Health care giants are dependent on payments Trump wants to end

https://www.axios.com/drug-prices-medicare-cvs-humana-unitedhealth-trump-1d66d7d6-66ea-4150-89f5-e3b357b17bb2.html

An older man grabs his prescription drugs at a pharmacy counter.

The 3 big health insurers that control a majority of Medicare’s prescription drug coverage — CVS Health, Humana and UnitedHealth Group — are arguably the most at risk from the Trump administration’s plan to eliminate rebates within Medicare.

The big picture: These companies rely heavily on rebates to offset the costs of covering seniors’ prescriptions. Losing those rebates would shift billions of dollars away from them, and they could lose customers if they raise premiums to make up the difference.

By the numbers: Axios analyzed the Medicare businesses within the companies’ 2018 filings with state insurance commissioners.

  • UnitedHealthcare paid $7.3 billion in prescription drug claims and received $4.1 billion in rebates, according to its major subsidiary in Connecticut.
  • Humana paid $7.1 billion in prescription drug claims and received $3.9 billion in rebates, according to its major subsidiary in Wisconsin.
  • CVS paid $6.3 billion in prescription drug claims and received $3.5 billion in rebates, according to its SilverScript subsidiary.

Between the lines: Those rebates offset more than half of what these 3 companies had to pay for people’s prescriptions.

  • That’s well above the average for all Medicare drug plans, which was just 25% in 2018 (Table IV.B8).
  • Plans don’t keep Medicare rebates as profit, and instead pass them back to the federal government. (They do, however, keep a small percentage of rebates from their commercial plans.)
  • The companies did not respond to requests for comment.

The bottom line: CVS, Humana and UnitedHealth — all of which vehemently oppose Trump’s proposed rebate rule — are “overly dependent on rebates to keep premiums low [so they can] buy market share, which is what these guys have been doing for the past decade,” said Emily Evans, a health care managing director at investment research firm Hedgeye.

  • If those rebates go away, sooner or later the big 3 would have to raise monthly premiums to avoid losses.
  • And hiking drug plan premiums could persuade seniors to switch to competing plans that don’t rely on rebates and therefore won’t need to raise their premiums as much.

 

 

 

Aetna, Anthem, Health Care Service Corporation, PNC Bank and IBM announce blockchain network

https://www.healthcarefinancenews.com/news/aetna-anthem-health-care-service-corporation-pnc-bank-and-ibm-announce-blockchain-network?mkt_tok=eyJpIjoiT0RJNU16UTNOakl4WlRFNCIsInQiOiJ1WHRTRHREbE5rM1hkZmc1QnRcL3JCSjdxMWdtXC9weGE1OE4yT0tMZ2d0eGVCYnlXbkVDSmVtU09UTzZDaUVSTmE2aVRpT1YzSklCVmVsZ3VaMWVyMDlNa1Z2b25DbXZ2QnpxSUpySWluXC8zSDRoTmkya2JCMU53b1h5YkRQUDlNcyJ9

Network will eventually be open to new members for secure digital sharing of healthcare information.

Aetna, Anthem, IBM, Health Care Service Corporation and PNC Bank have partnered to create a blockchain technology network aimed at improving transparency and interoperability in the healthcare industry. 

The groups intend to use blockchain for more efficient claims and payment processing. Blockchain enables the secure exchange of information. It will also benefit more accurate provider directories.

WHY THIS MATTERS

Collaboration is key in the industry as a more cost-effective alternative to merging to create more competitive and efficient systems.

The current network is expected to add additional health organizations in the coming months, including providers, startups, and technology companies.

Initial members include three of the nation’s largest insurers, Anthem; HCSC,a customer-owned health insurer that includes Blue Cross and Blue Shield plans; Aetna, which is now part of the CVS Health business; IBM, which is a leading blockchain provider; and PNC Bank, which is a member of The PNC Financial Services Group.

Blockchain technology gives health systems an edge because it ideally creates faster, more efficient and secure claims and payment processing.

