More on Consolidation within the Health Care Industry

Fortune's team of Maria Aspan and Erika Fry have focused their analytical lens on the growth of health care firms in their recent article, "Companies like CVS and UnitedHealth are now some of the world’s biggest businesses. Is that healthy for the rest of us?" (May 24, 2023). It's a good read.

Let's start some context. Despite a recent minor dip, health care is the largest single sector that contributes to our Gross Domestic Product, the equal of defense and education (at all levels) combined. 

Although this number -- whether expressed in absolute dollars, as a percentage of GDP, or as expenditures per capita -- is vastly larger than the expenditures of every other developed country in the world. And by almost any measure, the results -- in terms of life span, infant and maternal mortality, etc. --  pale in comparison to the same countries and many developing countries, as well. Much has been written about this conundrum. After all, we are a rich country and if we want to spend a lot of our wealth on health care, well, why not? The counter-argument is multifaceted. Are we as a society making smart decisions about those health care expenditures? Are there better strategies than "throw a ton of money at what ails you and hope that something works"? Are we doing all we reasonably can to root out waste and fraud? As COVID vividly and catastrophically demonstrated, expenditures for health care goods and services are not equitably distributed to racial and ethnic minorities, economically disadvantaged individuals and households, or the under- and uninsured, a group that persists despites the reforms of Obamacare.

This is Aspan and Fry's concern, too. They are looking at the rapid and extensive increase in firm size and the consolidation of disparate providers (hospitals, pharmacies, clinics, physician practices) into behemoths of unimaginable market power see at least a correlative relationship with GDP. Much of the merger activity in the health care sector is fueled by debt and venture capital, all of which demands cash flow to service. In other words, relentless growth in net revenues, year over year and quarter over quarter. Where's the incentive to keep patients healthy and out of hospital beds or to provide the most cost-effective care?

Granted, providers prosper by delivering more goods and services. And insurers prosper by paying for less care. As the authors point out, there is a conflict of interest at a fundamental level of this business model. Meanwhile, it's the wild, west out there, and the big firms seem to be doing just fine, at least for now. Whether that translates into better health outcomes for the rest of us is still very much in doubt.

Merger Chaos at the FTC?

If there's one indisputable legal and business trend in the health care industry over the past 10-20 years, it's the move toward greater consolidation of health care providers. Some observers praise consolidation on efficiency grounds (cutting duplication and waste --> lower costs --> lower prices for patients), while others decry consolidation because it concentrates market power and lessens competition, which leads to higher prices for patients.  

The mechanism for resolving these claims in connection with large proposed mergers is the statute known as Hart-Scott-Rodino (H-S-R), along with its numerous FTC, DOJ, and SCOTUS interpretations. But according to Daniel Sokol and Dick Pierce, the times they are a-changin', though where federal policy is headed is anyone's guess. 

In his Jotwell essay (May 25, 2023), Pierce argues that two articles by Sokol "are required reading for anyone who is interested in antitrust law, administrative law, government regulation, or corporate law." That's just about everyone in the legal profession, but I'll throw in health care law for good measure.

The catalyst for change is Lina Khan, the Biden Administration's chair of the FTC. As described by Pierce, 

Khan has made it clear that she disagrees with virtually every characteristic of the [FTC/DOJ merger]  guidelines, including the guidelines’ goals. She rejects the goal of maximizing consumer welfare, which the Justice Department and the FTC have pursued for the last 50 years. Instead, she has emphasized the need to protect competitors from large firms that charge low prices—a goal that the enforcement agencies and the Supreme Court disavowed 50 years ago. Khan cannot further her stated goals by applying the 2010 guidelines.

The Pierce essay is a quick and easy read. The implications of Chair Khan's views on mergers portends an era that will be messy and uncertain. 

Texas Chiropractic Board Requests AG Opinion

This would be a good fact pattern for a 1L Legislation-Regulation final exam. The question posed by the Board in its request is "Whether the Texas Board of Chiropractic Examiners has discretion to suspend or revoke a chiropractor’s license under Texas Occupations Code section 201.5065 if the chiropractor is convicted of certain offenses." The language in this section makes suspension or revocation of a license mandatory upon conviction of certain offenses. Other language sprinkled around the Occupations code provides for discretionary suspension or revocation for other offenses. Apparently the Board wants clarification as to the effect of mandatory authority on these discretionary provisions. Nice little statutory interpretation problem, eh? I think the answer should be clear: the Board has both types of authority absent a clear indication that the legislature intended to negate the discretionary provisions. I'll get back to you when the AG's opinions staff gives us their answer . . . 

Hellacious Health Care Fraud of the Week (I)

As with banks and bank robbers, health care is where the money is. And for some so-called health care providers, the temptation to rob, steal, and cheat is apparently irresistable. Starting today I will highlight some of the more audacious schemes drawn from the week's health fraud indictments, settlements, and verdicts.

We begin this series with the settlement of a civil fraud case in the Southern District of New York. A Bronx nursing home allegedly made cash payments to a hospital supervisor in return for patient referrals. Okay: big yawn. But the second fraud scheme is the frosting with sprinkles on top of the boring cake. The nursing home allegedly switched residents out of the lower-paying Medicare Advantage plan and into the relatively higher-paying Original Medicare plan without the consent of their residents. The parties paid $3.46 million to the United States to settle the claims.

"Preauthorization" and why your insurer is out to get you

I am not saying health insurers are evil. Or that their policies are evil. But their claims-handling practices are very often ill-advised, are calculated to maximize corporate revenues at the expense of the health of their insureds, and too often produce results that are, well, evil.

One of the defining characteristics of "managed care" -- which used to be this funky little thing over in the corner of our system of healthcare finance and delivery and now is everywhere -- is the notion of preauthorization by your insurance company before you can get almost anything: a visit to a specialist, hospitalization, a prescription drug, etc. The craziness that sometimes marks this process is hard to fathom (other than the aforementioned profit motive). Dr. Amy Faith Ho has taken this on over on Twitter and her posts are well worth following.

ChatGPT Summary of Congressional Testimony on “Innovation and Patient Access”

I'm re-posting the latest entry from Jason Shafrin's blog, "Healthcare Economist," for two reasons. 

First, "innovation and access" is and always will be an important health law and policy topic. The testimony on May 10 covered Alzheimer's, cancer, FDA regulatory issues, Big Pharma R&D, and NIH research support. Important stuff.

Second, the blog post consists of summaries of testimony that were generated, in whole or in part, by ChatGPT. 'Nuff said? I could have waded through the testimony and written my own summaries or paid a research assistant to do the same. And I would certainly read the testimony if I were citing it, relying on it, etc. I am guess, though, that these summaries are serviceable enough as background reading (and a way of determining whether the testimony appears interesting enough to invest more of my time reading it).