership Legacy, Leadership Vision, Medicaid, Medicaid Expansion, Medicare, Medicare Advantage, Private Equity, Strategy, Tipping Point • Leave a comment
Has U.S. Healthcare Reached its Tipping Point?

At a meeting with hospital system CEOs last Wednesday, one asked: “has healthcare reached the tipping point?”  I replied ‘not yet but it’s getting close.’

I iterated factors that make these times uniquely difficult in every sector:

  • An uncertain economy that’s unlikely to fully recover until next year.
  • The growth of Medicaid and Medicare coverage that shifts their financial shortfall to employers and taxpayers who are fed up and pushing back.
  • A vicious political environment that rewards partisan brinksmanship and focus-group tested soundbites to manipulate voters on complex issues in healthcare.
  • The growing domination of Big Business in each sector that have used acquisitions + corporatization to their advantage.
  • The widening role of private equity in funding non-conventional solutions that disrupt the status quo (and the uncertain future for many of these).
  • The federal courts system that’s increasingly the arbiter over access, fairness, quality and freedoms in healthcare.
  • The lingering impact of the pandemic.
  • And growing public disgust and distrust as the system’s altruism and good will is undermined by pervasive concern for profit.

Unprecedented! But events like those last week prompt hitting the pause button: not everyone pays attention to healthcare like many of us. The slaughter of 6 innocents in Nashville hit close to home: it’s about guns, mental health and life and death. The appeal of tech-giants to press the pause button on Generative AI for at least 6 months was sobering. The ravage of tornados that left thousands insecure without food, housing or hope seemed unfair. Mounting tensions with Russia and complex negotiations with China that reminded us that the U.S. competes in a global economy.  And President Trump’s court appearance tomorrow will stoke doubt about our justice system at a time when it’s role in healthcare and society is expanding.

I am a healthcare guy. I am prone to see the world through the lens of the U.S. health industry and keen to understand its trends, tipping points and future. There’s plenty to watch: this week will be no exception. The punch list is familiar:

  • Medicaid coverage: Many will be watching the fallout of from state redetermination requirements for Medicaid coverage starting as soon as this week with disenrollment in Arizona, Arkansas, Idaho, New Hampshire and South Dakota.
  • Medicare Advantage: Health insurers will be modifying their Medicare Advantage strategies to adapt to CMS’ risk adjustment and Value-based Insurance Design modifications announced last week.
  • Prescription drug prices: PBMs and drug companies will face growing skepticism as Senate and House committees continue investigations about price gauging and collusion. Hospitals will be making adjustments to higher operating losses as states cut their Medicaid rolls.
  • Technology: The 7500 VIVA attendees will be doing follow-up to secure entrées for their technologies and solutions among prospective buyers.
  • Physicians: And physicians will intensify campaigns against insurers and hospitals now seen as adversaries while lobbying Congress for more money and greater income opportunities i.e., physician-owned hospitals.
  • Hospitals: On the offense against site-neutral payments, physician owned hospitals, drug prices and inadequate reimbursement from health insurers.

All will soldier on but the food fights in healthcare and broader headwinds facing the industry suggest a tipping point might be near.

I am not a fatalist: the future for healthcare is brighter than its past, but not for everyone. Strategies predicated on protecting the past are obsolete. Strategies that consider consumers incapable of active participation in the delivery and financing of their care are archaic. Strategies that depend on unbridled consolidation and opaque pricing are naïve. And strategies that limit market access for non-traditional players are artifacts of the gilded age gone by when each sector protected its own against infidels outside.

These times call for two changes in every board room and C Suite in of every organization in healthcare:

Broader vision: Understanding healthcare’s future in the broader context of American society, democracy and capitalism: Beltway insiders and academics prognosticate based on lag indicators that are decreasingly valid for forecasting. Media pundits on healthcare fail to report context and underpinnings. Management teams are operating under short-term financial incentives lacking longer-term applicability. Consultants are telling C suites what they want to hear. And boards are being mis-educated about trends of consequence that matter. Understanding the future and building response scenarios is out of sight and out of mind to insiders more comfortable being victims than creators of the new normal.