Insurers are mandated to maintain accurate provider directories, a time consuming and often manual practice involving numerous emails, phone calls and even fax exchanges.

For providers, a new technology that can actually reduce time spent in administrative clicks on a computer is a boon.

THE TREND

Despite major initiatives to digitize healthcare information, improvements in transparency and interoperability are still needed for that data to be shared.

Blockchain is designed to fill that role, reducing administrative errors and costs and ultimately enhancing patient care. The network also enables the companies to build and deploy new solutions.

Walmart last year filed a patent to use blockchain for medical records. A pharmaceutical industry consortium called the MediLedger Project, launched in 2017, is using blockchain to track pills across the supply chain, according to Fortune.

ON THE RECORD

“Through the application of blockchain technology, we’ll work to improve data accuracy for providers, regulators, and other stakeholders, and give our members more control over their own data,” said Claus Jensen, chief technology officer at Aetna

Rajeev Ronanki, Anthem chief digital officer Rajeev Ronanki: “Timely access to medical information has been a stumbling block for creating a seamless consumer experience. With a trusted foundation based on transparency and cryptography, we will provide a faster, safer and more secure way to exchange medical information to transform the  consumer healthcare experience.”

What’s more, blockchain will enable large networks to exchange health data in a transparent and controlled way, according to Lori Steele, general manager for Healthcare and Life Sciences for IBM.

“Using this technology, we can remove friction, duplication, and administrative costs that continue to plague the industry,” added Chris Ward, head of product, PNC Treasury Management.

 

Medicare Advantage industry sees slower growth for 2019

https://www.modernhealthcare.com/article/20190116/NEWS/190119927/medicare-advantage-industry-sees-slower-growth-for-2019

Image result for Medicare Advantage industry sees slower growth for 2019

Medicare Advantage insurers added 1.4 million members to their rosters for 2019 coverage, as they looked to grow membership in a market known for being politically safe and predictably lucrative. But Advantage membership is growing at a slower pace compared with previous years. 

According to the latest federal data showing enrollment as of this month, 22.4 million people are enrolled in Medicare Advantage for 2019 coverage—an alternative to the traditional Medicare program in which private insurers contract with the federal government to administer program benefits. That’s an increase of 6.8% since January 2018. Health insurers, however, managed to grow their Advantage membership base by more than 1.5 million in both 2016 and 2017.

Some industry experts were expecting more. “The formula was there: Health plans were aggressive, they got nice rate increases, the rules around benefit design relaxed a little bit,” explained Jeff Fox, president of Gorman Health Group, which provides technology and other services to Medicare Advantage plans.

Fox expected Advantage enrollment to increase by double-digits over the past year, as health plans invested heavily in marketing and the federal government provided one of the biggest rate increases for the plans in years at 3.4%. The Trump administration also granted Advantage plans the flexibility to provide more supplemental benefits in 2019, such as transportation and in-home care.

But Fox said distraction from the craziness of the November midterm elections may have kept some seniors from enrolling during the annual open enrollment that lasted from Oct. 15 to Dec. 7, 2018. While the CMS data captures some of the sign-ups from open enrollment, figures out next month are likely to be higher.

Despite the slower pace, many Advantage insurers still experienced big enrollment increases as they picked up more market share. About half of all members are covered by just three companies. UnitedHealth held onto the top spot, adding nearly 500,000 Advantage members in the past year for a total 5.7 million. UnitedHealth holds more than a quarter of the total Medicare Advantage market share.

Humana remained the No. 2 Advantage insurer with 3.9 million members, an increase of 10.4% over January 2018. But thanks to its acquisition of Aetna, CVS Health took the No. 3 spot with 2.2 million Advantage enrollees. Kaiser Foundation Health Plan and Anthem rounded out the top five insurers with the most Advantage members.

On a percentage basis, Anthem and Aetna grew membership the fastest. Anthem’s Medicare Advantage membership spiked 53% to 1.1 million members compared with the same time last year. The Indianapolis-based insurer has long focused on serving employers, but recently turned its sights to growing Medicare Advantage rolls through acquisitions and expansions in places where it already operates.

