Payer/Provider relationships

Beleaguered and exhausted, the health sector marches into a third year of the pandemic.

For hospitals, it will mean continued pressure on profit margins as expenses climb due to a host of issues, including more expensive labor as clinical staff is in high demand. Ultimately, price hikes are likely as hospitals try to pass some of these higher costs on.

For payers, it likely means continued shifts in payer mix. Medicaid and Medicare coverage has swelled as policymakers have incentivized coverage as the nation recovers from the worst effects wrought by the pandemic. But as the emergency policies wane, it will likely cause disruption and payer mix fluctuations. And as people continue to put off care, that poses a risk to payers with a member base that is not only sicker but also has more advanced and complex illness.

Meanwhile, shifts in volume are likely to ebb and flow as COVID-19 cases rise and fall. A trend evident throughout much of the pandemic: Non-COVID volumes fall as hospitalizations balloon for COVID-19. It results in a tailwind for insurers while creating a headwind for providers. The amount of care people postpone more than outweighs what insurers spend on those hospitalized with COVID-19.

One of the takeaways from the pandemic is that when one part of the sector benefits, such as insurers, the inverse is true for providers.

Fluctuating payer mix

The COVID-19 pandemic served as a major stress test for the safety-net coverage that has been knitted together over the past decade thanks to the Affordable Care Act.

As the nation recorded historic job losses in the early parts of the pandemic, it did not result in a spike in the number of uninsured people as it had in previous recessions. In fact, the uninsured rate has held steady since 2019 despite the enormous upheaval across numerous industries.

Still, there have been fluctuations in enrollment trends. For example, Medicaid rolls have grown while employer-sponsored plans have recorded modest declines. Enrollment in Medicaid and the Children's Health Insurance Program hit 83.2 million members in June 2021, up nearly 18% from February 2020, before the worst of the pandemic's effects, according to government data.

Pandemic-era legislation also helped protect against coverage losses. States were barred from removing Medicaid enrollees from coverage during the duration of the public health emergency. The PHE is expected to end sometime this year and insurers are bracing for states to restart determining who is eligible for Medicaid coverage.

The redeterminations could result in another fluctuation to coverage in 2022, exposing Medicaid managed care organizations such as Centene and Molina to a decline in enrollment and a loss of revenue after recording membership gains in 2021. It's unclear how many Medicaid members will be booted from the program due to ineligibility.

On the flip side, some may be able to catch those customers through an ACA exchange plan. Many Medicaid members no longer eligible are likely to move to the exchanges "testing the links between the two programs," Massey Whorley, associate principal at Avalere, said in a recent presentation.

Labor constraints, rising expenses, margin pressure

Hospitals are staring down a difficult year of continued wage pressure as nurses are in high demand, desperately needed to respond to yet another COVID-19 surge. At the same time, traveling agencies are driving up wages as they lure nurses away from their traditional posts by offering significantly higher pay.

Meanwhile, morale among front-line staff is low due to high levels of burnout from an unrelenting workload during the pandemic, which now enters its third year. These dynamics have contributed to healthcare workers quitting their jobs.

"It's management's, No. 1, No. 2 and No. 3 concern at the moment," Kevin Holloran, senior director at Fitch Ratings overseeing nonprofit healthcare, said of the labor concerns, emphasizing the seriousness for providers.

For some hospitals, salaries, wages and benefits can account for anywhere between 45% to 50% of revenues — a massive cost item, Eric Axon, senior healthcare analyst for CreditSights, said. For hospitals, wage inflation "is going to be a persistent theme for the years ahead," Axon said in a recent webinar.

At the same time, hospitals will need to weather a host of other cost increases, including supply costs while inflation is climbing.

All together, this will likely squeeze hospitals' margins, experts have said, and will likely lead to price increases in the future as hospitals negotiate new contracts with payers.

As providers will likely try to pass these cost increases on, it will be more difficult for those with a payer mix that skews heavily toward government payers.

However, a considerable amount of cash on hand will help nonprofits offset margin pressure. Nonprofits' balance sheets "are currently showing unrestricted liquidity levels at virtually all-time highs … and that's going to give [them] a lot of cushion to absorb some of these losses," Holloran said.

Billions in provider relief funds helped prop up providers financially as volumes plummeted during the onset of the pandemic. But whether regulators plan to send the remaining funds to providers is still unclear.

"Will there be additional distributions? That's a question mark," Suzie Desai, director of nonprofit healthcare at S&P Global Ratings, said in a recent presentation.

Volume trends, ability to navigate through surges

Since its arrival, the pandemic has disrupted patient volumes, and much of that patient traffic is still below pre-pandemic levels.

This initially led to an explosion in telehealth visits, alleviating some concerns around the ability to readily access care during shutdowns and surges.

But insights into continued lagging volumes for certain services are raising some alarms. Putting off care can result in worse health outcomes for patients. Some oncology trends are raising a red flag.

Concerning breast cancer treatment, "at every step along the care journey, we're still not anywhere near pre-pandemic rates," said Lance Grady, leader of Avalere's market access practice, during a recent online presentation.

For metastatic breast cancer, "we're seeing screening biopsy, mastectomy and oncolytic treatment all down, and down substantially as most recently as November of 2021," Grady said, comparing a five-month period ending November 2021 to the same time period in 2019.

Mammography visits are down as much as 35% over that period, along with a 44% decrease in biopsy claims, according to claims data analyzed by Avalere.

Avalere's research takeaway — patients are sicker — has been echoed by hospitals and insurers who have all noted a higher acuity mix of patients.

These trends are poised to have a widespread effect on the industry, and pose a headwind for insurers, likely requiring them to spend more on patient care.

Meanwhile, providers will have to care for these patients while navigating through COVID-19 surges of their own.

