More Aggressive Review of Hospital Mergers Needed, Says FTC Commissioner

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The problems include ‘a legal shield’ enjoyed by nonprofit hospitals, and the solutions include more retrospective analysis of close calls, says Rebecca Kelly Slaughter.


KEY TAKEAWAYS

The FTC is prohibited from enforcing antitrust laws against nonprofits, which poses a challenge, Slaughter said.

The commission should conduct another round of retrospective study on closed healthcare mergers, she said.

Commissioners should be ‘as aggressive as possible’ moving forward to preserve healthcare competition, she added.

Federal Trade Commissioner Rebecca Kelly Slaughter told a liberal think tank Tuesday that antitrust regulators should take a more assertive approach to protect competitive forces among healthcare providers.

Slaughter, a Democrat appointed to the FTC by President Trump and confirmed last year, made the remarks in a speech at the Center for American Progress in Washington, D.C., where she took issue with what she described as “a legal shield for anticompetitive conduct” at nonprofit hospitals.

The FTC is allowed to review all hospital mergers, but it cannot enforce antitrust laws against nonprofits, including more than 45% of U.S. hospitals, she said.


“So, for example, if a non-profit hospital merger itself is not anticompetitive, but the newly merged entity engages in anticompetitive practices, the FTC is stuck on the sidelines,” Slaughter said in her prepared remarks.

“In effect, this means that all of the healthcare industry expertise that the FTC has worked for decades to, and continues to, develop cannot be deployed alongside the DOJ and state enforcers to stop anticompetitive practices by roughly half of all hospitals nationwide,” she added. “This is a significant lost opportunity.”

Slaughter called for greater scrutiny of horizontal and vertical mergers alike both in the future and in the past.

“I believe that the FTC should conduct a new round of retrospectives of healthcare provider mergers,” Slaughter said.

Studying the past has led the FTC to some of its biggest improvements in understanding market forces, as was the case with former Chairman Timothy J. Muris’ retrospective analysis of hospital mergers in the early 2000s, Slaughter said.

Moving forward, Slaughter said, the FTC should take another look at recently cleared “close-call hospital mergers” and those that were shielded from antitrust scrutiny by state laws despite posing significant concerns. This is consistent, she said, with a statement the FTC issued last fall when it decided not to challenge a proposed affiliation involving CareGroup Inc., Lahey Health System Inc., Seacoast Regional Health System, and others.

The FTC should also consider taking another look at vertical integration among healthcare providers, such as transactions involving hospitals and physician groups, she said.

“[W]e should be as aggressive as possible in challenging the mergers we encounter today, especially where the proposed consolidation involves new structural arrangements rather than traditional horizontal concerns,” Slaughter added. “It is important for parties considering mergers to know we will not shy away from challenging, for example, anticompetitive vertical organizations.”

“I am sensitive to the concern that we might lose litigation,” she added, “but our obligation is to identify the right outcome and fight for it.”

 

 

 

House Subcommittee Takes Dim View of Healthcare Consolidation

https://www.healthleadersmedia.com/strategy/house-subcommittee-takes-dim-view-healthcare-consolidation

Lawmakers and witnesses alike cited the ill-effects of hospital mergers and acquisitions in a long list of industry behavior they find troubling.


KEY TAKEAWAYS

An economics and health policy professor from Carnegie Mellon suggested lawmakers should give the FTC more power to review nonprofit mergers.

Lawmakers from both sides of the aisle expressed dissatisfaction with the healthcare industry’s consolidation trend and voiced support for legislative action.

A hearing of the House Judiciary Committee’s antitrust subcommittee would not have been a comfortable place Thursday for any healthcare executive touting the benefits of a planned merger or acquisition.

Lawmakers and witnesses took turns criticizing rampant consolidation among hospitals and other healthcare companies. While the public is often told these deals will lead to improved efficiency and higher quality care, those purported benefits frequently fail to materialize, they said.

Since the hearing grouped payer and provider consolidation with anticompetitive concerns about the pharmaceutical industry—an area that both major parties have expressed interest in addressing through congressional action—the discussion could signal how lawmakers will approach any legislation to address the problems they perceive.

