Health Care Matters | October 25, 2024
Private Equity in Health Care — Looking at State Policy
The Commonwealth Fund released a blog examining the increasing role of private equity (PE) in health care, noting concerns about its impact on cost, quality, and access. Federal legislative action has been limited despite concerns, leading some states to implement their own measures to regulate PE investments. CA, IN, MN, NM, and OR, have all imposed regulations that make it more difficult or less attractive for PE to invest in health care purely for profit. Other than IN, these states are all controlled by Democrats. According to the Commonwealth Fund analysis, Republican leaning states have been less likely to pass this type of legislation or call for this type of scrutiny noting that more than 15% of hospitals are owned by PE firms in TX, OK, TN, IN, KY and LA.
Why It Matters
The federal government under the current administration is using its existing authority to scrutinize these types of transactions with recent inquiries by the Federal Trade Commission and the Department of Justice. Despite increased scrutiny, the lack of any congressional action has led to an unclear policy framework. The upcoming election for both the houses of congress and the White House could have an impact on how private equity dollars show up in health care in the years to come.
Cigna Resumes Merger Discussions with Humana
Cigna and Humana have revived informal merger discussions after previous talks fell apart late last year. If the merger moves forward, it would create a combined market capitalization north of $120 million. The merger will likely face renewed antitrust scrutiny due to overlapping services. The announcement sparked an immediate response from Wall Street, with Humana’s stock rising by 6% while Cigna’s saw a slight decline.
Read more here.
Why It Matters
While Cigna and Humana share many features, they have distinct strengths including which lines of business are their focus: Cigna has a strong presence in the commercial market while Humana’s expertise lies in Medicare Advantage (MA). There are several factors we think are contributing to the renewed merger talks, including:
Humana received a significant cut to its MA star rating which has substantial financial impacts for the plan as these ratings are tied to billions of dollars in bonus payments.
Humana shares have fallen more than 40% this year. In contrast, Cigna’s stock has gained about 7% year to date. Humana may see the merger as a way to stabilize and strengthen their market position.
Both plans are targeting their focus on their main lines of business. Cigna is selling its MA business, while Humana is the second largest MA insurer. Humana is set to exit the commercial market, while Cigna has nearly 15 million commercial members.
Why 3 Medicare Advantage Insurers Sued Over Star Ratings
UnitedHealth Group, Humana, and Centene have taken CMS to court over their MA star ratings for 2025 while Elevance has also asked CMS to reconsider its ratings and is exploring all their options. The three lawsuits all center on CMS’s use of “secret shoppers” to assess call center quality. Each insurer argues that flaws in the “secret shopper” process unfairly counted against them and did not reflect the quality of their service. Of the three, Humana faces the largest drop in ratings which, if not recalculated, would result in financial loss between $1-3 billion in 2026.
Read more here.
Why It Matters
MA star ratings are directly tied to health plan bonus payments. A drop in these ratings can lead to substantial financial losses affecting the overall stability and operations of these organizations. The ratings also impact an insurer’s ability to attract and retain members as lower ratings make it harder for insurers to compete in the MA market. The long-term implications for insurers could be a loss in market share and threaten their viability. The outcome of these legal battles could set a precedent for how these disputes are handled in the future and may lead to changes in regulatory policies and practices.
What We Are reading
The Role of Health Data Utilities in Supporting Health AI
The authors of this NEJM article explore the promise of new developments in Artificial Intelligence (AI), summarizing the role health information exchanges (HIEs) have played in establishing the existing technical infrastructure and governance for collecting, sharing, and reusing health data, and highlighting the opportunity to modernize HIEs into health data utilities (HDUs). They dig into how HDUs would support AI advancements through their enhanced capabilities and authority as aggregators and stewards of validated, high-quality, multisource health data.
What We Went
NAACOS Fall 2024 Conference – 5 Things of Note
1. Artificial Intelligence Takes Center Stage
From the keynote speaker, Dr. Robert Pearl and his book, ChatGPT MD, to the standing room only sessions on use of AI in care transformation, to the vendor hall full of AI enabled tools, it was clear AI is on the minds of organizations taking risk for cost and quality.
2. Hall of Vendors for Quality Reporting
The shift away from GPRO is finally happening and a majority of the vendors at NAACOS were marketing solutions to ease that transition. ACOs may have a challenging time navigating which tool is right for them when weighing cost, resource allocation and long-term goals.
3. Care Management: Does it Lack ROI or Should We Scale It?
Many ACOs expressed concern over ROI of Care Management (CM), either an inability to measure it in their own programs or worries that the proposed new Advanced Primary Care Management (APCM) codes will lift expenditures in performance years without adequate mitigation in the benchmark/baseline years. While hands wring over whether and how to make CM deliver results for patients under total cost of care accountability, vendors (including those touting AI capabilities) have the tools to help you scale.
4. NAACOS Awards Excellence
After more than a decade, people still come to NAACOS to find affinity with like-minded professionals and organizations working to improve population health and drive value for their organizations. With that sentiment in mind, NAACOS has created the excellence awards as a way of lifting up those in the ACO community that have demonstrated success in patient and community engagement, commitment to a value culture, a focus on outcomes, use of data, and clinical interventions to improve patient care.
5. Clif Gaus Founded NAACOS and Maybe CMS, Too?
Clif Gaus retires and NAACOS welcomes new CEO Jeff Micklos, formerly of the Health Care Transformation Task Force. In saying his farewell, Clif shared how much easier it used to be to get things done, including forming the Health Care Financing Administration (HCFA), the predecessor organization to CMS, by surreptitiously slipping a memo to the Carter transition team about combining Medicare and Medicaid into one agency. Thank you, Clif, for NAACOS and CMS (who knew?)!
What We Are Listening To
Tradeoffs: 3 Health Care Decisions Awaiting the Next President
The next U.S. president will have to make consequential choices about the Affordable Care Act, prescription drug prices and abortion. This episode compares the positions of candidates Kamala Harris and Donald Trump on these major health policy issues.
What We Are Attending
PCC 2024 Evidence Report — Primary Care: The MVP of MSSP
On November 20, the Primary Care Collaborative will release its 2024 Evidence Report — Primary Care: The MVP of MSSP. The event will be held both in person at the PCC’s headquarters and virtually at 1:30pm ET. Register here.
Did You Know?
On September 5, 2024, CMS published a list of acute care hospitals located in one of the Core Based Statistical Areas (CBSAs) selected for mandatory participation in TEAM. CMS will also provide further information on eligibility and requirements for voluntary opt-in participation among BPCI Advanced and CJR participant hospitals outside the mandatory CBSAs prior to the voluntary election period in January 2025.
Learn more here.