As lawmakers seem less likely to impose shutdowns and force a pause on electives, providers will have to continue balancing the need to respond to COVID-19 upticks while also treating non-COVID-19 patients.

Surges can dent the ability to make money for providers as they crowd out other lucrative procedures. COVID-19 patients tend to use more resources, particularly during a surge, limiting both physical space and staffing resources.

Surprise billing ban compliance

Many surprise bills are no longer legal under major consumer protection legislation that went into effect at the start of the year.

Providers will have to come into compliance with the federal law, ensuring patients do not receive these types of sky-high bills that can leave them stuck between provider and insurer payment disputes.

Patients are now protected from surprise bills that originate from air ambulances, emergency services and non-emergency services at an in-network facility.

However, not all surprise bills are outlawed. Ground ambulances are not included and neither are urgent cares. Patients could also potentially receive a surprise bill after a lab is ordered by a primary care doctor.

Provider groups are challenging a segment of the law in federal court. The American Hospital Association and American Medical Association argue HHS' implementation of the law directly conflicts with what Congress had intended by "placing a heavy thumb on the scale" that favors insurers in the dispute resolution process.

There are three other similar suits that largely argue the same issue.

Article top image credit: Adeline Kon/Healthcare Dive

Dive Brief:

• As litigation surrounding the ban on surprise billing heats up, the insurance lobby has filed a legal brief in support of the government's implementation of the bill Congress passed in 2020 to outlaw the controversial practice, which leaves patients stuck in the middle of payment disputes between payers and providers.
• Siding with the HHS, AHIP argued the administration got it right when constructing the methodology behind the ban and, more specifically, how disputes around payments will be resolved through the arbitration process, according to the brief AHIP filed Tuesday in federal court in Texas.
• Relying on the qualifying payment amount, or median in-network rate, helps center the payment dispute, creating a starting point for when payers and providers may need to turn to a third-party arbiter. It also creates predictability and ultimately lowers costs, AHIP said.

Dive Insight:

The lawsuit in Texas is just one of four legal challenges to the federal ban on surprise billing, Katie Keith, who is tracking these suits at Georgetown University's Center on Health Insurance Reforms, said in a briefing on Jan. 6.

These challenges all target a narrow piece of the law, the vehicle for how payment disputes are resolved, through what is known as independent dispute resolution.

The independent dispute resolution process is a key piece of the law. It's the last step in the process to resolve a payment dispute between payers and providers. Under the law, IDR entails turning to a third party, in this case an arbiter, to settle the payment disagreement.

But how CMS chose to implement this IDR process has spurred debate, resulting in the multiple legal challenges.

CMS said that when payers and providers enter into the IDR process, the arbiter "must begin" with the presumption that the qualifying payment amount is the appropriate out-of-network payment.

Relying on the QPA in this way has generated intense pushback from providers who say it's tipping the scales in the favor of insurance companies.

But AHIP, which lobbies on behalf of insurers, objects to that assertion, according to its brief filed Tuesday in a case brought by the Texas Medical Association and Texas physician Adam Corley against HHS.

"The QPA reflects competitive, fair market rates, and Plaintiffs' unbounded alternatives would create the very problems the Act aims to remedy," according to the brief.

AHIP is arguing that the QPA is essentially a starting point for how arbiters should orient themselves when considering what a physician should be paid for an out-of-network service. Healthcare prices in the U.S. are notoriously opaque and the price of a single procedure can vary widely.

The QPA is meant to reflect the median rate that payers and providers contractually agree to for the same service, in the same area.

When using this as a starting point, it creates predictability and will ultimately lower costs, AHIP argued.

Lobbying groups for hospitals and doctors also are challenging the use of the QPA in federal court. Similarly, the providers say it "places a heavy thumb on the scale" of the dispute resolution process that will unfairly benefit insurers.

That case is playing out in the Washington, D.C., district court and the judge has recently laid out a timeline of filing deadlines to keep the case moving forward as surprise bills disputes will need resolutions in the coming months.

Article top image credit: Mario Tama via Getty Images

Health plans may soon be facing more transparency and accountability for their practices in Medicare Advantage and Part D, if the Biden administration finalizes a proposed rule released Thursday.

The regulation would overhaul a number of ways MA and Part D plans operate and disclose information, including in the areas of plan applications, provider network adequacy requirements, medical loss ratio reporting and marketing.

If finalized, it would also lean on pharmacy price concessions to try to lower out-of-pocket costs for prescription drugs in Part D, and revise regulations for Medicare special needs plans for dual-eligibles related to health risk assessments and beneficiary input into their own coverage.

CMS says updating the MA and Part D programs will improve price transparency and market competition while improving beneficiaries' experiences, especially among those who are dually eligible for both Medicare and Medicaid.

And in a fact sheet on the changes, which would kick in next year, CMS said it expects the "relatively modest costs" associated with the proposed rule to not significantly change MA plans' bids, supplemental benefits or beneficiary premiums.

MA trade group the Better Medicare Alliance said Thursday it was still reviewing the rule, but appreciated CMS' "thoughtful work" on the proposal in light of MA's growing popularity.

Higher standards for MA plans

A growing number of Medicare beneficiaries are electing to receive services through MA and Part D. More than 27 million beneficiaries are enrolled in MA plans — including those that offer Part D prescription drug coverage — while about 24 million are enrolled in standalone Part D plans, according to government data.

CMS is looking to hold the plans to a higher standard as their rolls swell, targeting their networks, past performance, marketing practices and spending.

The new proposed rule would require applicants for new or expanded MA plans to show they have a sufficient network of contracted providers to care for beneficiaries. The change would also give MA plans more information on their network adequacy ahead of bid submissions.