Rep. Doug Collins, a Republican from Georgia and the committee’s ranking member, said hospital consolidation has had an especially detrimental impact on rural communities in his state.


“These communities often already have few options for quality care, so as hospital consolidation has increased over the past 10 years, rural communities like my own have been hurt the most,” Collins said.

“At times, these mergers and acquisitions can help rural communities by keeping facilities open, but often they result in full or partial closures and shifting patients from nearby facilities to those hours away,” he added.

Some problems caused by consolidation, such as increased travel times for emergency services, can “literally mean the difference in life and death,” Collins said.

Jerry Nadler, a Democrat from New York and the committee’s chairman, said there’s no question that the recent spate of mergers has contributed to the industry’s problems.

“It is well documented that hospital mergers can lead to higher prices and lower quality of care,” Nadler said.

Martin Gaynor, PhD, an economics and health policy professor at Carnegie Mellon University and a founder of the Health Care Cost Institute, said in his testimony that there have been nearly 1,600 hospital mergers in the past 20 years, leading most regions to be dominated by one large health system apiece.

“This massive consolidation in healthcare has not delivered for Americans. It has not given us better care or enhanced efficiency,” Gaynor said. “On the contrary, extensive research evidence shows us that consolidation between close competitors results in higher prices, and patient quality of care suffers for lack of competition.”

Since hospitals that have fewer competitors can better negotiate favorable payment terms, this consolidated landscape “poses a serious challenge for payment reform,” he added.

“Our healthcare system is based on markets. That system is only going to work as well as the markets that underpin it,” Gaynor said. “Unfortunately, these markets do not function as well as they could or should.”

Gaynor recommended several possible policy changes, including an end to policies that make it harder for new competitors to enter a market and compete and an expanded authority for the Federal Trade Commission to review potentially anticompetitive conduct by nonprofit entities. He also said lawmakers should consider imposing FTC reporting requirements for even small transactions to enhance the tracking capabilities of enforcement agencies.

To support his claims, in his written testimony, Gaynor pointed to research he completed with Farzad Mostashari of Aledade Inc. and Paul B. Ginsburg of The Brookings Institution.

 

 

 

 

NC hospital system tries another megamerger

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Atrium Health struck out a year ago when it attempted to merge with in-state rival UNC Health Care, Bob reports. Now, the hospital system has inked a new deal to combine with Wake Forest Baptist Health, which is 90 minutes away from its headquarters.

Why it matters: Research overwhelmingly shows these kinds of regional hospital mergers lead to higher health care prices (and, consequently, premiums) because providers gain negotiating leverage and make it harder for health insurers to exclude them from networks.

Between the lines: The primary hook that Atrium and Wake Forest are selling is that they would build a new medical school in Charlotte. Because who could be against more doctors and research?

  • The organizations didn’t mention how, or if, they would try to keep costs and prices down.
  • The combined system would have almost $10 billion of revenue, which is roughly the size of Boston Scientific.

 

ELITE HOSPITALS PLUNGE INTO UNPROVEN STEM CELL TREATMENTS

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Hospitals say they’re providing options to patients who have exhausted standard treatments. But critics suggest the hospitals are exploiting desperate patients and profiting from trendy but unproven treatments.

The online video seems to promise everything an arthritis patient could want.

The six-minute segment mimics a morning talk show, using a polished TV host to interview guests around a coffee table. Dr. Adam Pourcho extols the benefits of stem cells and “regenerative medicine” for healing joints without surgery. Pourcho, a sports medicine specialist, says he has used platelet injections to treat his own knee pain, as well as a tendon injury in his elbow. Extending his arm, he says, “It’s completely healed.”

Brendan Hyland, a gym teacher and track coach, describes withstanding intense heel pain for 18 months before seeing Pourcho. Four months after the injections, he says, he was pain-free and has since gone on a 40-mile hike.

“I don’t have any pain that stops me from doing anything I want,” Hyland says.

