What’s Up With Insurance Mega-Mergers?

Amid speculation about the outcome, The Department of Justice (DOJ), joined by a number of states, filed complaints on July 21 in federal district court challenging the mergers of health insurance giants Anthem and Cigna and Aetna and Humana. Attorney General Loretta Lynch announced the filing and noted that these deals would eliminate competition at the expense of consumers, employers and healthcare providers.

 

Another top DOJ official said, “If allowed to proceed, these mergers also would cut off innovation and competition American consumers otherwise would enjoy in the future . . . the mergers would increase premiums, decrease benefits and slow innovation. These companies are thriving independently and don’t need these to survive.” (See the prepared remarks here.

 

These mergers may be a convenient shortcut to increased profits for those companies, “but the antitrust laws make clear that mergers are not lawful when they risk denying consumers the benefits of competition, said one of the department’s top antitrust officials.” (“Insurers will consolidate even if mega-mergers fail,” Modern Healthcare, July 23, 2016)

 

Eleven states—California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, Tennessee and Virginia—and the District of Columbia joined DOJ’s challenge of Anthem’s $54 billion acquisition of Cigna. Eight states—Delaware, Florida, Georgia, Iowa, Illinois, Ohio, Pennsylvania and Virginia—and the District of Columbia joined the challenge of Aetna’s $37 billion acquisition of Humana, DOJ said in a press release. (“DOJ Sues to Block Health Insurance Mergers,” AHLA Weekly, July 22, 2016)

 

Stifling Competition

 

The DOJ official noted that “Anthem’s effort to buy Cigna affects both price competition and quality competition” and rejected claims that consumers would benefit from a combined Anthem-Cigna through additional cost concessions from healthcare providers.

 

“Antitrust laws don’t work that way—you don’t get to buy a competitor, and eliminate substantial competition, just to increase bargaining leverage with healthcare providers,” the official said.

 

The Aetna-Humana combination would eliminate meaningful choices for seniors in certain Medicare Advantage markets, and in other areas benefits would be reduced and seniors would experience a hike in premiums, as well as fewer choices.

 

And both deals would dampen competition on the health insurance exchanges.

 

Response from Providers

 

The American Hospital Association (AHA) called DOJ’s action “good news for consumers.” The President and CEO of AHA noted that competition in the health insurance markets already is alarmingly low.

 

The American Medical Association’s president said that the federal government has a strong obligation to enforce antitrust laws that prohibit harmful mergers and foster a more competitive market place that will operate in the patients’ best interests.

 

Federal regulators did not agree that the deals “were necessary to extract better price discounts from hospitals and doctors.” Anthem, for instance, claimed “if it becomes the 800-pound gorilla at the bargaining table,” it could push back against the consolidating provider systems, hypothetically lowering premiums. (“Why the Justice Department rejected the Aetna and Anthem deals,” Modern Healthcare, July 25, 2016)

 

“Many people maintain” that the desire to grow larger results from the Affordable Care Act because it “encourages hospitals, doctors and insurers to create more cohesive systems of care.” (“Insurers will consolidate even if mega-mergers fail, Modern Healthcare, July 23, 2016)

 

 

 

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What is MACRA, Really?

The healthcare industry has less than six months to prepare for the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). But according to a recent survey by Deloitte, it may be an uphill battle.

 

According to Deloitte’s 2016 Survey of US Physicians, “half of surveyed physicians have never heard of MACRA, and most physicians would have to change aspects of their practice to meet the law’s requirements and do well under its incentives.” (MACRA: The status quo is not an option,” Deloitte Perspectives, Health Care Current, July 19, 2016)

 

The report’s authors wrote that there seems to be a variety of misconceptions among physicians about MACRA. For example, some see it as “the law that repealed the sustainable growth rate (SGR),” leading them to believe that they can move on and forget about the recurring annual doc fix debate.

 

When CMS announced last week that it is open to considering changes to the implementation of MACRA, the report authors speculated that physicians may see this as a repeat of ICD-10 implementation – a deadline that will inevitably change before it is finalized.

 

“But, MACRA is more than a Medicare payment law or a fix to the SGR debate. And it is here to stay.” (MACRA: The status quo is not an option,” Deloitte Perspectives, Health Care Current, July 19, 2016)

 

MACRA is intended to be a transformative law to fundamentally change how physicians and other clinicians are reimbursed under the Medicare Physician Fee Schedule. It will also drive major healthcare payment and delivery system reform for clinicians, health systems, Medicare, and other government and commercial payers for years into the future. (See iProtean blog/newsletter, “Comments to CMS: MACRA Threatens Viability of Smaller ACOs,” June 22, 2016)

 

When MACRA goes live in 2019, it promises bonuses for top-performing doctors and clinicians and penalties for underperformers on a variety of measures, especially quality of care. Some of the key points include: (“Blog: Holy MACRA! Half of docs have never heard of Medicare payment reform,” Modern Healthcare Daily Dose, July 14, 2016)

 

  • Two payment tracks: clinicians in advanced alternative payment models can earn bonuses annually of 5%. Clinicians in the Merit-based Incentive Payment System can earn plus or minus 4 percent of reimbursement in 2019, 5 Percent in 2020, 7 percent in 2021 and 9 percent in 2022.

 

  • MACRA projections from CMS: the vast majority of physicians in groups of less than 10 will suffer penalties—87 percent of solo practitioners, 70 percent of physicians in groups of two to nine.

 

For physicians in groups of 25 to 99, 55 percent can expect reimbursement to increase, as will 81 percent of physicians in groups of more than 100 .