CMS noted meeting this requirement may be difficult for some plans, in that it requires them to build a full network about a year in advance of the contract year. As a result, to ease the burden on plans, CMS is proposing phasing in this requirement by allowing a 10-percentage point credit toward the percentage of beneficiaries living within published time and distance standards for new or expanding service area applicants, to help their network qualify.

Once the coverage year starts on Jan. 1, the 10-percentage point credit would no longer apply, and plans would have to meet full compliance.

The rule would also limit MA plans' ability to expand or enter into new contracts if they have a history of poor performance.

Currently, regulations allow CMS to deny applications from companies under sanction, or those failing CMS' net worth requirements during the performance period.

The proposed rule would add new bases for CMS denying applications, including star ratings of 2.5 or lower, bankruptcy or bankruptcy filings and exceeding the threshold for compliance actions.

The Biden administration is also looking to hold plans more accountable for how their Medicare revenue is spent, as the program continues to face financial stress.

That includes requiring plans to provide more transparency on how much they spend on supplemental benefits not available through traditional Medicare, which include dental, vision, hearing, transportation and meals.

CMS is also proposing that MA and Part D plans be required to report more information on how they calculate their medical loss ratios, which is the percent of plan revenue spent on patient care and quality improvement activities.

Currently, plans must meet an MLR of at least 85% of premium dollars going toward medical claims. If they fail to meet that threshold, they have to pay a remittance to CMS.

The proposed reporting requirements, which were actually in place from 2014 to 2017, would require MA and Part D plans to report the underlying cost and revenue information they use to calculate and verify their MLR and amount of the remittance, if any.

CMS is also looking to improve the accuracy of information about Medicare coverage by strengthening oversight of third-party marketing organizations that work, either directly or indirectly, on behalf of MA plans and Part D sponsors.

Such companies have come under fire for using deceptive marketing tactics to enroll beneficiaries in specific plans. According to CMS, the number of beneficiary complaints about third-party marketing tactics more than doubled from 2020 to 2021.

Because of this, regulators are proposing defining third-party marketing organizations, in a bid to minimize any confusion over plans' responsibility for marketers' activities. If the proposed rule is finalized, organizations would also have to publish a disclaimer saying they don't offer every plan availability in the area.

CMS is also proposing codifying enrollee ID card standards and requiring plan website instructions on how to appoint a representative, and website posting of enrollment instructions and forms. Additionally, all MA and Part D plans would have to provide information about the availability of free language and translation services in all required communications with beneficiaries.

CMS also wants to revise and clarify timeframes and standards associated with disasters and emergencies.

Currently, regulations have special requirements for MA plans during these events, including requiring plans to cover services provided by non-contracted providers and to waive gatekeeper referral requirements

The agency is proposing requiring MA plans to comply with the special requirements when a disaster or emergency is declared — including a public health emergency — and when healthcare access is disrupted.

Improving input and cost-sharing for dual-eligibles

Some MA enrollees are also enrolled in Medicaid, with a growing number enrolling in managed care plans through Medicare, Medicaid or both. Roughly 3.7 million dually eligible beneficiaries getting coverage through dual-eligible special needs plans, or D-SNPs, CMS said.

CMS is proposing requiring MA organizations with a D-SNP to establish, maintain and consult with one or more enrollee advisory committee to make sure the experiences of those dually eligible individuals are considered in plan decision-making.

The agency also wants to simplify materials describing how to access Medicare and Medicaid services and streamline the grievance and appeals process in certain D-SNPs, extending the protection of continuation of benefits pending appeal. The goal is to help dually eligible beneficiaries with low health literacy to navigate a more complex system of coverage than non-dual eligibles, CMS said.

CMS also wants to change the current MA cost-sharing rules, in a bid to create more equitable payments to providers serving dual-eligibles and improve dual-eligibles' access to providers. The agency wants to specify that the maximum out-of-pocket limits for an MA plan should be calculated based on the total of all Medicare cost-sharing in that plan's benefits, whether it's paid by the beneficiary, Medicaid, another payer or remains unpaid.

Regulators project the change would save state Medicaid agencies $2 billion over a decade, while increasing payments to providers serving dually eligible patients by $8 billion in the same timeframe.

The rule would also require all MA special needs plans to solicit information about beneficiaries' barriers to accessing care through standardized questions in health risk assessments on instability in housing, food and transportation. Such social factors are important contributors to overall health, and the Biden administration has made weaving them into regulations a key component of its health agenda.

Part D price concessions to be applied at point-of-sale

More Part D plans and pharmacies are entering into price concession agreements, where plans pay less money to pharmacies for dispensed drugs if the pharmacies fail to meet certain metrics. However, there's little public visibility on the price concessions, and any lower prices aren't being passed down to beneficiaries, CMS said.

As a result, in 2018, the government asked for public comment on a policy that would require Part D plans to apply all price concessions received from network pharmacies at the point of sale, which should in turn reduce beneficiary cost-sharing.

After digesting the comments, CMS is now proposing this policy. The agency said it would reduce beneficiaries' Medicare Part D out-of-pocket costs while bettering market competition and price transparency in Part D.

The policy, which would also redefine the negotiated price as the lowest admissible payment to a pharmacy, will take affect in 2023, if finalized.

CMS is also looking for feedback on the challenges with building behavioral health provider networks within MA plans, and how the changes proposed Thursday might impact network adequacy.

Comments on the proposed rule are due by March 7.