Anthem bought Florida-based Medicare plans HealthSun in December 2017 and America’s 1st Choice in February 2018, together giving Anthem about 170,000 more Advantage members. Anthem CEO Gail Boudreaux told investment analysts in July that the company would focus on selling group Medicare Advantage plans and serving medically complex dual-eligible members in 2019.

CVS Health, meanwhile, grew its Medicare membership by 26.7% in 2018 to 2.2 million through its acquisition of Aetna. The deal is still technically awaiting a federal judge’s approval. In a research note Monday, Barclays equity analyst Steve Valiquette noted that Aetna’s membership growth was driven by its expansion into about 360 new counties. Valiquette wrote that the growth experienced by some public health insurers during the annual enrollment period for 2019 coverage was driven more by market share gains than by industry growth.

Medicare Advantage enrollment is climbing as the baby boomer generation ages rapidly into Medicare. Those seniors are used to employer-sponsored managed-care plans and are choosing Advantage over traditional Medicare more often than previous generations did. Seniors also often get more benefits, including dental care, eyeglasses and gym memberships, with an Advantage plan. 

Medicare Advantage also enjoys support from both political parties and is able to weather swings from one federal administration to the next, whereas insurers that sell plans in the individual market, for example, may have to deal with more volatility.

Moreover, Medicare Advantage margins tend to hover between 4% to 5%, whereas Medicaid margins come in at 2% to 3% and the individual market historically has had even lower margins, S&P analyst Deep Banerjee told Modern Healthcare in August. The group employer business has higher margins, but that market isn’t growing like Medicare Advantage is.

 

 

 

WHY HEALTH SYSTEMS SHOULD WORRY ABOUT WALGREENS AND CVS

https://www.healthleadersmedia.com/strategy/why-health-systems-should-worry-about-walgreens-and-cvs

 

There’s a building threat from the nation’s two retail drugstore giants to hospitals and health systems as providers move toward value-based care and lower-cost outpatient services.

Even with Amazon threatening to compete with retail drugstore chains CVS Health and Walgreens with its own online pharmacy, these retailers aren’t giving up on brick-and-mortar as a way to attract more patients into their stores.

And that’s bad news for the nation’s hospitals and health systems.

There’s a building threat from the nation’s two retail drugstore giants to hospitals and health systems as medical care providers move away from fee-for-service medicine to value-based care and lower-cost outpatient services.

Walgreens and CVS are looking to healthcare as a way to keep customers coming into their stores, particularly in an era where consumers are fleeing brick-and-mortar to shop online via Amazon.

As front-end retail sales have fallen in recent years, CVS and Walgreens are moving more rapidly into healthcare from simply their historic role of filling prescriptions beyond the pharmacy counter and treating routine maladies with nurse practitioners in their retail centers to more services.

They are partnering more closely with health insurance companies that will work harder to funnel more patients to outpatient healthcare services inside the stores that will make them direct competitors of U.S. hospitals and health systems.

CVS has more than 1,100 retail MinuteClinics compared to 800 five years ago and 400 a decade ago.

CVS was opening 100 clinics per year 10 years ago, and that has slowed because they are now focusing on expanding healthcare services in the clinics as well as their stores generally. The same goes for Walgreens.

Walgreens has increased the services in its retail clinics, advertising the ability of nurse practitioners to conduct routine exams and student physicals and has been aggressively lobbying states across the country to change scope-of-practice laws to allow pharmacists to administer an array of vaccines.

“Why not use those locations as a strategy for healthcare?” Walgreens Chief Medical Officer Dr. Patrick Carroll says of the drugstore chain’s nearly 10,000 locations across the country. “We have the space. We should use it.”

To be sure, Walgreens is looking to provide more physician services like x-rays and procedures by partnering with UnitedHealth Group’s Optum to connect its MedExpress brand urgent care centers to an adjacent Walgreens. Like most retailers, Walgreens’ sales of general merchandise in the front end of the store is falling just as pharmacy sales, personal healthcare, and wellness revenues rise.