Board leadership: Equipping boards to make tough decisions: Governance in healthcare is not taken seriously unless an organization’s investors are unhappy, margins are shrinking or disgruntled employees create a stir. Few have a systematic process for looking at healthcare 10 years out and beyond their business. Every Board must refresh its thinking about what tomorrow in healthcare will be and adjust. It’s easier for board to approve plans for the near-term than invest for the long-term: that’s why outsiders today will be tomorrow’s primary incumbents.

So, is U.S healthcare near its tipping point? I don’t know for sure, but it seems clear  the tipping point is nearer than at any point in its history. It’s time for fresh thinking and new players.

Tackling Medicare Advantage overpayments

Posted on by • Posted in Health Policy, Health System, Healthcare Reform, Hospital, Hospital Industry, Medicare, Medicare Advantage, Medicare Advantage Overpayments, MedPAC • Leave a comment

Republicans divided over tackling Medicare Advantage overpayments

Hard-pressed to come up with significant savings to reduce the deficit, some Senate Republicans are taking a closer look at reforms to Medicare Advantage in light of reports that insurance companies are collecting billions of dollars in extra profits by over-diagnosing older patients.  

But the idea of cracking down on Medicare Advantage overpayments to insurance companies divides Republicans, who have traditionally championed the program. 

Proponents of Medicare Advantage reform anticipated it will face strong opposition from the insurance industry, one of the most powerful special interest groups in Washington.  

Sen. Bill Cassidy (La.), the top-ranking Republican on the Senate Health, Education, Labor and Pensions Committee, is leading the push to reduce Medicare overpayments.  

“Medicare is going insolvent. If we don’t do anything, it’s going to go insolvent. We have a whole package of things, all of them bipartisan, and we’re doing it essentially to have something out there so that if somebody decides to do something, there will be things that are examined, considered and bipartisan” to vote on, he said.  

“I come up with lots of stuff. We thought it through policy and think it’s policy that can make it all the way through,” he said.

Cassidy’s office says his bill could extend the solvency of Medicare by saving as much as $80 billion in federal funds over the next decade without cutting benefits.

He emphasizes that it would not cut Medicare Advantage benefits, but critics of the legislation are sure to challenge that claim.  

“We’re not undermining Medicare Advantage,” he said.  

“In fact, I would say this is a better alternative than what CMS is doing by rule,” he added, referring to a new rule-making action by the Biden administration to recover overpayments in Medicare Advantage through the Centers for Medicare & Medicaid Services.

The Medicare Payment Advisory Panel estimates that Medicare Advantage plans collected $124 billion in overpayments from 2008 to 2023. They collected an estimated $44 billion overpayments in 2022 and 2023 alone, according to MedPAC. 

Unlike traditional fee-for-service Medicare, Medicare Advantage plans are offered by private companies. Both are funded by taxpayers through general revenues, payroll taxes and beneficiaries’ premiums. 

Cassidy is also leading a bipartisan working group to reform Social Security to extend its solvency. Members include Sens. Angus King (I-Maine) and Mitt Romney (R-Utah).  

“To have a significant impact on fiscal policy, you’d have to look at entitlements,” said Romney, who called Medicare Advantage “an area we’re going to be looking at very shortly — the committee will be looking at Medicare Advantage,

the cost of Medicare Advantage …. It’s become more expensive than the old fee-for-service Medicare.”  

In a follow-up interview Thursday, Romney said senators are also looking at reforms to Pharmacy Benefit Managers, the companies that serve as middle-men between drug manufacturers, insurance companies and pharmacies.  

Romney said, “in the past, Medicare Advantage has been a lower-cost way of providing Medicare than fee-for-service Medicare.” 

“If that’s changing, I’d like to understand why and make sure we don’t create impediments to the lower-cost Medicare Advantage,” he said.  

Sen. Mike Braun (R-Ind.) said Medicare Advantage overpayment “definitely” is a “reform issue.” 

“I’ve been the loudest voice on reforming health care and that’s a commonsense idea,” he said. “Whatever it takes to bring down health care costs.

“I’m one of the most free-market people here, but the health care industry is not a free market. It’s like an unregulated utility,” he said. “There’s so much opaqueness.”  

But some Republicans are already trying to paint efforts to reduce overpayments as cuts to Medicare Advantage.  

“The problem with Medicare Advantage is President Biden is cutting $540 per member per year. That’s the problem. Medicare Advantage has been very successful,” said Sen. Roger Marshall (R-Kan.), an OB/GYN who practiced medicine for more than 25 years.  

