Hospital Mergers Improve Health? Evidence Shows the Opposite

https://theincidentaleconomist.com/wordpress/hospital-mergers-improve-health-evidence-shows-the-opposite/

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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?

https://www.fiercehealthcare.com/payer/healthcare-s-vertical-mergers-kick-started-a-massive-industry-shift-2018-will-it-pay-off?mkt_tok=eyJpIjoiTnpBNE1HTmtObUl3WVRkayIsInQiOiJFOU1xMDRPMGtzMCtnWXU4MExUVFAzZ3Jrdm5cL2s3S1dMRkVldTRWS2QyNmJZU255UWRIWW14QmtXVkJ2T2VTeGpYTVBvQXZWWW1JVnB0S0crTXV3aFhDS0wrY3NzTmtEYmJEMHdvSG03bGkxS2ZlREdiaWZydFZkbkdlXC9tTHE1In0%3D&mrkid=959610&utm_medium=nl&utm_source=internal

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

https://www.healthleadersmedia.com/beth-israel-lahey-health-merger-gets-ftc-massachusetts-ags-approval?utm_source=silverpop&utm_medium=email&utm_campaign=ENL_181130_LDR_BRIEFING%20(1)&spMailingID=14711589&spUserID=MTY3ODg4NTg1MzQ4S0&spJobID=1522364043&spReportId=MTUyMjM2NDA0MwS2

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.”

 

When Hospitals Merge to Save Money, Patients Often Pay More

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FTC: Florida company made $100M selling fake insurance

https://www.beckershospitalreview.com/legal-regulatory-issues/ftc-florida-company-made-100m-selling-fake-insurance.html

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A federal judge has temporarily shut down Miami-based Simple Health Plans at the request of the Federal Trade Commission.

In a federal complaint against Simple Health Plans, the company’s owner and five other entities, the FTC alleges Simple Health Plans collected more than $100 million by selling worthless health plans to thousands of people. The company allegedly misled consumers to think they were buying comprehensive “PPO” health insurance plans when they were actually purchasing plans that provided no coverage for pre-existing conditions or prescription medications.

Many of the people who purchased plans from Simple Health Plans are facing hefty medical bills for expenses they assumed would be covered by their health insurance plan. In addition, because the limited health plans do not qualify as health insurance under the ACA, some people were subject to a fee imposed on those who can afford to buy health insurance but choose not to.

The FTC is seeking to permanently shut down Simple Health Plans and to have the company return money to consumers.

 

 

Congress Is Making Quiet Progress on Drug Costs

https://www.commonwealthfund.org/blog/2018/congress-making-quiet-progress-drug-costs?omnicid=EALERT1477719&mid=henrykotula@yahoo.com

Progress on drug costs

While the Trump administration has taken small steps to implement its blueprint to lower prescription drug prices, Congress has recently made quiet progress on some policies that could help lower drug costs for patients.

First, both the Senate and House advanced legislation to ban “gag clauses” that prevent pharmacists from telling patients that they can save money on medications by paying for them out of pocket. Certain prescription benefit managers (PBMs) have used gag clauses as part of their formulary design. While this is not a widespread industry practice, a 2016 survey of community pharmacists found that nearly 60 percent had encountered a gag clause in the previous 10 months. Two bills (S. 2553 and H.R. 6733) would prohibit private Medicare plans from instituting gag clauses. A third, related bill (S. 2554) — passed by the Senate on Monday with overwhelming support — prohibits private health insurance plans from using them. While they enable pharmacists to advise patients on how to spend less at the pharmacy counter, these bans won’t necessarily lower the prices of drugs.

Second, a lesser-known provision of S. 2554, added by the Senate Committee on Health, Education, Labor and Pensions (HELP), could help lower drug prices by shedding light on patent-settlement agreements between drug manufacturers. Brand-name manufacturers sometimes use these agreements to extend their monopolies and keep drug prices higher by directly and indirectly compensating generic manufacturers for voluntarily delaying generics from coming to market. The Congressional Budget Office has found that setting a standard to rein in these types of settlements would produce $2.4 billion in savings over 10 years.