 

Even though physicians are aware of coming financial pressures, many are generally unaware of the impact of MACRA. Many physicians will have a lot of work to do over the next few months to prepare for January 1, 2017. (MACRA: The status quo is not an option,” Deloitte Perspectives, Health Care Current, July 19, 2016)

 

To read the Deloitte survey, click here.

 

CMS Announcement of Implementation Delay

 

Amid a “crush” of concerned feedback from providers, Medicare is considering delaying the January 2017 start of data collection under MACRA according to Andy Slavitt, the agency’s leader. The proposed rules would require most physicians paid under Medicare to begin tracking various quality indicators on January 1, 2017. (“CMS Considering Delaying MACRA: Slavitt,” HFMA Weekly News, July 15, 2016)

 

CMS is open to multiple approaches, according to Slavitt. It is considering alternative start dates, shorter periods, eliminating all reporting for some physicians, dropping reporting requirements for physicians who are already performing well and finding other ways for physicians to get experience with the program.

 

Nearly 4,000 comments have been submitted to CMS, and 64,000 attendees have participated in more than 200 MACRA discussion sessions through CMS. Many of the comments highlighted concerns that small and independent practices would have a hard time meeting MACRA’s new quality-reporting requirements. Physicians who fail to meet quality-reporting thresholds under one of the two MACRA tracks—which is expected to include most physicians—will face cuts of up to 9 percent of their total Medicare payments in future years. (“CMS Considering Delaying MACRA: Slavitt,” HFMA Weekly News, July 15, 2016)

 

 

iProtean subscribers, the advanced Mission & Strategy course Beyond Payment Changes: Disruptors of Our Health System, featuring Marian Jennings, Dan Grauman and Jim Rice, is in your library. Our experts discuss the disruptor/payment change link, changes driving disruption and preparing for demand destruction.

 

 

 

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Finance Experts Push Back on Proposed Payment Changes

Hospitals have been adding services to their outpatient departments in recent years as a means of reducing utilization in costlier inpatient settings as they move to population-based payment models. Medicare’s Outpatient Prospective Payment System (OPPS) proposed rule issued this week might negatively affect this trend, according to finance experts.

 

The proposed rule would disqualify rebuilt or relocated off-campus outpatient facilities for hospital-level payment from Medicare. It results from an interpretation of the Bipartisan Budget Act of 2015, which required Medicare to reduce hospital outpatient rates to physician fee schedule rates at off-campus hospital outpatient departments (HOPDs).

 

CMS noted that without the restriction on OPPS payments to relocated HOPDs, hospitals could relocate HOPDs “to larger facilities, purchase additional physician practices, move these practices into the larger relocated facilities, and receive OPPS payment for services furnished by these physicians.” Such strategies would be counter to the law’s intent, CMS officials wrote in the rule. (”‘Unexpectedly Restrictive’ Medicare Outpatient Pay Changes Proposed,” HFMA Weekly News, July 8, 2016)

 

Expanding the types of services paid at OPPS rates at existing remote HOPDs would allow hospitals “to purchase additional physician practices and add those physicians to existing excepted off-campus PBDs [provider-based departments],” CMS officials wrote in the rule. (The rule will be published in the Federal Register on July 14 and will be available online at http://federalregister.gov/a/2016-16098)

 

CMS based its decision regarding the remote-HOPD payment provisions partly on a MedPAC report that concluded the payment difference between HOPDs and physician practices created a financial incentive for hospitals to purchase freestanding physician offices and convert them to HOPDs without changing their location or patient mix.

 

But finance experts think CMS exceeded the bounds of the MedPac recommendations, which were limited to specific services offered at HOPDs.

 

Although the Budget Act did not address specifically which rates would apply to off-campus HOPDs already under construction, CMS decided those facilities would qualify only for the lower physician rates. A Healthcare Financial Management executive noted, “This was an unexpectedly restrictive interpretation of the statute. For organizations that were mid-build, this is going to have a significantly negative financial impact.” (”‘Unexpectedly Restrictive’ Medicare Outpatient Pay Changes Proposed,” HFMA Weekly News, July 8, 2016)

 

Potential Negative Effects

 

In response to the proposed rule, finance experts noted its effect on population-based payment models such as the accountable care organization collaborative operated by Premier. Some of the ACOs in this collaborative have sought savings by shifting more patients from inpatient to outpatient settings.

 

One expert said, “At the micro level it may cost more to use an off-campus [HOPD] compared to a physician office, but when you look at it from a macro level, using them may help you reduce your overall spending if you’re avoiding the hospitalizations and readmissions. CMS is essentially removing an important tool from their toolbox.” (”‘Unexpectedly Restrictive’ Medicare Outpatient Pay Changes Proposed,” HFMA Weekly News, July 8, 2016)

 

Another impact of the payment policy change, according to some hospital finance experts, would be to further restrict access to the 340B program’s drug discounts for hospitals because those are unavailable only for drugs prescribed in specific types of hospitals and select outpatient clinics. (”‘Unexpectedly Restrictive’ Medicare Outpatient Pay Changes Proposed,” HFMA Weekly News, July 8, 2016)

 

 

 

iProtean subscribers, the advanced Mission & Strategy course Beyond Payment Changes: Disruptors of Our Health System, featuring Marian Jennings, Dan Grauman and Jim Rice, is in your library. Our experts discuss the disruptor/payment change link, changes driving disruption and preparing for demand destruction.

 

 

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.