National Republican Senatorial Committee Chairman Steve Daines (R-Mont.) accused Biden of “proposing Medicare Advantage cuts” when the president accused some Republicans of wanting to sunset Medicare at his Feb. 7 State of the Union address.  

Medicare Advantage is getting more popular among Democrats as well as the number of blue state enrollees in the program soars. The number of Americans enrolled in Medicare Advantage has nearly doubled over the last 12 years, according to the Kaiser Family Foundation.

Cassidy’s proposal, which he introduced with progressive Sen. Jeff Merkley (D-Ore.) on Monday, could draw broader interest from Republicans.

Sen. John Cornyn (R-Texas), an adviser to the Senate GOP leadership, called Medicare Advantage a “success.”

“That doesn’t mean that it should be immune from oversight, so I’ll be interested to see what they have to say,” he said.  

Cassidy and Merkley say that Medicare Advantage plans have a financial incentive to make beneficiaries appear sicker than they are because they are paid a standard rate based on the health of individual patients. Their bill, the No Unreasonable Payment, Coding or Diagnoses for Elderly (No Upcode Act) would require risk models based on more extensive diagnostic data over a period of two years.  

It would also limit the ability of insurance companies to use old or unrelated medical conditions to inflate the cost of care and ensure that Medicare is only charged for treatment related to relevant medical conditions, according to a summary provided by the senators’ offices.Biden administration approves California’s electric truck mandateFlorida transgender bathroom bill passes committee

The goal is to narrow the disparity in how patients are assessed by traditional Medicare and Medicare Advantage.  

Studies and audits conducted by CMS and the Department of Health and Human Services’ inspector general found that insurance companies collected billion of dollars in overpayments because of diagnoses that were not later supported by enrollees’ medical records.

The Kaiser Family Foundation reported in August that more than 28 million people — or about 48 percent of the eligible Medicare population — were enrolled in Medicare Advantage plans in 2022. They accounted for $427 billion or 55 percent of total federal Medicare spending.

MedPAC recommendations on 2024 payment rates get mixed reaction

Posted on by • Posted in Ambulatory Surgery Centers (ASC), Health System, Hospital, Hospital Industry, Long Term Care Hospital, Medicare, Medicare Advantage, Medicare Disproportionate Share Reimbursement, Medicare Fee Schedule, Medicare Part D, Medicare Payment Advisory Commission (MedPAC), MedPAC, Physician, Physician Reimbursement • Leave a comment

https://www.healthcarefinancenews.com/news/medpac-recommendations-2024-payment-rates-get-mixed-reaction?mkt_tok=NDIwLVlOQS0yOTIAAAGKp7vNV3A6CzC0o2XF8C2hS5N1Kk9ACTtp30hGJo7LueVqxb66DEIO2wT7o9fvX7ugB5ZV9-5x5SflPXw0J1OOEXxbSDHlRc2CuGYvl9wz

The Medicare Advisory Payment Commission recommends a higher-than-current-law fee-for-service payment update in 2024 for acute care hospitals and positive payment updates for clinicians paid under the physician fee schedule. It recommends reductions in base payment rates for skilled nursing facilities, home health agencies and inpatient rehabilitation facilities. 

MedPAC gave Congress recommendations on payment rates in both traditional fee-for-service and Medicare Advantage for 2024, satisfying a legislative mandate comparing per enrollee spending in both programs.

MedPAC estimates that Medicare spends 6% more for MA enrollees than it would spend if those enrollees remained in fee-for-service Medicare.

In their March 2023 Report to the Congress: Medicare Payment Policy, commissioners said they were acutely aware of how providers’ financial status and patterns of Medicare spending varied in 2020 and 2021 due to COVID-19 and were also aware of higher and more volatile cost increases.

However, they’re statutorily charged to evaluate available data to assess whether Medicare payments are sufficient to support the efficient delivery of care and ensure access to care for Medicare’s beneficiaries, commissioners said. 

FEE-FOR-SERVICE RATE RECOMMENDATIONS 

MedPAC’s payment update recommendations are based on an assessment of payment adequacy, beneficiaries’ access to and use of care, the quality of the care, the supply of providers, and their access to capital, the report said. As well as higher payments for acute care hospitals and clinicians, MedPAC recommends positive rates for outpatient dialysis facilities.