In the first such ventures, the Walgreens store and the MedExpress center each have their own entrance with a door inside connecting the urgent care center with the drugstore. It’s designed for a medical provider to guide a patient to either facility depending on their prescription or other needs.

For now, there are 15 locations in six states that have MedExpress urgent care centers connected to Walgreens stores as part of the pilot. The markets include Las Vegas; Dallas; Minneapolis; Omaha, Nebraska; two cities in West Virginia; and Martinsville, Virginia.

“We’re working closely with a number of partners in the healthcare community to bring services closer to our customers,” Carroll said. “With our stores serving as more of a neighborhood health destination, we can best meet the changing needs of our customers, while also complementing our expanded pharmacy services.”

Meanwhile, CVS plans to offer more healthcare services inside its stores after its merger with Aetna closes. CVS executives say they aren’t ruling out developing urgent care centers as well.

CVS’ network of nearly 10,000 pharmacies and over 1,000 retail clinics, and Optum’s growing network of ambulatory facilities like the MedExpress urgent care centers are emerging as a model health insurers want to do business with as fee-for-service medicine gives way to value-based care that keeps patients out of the hospital.

And in CVS’ case, the pharmacy will soon own Aetna, a health plan with more than 20 million members. That combination, which is currently wending its way through the regulatory process, is expected to lead to more narrow network health plans that encourage patients to use providers in the Aetna-CVS network over other health systems’ facilities.

Health systems should be concerned, healthcare analysts say.

“CVS and Aetna, in their own words, are promising to reinvent the front door of American healthcare,” says Kenneth Kaufman, managing director and chair of the consulting firm Kaufman Hall. “That promise should be of serious concern for legacy hospital providers since those providers have occupied that front door for the past 75 years.”

CVS Health President and CEO Larry Merlo is beginning to offer some details to their strategies.

While cautioning that it’s “very early” in the development of new programs the combined company will develop, Merlo has said the larger company plans to first focus on three primary patient populations: those patients with any of five chronic diseases: diabetes, hypertension, hyperlipidemia, asthma, and depression.

CVS and Aetna will also focus on “patients undergoing transitions in care,” and a third “broader focus on managing high-risk patients,” Merlo told analysts on the company’s second quarter earnings call in May.

“By extending our new health care model more broadly in the marketplace, patients will benefit from earlier interventions and better connected care leading to improved health outcomes,” Merlo said on September 20 at a CVS Health town hall meeting in Los Angeles.

“Think again about that senior leaving the hospital, knowing that the care plan prescribed by her doctor is being seamlessly coordinated by CVS and her caregiver. By fully integrating Aetna’s medical information and analytics with CVS Health’s pharmacy data and our 10,000 community locations, we can enable more effective treatment of the whole patient,” he says.

 

California insurance commissioner urges Department of Justice to block CVS Health, Aetna merger

https://www.healthcarefinancenews.com/news/california-insurance-commissioner-urges-department-justice-block-cvs-health-aetna-merger?mkt_tok=eyJpIjoiWXpNMVltTm1OVGswTlRGbSIsInQiOiJjXC82T2s4Yms2K2RuSXhJYlpoMTd4OFRWSkVnd0pXXC9PN1wvaVBKT1dEdFI2OStpcVhWVkVzaUlPOU9maklhZG5lYlFSOGNSQ2dvTmtSTm1reE56U0JsbFEzdzJ6dmpOXC95V3RySUtmbExTbmhtUENrRDZ6REw4VisybWhwSExMVVwvIn0%3D

The merger would increase market concentration in the PBM space and put other insurers at a competitive disadvantage, Dave Jones says.

The proposed $69 billion merger between CVS Health and Aetna hit a snag on Wednesday when the California insurance commissioner urged the Department of Justice to block the deal.

California Insurance Commissioner Dave Jones said the proposed merger would have significant anti-competitive impacts on consumers and health insurance markets and would also pose a concern in the Medicare Part D market.