The video’s cheerleading tone mimics the infomercials used to promote stem cell clinics, several of which have recently gotten into hot water with federal regulators, said Dr. Paul Knoepfler, a professor of cell biology and human anatomy at the University of California-Davis School of Medicine. But the marketing video wasn’t filmed by a little-known operator.

It was sponsored by Swedish Medical Center, the largest nonprofit health provider in the Seattle area.

Swedish is one of a growing number of respected hospitals and health systems — including the Mayo Clinic, the Cleveland Clinicand the University of Miami — that have entered the lucrative business of stem cells and related therapies, including platelet injections. Typical treatments involve injecting patients’ joints with their own fat or bone marrow cells, or with extracts of platelets, the cell fragments known for their role in clotting blood. Many patients seek out regenerative medicine to stave off surgery, even though the evidence supporting these experimental therapies is thin at best, Knoepfler said.

Hospitals say they’re providing options to patients who have exhausted standard treatments. But critics suggest the hospitals are exploiting desperate patients and profiting from trendy but unproven treatments.

The Food and Drug Administration is attempting to shut down clinics that hawk unapproved stem cell therapies, which have been linked to several cases of blindness and at least 12 serious infections. Although doctors usually need preapproval to treat patients with human cells, the FDA has carved out a handful of exceptions, as long as the cells meet certain criteria, said Barbara Binzak Blumenfeld, an attorney who specializes in food and drug law at Buchanan Ingersoll & Rooney in Washington.

Hospitals like Mayo are careful to follow these criteria, to avoid running afoul of the FDA, said Dr. Shane Shapiro, program director for the Regenerative Medicine Therapeutics Suites at Mayo Clinic’s campus in Florida.

‘EXPENSIVE PLACEBOS’

While hospital-based stem cell treatments may be legal, there’s no strong evidence they work, said Leigh Turner, an associate professor at the University of Minnesota’s Center for Bioethics who has published a series of articles describing the size and dynamics of the stem cell market.

“FDA approval isn’t needed and physicians can claim they aren’t violating federal regulations,” Turner said. “But just because something is legal doesn’t make it ethical.”

For doctors and hospitals, stem cells are easy money, Turner said. Patients typically pay more than $700 a treatment for platelets and up to $5,000 for fat and bone marrow injections. As a bonus, doctors don’t have to wrangle with insurance companies, which view the procedures as experimental and largely don’t cover them.

“It’s an out-of-pocket, cash-on-the-barrel economy,” Turner said. Across the country, “clinicians at elite medical facilities are lining their pockets by providing expensive placebos.”

Some patient advocates worry that hospitals are more interested in capturing a slice of the stem-cell market than in proving their treatments actually work.

“It’s lucrative. It’s easy to do. All these reputable institutions, they don’t want to miss out on the business,” said Dr. James Rickert, president of the Society for Patient Centered Orthopedics, which advocates for high-quality care. “It preys on people’s desperation.”

In a joint statement, Pourcho and Swedish defended the online video.

“The terminology was kept simple and with analogies that the lay person would understand,” according to the statement. “As with any treatment that we provide, we encourage patients to research and consider all potential treatment options before deciding on what is best for them.”

But Knoepfler said the guests on the video make several “unbelievable” claims.

At one point, Dr. Pourcho says that platelets release growth factorsthat tell the brain which types of stem cells to send to the site of an injury. According to Pourcho, these instructions make sure that tissues are repaired with the appropriate type of cell, and “so you don’t get, say, eyeball in your hand.”

Knoepfler, who has studied stem cell biology for two decades, said he has never heard of “any possibility of growing eyeball or other random tissues in your hand.” Knoepfler, who wrote about the video in February on his blog, The Niche, said, “There’s no way that the adult brain could send that kind of stem cells anywhere in the body.”

The marketing video debuted in July on KING-TV, a Seattle station, as part of a local lifestyles show called “New Day Northwest.” Although much of the show is produced by the KING 5 news team, some segments — like Pourcho’s interview — are sponsored by local advertisers, said Jim Rose, president and general manager of KING 5 Media Group.

