Insurers pave the way for a new vertically integrated provider model

But this may change.

In late February, the Justice Department filed a lawsuit to block UnitedHealth Group’s $13 billion acquisition of data broker and clearing house Change Healthcare, arguing that “Either they don’t believe in this firewall or that it can’t be used as a defense on its own.” from antitrust laws,” Taylor said.

If the merger goes through, UnitedHealth would control more than 75% of the claims center market, giving the company unprecedented insight into how competitors operate their networks and making it impossible for other insurers to escape the healthcare giant’s control, senior justice officials said.

UnitedHealth disputes the claim and disagrees with the claims.

New look, new rules

Federal regulators are reviewing their merger rules to expand their scope of oversight.

It is generally assumed that vertical integration promotes competition, although this consensus may change.

Market definitions need to be adjusted as insurers, service providers, pharmacies and others continue to join forces, regulators say. Assistant Attorney General Jonathan Kanter said separating vertical and horizontal rails could be a good start, noting that branching oversight could be limited.

“The Antitrust Division shares the FTC’s strong concerns about vertical merger guidelines. These guidelines overstate the potential effectiveness of vertical mergers and fail to identify important theories of harm,” he said in a statement related to the Federal Trade Commission and Justice Department’s request for public comment on antitrust reform.

The FTC takes a close look at labor market impacts, looking at factors other than wages and financial rewards that can measure anticompetitive effects.

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

“The key, however, has to do with exclusivity in circumstances where there are bargaining power issues,” Manning said, adding that regulators will look closely at contracts that restrict the referral of medical workers outside of their employers’ operations.

Generally, antitrust laws work best in concentrated markets. But the regulatory framework for vertical mergers doesn’t allow for more fragmented markets to be controlled, said Gary, a lawyer for Dickinson Wright. According to the latest market research conducted by the American Medical Association, in 2020 UnitedHealthcare held 15% of the entire insurance market.

“It’s not a concentrated market,” Gary said. “Antitrust law is a dumb tool to solve this problem. I’m not sure the government is going to do a good job. They’re trying to solve a problem that largely doesn’t exist.”

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Provider-owned payers

Providers have long been leveraging payer departments with the promise of reducing billing-related administrative friction, incentivizing healthcare initiatives, taking more risk, and adapting in times of crisis. Their model could serve as a blueprint for a growing number of insurance companies expanding their clinical divisions through acquisitions and partnerships.

When a HealthPartners insured patient receives a prescription, for example, the IHS insurance division receives a claim. If the patient does not take it, HealthPartners’ caregiver is notified and intervenes, detecting the disconnect and working to connect the patient to their medication.

“Integrated Healthcare allows us to connect the dots for the consumer and tie together care and insurance coverage to achieve better outcomes at a more affordable cost,” said Andrea Walsh, President and CEO of the Bloomington, Minnesota-based organization. “We need a combination of EHR and claims data to complete the picture and see what patterns exist outside of our healthcare delivery system.”

The integrated system has also smoothed the transition to telemedicine at Sioux Falls, South Dakota, Sanford Health, said Matt Hawks, chief operating officer of the healthcare system. Even though moving ER out of the ER or ER reduced clinical revenue, it saved patients, employers, and Sanford’s health plan money, Hawkes said.

“At first, there were a lot of concerns about how carefully we would move into the virtual environment and whether we could shift expenses as quickly as income decreased. As an integrated system, we didn’t see revenue leaking out of the system, it was more of a trickle,” he said. “We agree philosophically that we should not do what is right for us at the expense of the patient.”

San Diego-based Sharp HealthCare has been protected from intermittent non-urgent service outages in part because of its integrated model, according to CEO Chris Howard.

“When you consider that half of Sharp Health Plan is managed care income, you had not only isolation, but protection from the inside, if you like,” he said, noting that 35% to 40% of health system revenue fully distributed per capita. “This ensures that you treat the entire population to keep the cost of treatment down.”

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