Nationally, Aetna has a 9 percent market share among Part D plans while CVS Health has a 24 percent market share, with even greater overlap in some geographic markets. Economic evidence suggests that increasing the market concentration and reducing competition for Part D plans will likely result in higher premiums, Jones said.

California is the largest insurance market in the U.S., according to Jones. Insurers collect $310 billion annually in premiums from individuals and businesses in the state.

“Mergers which decrease competition are not in the interest of Californians,” Jones said in the August 1 letter to Attorney General Jeff Sessions and Assistant Attorney General Makan Delrahim.

In 2016, Jones also vetoed the proposed Anthem/Cigna and Aetna/ Humana mergers that were both blocked by federal regulators.

Jones did approve of Centene’s plan to acquire Health Net, a deal that also received federal approval.

Those mergers would have combined competitors in the same industry, while CVS has dominant market power as a supplier.

Post merger, CVS would have less incentive to keep down the cost of prescription drugs for insurers competing with Aetna, Jones said. Insurers would have difficulty using CVS’s pharmacy benefit manager, CVS-Caremark.

CVS currently provides PBM services to 94 million plan beneficiaries nationally, of which 22 million are Aetna subscribers.

The merger would increase market concentration in the PBM market, eliminate Aetna as a potential entrant in that market and put other insurers at a competitive disadvantage, he said.

Many of the largest PBM competitors are also owned by health insurers, such as OptumRx, which is part of UnitedHealthcare, and Cigna, which has initiated a merger with Express Scripts.

“The PBM market’s lack of competition and the merger of CVS-Aetna is likely to put other insurers that do not own a PBM at a disadvantage,” Jones said.

The merger would not benefit consumers and it would also harm independent pharmacies, he said.

The California Department of Insurance does not have direct approval authority over the proposed acquisition because the transaction does not involve a California insurance company. It does involve Aetna subsidiary, Aetna Life Insurance Company, which is licensed by the state.

The proposed merger was announced in December. The deal has been going through the regulatory process.

 

 

Walmart, Not Amazon, May Turn Out To Be The Real Health Care Disruptor

https://www.investors.com/news/walmart-humana-amazon-disrupt-health-care/

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Every Amazon (AMZN) flirtation toward the health care industry has sent hearts racing on Wall Street. Yet Amazon appears to be having commitment issues, and others have leapt while Jeff Bezos hesitated. Now comes a possible Walmart (WMT)-Humana (HUM) merger. A Walmart acquisition of the insurer could fundamentally reshape health care delivery in ways that Amazon may have trouble matching.

A Walmart-Humana deal could potentially transform the health care market for seniors, a demographic that is critical for both companies.

Walmart already operates about 4,500 in-store pharmacies and 2,900 vision centers, but a Humana deal would likely accelerate its efforts in developing in-store clinics. The clinics haven’t been a knockout success, but Walmart has been learning, wrote Tracy Watts, U.S. health reform leader at Mercer, in a blog post. “This partnership could foster new ways to bring people what they want and need,” she wrote, highlighting health care access in rural areas.

CVS Health (CVS), which is in the process of acquiring Aetna (AET), is planning to revamp its drugstores to provide more health services. Walmart has greater financial wherewithal to execute the strategy and its supercenters may be a more natural fit for health services.

Strategic Merits For Walmart-Humana

A Walmart-Humana tie-up has strategic merits for the retail giant, wrote Stifel analyst Mark Astrachan. He expects it would drive greater store traffic and produce health care cost savings, helping the discounter to keep investing to fend off Amazon.

Savings would come from closer ties to Humana, the largest remaining independent pharmacy benefits manager. That would help to reduce drug prices for Walmart’s 1.5 million U.S. employees, Astrachan wrote.

Humana recently purchased a major stake in the home health care business of Kindred Healthcare, a natural fit for Walmart’s home delivery business.