After being contacted by KHN, Rose asked Swedish to remove the video from YouTube because it wasn’t labeled as sponsored content. Omitting that label could allow the video to be confused with news programming. The video now appears only on the KING-TV website, where Swedish is labeled as the sponsor.

“The goal is to clearly inform viewers of paid content so they can distinguish editorial and news content from paid material,” Rose said. “We value the public’s trust.”

INCREASING SCRUTINY

Federal authorities have recently begun cracking down on doctors who make unproven claims or sell unapproved stem cell products.

In October, the Federal Trade Commission fined stem cell clinics millions of dollars for deceptive advertising, noting that the companies claimed to be able to treat or cure autism, Parkinson’s disease and other serious diseases.

In a recent interview Scott Gottlieb, the FDA commissioner, said the agency will continue to go after what he called “bad actors.”

With more than 700 stem cell clinics in operation, the FDA is first targeting those posing the biggest threat, such as doctors who inject stem cells directly into the eye or brain.

“There are clearly bad actors who are well over the line and who are creating significant risks for patients,” Gottlieb said.

Gottlieb, set to leave office April 5, said he’s also concerned about the financial exploitation of patients in pain.

“There’s economic harm here, where products are being promoted that aren’t providing any proven benefits and where patients are paying out-of-pocket,” Gottlieb said.

Dr. Peter Marks, director of the FDA’s Center for Biologics Evaluation and Research, said there is a broad “spectrum” of stem cell providers, ranging from university scientists leading rigorous clinical trials to doctors who promise stem cells are “for just about anything.” Hospitals operate somewhere in the middle, Marks said.

“The good news is that they’re somewhat closer to the most rigorous academics,” he said.

The Mayo Clinic’s regenerative medicine program, for example, focuses conditions such as arthritis, where injections pose few serious risks, even if that’s not yet the standard of care, Shapiro said.

Rickert said it’s easy to see why hospitals are eager to get in the game.

The market for arthritis treatment is huge and growing. At least 30 million Americans have the most common form of arthritis, with diagnoses expected to soar as the population ages. Platelet injections for arthritis generated more than $93 million in revenue in 2015, according to an article last year in The Journal of Knee Surgery.

“We have patients in our offices demanding these treatments,” Shapiro said. “If they don’t get them from us, they will get them somewhere else.”

Doctors at the Mayo Clinic try to provide stem cell treatments and similar therapies responsibly, Shapiro said. In a paper published this year, Shapiro described the hospital’s consultation service, in which doctors explain patients’ options and clear up misconceptions about what stem cells and other injections can do. Doctors can refer patients to treatment or clinical trials.

“Most of the patients do not get a regenerative [stem cell] procedure,” Shapiro said. “They don’t get it because after we have a frank conversation, they decide, ‘Maybe it’s not for me.'”

LOTS OF HYPE, LITTLE PROOF

Although some hospitals boast of high success rates for their stem cell procedures, published research often paints a different story.

The Mayo Clinic website says that 40 to 70% of patients “find some level of pain relief.” Atlanta-based Emory Healthcare claims that 75 to 80% of patients “have had significant pain relief and improved function.” In the Swedish video, Pourcho claims “we can treat really any tendon or any joint” with PRP.

The strongest evidence for PRP is in pain relief for arthritic knees and tennis elbow, where it appears to be safe and perhaps helpful, said Dr. Nicolas Piuzzi, an orthopedic surgeon at the Cleveland Clinic.

But PRP hasn’t been proven to help every part of the body, he said.

PRP has been linked to serious complications when injected to treat patellar tendinitis, an injury to the tendon connecting the kneecap to the shinbone. In a 2013 paper, researchers described the cases of three patients whose pain got dramatically worse after PRP injections. One patient lost bone and underwent surgery to repair the damage.

“People will say, ‘If you inject PRP, you will return to sports faster,'” said Dr. Freddie Fu, chairman of orthopedic surgery at the University of Pittsburgh Medical Center. “But that hasn’t been proven.”