Article top image credit: Alex Wong via Getty Images

Dive Brief:

• Despite some end-of-year confusion between a powerful hospital lobby and a payer giant, UnitedHealthcare — the nation's largest private health insurer — has no immediate plans to institute stricter coverage criteria for emergency services.
• UnitedHealthcare had revised some language around its emergency and urgent care center coverage determination guideline that led the American Hospital Association to believe the payer, which covers more than 50 million people in the U.S., was instituting a harsher ER coverage policy it floated earlier last year. AHA sent a letter to UnitedHealthcare urging it to rescind the policy, saying it would result in fewer patients seeking emergency care.
• However, UnitedHealthcare clarified with the AHA in a Thursday letter that the confusion was due to unclear language in its guidelines, and that it has no intention of implementing any such new policy for its fully insured business. The Minnesota-based health insurer has revised the coverage determination to remove the language added last month.

Dive Insight:

Following concerns from the AHA regarding an apparent change to its ER coverage policy, UnitedHealthcare has clarified no changes were made — or will be made — to how it approves or denies its members' emergency claims.

The confusion stemmed from the payer updating its coverage determination guideline to comply with federal guidance released in September and clarifying some terms in its benefit coverage documents. But "our intention to align coverage definitions with the new federal guidance created confusion rather than clarifying matters," UnitedHealthcare CEO Brian Thompson wrote to the AHA.

The hospital lobby said in a statement it was pleased with UnitedHealthcare's response, received just one day after AHA sent a letter to the payer arguing against the policy.

Previously, the coverage determination appeared to suggest UnitedHealthcare would begin on Jan. 1 to review claims for emergency services to evaluate whether the patients' medical needs required ER care, one of the highest-cost sites for services in the healthcare delivery ecosystem. If the payer determined ER-level care wasn't warranted, it might retroactively elect to deny the claim.

UnitedHealthcare first attempted to implement the controversial policy last summer, but delayed it in June following fierce backlash from provider groups and patient advocates.

The new coverage criteria, which would have applied to commercially insured members, could have led to as many as one in every 10 claims being rejected, per an estimate from UnitedHealthcare's parent company UnitedHealth.

At the time, hospital interests were especially furious at the proposal, saying it would require patients with likely little-to-no medical experience to determine the severity of their injuries and illnesses, put patients on the hook for potentially exorbitant ER bills and eventually threaten provider finances due to the loss of reimbursement.

The payer originally cast the delay as only a temporary pause, at least until the end of the national public health emergency for COVID-19.

However, UnitedHealthcare confirmed with Healthcare Dive on Monday that it has no intent of moving forward with the stricter coverage criteria.

Even minute changes to coverage policies can be concerning for providers, especially during the pandemic. Despite tens of billions of dollars in federal relief funds (and little evidence the nation's largest operators are experiencing deep-seated financial troubles) hospitals continue to raise concerns about COVID-19-related financial stress.

Another factor is perennial disputes over billing between insurers and hospitals, which can often leave patients caught in the middle, bearing the brunt of unresolved claims. Providers have complained about insurers implementing more onerous policies, including requiring prior authorization for some services or publishing confusing layers of documentation requirements. Those administrative hurdles can be a major contributor to burnout, even as the healthcare workforce continues to shed jobs.

Some hospitals began flagging late last year a spike in retroactive claims denials by some major payers, including UnitedHealthcare, for care received in emergency departments. Though research suggests only about 6% of ER visits annually are actually nonemergent, misuse of emergency rooms for minor ailments costs the U.S. healthcare system $32 billion annually, according to a previous report from UnitedHealth.

Hospitals accuse payers of gatekeeping necessary care and threatening patient access, but insurers say the stricter policies are needed to control excessive prices charged by hospitals.

UnitedHealthcare isn't the first payer to attempt paring down ER expenditures: Indianapolis-based Anthem adopted a similar policy in 2018, but ultimately scaled the changes back after objections to the move poured in from legislators and doctors.

UPDATE: Dec. 8, 2021: A Nevada jury on Tuesday ordered UnitedHealthcare to pay $60 million in punitive damages to TeamHealth, in one of a handful of legal cases between the massive private payer and the physician network.

That’s on top of the $2.65 million already awarded to TeamHealth in initial compensatory damages.

UnitedHealthcare plans to appeal the decision on several grounds, saying the jury wasn’t allowed to hear critical pieces of evidence in the case that may have impacted their verdict, including that TeamHealth sought payment of more than five times the market rate in Nevada, and more than seven times its costs.

"Everyone agrees health care costs too much, and today’s decision only adds to the problem," a UnitedHealthcare spokesperson said. "We will be appealing this decision immediately in order to protect our customers and members from private equity-backed physician staffing companies who demand egregious and anticompetitive rates for their services and drive up the cost of care for everyone."

Meanwhile, TeamHealth CEO Leif Murphy said the ruling sets a "critical precedent" in contests between health insurers and doctors over payments.

The provider group still has pending cases against UnitedHealthcare alleging it shortchanged doctors out of owed reimbursement in New Jersey, Pennsylvania, New York, Florida, Oklahoma and Texas.

Dive Brief:

• A Las Vegas jury on Monday found UnitedHealthcare guilty of underpaying TeamHealth physicians for emergency services in the latest legal salvo between the nation's largest payer and the private-equity backed provider group.
• Following a monthlong court case, the jury ruled in favor of TeamHealth, which accused UnitedHealthcare of bilking its clinicians out of owed reimbursement and demanded $10.5 million in restitution for the alleged underpayments. The jury awarded TeamHealth $2.65 million in initial compensatory damages, and is considering additional punitive damages to be determined in December.
• The verdict brings to a close one in a number of cases currently pending against Minnesota-based UnitedHealth brought by TeamHealth subsidiaries in Texas, Pennsylvania, New Jersey, New York, Oklahoma and Florida that challenge the payer's reimbursements.

Dive Insight:

TeamHealth CEO Leif Murphy cheered the verdict in a statement Monday, saying he was "thrilled" by the jury's decision.

"The court evidence clearly demonstrated that United's refusal to adequately reimburse emergency medicine physicians was intentional and will no longer be tolerated," Murphy said.