The HELP committee provision would require manufacturers of biologics (large-molecule drugs) and biosimilars (nearly identical copies of original biologics) to report patent-settlement agreements to the Federal Trade Commission (FTC) — an important step in understanding and preventing abuse of what is sometimes referred to as “pay for delay.”

Pay-for-Delay Stalls Drug Competition, Costing Patients Billions

In 2003, Congress required patent-settlement agreements between brand-name and generic small-molecule drug manufacturers to be filed with the FTC for review after they are made. (Currently most drugs sold are small-molecule drugs, but the biologics market is growing rapidly.) Such agreements effectively delay the sale of lower-cost generic drugs by nearly 17 months longer than agreements without payments, according to a 2010 report by the FTC. These anticompetitive agreements cost taxpayers approximately $3.5 billion each year.

In 2012, the U.S. Supreme Court decided in FTC v. Actavis that a brand-name drug manufacturer’s payment to a generic competitor to settle patent litigation can violate antitrust law. After the Court’s decision, the number of pay-for-delay agreements declined two years in a row. With drug companies now required to report these settlements to the FTC, the agency has been able to act to protect patients from anticompetitive deals that delay cheaper, generic drug products from coming to market. The FTC reviews reported settlements and, if it determines an agreement violates antitrust law, the agency challenges the agreement in the courts.

For example, in 2008 the FTC sued Cephalon, Inc., for paying four generic companies $300 million to delay marketing of their generic versions of Cephalon’s sleep-disorder drug, Provigil, until 2012. In 2015, the FTC reached a settlement with Cephalon’s owner, Teva Pharmaceutical Industries, Ltd., which agreed to ending pay-for-delay agreements for all their U.S. operations. The company also paid $1.2 billion in compensation for Cephalon’s anticompetitive behavior.

FTC Reporting Requirement Does Not Apply to Biologic and Biosimilar Manufacturers

The FTC reporting requirement applies only to small-molecule drugs, however, and not to far more expensive biologics and biosimilars. The potential savings of having biosimilars available for sale are significant: even one biosimilar competing against a brand-name biologic can result in a 35 percent lower price for patients and payers. Without delays in competition with brand-name biologics, biosimilars could save $54 billion to $250 billion over 10 years.

But there are concerns that manufacturers are entering into pay-for-delay agreements to keep prices for these drugs artificially high. Since 2015, when the biosimilar pathway was implemented, the FDA has approved 12 biosimilars, yet only three are currently available to patients — likely because of patent litigation and pay-for-delay agreements.

FTC Review Is Part of the Solution

In his remarks upon releasing the U.S. Food and Drug Administration’s Biosimilars Action Plan in July, FDA commissioner Scott Gottlieb noted the FTC’s key role in monitoring U.S. markets to protect consumers from anticompetitive behaviors, including those of prescription drug manufacturers. He also pointed out the patent litigation tactics manufacturers use to delay biosimilar competition.

As it does for the small-molecule drug market, the FTC can play a proactive role in monitoring what is happening in the biologic and biosimilar markets. At a workshop on drug pricing held last year, acting FTC chair Maureen Ohlhausen said that while her agency has been making progress in eliminating pay-for-delay agreements, it has not seen the last of them. She said they will remain a target. But to move forward, the FTC needs clearer authority to review patent settlements between biologic and biosimilar manufacturers.

With Senate passage of S. 2554 and its FTC reporting provision, Congress has taken an important step in encouraging a robust biosimilar market. (While the House has not passed a similar measure, the Senate bill could be added to a reconciliation of the House and Senate gag clause bills.) Engaging all the relevant market regulators — including the FTC, the U.S. Patent and Trademark Office, the Centers for Medicare and Medicaid Services, and the FDA — will inject needed competition into this nascent market and help lower drug prices for U.S. consumers.