Still, there would be challenges. Piper Jaffray analyst Sarah James sees hurdles to staffing up clinics amid a nursing shortage that’s pushing up wages. She also questioned how attractive a merger would be for Humana. Humana has an enviable Medicare position while Walmart has a smaller store base compared to CVS Health and Walgreens Boots Alliance (WBA).

Still, Humana shares rose 4.4% on the stock market today, even as the Dow Jones, S&P 500 index and Nasdaq composite all lost about 2% or more. Meanwhile, shares of Walmart lost 3.8% and Amazon skidded 5.2%.

Amazon Threat Spurs Action

So far Amazon’s disruptive impact on health care has been all about what others are doing. Since reports last summer that Amazon might enter the retail prescription industry, the shockwaves have set in motion one deal after another. First it was CVS buying Aetna and beginning to offer same-day delivery in major markets, and next-day nationwide. Albertsons grabbed the Rite Aid (RAD) stores not bought by Walgreens. Last month, Cigna (CI) announced the purchase of Express Scripts (ESRX), the largest of the pharmacy benefit managers.

Options to enter the prescription drug business have narrowed for Amazon but haven’t been closed off entirely. One potential avenue would be acquiring Walgreens.

In January, Amazon announced a health care venture with JPMorgan Chase (JPM) and Berkshire Hathaway (BRKB). Health care stocks tumbled amid fear that Amazon would use the same formula that slayed book sellers and department stores. The scariest part: The companies say they have no intent to earn a profit from the effort. Yet they also confessed to a lack of any coherent plan for putting still-to-be-formed cost-saving ideas to work.

 

 

Global M&A activity hits record high on mega US health care deals

https://www.cnbc.com/2018/04/04/global-ma-activity-hits-record-high-on-mega-us-health-care-deals.html

A CVS Pharmacy store is seen in the Manhattan borough of New York City, New York, U.S., November 30, 2017.

 

  • In the first three months of 2018, there were 3,774 deals globally, totaling $890.7 billion.
  • So far this year, there have been $393.9 billion invested in U.S. companies.
  • Domestic activity was also particularly strong in China.

Merger and acquisition (M&A) activity across the world has hit a seventeen-year-record high in the first quarter of 2018, according to a report by research firm Mergermarket.

In the first three months of 2018, there were 3,774 deals globally, totaling $890.7 billion, it said Wednesday. This was the strongest start to the year since 2001, when Mergermarket began recording the data, and represents an 18 percent increase in value compared to the first quarter of 2017.

“The extraordinary surge in dealmaking seen at the end of 2017 has carried through into 2018,” Jonathan Klonowski, research editor at Mergermarket said in the quarterly report, citing pressure from shareholders and a search for innovation as the main drivers.

“Amazon’s move into pharmaceuticals appears to have been a catalyst for dealmaking in health care-related areas with the CVS/Aetna deal announced in December and the Cigna/Express Scripts transaction this quarter,” he added.

Amazon announced a partnership with J.P. Morgan and Berkshire Hathaway’s Warren Buffett in January to reduce health costs for U.S. employees. The move has sparked fears that the retail giant could enter and compete with traditional health care businesses. As result, the sector has consolidated to fight possible future competition from Amazon.

Cigna bought Express Scripts in a $54 billion cash-and-stock deal in early March. CVS also approved the acquisition of Aetna for about $69 billion in cash and stock last month.

Such deals have been particularly relevant in the U.S., where M&A activity during the first quarter of the year represented 44.2 percent of the total global share.

So far this year, there have been $393.9 billion invested in U.S. companies, according to the report. This represented a 26.1 percent increase from the same period a year ago. “Domestic dealmaking has been a key factor registering 952 deals worth $330.8 billion,” the report said.

But it’s not only U.S. companies that seem to be consolidating in their own market. Domestic activity was also particularly strong in China, where firms spent $68.7 billion — this was the highest first quarter on record.

“Domestic M&A accounts for 85.2 percent of Chinese acquisitions in Q1 (first quarter) 2018, a significant increase from the 61.6 percent and 71.3 percent seen during 2016 and 2017,” Mergermarket said.