2017 study of PRP found it relieved knee pain slightly better than injections of hyaluronic acid. But that’s nothing to brag about, Rickert said, given that hyaluronic acid therapy doesn’t work, either. While some PRP studies have shown more positive results, Rickert notes that most were so small or poorly designed that their results aren’t reliable.

In its 2013 guidelines for knee arthritis, the American Academy of Orthopaedic Surgeons said it is “unable to recommend for or against” PRP.

“PRP is sort of a ‘buyer beware’ situation,” said Dr. William Li, president and CEO of the Angiogenesis Foundation, whose research focuses on blood vessel formation. “It’s the poor man’s approach to biotechnology.”

Tests of other stem cell injections also have failed to live up to expectations.

Shapiro published a rigorously designed study last year in Cartilage, a medical journal, that found bone marrow injections were no better at relieving knee pain than saltwater injections. Rickert noted that patients who are in pain often get relief from placebos. The more invasive the procedure, the stronger the placebo effect, he said, perhaps because patients become invested in the idea that an intervention will really help. Even saltwater injections help 70% of patients, Fu said.

A 2016 review in the Journal of Bone and Joint Surgery concluded that “the value and effective use of cell therapy in orthopaedics remain unclear.” The following year, a review in the British Journal of Sports Medicine concluded, “We do not recommend stem cell therapy” for knee arthritis.

Shapiro said hospitals and health plans are right to be cautious.

“The insurance companies don’t pay for fat grafting or bone-marrow aspiration, and rightly so,” Shapiro said. “That’s because we don’t have enough evidence.”

Rickert, an orthopedist in Bedford, Ind., said fat, bone marrow and platelet injections should be offered only through clinical trials, which carefully evaluate experimental treatments. Patients shouldn’t be charged for these services until they’ve been tested and shown to work.

Orthopedists — surgeons who specialize in bones and muscles — have a history of performing unproven procedures, including spinal fusion, surgery for rotator cuff disease and arthroscopy for worn-out knees, Turner said. Recently, studies have shown them to be no more effective than placebos.

MISLEADING MARKETING

Some argue that joint injections shouldn’t be marketed as stem cell treatments at all.

Piuzzi said he prefers to call the injections “orthobiologics,”noting that platelets are not even cells, let alone stem cells. The number of stem cells in fat and bone marrow injections is extremely small, he said. In fat tissue, only about 1 in 2,000 cells is a stem cell, according to a March paper in The Bone & Joint Journal. Stem cells are even rarer in bone marrow, where 1 in 10,000 to 20,000 cells is a stem cell.

Patients are attracted to regenerative medicine because they assume it will regrow their lost cartilage, Piuzzi said. There’s no solid evidence that the commercial injections used today spur tissue growth, Piuzzi said. Although doctors hope that platelets will release anti-inflammatory substances, which could theoretically help calm an inflamed joint, they don’t know why some patients who receive platelet injections feel better, but others don’t.

So, it comes as no surprise that many patients have trouble sorting through the hype.

Florida resident Kathy Walsh, 61, said she wasted nearly $10,000 on stem cell and platelet injections at a Miami clinic, hoping to avoid knee replacement surgery.

When Walsh heard about a doctor in Miami claiming to regenerate knee cartilage with stem cells, “it seemed like an answer to a prayer,” said Walsh, of Stuart, Fla. “You’re so much in pain and so frustrated that you cling to every bit of hope you can get, even if it does cost you a lot of money.”

The injections eased her pain for only a few months. Eventually, she had both knees replaced. She has been nearly pain-free ever since. “My only regret,” she said, “is that I wasted so much time and money.”

 

 

 

Hospital Mergers Improve Health? Evidence Shows the Opposite

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Image result for hospital market power

Many things affect your health. Genetics. Lifestyle. Modern medicine. The environment in which you live and work.

But although we rarely consider it, the degree of competition among health care organizations does so as well.

Markets for both hospitals and physicians have become more concentrated in recent years. Although higher prices are the consequences most often discussed, such consolidation can also result in worse health care. Studies show that rates of mortality and of major health setbacks grow when competition falls.

