Mergers & Acquisitions

The higher the market share of the leading insurer in a state, the lower the negotiated prices were that the insurer paid to hospitals, according to a new study published in Health Affairs, which used market concentration data from 2019 and payer-specific negotiated prices from 1,446 acute care hospitals as of the end of 2021.

The level of insurer market concentration varied significantly across the nation. In states like Alabama and Alaska, the dominant insurers held a near-monopoly position with market share over 71%, while the leading health plans in states like New York and Wisconsin faced a more competitive environment. The study found that market leaders in the most concentrated markets paid 15% less to hospitals than those in the least concentrated markets.

During a May 17 hearing, PBMs and merging hospitals were in the crosshairs of a U.S. House of Representatives subcommittee considering policies to slow the growth of health care prices. Although independent experts called as witnesses agreed with members’ assertions that PBMs, hospital mergers, and hospital purchases of independent physicians exacerbate high health care costs, the experts also pointed out that prices are already too high, and preventing hospital mergers or reining in PBMs will do little to reverse decades of price growth.

The hearing, titled “Why Health Care is Unaffordable: Anticompetitive and Consolidated Markets,” was convened on May 17 by the Health Subcommittee of the House Ways and Means Committee. The hearing piled on to the growing momentum across Congress that seems likely to result in more stringent PBM regulations, with majority Republicans tipping support for policies that would rein in PBMs.

A spate of deals and new initiatives from Kaiser Permanente, CareSource and Blue Cross Blue Shield of Michigan highlight the race for nonprofit insurers to expand and diversify in increasingly competitive markets, as well as the rise of value-based care.

Perhaps the most significant deal is Kaiser’s planned acquisition of Geisinger Health, a nonprofit health system of 10 hospitals in Pennsylvania that also operates the ninth-largest insurer in the state. If the deal gains regulatory approval, Geisinger will be the first member of Kaiser’s new Risant Health, a nonprofit alliance of health systems focused on value-based care. “Risant Health’s vision is to improve the health of millions of people by increasing access to value-based care and coverage and raising the bar for value-based approaches that prioritize patient quality outcomes,” Kaiser said in an April 26 press release. Kaiser aims to add “like-minded” regional or community-based health systems to Risant, which will operate “separately and distinctly” from Kaiser as a whole.

On May 3, Option Care Health, Inc., the largest independent provider of home and alternate site infusion services in the U.S., revealed that it was acquiring Amedisys, Inc., which provides home health, hospice and high-acuity care, for $3.6 billion. While opinions on the deal differed, one industry expert contends that the transaction offers multiple long-term benefits within the ever-evolving health care space, especially the home setting.

The deal comes less than a week after Option Care unveiled its wholly owned subsidiary Naven Health, Inc., a nationwide home infusion nursing network and platform employing more than 1,500 nurses and serving all 50 states.

Due to the early close of its deal to purchase Oak Street Health, CVS Health Corp. when reporting first-quarter 2023 results said it would lower its full-year earnings per share (EPS) estimate from a range of $8.70 to $8.90 down to $8.50 to $8.70. Yet that short-term headwind is a small price to pay for the long-term benefits of the transaction combined with another recently closed deal to buy Signify Health, CEO Karen Lynch said during the company’s May 3 earnings call.

“These acquisitions significantly advance our value-based strategy by adding primary care, home-based care, and provider enablement capabilities to our platform,” she said. Moreover, “the combination of Signify, Oak Street and CVS Health creates a value-based, person-centered care platform propelled by the powerful connections between our unique capabilities and assets. This will enable us to drive better patient experience and health outcomes while delivering on our long-term financial goals.”

Integrated insurer-provider Kaiser Permanente (KP) will acquire Geisinger Health, the Pennsylvania-based integrated health system and health insurance plan, as part of a new Kaiser venture that will aim to take over other regional nonprofit hospital systems. That new venture, Risant Health, will be an independent division of Kaiser and seek to orient its subsidiary hospital systems toward payer-agnostic, value-based reimbursement. Experts tell AIS Health, a division of MMIT, that the deal accelerates and intensifies the ongoing trend of multistate, cross-market hospital system consolidation.

According to Kaiser spokesperson Stephen Shivinsky, Geisinger is the inaugural member of Risant Health, “a new nonprofit organization created by Kaiser Foundation Hospitals to expand and accelerate the adoption of value-based care in diverse, multi-payer, multi-provider community health system environments….Risant Health will operate separately and distinctly from Kaiser Permanente’s core integrated care and coverage model while building upon Kaiser Permanente’s 80 years of expertise in value-based care.”

Based on estimates from the Congressional Budget Office, a new KFF analysis predicts that House Republicans’ Medicaid work requirements proposal would leave 1.7 million enrollees ineligible for Medicaid. The analysis noted that states could continue to cover enrollees who run afoul of work requirements, but they would have to cover 100% of their costs without federal help. If states did go that route, they could collectively face $10.3 billion worth of new costs in 2024. Republicans included Medicaid work requirements provisions in debt-ceiling legislation that passed the House on April 26, although the measure is not expected to clear the Democrat-controlled Senate.

Blue Cross Blue Shield of Michigan and Blue Cross and Blue Shield of Vermont, the largest health insurers in their respective states, have struck an agreement that will see the Vermont Blues plan become a subsidiary of BCBS of Michigan. The nonprofit companies said in a May 1 news release that this deal “is an affiliation, not an acquisition, which means there is no financial exchange between the organizations.”

The plans’ boards of directors have approved the agreement, which still needs to be approved by state regulators. A BCBS of Michigan spokesperson tells AIS Health that the regulatory process “will take several months to complete.” If the deal closes, the insurers will share technology platforms and other service offerings, among other collaborations.

Kaiser Permanente unveiled plans to acquire Geisinger Health and make it the first member of a new value-based nonprofit health organization called Risant Health, if the deal gains regulatory approval.

Kaiser Permanente’s health insurance products cover more than 11 million people in eight states and the District of Columbia, according to AIS’s Directory of Health Plans. Combined, Kaiser’s seven regional managed care plans form the largest provider-sponsored insurer, enrolling 28.1% of all provider-sponsored lives. It is the largest insurer in the commercial risk market, with over 9 million members. It also ranks as the fifth-largest Medicare Advantage health plan in the nation.

CMS on April 27 proposed new regulations that would “establish tangible, consistent access standards” in Medicaid as well as create “a consistent way to transparently review and assess Medicaid payment rates across states.” The new policies are included in two notices of proposed rulemaking — the Ensuring Access to Medicaid Services NPRM and the Managed Care Access, Finance, and Quality NPRM. Of note for the managed care industry, the proposed regulations would create national maximum standards for certain appointment wait times for Medicaid or Children’s Health Insurance Program (CHIP) managed care enrollees, CMS said. They would also create stronger state monitoring and reporting requirements related to access and network adequacy for Medicaid or CHIP managed care plans, and require states to conduct “independent secret shopper surveys” of Medicaid or CHIP managed care plans to verify compliance with appointment wait time standards and to identify where provider directories are inaccurate. Among other provisions, the NPRMs would additionally require states to conduct annual enrollee experience surveys for each Medicaid managed care plan, and establish a framework for states to implement a Medicaid or CHIP quality rating system, which CMS calls a “one-stop-shop” for enrollees to compare Medicaid or CHIP managed care plans based on quality of care, access to providers, covered benefits and drugs, cost, and other plan performance indicators.