Payer/Provider relationships

Dive Brief:

• Advocate Aurora Health is facing allegations of unlawfully using its market power in Wisconsin to raise healthcare prices, according to a federal lawsuit filed Tuesday.
• Uriel Pharmacy Health, a Wisconsin business with a self-funded health plan, filed suit Tuesday in the Eastern District of Wisconsin, alleging the Midwest system overcharged for services and forced employers into "all-or-nothing" contracting, requiring all of Advocate Aurora's facilities to be included in-network.
• Advocate Aurora said in a statement it is "mounting what will be a vigorous defense as all of our decisions are guided by a relentless pursuit to provide the highest quality, affordable care for our patients."

Dive Insight:

The lawsuit alleges Advocate Aurora Health has used a number of anticompetitive practices to inflate healthcare prices at a cost to Wisconsin businesses.

Restrictive contracting terms have prevented employers from curbing costs, the lawsuit, which is seeking class action status, claims.

Advocate Aurora has allegedly gone to "extraordinary lengths" to limit insurance products that seek to exclude certain Advocate Aurora Health facilities that could save employers money. Instead, Advocate Aurora requires all-or-nothing contracting, meaning if one facility is in-network, all Advocate Aurora facilities must be included in an employer's insurance network.

As a result, these anticompetitive contracts allow Advocate Aurora to charge higher prices than competitors, according to the lawsuit.

The price for a hip or knee replacement at an Advocate Aurora facility in Milwaukee is $62,538, more than $21,000 above a competitor's price five minutes away, the lawsuit alleges.

Advocate Aurora's outsized presence in local markets in turn leads to a "systemwide power that gives it market power over its entire service area," according to the lawsuit. Advocate Aurora operates hospitals across Illinois and Wisconsin.

“Our complaint alleges that Advocate Aurora’s anticompetitive conduct has unlawfully taken huge sums of money from the pockets of Wisconsin employers to fund the hospital system’s never-ending expansion across the country,” said Jamie Crooks, managing partner of Fairmark Partners, LLP, which represents the plaintiffs.

The lawsuit comes on the heels of Advocate Aurora's announcement that it is merging with Atrium Health to create one of the nation's largest health systems with $27 billion in revenue.

The deal would create a 67-hospital system that spans six states across parts of the Midwest and the South.

All-or-nothing contracting caught the attention of the former California attorney general after Sutter Health faced a similar suit brought by a grocer's union in 2014.

HHS Secretary Xavier Becerra, then California AG, reached a $575 million antitrust settlement in 2019 with Sutter that barred the system from engaging in the all-or-nothing contracting among other conditions.

Dive Brief:

• The American Hospital Association is urging the Justice Department to use its authority under the False Claims Act to create a fraud task force to investigate commercial insurers that routinely deny patients access to services.
• The hospital lobby cited what it called an "alarming" and "distressing" report from the HHS Office of the Inspector General showing that 13% of prior authorization denials and 18% of payment denials met Medicare coverage rules and should have been granted. According to the OIG report, the CMS' annual audits of Medicare Advantage organizations have uncovered "widespread and persistent problems" involving inappropriate denials of services and payment.
• "This problem has grown so large — and has lasted for so long — that only the prospect of civil and criminal penalties can adequately prevent the widespread fraud certain MAOs are perpetrating against sick and elderly patients across the country, as well as against the public," the AHA said in a letter to Acting Assistant Attorney General Brian Boynton.

Dive Insight:

The AHA wants the Justice Department to take more aggressive action to remedy a pattern of improper coverage denials that the OIG highlighted in its new report. With Medicare facing potential insolvency in just a few years, lawmakers are looking into increasing oversight of the privately administered Medicare Advantage plans.

As enrollment in the plans continues to grow, so too has fraud associated with the program, costing Medicare billions of dollars, noted Sen. Elizabeth Warren, D-Mass., who addressed a Senate finance subcommittee hearing on Medicare in February. More than 26 million Medicare beneficiaries were enrolled in MA plans last year, or about 42% of the total Medicare population.