This runs counter to claims some in the health care industry have made in favor of mergers. By harnessing economies of scale and scope, they’ve argued, larger organizations can offer better care at lower costs.

In one recent example, two Texas health systems — Baylor Scott & White, and Memorial Hermann Health System — sought to merge, forming a 68-hospital system. The systems have since abandoned the plan, but not before Jim Hinton, Baylor Scott & White’s chief executive, told The Wall Street Journal that “the end, the more important end, is to improve care.”

Yet Martin Gaynor, a Carnegie Mellon University economist who been an author of several reviews exploring the consequences of hospital consolidation, said that “evidence from three decades of hospital mergers does not support the claim that consolidation improves quality.” This is especially true when government constrains prices, as is the case for Medicare in the United States and Britain’s National Health Service.

“When prices are set by the government, hospitals don’t compete on price; they compete on quality,” Mr. Gaynor said. But this doesn’t happen in markets that are highly consolidated.

In 2006, the National Health Service introduced a policy that increased competition among hospitals. When recommending hospital care, it required general practitioners to provide patients with five options, as well as quality data for each. Because hospital payments are fixed by the government — whichever hospital a patient chooses gets the payment for care provided to that patient — hospitals ended up competing on quality.

Mr. Gaynor was an author of a study showing that consequences of this policy included shorter hospital stays and lower mortality. According to the study, for every decrease of 10 percentage points in hospital market concentration, 30-day mortality for heart attacks fell nearly 3 percent.

Another study found that hospital competition in the N.H.S. decreased heart attack mortality, and several studies of Medicare also found that hospital competition results in lower rates of mortality from heart attacks and pneumonia.

Another piece of evidence in the competition-quality connection comes from other types of health care providers, including doctors. Recently, investigators from the Federal Trade Commission examined what happens when cardiologists team up into larger groups. The study, published in Health Services Research, focused on the health care outcomes of about two million Medicare beneficiaries who had been treated for hypertension, for a cardiac ailment or for a heart attack from 2005 to 2012.

The study found that when cardiology markets are more concentrated, these kinds of patients are more likely to have heart attacks, visit the emergency department, be readmitted to the hospital or die. These effects of market concentration are large.

To illustrate, consider a cardiology market with five practices in which one becomes more dominant — going from just below a 40 percent market share to a 60 percent market share (with the rest of the market split equally across the other four practices). The study found that the chance of having a heart attack would go up 5 to 7 percent as the largest cardiology practice became more dominant. The chance of visiting the emergency department, being readmitted to the hospital or dying would go up similarly.

The study also found that greater market concentration led to higher spending. And a different study of family doctors in England found that quality and patient satisfaction increased with competition.

For many goods and services, Americans are comfortable with the idea that competition leads to lower prices and better quality. But we often think of health care as different — that it somehow shouldn’t be “market based.”

What the research shows, though, is that there are lots of ways markets can function, with more or less government involvement. Even when the government is highly involved, as is the case with the British National Health Service or American Medicare, competition is a valuable tool that can drive health care toward greater value.

 

 

Healthcare’s vertical mergers kick-started a massive industry shift in 2018. Will it pay off?

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Mergers and acquisitions deals consolidation

Two massive megamergers in CVS-Aetna and Cigna-Express Scripts dominated the conversation around mergers and acquisitions in healthcare.

Whether you think the mergers will help or hurt consumers, both deals have sparked a distinct shift across the industry as competitors search for ways to keep pace. It also frames 2019 as the year in which five big vertically integrated insurers in CVS, UnitedHealth, Cigna, Anthem and Humana begin to take shape.

Combined, the mergers totaled nearly $140 billion.

Both CVS and Cigna closed their transactions in the fourth quarter with promises that their new combined companies would “transform” the industry. Unquestionably, it’s already triggered some response from other players. Whether those companies can make good on their promises to improve care for consumers remains to be seen, and the payoff may not come for several years, as 2019 is likely to be a year of initial integration.