The suit began last month, when TeamHealth subsidiary Fremont Emergency Services sued UnitedHealthcare in Clark County, Nevada's district court. Fremont alleged the payer, which covers some 50.4 million people, terminated its contracts with the provider group and began reimbursing them at illegally low rates following a 2019 pledge to not balance bill out-of-network patients.

In its suit, TeamHealth claimed the payer was shelling out just 20% of its clinicians billed charges, resulting in $10.5 million in underpayments on 11,000 claims.

UnitedHealthcare denied the allegations, arguing in this suit (and others brought by TeamHealth subsidiaries) that the physician group charges unreasonably high prices which caused it to be removed from UnitedHealthcare's provider networks. The payer claimed TeamHealth's private equity owner, Blackstone Group, which purchased the staffing firm in 2017 for $6.1 billion, has been pushing its providers to generate additional profits by inflating their rates.

A UnitedHealth spokesperson told Healthcare Dive the payer is still reviewing the implications of the decision, but it remains committed to curbing "rapidly rising" healthcare costs for its employer customers and beneficiaries.

Tennessee-based TeamHealth, which employs some 15,000 clinicians nationwide, isn't the only physician staffing firm that's been culled from UnitedHealthcare's networks over pricing squabbles.

Last year, the payer giant cut ties with Mednax, alleging it was charging more than 60% higher than other firms for similar services; and canceled its in-network contracts with PE-backed U.S. Anesthesia Partners in Texas. And, after threatening to drop investment firm KKR-owned Envision from its network in 2018, UnitedHealthcare made good on its warning this year when the payer cut Envision's 25,000 clinicians from its network, citing high prices.

But the Nevada jury agreed with TeamHealth's case on Monday, following more than three weeks of testimony and two days of deliberation.

The jury found UnitedHealthcare engaged in abusive reimbursement practices by deliberately failing to pay ER doctors fair rates for care and found the payer "guilty of oppression, fraud, and malice" in its conduct, prompting potential additional punitive damages on UnitedHealth.

The jury will determine the exact amount of damages following additional witness testimony next week, but TeamHealth's legal team expects damages could be as high as $1 billion.

The current $2.65 million in compensatory damages on the table is a drop in the bucket for UnitedHealth. The diversified healthcare behemoth expects to bring in revenue of about $287 billion in 2021 and about $317 billion in 2022, according to financial guidance released Monday.

The Nevada trial ran parallel to another complaint between the two entities, this time filed by UnitedHealthcare against TeamHealth in a Tennessee district court. The complaint alleges TeamHealth upcoded claims, resulting in the insurer overpaying an estimated $100 million on fraudulent claims since 2016.

The litigation is a case study into the perennial push and pull between provider groups and insurers over bills, a fight that often leaves patients caught in the middle.

Last year, Congress passed the No Surprises Act in an effort to shield patients from surprise medical bills, which patients receive when they inadvertently receive out-of-network care. The legislation banned billing patients for surprise out-of-network treatment starting next year, meaning payers and providers will have to settle disputes over billed amounts between themselves or undergo an independent third-party arbitration process.

Physician groups like TeamHealth are often fingered as a major driver of out-of-network spend, as their clinicians are often out-of-network even at in-network facilities, leaving them free to charge patients unexpected, exorbitant rates even after collecting a portion of the bill from a patient's insurer.

Insurers have raised the alarm about such practices being acquired by profit-driven private equity firms, which have become increasingly interested in healthcare over the past few years.

Studies have shown there's little incentive for physician staffing companies to come in-network with payers, as it's often impossible for patients to shop for the services their clinicians provide, like emergency medicine and anesthesiology. That means it's unlikely they'll see a reduction in patient volume, even if they fail to negotiate contracts with insurers.

TeamHealth, which brought in $3.6 billion in revenue in its final year as a publicly traded company before being acquired by Blackstone, is known for taking to the courts to argue its physicians are being shortchanged by insurers.

Its legal battles have been successful in the past: Last summer, an Arkansas jury ruled in favor of a TeamHealth affiliate, finding a Centene health plan had underpaid the group for years, and awarded $9.4 million in damages.

Article top image credit: UnitedHealth Group

Dive Brief:

• Humana said it is expanding an existing agreement with hospital operator Allina Health to provide value-based care to its Medicare Advantage members in the Minnesota market. Under the multi-year pact, reimbursement to physicians will be linked to patient health outcomes rather than based on a traditional fee-for-service model alone.
• Through the arrangement with Allina, Humana said its Medicare Advantage enrollees will gain access to more personalized care, health screenings and other preventive programs, and care for chronic conditions. Physicians will be able to use Humana's data analytics and other technologies to coordinate patient care. The new contract takes effect Jan. 1.
• The insurer also announced it has extended a value-based care partnership for Medicare Advantage members with Hutchinson Clinic, a physician group with 14 locations in central Kansas.

Dive Insight:

Humana's latest deals with Allina Health and Hutchinson Clinic reflect the insurer's ongoing focus on the value-based care model, which it says has both lowered costs and improved health outcomes for its members.

The agreements closely follow the insurer's big push into home health with the $5.7 billion purchase of the remaining 60% stake in Kindred at Home. The acquisition closed in the third quarter. Humana's ambitions for Kindred include transitioning the home health business to a value-based model, CEO Bruce Broussard said on the company's earnings call earlier this month. 

Humana aims to cover 50% of its Medicare Advantage members through a value-based home health model in the next five years, with the effort expected to launch in the second quarter of next year. The company already has 270,000 members in value-based home care in south Florida and southeast Texas, Broussard said.

Humana in May also said it would offer value-based care for people with original Medicare in collaboration with providers through the Direct Contracting Model established by the CMS Innovation Center.