The federal government has been cracking down on MA fraud. The DOJ said in February that a growing number of its fraud and false claims settlements in 2021 involved the program.

The OIG report found MAOs, in denying prior authorization and payment requests, used clinical criteria not contained in Medicare coverage rules, requested unnecessary documentation and made manual and system errors. For its report, the OIG reviewed case files for a random sample of 250 prior authorization denials and 250 payment denials issued by 15 of the largest MAOs during one week in June 2019.

The watchdog agency said denying requests that meet Medicare coverage rules may prevent or delay beneficiaries from receiving medically necessary care, such as advanced imaging services or stays in post-acute facilities. MAOs sometimes reversed prior authorization requests that met Medicare coverage rules and MAO billing rules, often prompted by an appeal from a beneficiary or provider.

To address the problem of improper denials, the OIG recommended the CMS issue new guidance on the appropriate use of clinical criteria in medical necessity reviews, update its audit protocols and direct MAOs to identify vulnerabilities that can lead to errors. The CMS agreed with the recommendations.

But the AHA argued those actions don't go far enough, noting the OIG identified similar problems with improper MAO denials in September 2018, yet the CMS had not acted on all of the recommendations in that report as of this March.

The government pays MAOs a capitation rate of about $1,000 per beneficiary, giving the organizations "every incentive to deny services to patients or payments to providers in order to boost their own profits," the AHA said in its letter to Boynton.

"It is time for the Department of Justice to exercise its False Claims Act authority to both punish those MAOs that have denied Medicare beneficiaries and their providers their rightful coverage and to deter future misdeeds," the AHA stated.

Healthcare data is growing at an astronomical rate—by some estimates, at least 48% annually. This explosion of information is prompting a new era in healthcare, transforming clinical diagnostics and the delivery of patient care. But it also presents healthcare organizations with the challenge of managing and analyzing extremely large and diverse data assets.

At the same time, organizations are changing their care and reimbursement frameworks from volume-based to value-based, focusing on clinical outcomes and treatment efficiency. This shift has had many benefits, including higher patient satisfaction, reduced medical errors, and lower costs. But this new model of care and payment also requires robust and advanced analytics that can provide data-driven insights. According to Deloitte, “The need for robust healthcare data analytics explodes exponentially with the shift to value-based care. At the very foundation, healthcare organizations can’t operate within value-based care—or recognize its upsides—without robust data and analytics.”

So how can healthcare providers and payers use data analytics to provide better value-based care and adopt effective value-based reimbursement models?

HEALTHCARE PROVIDERS

Healthcare providers know that data has the potential to improve patient outcomes as well as increase operational efficiencies and lower costs, and they are spending aggressively to gain data management and analysis capabilities. According to ResearchandMarkets.com, the global big data in healthcare market was valued at $32,925.1 million in 2021 and is anticipated to reach $130,132.1 million by the end of 2031, registering a CAGR of 13.96% during the forecast period 2022–2031.

Here are some of the benefits healthcare practitioners (HCPs) stand to gain from healthcare data analysis:

1. Better clinical decision-making and population health management: By analyzing data from disparate sources (including clinical, demographic, and environmental data), clinicians can improve treatment outcomes for individual patients or groups with chronic disease states. Such analysis can help them focus on prevention and proactive care, leading to lower costs for both the patient and the healthcare system.
2. Improved patient care access and experience: With data insights available at different points of care, clinicians and administrators can optimize key care delivery processes such as admittance and discharge. They can improve resource utilization and ensure patients receive quality care in a timely manner.
3. Lower costs by reducing inefficiencies: Analyzing patient outcomes on a large scale and identifying wasteful practices (such as unnecessary testing or use of medical products) can help HCPs reduce clinical and patient care costs and pursue treatment options that are more sustainable and cost efficient.