While CVS and Cigna hogged most of the spotlight, several other notable transactions across the payer sector could have smaller but similarly important consequences going forward.

WellCare acquires Meridian Health Plans for $2.5B

In May, WellCare picked up Illinois-based Meridian Health Plans for $2.5 billion, acquiring a company with an established Medicaid footprint with 1.1 million members. The deal boosted WellCare’s membership by 26%.

But the transaction also thrust WellCare back onto the ACA exchanges. Meridian has 6,000 marketplace members in Michigan.

Importantly, the acquisition gave WellCare a new pharmacy benefit manager in Meridian Rx. CEO Kenneth Burdick said it would provide “additional insight into changing pharmacy costs and improving quality through the integration of pharmacy and medical care.”

WellCare also makes out on CVS-Aetna transaction

WellCare was also a beneficiary of the CVS-Aetna deal after the Department of Justice required Aetna to sell off its Part D business in order to complete its merger.

The deal adds 2.2 million Part D members to WellCare, tripling its existing footprint of 1.1 million.

Humana goes after post-acute care

2018 was the year of post-acute care acquisitions for Humana. The insurer partnered with two private equity firms to buy Kindred Healthcare for $4.1 billion in a deal that was first announced last year. It used a similar purchase arrangement to invest in hospice provider Curo Health Service in a $1.4 billion deal.

Both acquisitions give Humana equity stake in the companies, with room to make further investments down the road. Kindred, in particular, is expected to further Humana’s focus on data analytics, digital tools and information sharing and improve the continuity of care for patients even after they leave the hospital.

Not to be outdone, rival Anthem also closed its purchase of Aspire Health, one of the country’s largest community-based palliative care providers.

UnitedHealth keeps quietly buying up providers, pharmacies

With ample reserves, UnitedHealth is always in the mix when it comes to acquisitions. This year was no different. The insurance giant snapped up several provider organizations to add to its OptumHealth arm. In June, it was one of two buyers of hospital staffing company Sound Inpatient Physicians Holdings for $2.2 billion. It also bought out Seattle-based Polyclinic for an undisclosed sum. The physician practice has remained staunchly independent for more than a century.

Most notably, UnitedHealth is still in the process of closing its acquisition of DaVita Medical Group. DaVita recently dropped the price of that deal from $4.9 billion to $4.3 billion in an effort to speed up Federal Trade Commission approval.

The Minnesota-based insurer is also clearly interested in specialty pharmacies to supplement its PBM OptumRx. UnitedHealth bought Genoa Healthcare in September, adding 435 new pharmacies under its umbrella. Shortly after, it bought up Avella Specialty Pharmacy, a specialty pharmacy that also offers telepsychiatry services and medication management for behavioral health patients.

Centene invests in a tech-forward PBM

Perhaps in an effort to keep pace with Cigna and CVS, Centene has made smaller scale moves in the PBM space, investing in RxAdvance, a PBM launched by former Apple CEO John Sculley. Following an initial investment in March, Centene sunk another $50 million into the company in October and then announced plans to roll the solution out nationally. Notably, CEO Michael Neidorff has said he is pushing the PBM to move away from rebates and toward a model that relies on net pricing.

“You talk about ultimate transparency—that gets us there,” he said recently.

 

 

 

BETH ISRAEL, LAHEY HEALTH MERGER GETS FTC, MASSACHUSETTS AG’S APPROVAL

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he condition-laden approval stipulates a seven-year price cap that guarantees that the merged health system’s price increases will be kept below the state’s healthcare cost growth benchmarks.


KEY TAKEAWAYS

The Federal Trade Commission calls the merger ‘a close call’ but defers to state regulators.

The merged health system will provide $71 million for care in underserved areas.

The merged, 13-hospital health system will be one of the largest in the Bay State.

The proposed merger of Beth Israel Deaconess Medical Center and Lahey Health System cleared a huge hurdle today when Massachusetts Attorney General Maura Healey announced her conditional support.

The approval comes with what Healey called an “unprecedented” seven-year price cap that guarantees that the merged health system’s price increases will be kept below the state’s Health Care Cost Growth benchmark.