Allina Health system operates 11 hospitals, more than 90 clinics, and 15 retail pharmacies in Minnesota and western Wisconsin. The non-profit also offers services such as emergency medical transportation and home care. The agreement with Humana comes a year after Allina entered into a multiyear value-based deal with Blue Cross Blue Shield of Minnesota aimed at lowering the cost trend for care by 10% over five years.

Value-based care arrangements helped Humana reduce total medical costs by 13.4% in 2020, the company said in its eighth annual Value-Based Care Report released last week.

And the report showed hospital admissions were reduced by 7% and emergency room visits by 12% for Humana members whose primary care physicians were in value-based agreements, compared to those whose doctors were not in a value-based agreement.

CMS continues to expand its Medicare Advantage Value-Based Insurance Design Model, which tests an array of new plan designs geared toward improving care for Medicare beneficiaries, especially those with low incomes. The model will have 34 participating organizations next year, up from 14 in 2021.

Humana has HMO point-of-service and local PPO plans, including those with zero-dollar-premium options, in Minnesota.

Article top image credit: Humana

Dive Brief:

• An anesthesiologist organization is accusing Blue Cross Blue Shield of North Carolina of using the upcoming surprise billing ban as justification to "strong-arm" in-network clinicians into lower rates.
• The payer, which covers roughly 3.8 million people in the state, has been sending letters to anesthesiology and other physician practices, including radiology and emergency physicians, threatening contract termination unless the physicians agree to payment reductions ranging from 10% to more than 30%, the American Society of Anesthesiologists said.
• In the letters to 54 practices sent earlier this month, Blue Cross NC cites the No Surprises Act passed in December as the reason for the payment reductions, though it doesn't go into effect until 2022. The payer defended its actions, with a spokesperson citing the need to curb the high cost of medical care and noting only practices charging hyper-inflated rates received the letters.

Dive Insight:

The fight between payers and providers over specifics of the ban's implementation has been heating up, with ASA raising the alarm against what it perceives as Blue Cross NC's "take it or leave it" ultimatums to in-network clinicians, using the consumer protection legislation as a bargaining chip to negotiate more favorable rates.

"The clear intent of the insurance company in taking this action is to improve its negotiating position against community physician practices in the dispute resolution process outlined in the recently released Interim Final Rule implementing the legislation," the ASA said.

The purpose of the No Surprises Act is to protect patients from unexpected out-of-network bills, which can be exorbitantly expensive. The legislation calls on payers and providers to resolve any payment disputes through an impartial third-party arbitration process but left it up to HHS to determine specifics, resulting in fierce lobbying from both sides as to their preferred method of arbitration.

Provider interests were furious when the Biden administration in October set payments from plans to any out-of-network providers, or the "qualifying payment amount," as the median in-network rate for the same or similar specialty within a geographic area.

Doctors argued that step, which solidifies the baseline for arbiters to consider, unfairly benefits payers. Exact and final QPAs aren't yet available pending the rules' finalization.

But in the letters, Blue Cross NC said the law and the determination of the QPA allows for a "significant change" in its contracting approach with emergency service providers, hospital-based providers and air ambulance services.

VP of provider networks Mark Werner writes that Blue Cross NC has previously contracted with some practices at what it considers an inflated rate, and is now able to seek to contract at a more reasonable and market-based rate.

"The Interim Final Rules provide enough clarity to warrant a significant reduction in your contracted rate with Blue Cross NC," Werner writes in one letter sent Nov. 5.

"If we are unable to establish in-network rates more in line with a reasonable, market rate, our plan is to terminate agreements where the resulting out-of-network QPA would reduce medical expenses to the benefit of our customers' overall premiums," Werner said.

Blue Cross NC asked for an immediate reduction in rates to buy the plan "breathing room" before negotiating the final rates when the QPA amounts are established. That way, the payer won't need to terminate outlier contracts to avoid payment levels after Jan. 1 that are significantly higher than the default out-of-network QPA, Werner said.

A spokesperson for the Durham, N.C.-based payer said some in-network providers have been charging its members significantly higher prices than other specialty practices in the state, and up to 500% higher than what they charge Medicare patients.

The 54 practices that received letters are a "small percent of the thousands of contracts we have with providers and hospitals across the state who have agreed to negotiate more reasonable rates," the spokesperson said.

ASA President Randall Clark argued the move threatens anesthesiologists' ability to fully staff hospitals and other healthcare facilities.

But anesthesiologists are often fingered as one of the biggest drivers of surprise billing, as they're often out-of-network even at in-network facilities and bill patients separately. That results in mammoth charges for patients who thought they were receiving covered care.

A study published last year found one in five commercially insured patients undergoing an elective surgery with in-network physicians received a surprise medical bill. Anesthesiologists were associated with the most out-of-network charges, with bills averaging more than $1,200.

But Blue Cross NC's actions have "demonstrated what we explained to Congress and the rule-making agencies would happen: insurance companies will use their overwhelming market power and the No Surprises Act's flawed rules to push more physicians out of insurance networks and fatten their own bottom line," Clark said.

Despite the hubbub over the QPA, payers say establishing a median in-network baseline is essential to keep down what they perceive as inflated rates, and taking out-of-network charges into account in the arbitration process would result in sky-high payouts to doctors, driving up premiums for consumers.

Consumer and patient advocacy groups also supported the outlined process in the interim final rule.

But controversy over the method has resulted in multiple legal challenges to the ban from provider groups, including the Association of Air Medical Services and the Texas Medical Association, which argue the dispute resolution process gives the QPA (and, correspondingly, payers) too much weight.

Congress is also split, with 152 lawmakers penning a letter earlier this month stating the latest rules don't reflect the intent of the law and create an imbalanced process to settle payment disputes.