It recommends providing additional resources to acute care hospitals and clinicians who furnish care to Medicare beneficiaries with low incomes. It also recommends a positive payment update in 2024 for hospice providers concurrent with wage adjusting and reducing the hospice aggregate Medicare payment cap by 20%.

It recommends negative updates, which are reductions in base payment rates, for skilled nursing facilities, home health agencies and inpatient rehabilitation facilities. 

Acute care

For acute care hospitals paid under the inpatient prospective payment system, commissioners recommend adding $2 billion to current disproportionate share and uncompensated care payments and distributing the entire amount using a commission-developed “Medicare SafetyNet Index” to direct funding to those hospitals that provide care to large shares of low-income Medicare beneficiaries.

This recommendation got pushback from America’s Essential Hospitals.

“We appreciate the Medicare Payment Advisory Commission’s desire to define safety net hospitals for targeted support, but the commission’s Medicare safety net index (MSNI) could have the perverse effect of shifting resources away from hospitals that need support the most,” said SVP of Policy and Advocacy Beth Feldpush. “The MSNI methodology fails to account for all the nation’s safety net hospitals by overlooking uncompensated care and care provided to non-Medicare, low-income patients – especially Medicaid beneficiaries. Any practical definition of a safety net provider must consider the care of Medicaid and uninsured patients, yet the MSNI misses on both counts.”

Feldpush urged policymakers to develop a federal designation of safety net hospitals and to reject the MSNI.

“Further, policymaking for these hospitals should supplement, rather than redistribute, existing Medicare DSH funding, which reflects a congressionally sanctioned, well-established methodology,” she said.

Physicians and clinicians

For clinicians, the commission recommends that Medicare make targeted add-on payments of 15% to primary care clinicians and 5% to all other clinicians for physician fee schedule services provided to low-income Medicare beneficiaries. 

The American Medical Association commended MedPAC, but also said that an update tied to just 50% of the Medicare Economic Index would cause physician payment to chronically fall even further behind increases in the cost of providing care. AMA president Dr. Jack Resneck Jr. urged Congress to pass legislation providing for an annual inflation-based payment update.

MedPAC has long championed a physician payment update tied to the Medicare Economic Index, Resneck said. Physicians have faced the cost of inflation, the COVID-19 pandemic and growing expenses to run medical practices, jeopardizing access to care, particularly in rural and underserved areas.

“Not only have Medicare payments failed to respond adequately, but physicians saw a 2% payment reduction for 2023, creating an additional challenge at a perilous moment,” Resneck said. “As one of the only Medicare providers without an inflationary payment update, physicians have waited a long time for this change. When adjusted for inflation, Medicare physician payment has effectively declined 26% from 2001 to 2023. These increasingly thin or negative operating margins disproportionately affect small, independent, and rural physician practices, as well as those treating low-income or other historically minoritized or marginalized patient communities. Our workforce is at risk just when the health of the nation depends on preserving access to care.”

The AMA and 134 other health organizations wrote to congressional leaders urging for a full inflation-based update to the Medicare Physician Fee Schedule.

MGMA’s SVP of Government Affairs Anders Gilberg said, “Today’s MedPAC report recommends Congress provide an inflationary update to the Medicare base payment rate for physician and other health professional services of 50% of the Medicare Economic Index (MEI), an estimated annual increase of 1.45% for 2024. In the best of times such a nominal increase would not cover annual medical practice cost increases. In the current inflationary environment, it is grossly insufficient.”

MGMA urged Congress to pass legislation to provide an annual inflationary update based on the full MEI.

Ambulatory surgical centers and long-term care hospitals

Previously, the commission considered an annual update recommendation for ambulatory surgical centers (ASCs). However, because Medicare does not require ASCs to submit data on the cost of treating beneficiaries, the commissioners said they had no new significant data to inform an ASC update recommendation for 2024.

Commissioners also previously considered an annual update recommendation for long-term care hospitals (LTCHs). But as the number of cases that qualify for payment under Medicare’s prospective payment system for LTCHs has fallen, they said they have become increasingly concerned about small sample sizes in the analyses of this sector.

“As a result, we will no longer provide an annual payment adequacy analysis for LTCHs but will continue to monitor that sector and provide periodic status reports,” they said in the report. 