“Through this settlement, Beth Israel Lahey Health will cap its prices, strengthen safety net providers across the region, and invest in needed behavioral health services,” Healey said in a media release.

“These enforceable conditions, combined with rigorous monitoring and public reporting, create the right incentives to keep care in community settings and ensure all our residents can access the high-quality health care they deserve,” she said.

The deal also cleared a key federal hurdle when the Federal Trade Commission voted to close its investigation in light of Healey’s agreement.

“The assessment of whether to take enforcement action was a close call. However, based on Commission staff’s work and in light of the settlement obtained by the Massachusetts AG, we have decided to close this investigation,” the FTC said in a media release.

Kevin Tabb, MD, CEO of Beth Israel Deaconess Medical Center, who will serve as CEO of Beth Israel Lahey Health, called the state and federal approvals “an important step forward in making our vision a reality.”

“We appreciate the enormous effort that the Attorney General, her staff and the Federal Trade Commission have devoted to our proposal.  We share their commitment to health care innovation in Massachusetts, and we are eager to build on the strengths of our legacy organizations and deliver on our promise to our patients, their families and our communities,” Tabb said.

Massachusetts’ Health Care Cost Growth benchmark controls the annual growth of total medical spending in the state and is now set at 3.1%. Over the seven-year term, the cap will avoid more than $1 billion of the potential cost increases projected by the state’s Health Policy Commission.

When finalized, the merged, 13-hospital health system will be will one of the largest in the Bay State.

The merger push began in 2017, with Beth Israel and Lahey justifying the consolidation as a market-based attempt to address rising costs, price disparities, and healthcare access issues.

However, the deal has faced headwinds since its inception.

Even as late as this September, the Massachusetts Health Policy Commission noted that the merger would create a health system roughly the same size as Partner’s HealthCare System, the state’s largest health system, which would “increase substantially” market concentration in eastern Massachusetts.

“BILH’s enhanced bargaining leverage would enable it to substantially increase commercial prices that could increase total healthcare spending by an estimated $128.4 million to $170.8 million annually for inpatient, outpatient, and adult primary care services,” MHPC said.

In addition, the commission said spending on specialty physician services could increase by as much as $60 million annually if the merged health system obtains similar prices increases for those services.

“These would be in addition to the price increases the parties would have otherwise received,” the commission wrote. “These figures are likely to be conservative. The parties could obtain these projected price increases, significantly increasing healthcare spending, while remaining lower-priced than Partners.”

Those concerns appeared to have been alleviated on Thursday, when MHPC Commissioner Martin Cohen said “the investments required by the settlement will have a real impact on access to treatment for mental health and substance use disorders for patients across Eastern Massachusetts.”

Healey’s assurance of discontinuance also includes requirements that the merged Beth Israel Lahey Health pledge $71.6 million to support healthcare services for underserved areas.

The deal also requires BILH to strengthen its commitment to MassHealth; engage in business planning with its safety net hospital affiliates; enhance access to mental health and substance use disorder treatment; and retain a third-party monitor to ensure compliance with the terms.

The deal exempts affiliated safety net hospitals from the price-cap constraints. Lawrence General Hospital CEO Dianne J. Anderson said the exemption for her safety net will “ensure a commitment to joint, long-term planning for distribution of health care resources across the region.”

The $71.6 million that BILH will spend over eight years for underserved areas will include:

  • $41 million to fund affiliated community health centers and safety net hospitals, which guarantees support at the systems’ historic levels.
  • At least $8.8 million in additional financial support for affiliated community health centers and safety net hospitals.
  • At least $5 million in strategic investment to expand access to healthcare for low-income communities through community health centers.
  • At least $16.9 million to develop and expand behavioral health services across the BILH system.

“THROUGH THIS SETTLEMENT, BETH ISRAEL LAHEY HEALTH WILL CAP ITS PRICES, STRENGTHEN SAFETY NET PROVIDERS ACROSS THE REGION, AND INVEST IN NEEDED BEHAVIORAL HEALTH SERVICES.”