Insurers pave new vertically integrated provider model – Modern Healthcare

But that may be changing.

At the end of February, the Justice Department sued to block UnitedHealth Group’s $13 billion acquisition of data broker and claims clearinghouse Change Healthcare, arguing “that either they don’t believe in that firewall or that, in and of itself, it can’t be used as an antitrust defense,” Taylor said.

If the merger goes through, UnitedHealth would control more than 75% of the claims clearinghouse market, giving the company unparalleled insight on how rivals manage their networks and leaving other insurers unable to avoid the healthcare giant’s grip, senior justice officials said.

UnitedHealth is challenging the lawsuit and disagrees with the claims.

New look, new regs

Federal regulators are reworking their merger guidelines to broaden the scope of their oversight.

Generally, vertical integration is assumed to be pro-competitive, although that consensus may be shifting.

Market definitions should be adjusted as insurers, providers, pharmacies and others continue to join forces, regulators said. Separating the vertical and horizontal guidelines may be a good start, Assistant Attorney General Jonathan Kanter said, noting that the bifurcation may have limited oversight.

“The antitrust division shares the FTC’s substantive concerns regarding vertical merger guidelines. Those guidelines overstate the potential efficiencies of vertical mergers and fail to identify important relevant theories of harm,” he said in a statement linked to the FTC’s and Justice Department’s request for public comment on antitrust reform.

The FTC is taking a close look at labor market impacts, reviewing factors beyond wages, salaries and financial compensation that could measure anticompetitive effects.

Health systems, private equity firms, payers and pharmacy chains could reduce labor market concentration as they compete for physicians and other clinicians, said Susan Manning, senior managing director at FTI Consulting. That may sway regulators, she said.

“The key, however, has to do with exclusivity in circumstances where there are market power concerns,” Manning said, adding that regulators would closely scrutinize contracts that limit healthcare professionals’ referrals outside of their employers’ operations.

Generally, antitrust law works best in concentrated markets. But the vertical merger regulatory framework does not lend itself to overseeing more fragmented markets, said Gary, the attorney at Dickinson Wright. UnitedHealthcare held 15% of the overall insurance market in 2020, according to the most recent market survey by the American Medical Association.

“That isn’t a concentrated market,” Gary said. “Antitrust law is a blunt instrument for fixing this. I am not convinced the government is going to do a good job. They are trying to fix a problem that, to a great extent, doesn’t exist.”

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Provider-owned payers

Providers have long operated payer arms, with the promise of reducing administrative friction related to billing, boosting population health initiatives, taking on more risk and adapting in times of crisis. Their model can serve as blueprint for the rising number of insurers growing their clinician arms through acquisition and partnership.

When a HealthPartners-insured patient fills a prescription, for instance, the integrated health system’s insurance arm receives a claim. If the patient doesn’t pick it up, HealthPartners’ care delivery side is notified and intervenes, identifying the disconnect and working to connect the patient with their medication.

“Being an integrated health system allows us to connect the dots for the consumer and link care and coverage together to produce better outcomes at a more affordable price,” said Andrea Walsh, president and CEO of the Bloomington, Minnesota-based organization. “We need the combination of the EHR and the claims data to complete the picture and know what patterns exist beyond our care delivery system.”

Being an integrated system also smoothed the shift to telehealth at the Sioux Falls, South Dakota-based Sanford Health, said Matt Hocks, the health system’s chief operating officer. Even though moving low-acuity care from the emergency department or urgent care dented the clinical side’s revenue, it saved patients, employers and Sanford’s health plan money, Hocks said.

“Early on there was a lot of apprehension about how much care we would move to virtual and if we could move costs as fast as revenue would chip away. As an integrated system, we weren’t seeing hemorrhaging of revenue out of the system, it was more of a trickle,” he said. “We philosophically agree that we shouldn’t do what is right for us at the expense of the patient.”

San Diego-based Sharp HealthCare was insulated from the intermittent shutdowns of non-urgent services, in part, because of its integrated model, CEO Chris Howard said.

“When you consider half of Sharp Health Plan is managed-care revenue, you had not only insulation but protection from within if you will,” he said, noting that about 35% to 40% of the health system’s revenue is fully capitated. “It ensures that you are treating the totality of the population to reduce the cost of care.”