MEDICARE ADVANTAGE

Commissioners said that overall, indicators point to an increasingly robust MA program. In 2022, the MA program included over 5,200 plan options, enrolled about 29 million Medicare beneficiaries (49% of eligible beneficiaries), and paid MA plans $403 billion (not including Part D drug plan payments). 

In 2023, the average Medicare beneficiary has a choice of 41 plans offered by an average of eight organizations. Further, the level of rebates that fund extra benefits reached a record high of about $2,350 per enrollee, on average.

Medicare payments for these extra benefits – which are not covered for beneficiaries in FFS – have more than doubled since 2018. For 2023, the average MA plan bid to provide Medicare Part A and Part B benefits was 17% less than FFS Medicare would be projected to spend for those enrollees. 

However, the benefits from MA’s lower cost relative to FFS spending are shared exclusively by the companies sponsoring MA plans and MA enrollees (in the form of extra benefits). The taxpayers and FFS Medicare beneficiaries (who help fund the MA program through Part B premiums) do not realize any savings from MA plan efficiencies. 

Medicare should not continue to overpay MA plans, MedPAC said. Over the past few years, the commission has made recommendations to address coding intensity, replace the quality bonus program and establish more equitable benchmarks, which are used to set plan payments, the report said. All of these would stem Medicare’s excess payments to MA plans, helping to preserve Medicare’s solvency and sustainability while maintaining beneficiary access to MA plans and the extra benefits they can provide. 

PART D

Medicare’s cost-based reinsurance continues to be the largest and fastest growing component of Part D spending, totaling $52.4 billion, or about 55% of the total, according to the report. 

As a result, the financial risk that plans bear, as well as their incentives to control costs, has declined markedly. The value of the average basic benefit that is paid to plans through the capitated direct subsidy has plummeted in recent years. 

In 2023, direct subsidy payments averaged less than $2 per member per month, compared with payments of nearly $94 per member, per month, for reinsurance. To help address these issues, in 2020 the commission recommended substantial changes to Part D’s benefit design to limit enrollee out-of-pocket spending; realign plan and manufacturer incentives to help restore the role of risk-based, capitated payments; and eliminate features of the current program that distort market incentives.

In 2022, Congress passed the Inflation Reduction Act, which included numerous policies related to prescription drugs. One such provision is a redesign of the Part D benefit with many similarities to the commission’s recommended changes. 

The changes adopted in the IRA will be implemented over the next several years, and are likely to alter the drug-pricing landscape, commissioners said.

Non-hospital physician employment rose sharply during pandemic 

Posted on by • Posted in Market Consolidation, Medicare Advantage, Pandemic, Physician, Physician Employment, Physician Independence, Private Equity • Leave a comment

https://mailchi.mp/28f390732e19/the-weekly-gist-march-10-2023?e=d1e747d2d8

While hospitals, payers, and private equity firms have long been competing to acquire independent physician groups, the COVID pandemic spurred a marked acceleration of the physician employment trend, with non-hospital corporate entities leading the charge.

The graphic above uses data released by consulting firm Avalere Health and the nonprofit Physicians Advocacy Institute to show that nearly three quarters of American physicians were employed by a larger entity as of January 2022, up from 62 percent just three years prior. 

While hospitals employ a majority of those physicians, corporate entities (a group that includes payers, private equity groups, and non-provider umbrella organizations) have been increasing their physician rolls at a much faster rate. 

Corporate entities employed over 40 percent more physicians in 2022 than in 2019, and in the southern part of the country—a hotspot for growth of Medicare Advantage—corporate physician employment grew by over 50 percent.

We expect the move away from private practice, accelerated by the pandemic, will only continue as physicians seek financial returns, secure a path to retirement, and look to access capital for necessary investments to help grow and manage the increasing complexities of running a practice. 

UnitedHealth Group (UHG) closes its $5.4B acquisition of LHC Group

Posted on by • Posted in Care Management and Coordination, Health Insurance Industry, Market Consolidation, Market Power, Market Share, Market Trends, Medicare Advantage, Post Acute Referral Integration • Leave a comment

https://mailchi.mp/12e6f7d010e1/the-weekly-gist-february-24-2023?e=d1e747d2d8

The deal, first announced in March 2022, will bring LHC’s home health locations, hospice sites, and long-term acute care hospitals across 37 states into UHG’s Optum division. LHC also has over 400 joint-venture arrangements with hospitals. The acquisition received heightened scrutiny from antitrust regulators, but was ultimately allowed to proceed. 