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Dive Brief:

• The nation's most powerful hospital lobby is ramping up its defense of hospital mergers as the Biden administration aims to crack down on provider consolidation.
• The American Hospital Association sent a letter Wednesday to top officials in the White House, HHS, Department of Justice and Federal Trade Commission defending health system M&A and attempting to shift Washington's rising antitrust focus from providers to commercial health plans.
• The letter included an updated AHA-funded study on the benefits of hospital mergers, which was previously criticized by outside experts for cherry-picked data, among other methodological weaknesses.

Dive Insight:

In an executive order signed in July, President Joe Biden directed regulatory agencies to vigorously enforce antitrust laws, including in healthcare as hospital M&A continues at a rapid clip. The order came shortly after the FTC said it plans to prioritize healthcare in its enforcement strategy over the next decade, as research indicates lack of industry competition has led to price increases without improving the quality of care.

"Too many hospital mergers lead to jacked up prices and diminished care for patients most in need," Lindsay Kryzak, the FTC's director of public affairs, said in a statement earlier this month. Kryzak's remarks followed a U.S. district court's decision to grant a preliminary injunction against New Jersey system Hackensack Meridian Health's proposed acquisition of close competitor Englewood Healthcare Foundation, a deal the FTC opposed.

"The Court has hit pause on this merger, which the FTC alleges is unlawful. Hospital executives hatching merger plans should take note," Kryzak said.

The recent swell of M&A filings prompted the FTC earlier this month to warn organizations looking to merge that the agency would be retrospectively reviewing deals, which could result in completed mergers being unwound. Regulators have forced hospitals to unravel completed deals before, including ProMedica's acquisition of a Toledo, Ohio, hospital in 2015 following a five-year court battle.

The Biden administration's renewed antitrust efforts have drawn a response from industry groups, as shown by the AHA's new letter to policy and regulatory officials. AHA CEO Rick Pollack called Kryzak's remarks "unfortunate" in the letter, as "most proposed hospital mergers present no competitive issues and offer real benefits for those communities."

As evidence, AHA sent regulators a study conducted by Charles River Associates, first published in 2019 before being updated to include more recent data this August. The study found contemporary hospital mergers result in cost savings and quality improvements, without a corresponding increase in revenue consistent with the acquisition of market power.

The 2019 version showed acquired hospitals realized a greater than 2% reduction in annual operating expenses, while the 2021 version found a more than 3% reduction. Both said that lowering in costs was tied to a statistically significant drop in inpatient readmission and mortality rates.

However, that study contradicts a mountain of research finding prices tend to be higher in more consolidated markets and that providers with greater market share see higher commercial profit margins, leading to higher costs per discharge. The brunt of those higher costs is often borne by consumers in the form of higher premiums and out-of-pocket costs.

In its letter, however, AHA maintained that cost savings from mergers are passed onto plans, but it's unclear whether they make their way to consumers. The trade association, which represents some 5,000 hospitals, criticized antitrust agencies for stringently reviewing hospital mergers and avoiding the commercial health insurance industry, saying they receive unequal amounts of attention.

Payers appear to "have skirted much of the antitrust enforcement and regulatory attention provided by this assemblage of federal agencies," Pollack said.

Hospital mergers have been increasing over the past decade. Deal size was even accelerated by the pandemic as many smaller facilities, facing the risk of closure as volumes plummeted, had little choice but to consolidate with larger systems to avoid shutting their doors.

In the first half of 2021, deal revenue was at $17.2 billion across 27 transactions, according to a Kaufman Hall report. During that same period last year, revenue was $17 billion across 43 transactions.

Article top image credit: White House

Dive Brief:

• Two Midwest healthcare organizations, Minnesota-based Medica and SSM Health, are launching a joint venture, the companies confirmed to Healthcare Dive following a Wednesday announcement.
• Medica, a nonprofit insurer, will invest an undisclosed sum in Dean Health Plan, a subsidiary of St. Louis-based SSM Health — one of the nation's largest nonprofit health systems — to enhance services and products. 
• The two will retain their separate brand identities and the agreement is expected to be finalized during the fourth quarter pending regulatory approvals.

Dive Insight:

Healthcare consolidation has continued at a steady pace even amid the volatility spurred by the COVID-19 pandemic. 

Analysts expect hospitals, both for-profit and nonprofit, to continue M&A at a robust clip following the pandemic, according to a Moody's Investor Service report. And payers also have been active in dealmaking, scooping up complementary businesses. For example, Humana has acquired the remaining stake in Kindred, a giant in the home-health space, in a deal completed on Wednesday.

Cigna's health services business said in February it was acquiring telehealth vendor MDLive in an attempt to capitalize on telehealth services that have been in high demand since the onset of the pandemic. And Molina has continued to buy up health plans to expand its core business.  

However, Medica and Dean Health Plan are not calling the "strategic relationship" an acquisition or merger. Instead, they characterized it as a joint venture between Medica and SSM Health that will still need regulatory approval. 

Medica covers almost 1 million people across nine states throughout the Midwest. Employer-based coverage is by far its largest segment, insuring about 594,000 people, according to the nonprofit insurer's 2020 annual report. Medica sells Medicare, Medicaid and individual and employer-sponsored plans. 

Meanwhile, Dean Health Plan covers 500,000 people across four Midwestern states. 

Article top image credit: CCO Public Domain

Dive Brief:

• CVS Health said its Aetna unit will offer virtual primary care to self-funded employers nationwide in a move that underscores the growing popularity of telehealth services fueled by the COVID-19 public health emergency.
• Using Teladoc Health's physician-led care team model, the Aetna Virtual Primary Care service is intended to help strengthen the patient-doctor relationship and improve access to care, the vertically integrated company announced Tuesday. Members can receive health services remotely and in person.
• The initiative follows Amazon's nationwide rollout in March of its virtual care pilot program, Amazon Care, offering free telehealth consults and in-home visits for a fee to employees and their families. Amazon will also offer on-demand primary care services to other companies in Washington state.