 

Hospital Market Consolidation

https://www.beckershospitalreview.com/hospital-management-administration/54-health-systems-with-the-most-hospitals.html

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The following health systems contain the most short-term acute care hospitals in the United States.

The number of short-term acute care hospitals is based on data from the American Hospital Directory, which is based on hospitals’ CMS cost reports. Data was accessed Dec. 4. The list includes nonprofit, public and for-profit organizations. There are 54 organizations listed here; numbering does not serve as a ranking or reflect ties in the number of hospitals.

Note: Figures reflect facilities that fall under the category of “short term acute care” as defined by CMS. Numbers do not include psychiatric, rehabilitation, children’s, critical access, long-term or “other” types of hospitals, and may differ from systems’ marketing materials.

1. HCA Healthcare (Nashville, Tenn.) — 174
2. U.S. Department of Veterans Affairs (Washington, D.C.) — 143
3. Community Health Systems (Franklin, Tenn.) — 119
4. Ascension Health (St. Louis) — 78
5. Tenet Healthcare (Dallas) — 59
6. LifePoint Health (Brentwood, Tenn.) — 45
7. Trinity Health (Livonia, Mich.) — 44
8. Prime Healthcare Services (Ontario, Calif.) — 42
9. Providence Health & Services (Renton, Wash.) — 41
10. Kaiser Permanente (Oakland, Calif.) — 39
11. Dignity Health (San Francisco) — 36
12. Catholic Health Initiatives (Englewood, Colo.) — 34
13. Steward Health Care System (Boston) — 32
14. Adventist Health System (Winter Park, Fla.) — 31
15. Indian Health Service (Rockville, Md.) — 31
16. UPMC (Pittsburgh) — 29
17. Universal Health Services (King of Prussia, Pa.). — 28
18. Christus Health (Irving, Texas) — 26
19. Quorum Health (Brentwood, Tenn.) — 26
20. Sutter Health (Sacramento, Calif.) — 26
21. Baylor Scott & White Health (Dallas) — 20
22. Banner Health (Phoenix) — 19
23. Mercy Health (Cincinnati) — 18
24. SSM Health (St. Louis) — 18
25. Intermountain Healthcare (Salt Lake City) — 17
26. Mercy (Chesterfield, Mo.) — 17
27. UnityPoint Health (Des Moines, Iowa) — 17
28. Northwell Health (Great Neck, N.Y.) — 16
29. Prospect Medical Holdings (Los Angeles) — 15
30. Adventist Health (Roseville, Calif.) — 14
31. Centura Health (Englewood, Colo.) — 14
32. Aurora Health Care (Milwaukee) — 13
33. BayCare Health System (Clearwater, Fla.) — 13
34. Franciscan Health (Mishawaka, Ind.) — 13
35. Memorial Hermann (Houston) — 13
36. Texas Health Resources (Arlington) — 13
37. Ardent Health Services (Nashville, Tenn.) — 12
38. Baptist Memorial Health Care Corp. (Memphis) — 12
39. Cleveland Clinic — 12
40. Duke LifePoint (Brentwood, Tenn.) — 12
41. Hospital Sisters Health System (Springfield, Ill.) — 12
42. Sentara Healthcare (Norfolk, Va.) — 12
43. Bon Secours Health System (Marriottsville, Md.) — 11
44. Carolinas HealthCare System (Charlotte, N.C.) — 11
45. Hackensack Meridian Health (Edison, N.J.) — 11
46. Mayo Clinic (Rochester, Minn.) — 11 (includes short-term acute care hospitals in Rochester, Phoenix and Jacksonville, Fla., as well as those part of Mayo Clinic Health System)
47. McLaren Health Care (Flint, Mich.) — 11
48. NYC Health + Hospitals (New York City) — 11
49. Presence Health (Chicago) — 11
50. RWJBarnabas Health (West Orange, N.J.) — 11
51. Advocate Health Care (Downers Grove, Ill) — 10
52. Allina Health (Minneapolis) — 10
53. Novant Health (Winston-Salem, N.C.) — 10
54. University Hospitals (Cleveland) — 10