The Gist: LHC’s postacute footprint expands UHG’s Medicare Advantage value play, guaranteeing postacute capacity and providing a platform to funnel care into lower-cost settings. 

UHG’s strategy is right in line with its peers: Humana fully owns home health provider Kindred at Home (now branded CenterWell Home Health), and CVS Health plans to acquire Signify Health, which provides home care services with an emphasis on risk scoring. But achieving lower cost of care will require integration of postacute referrals and care management across rapidly expanding physician networks.

Humana to exit employer-sponsored insurance market

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https://mailchi.mp/12e6f7d010e1/the-weekly-gist-february-24-2023?e=d1e747d2d8

On Thursday, Louisville, KY-based Humana announced it will wind down its Employer Group Commercial Medical Products business over the next two years. The company said its exit from all fully insured, self-funded, and federal employee medical plans—a book of business that shrunk to under 1M lives in 2022—will allow the company to focus more on its Medicare Advantage (MA) offerings, which covered over 5M lives in 2022. Humana is currently the second largest MA payer behind UnitedHealthcare. 

The Gist: In a move signaled earlier this month, Humana has chosen to double down on its more profitable MA business, rather than continuing to compete with other major payers in the shrinking employer-sponsored commercial market. Humana already offers MA plans in 89 percent of US counties, more than UnitedHealthcare, but its 2022 MA growth was only a third of United’s (250K new lives enrolled, versus 750K). 

This move allows Humana to devote more resources to fielding competitive MA plan offerings and integrating its growing portfolio of physician and postacute care assets. 

Physician Arms Race

Posted on by • Posted in Health Insurance Industry, Market Consolidation, Market Power, Market Trends, Medicare Advantage, Physician Arms Race, Primary Care, Primary Care Delivery Model, Primary Care Strategy, Private Equity, Vertical Integration • Leave a comment

https://mailchi.mp/d62b14db92fb/the-weekly-gist-february-10-2023?e=d1e747d2d8

After rumors of a possible deal first surfaced in early January, CVS Health announced on Wednesday that it has entered into a definitive agreement to acquire value-based primary care provider Oak Street Health for $10.6B. The Chicago-based company will join CVS’s recently formed Health Care Delivery organization, bringing with it roughly 600 physicians and nurse practitioners working at 169 senior-focused clinics in 21 states. This move is the latest by CVS to expand its care offerings, following its $100M investment last month in primary and urgent care provider Carbon Health, and its $8B acquisition of in-home evaluation company Signify in September.

The Gist: If this deal goes through, CVS will have the key pieces of the national primary care physician network it needs for a value-based care platform focused on Medicare Advantage—although how they will combine Oak Street’s clinics with retail-based HealthHUBs and other primary care assets remains unclear.

The fact that CVS is paying about a 50 percent share price premium shows how competitive the market for large physician organizations has become, driving up bidding prices such that only cash-rich payers, pharmacies, and retailers can afford them as they seek to emulate UnitedHealth Group’s Optum strategy.

Of note, the same day CVS announced the deal, Aetna competitor and erstwhile investor in Oak Street, Humana announced a five-year network partnership with Oak Street competitor ChenMed.

We’ll be watching for whose strategy proves most effective as we enter the next phase of the physician arms race between vertically-integrated payers, and the emphasis shifts from how many providers are employed to how they’re integrated and deployed.

CVS Health is close to acquiring Oak Street Health for $10.5B

Posted on by • Posted in Competition, Innovation, Market Consolidation, Medicare Advantage, Mergers & Acquisitions, Primary Care, Primary Care Delivery Model, Primary Care Strategy, Retail Clinic, Retail Healthcare, Retail Pharmacy • Leave a comment
https://www.advisory.com/daily-briefing/2023/02/07/cvs-oak-street?utm_source=public_db&utm_medium=email&utm_campaign=2023feb08&utm_content=public_headline_public_x_x_x_x&elq_cid=4778863&x_id=

CVS Health is close to a deal to acquire primary care provider Oak Street Health for around $10.5 billion, including debt, marking the latest move among major healthcare stakeholders in acquiring primary care companies, the Wall Street Journal reports.