Dive Insight:

The pandemic has shown that telehealth can be a viable long-term option for consumers. A recent survey by Social Sciences Research Solutions for the Bipartisan Policy Center, for example, found 90% of patients were satisfied with their telehealth care and would use the service again, with 80% saying their medical issue was resolved as a result of the virtual visit.

Telehealth use declined as patients ventured back into doctor offices in recent months amid tapering COVID-19 case numbers, but virtual visits appear to have steadied in May, according to Fair Health's monthly telehealth regional tracker. Utilization, measured as a percentage of all medical claim lines, climbed 2% from April to May among privately insured people. Telehealth claim lines as a percentage of medical claim lines rose 5.6% in the South and 4.8% in the West.

With COVID-19's rapid reemergance in communities across the United States, already straining hospital capacity in some Southern states, Aetna's telehealth initiative appears well-timed. "The future of digital health solutions is rapidly unfolding," Aetna President Dan Finke said in a statement.

The program combines telehealth services and access to in-person visits with providers in the CVS Health-Aetna network, including MinuteClinic and HealthHUB locations. There is no co-pay for virtual primary care visits and some in-person services after deductibles are met.

Members can maintain a continuous relationship with a primary care physician and have access to a team of specialists based on their health needs. No referral is needed for in-person visits with providers in the network. Existing Aetna virtual care services including mental health counseling, dermatology and round-the-clock urgent care are included in the benefit, as is virtual access to a nurse support team.

The telehealth boom has fueled a burst of M&A activity, some of it involving payers. Earlier this year, Cigna's Evernorth health services business acquired telehealth provider MDLive for an undisclosed sum. The insurer plans to sell MDLive's telehealth offerings to third-party clients and offer it to beneficiaries. Teladoc itself paid $18.5 billion last year to buy chronic care manager Livongo.

Aetna's new virtual primary care offering looks to be following the path of Amazon Care, which will be available to outside companies in direct competition with virtual care giants such as Teladoc, Amwell and Doctor on Demand.

Teladoc hinted at its primary care deal with Aetna when it released better-than-expected second-quarter earnings in July. The company is looking for ways to keep the momentum going after benefiting from surging volumes during the pandemic lockdowns.

Article top image credit: Bruce Bennett via Getty Images

Dive Brief:

• The Department of Justice is reportedly considering a lawsuit to block UnitedHealth Group's $8 billion acquisition of data analytics company Change Healthcare as the Biden administration steps up its antitrust efforts.
• According to The Information, which cited people familiar to the matter, the DOJ recently reached out to private attorneys about the possibility of litigation to halt the transaction as it evaluates whether UnitedHealth, which owns the biggest private payer in the U.S., might have an incentive to block access of competing insurers to Change.
• The deal was first announced in January and immediately drew opposition, including from competing payers, the American Hospital Association and the American Antitrust Institute, over anticompetitive concerns.

Dive Insight:

According to The Information, several state attorneys general have aired issues with the transaction, and the DOJ has been looking for sworn witness testimony for the potential trial. In late March, UnitedHealth and Change disclosed the DOJ had requested additional information and documents from them as it embarks on deeper scrutiny of the proposed tie-up.

A UnitedHealth spokesperson declined to answer questions about its response to the potential suit or how it could change the timeline of the deal. But despite the stricter DOJ review, the two said earlier this year they still expected the deal to close in the second half of this year.

And in the merger agreement, UnitedHealth said it would be open to divesting assets if required for approval, though it noted such divestitures couldn't account for more than $650 million in annual revenue, which would be a "burdensome condition."

AHA in March called on the DOJ to give the merger a stringent review, as the deal — meant to beef up UnitedHealth's data analytics arm OptumInsight — could also result in less competition for health IT and revenue cycle management services, and give UnitedHealth's payer business UnitedHealthcare an unfair edge in contract negotiations with hospitals, the hospital lobby alleged.

AHA also aired concerns the tie-up could result in a massive consolidation of healthcare data under UnitedHealth, which could distort decisions about patient care, claims processing and denials. Currently, Change as an independent alternative to Optum serves as a check against those outcomes, AHA said.

In response to the concerns, UnitedHealth has maintained Optum's and UnitedHealthcare's operations are kept separate.

"With distinct and complementary capabilities, this combination will help health care providers and payers better serve patients by more effectively connecting and simplifying key clinical, administrative and payment processes to the benefit of the health system and the people we serve," an Optum spokesperson told Healthcare Dive on Thursday.

The potential suit comes as the Biden administration steps up its antitrust efforts. On Tuesday, the Federal Trade Commission, said that due to a "tidal wave" of recent merger filings, it would now potentially deem combinations unlawful even after the companies consummate their merger. The alert could dampen accelerating M&A, as unwinding a transaction that's already closed is expensive and complex.

The FTC has also said it's prioritizing healthcare as part of its enforcement strategy over the next decade, as the lack of competition in the industry can lead to price hikes that threaten patient access to care.

And the DOJ's already taken its opposition to a major healthcare deal to court this year.

In June, the DOJ sued to block Aon's $30 billion acquisition of Willis Towers Watson, saying it would harm competition in retiree multicarrier healthcare exchanges, among other markets. The deal was then called off in late July after the two insurance brokers failed to reach an agreement with regulators.

Change management did not take questions from investors on a Thursday morning call on its first quarter results, citing the pending acquisition. However, the Nashville-based health IT company's stock took a nosedive on Wednesday following the news, dropping roughly 7% in morning trading.

Article top image credit: Coolcaesar/Wikimedia Commons