According to people with knowledge of the matter who spoke to the Journal, the two companies are discussing a deal in which CVS would acquire Oak Street for a price of around $39 a share. If the deal goes through, it could be announced as soon as this week.

According to the Journal, “the Oak Street acquisition would further the company’s long-term shift to broaden into businesses beyond retail pharmacy by adding doctors who can more fully manage patients’ care.”

Oak Street has more than 160 centers across 21 states and focuses mainly on caring for patients enrolled in Medicare. The company, which is based in Chicago, was founded in 2012 and specializes in caring for patients under value-based care arrangements.

Aetna, which is owned by CVS, has a growing Medicare Advantage business that would likely tie in with Oak Street’s clinics, which care for about 159,000 patients under value-based arrangements, the Journal reports.

The move is the latest among major healthcare stakeholders acquiring primary care companies. In September 2022, CVS announced an $8 billion deal to acquire home healthcare company Signify Health.

Meanwhile, Amazon in July 2022 announced a $3.9 billion deal to acquire primary care company One Medical, Humana in September 2022 announced its intention to spend up to $550 million to purchase 20 CenterWell Senior Primary Care clinics, and Walgreens Boots Alliance in November 2022 announced a roughly $9 billion deal to acquire Summit Health.

CMS finalizes audit plan to recapture overpayments to MA insurers

Posted on by • Posted in Audit, Center for Medicare and Medicaid Services (CMS), Clawbacks, Cost Management, Cost-Effective, Health Insurance Industry, Health Policy, Medicare Advantage • Leave a comment

https://mailchi.mp/a44243cd0759/the-weekly-gist-february-3-2023?e=d1e747d2d8

This week, the Centers for Medicare and Medicaid Services (CMS) finalized a 2018 proposed rule that will impose aggressive audits on Medicare Advantage (MA) insurers. By extrapolating the audits to insurers’ entire contracts, CMS expects to claw back almost $500M annually in overpayments since 2018, but has opted not to extrapolate the audits for 2011 to 2017. While MA insurers threaten to sue over the rule’s exclusion of a “fee-for-service adjustor” that would have reduced the degree of overpayments, CMS officials note that the estimated repayments under the final rule constitute less than 0.2 percent of total MA spending. 

The Gist: This MA overpayment audit is overdue, especially given how well-documented MA overbilling has become. This week the Biden administration also announced a proposed change to MA risk adjustment that would reduce MA spending by $11B annually.

Though nearly half of all US seniors are now enrolled in MA plans, the program has yet to achieve its original purpose of saving the government money by encouraging competition around delivering care more efficiently. 

MA cannot continue to cost more per enrollee than traditional Medicare in perpetuity, and an eventual reduction in per-member per-year payments is inevitable.

Elevance to acquire Blue Cross Blue Shield of Louisiana

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https://mailchi.mp/8f3f698b8612/the-weekly-gist-january-27-2023?e=d1e747d2d8

On Monday, Indiana-based Elevance Health, formerly known as Anthem, announced it has signed a deal to add Blue Cross Blue Shield of Louisiana (BCBSLA) to its network of Blues plans for an undisclosed sum. BCBSLA covers two-thirds of the state’s commercial insurance market, and has partnered with Elevance for five years to serve Louisiana’s dual-eligible population.

Elevance will operate BCBS plans in 15 states and cover 49M beneficiaries should the acquisition go through, though the move faces regulatory obstacles around folding nonprofit BCBSLA into its for-profit business.

The Gist: This deal is a harbinger for similar combinations to come. We’ve long been expecting more roll-ups of state- and regional-level plans as they struggle to compete with the for-profit national giants. 

Standalone regional plans often lack the scale to diversify their businesses and emulate the successful strategic playbooks of national insurers like UnitedHealth Group and Humana, which have rapidly expanded into the more profitable areas of care provision, provider support services, and pharmacy benefit management. 

State-level Blues plans have long been dominant in the PPO-driven commercial market, but have experienced mixed success in expanding into Medicare Advantage and other segments. If these mid-sized insurance players find they can’t compete alone, it won’t bode well for the cohort of much smaller “insurtech” startups. 

More payer consolidation ahead.