HEALTHCARE PAYERS

According to the Centers for Medicare & Medicaid Services, annual growth in national health spending is expected to average 5.1% through 2030. By 2030, it’s expected to reach nearly $6.8 trillion—that’s 19.6% of the GDP. The upward trajectory of U.S. healthcare spending continues to put pressure on healthcare payers to provide cost-effective services that produce high-value results for members. 

Payers can leverage outcome-based analytics to streamline operations and maximize efficiency. This includes:

1. Better decision-making at every organizational level: Healthcare data analysis can help payers improve benefits planning, assess providers and treatments, identify emerging trends, and measure the effectiveness of care management.
2. Better customer service: Developing and sharing analytical insights can enable payers to deliver reliable, timely advice to customers and strengthen payer/provider relationships. Modern analytics platforms can also drive internal efficiency by taking the low-value work out of manually analyzing spreadsheets, allowing managers and service teams to focus on customer-related issues.
3. Lower costs and higher revenues: More data transparency helps healthcare payers identify and combat fraud, waste, errors, and abuse at every stage of the health claims reimbursement process. Meanwhile, insight into areas such as customer behavior and health plan trends can help payers identify opportunities for new products and offerings that improve the patient/customer experience.

Healthcare providers and healthcare payers have much to gain from driving value-based analytics in their organization. They can improve decision-making, lower the risk of errors, achieve higher operational efficiency and lower costs, and even unlock new sources of value and revenue streams. But most importantly, they can deliver better patient care. 

The Snowflake Healthcare & Life Sciences Data Cloud provides a secure and flexible enterprise analytics platform that can bring complex data sources together and centralize sensitive data in a single, secure, and easily shareable location. Healthcare providers and payers can harness the power of our partner ecosystem to perform robust advanced analytics and get deeper insights. To learn more, visit Snowflake for Healthcare & Life Sciences.

Dive Brief:

• Employers and private insurers paid 224% of what Medicare would pay for the same services at the same facilities across all hospital inpatient and outpatient services on average in 2020, according to a Rand study funded by the Robert Wood Johnson Foundation.
• Researchers found significant variations in those prices across states. For instance, Hawaii, Arkansas and Washington had relative prices below 175% of Medicare prices, while other states like Florida, West Virginia and South Carolina had relative prices at or above 310% of Medicare.
• Price variations by state are more attributable to hospital market power than each hospital's share of patients covered by Medicare or Medicaid, according to the report released Tuesday.

Dive Insight:

The findings illustrate just how broadly prices for healthcare services can vary based on a patients’ insurance coverage and which state they receive care in.

Despite recent price transparency regulations designed to help consumers shop around for services, employers that provide most private insurance often don't have usable information on prices negotiated with hospitals on their behalf, researchers wrote.

About 157 million Americans got health coverage through an employer or union in 2020, according to data from the Kaiser Family Foundation.

The latest figures are a slight improvement from Rand’s previous 2018 study, when employers and private insurers paid 247% more on average than Medicare for the same services and the same facilities, according to the report. That’s mostly attributable to a boost in the volume of claims from states with prices below the previous mean price, the researchers said.

For COVID-19 hospitalizations, employers and private insurers paid on average 241% more than what Medicare would pay in 2020, the report, based on claims data from over 4,000 hospitals and over 4,000 ambulatory surgery centers in every state except Maryland, found.

Researchers also found variations between different sites of care.

Looking at five common procedures done in both ambulatory surgical centers and hospital outpatient departments, the average price in the outpatient department was $6,169 while the average ASC price was $2,404.

While commercial prices for ASC services rose slightly faster than Medicare prices over the study period, they remained well below relative prices for the same services in hospital outpatient departments.

Employers and private insurers paid about 162% more than Medicare for common outpatient services done in ambulatory surgery centers.

But if ASCs were paid the same as hospital outpatient departments in Medicare, the prices for those services would have averaged 117% of Medicare payments, the study found.

The American Hospital Association pushed back on the findings, saying “researchers should expect variation in the cost of delivering services across the wide range of U.S. hospitals — from rural critical access hospitals to large academic medical centers,” according to a statement from CEO Rick Pollack.

The AHA also said the report looks at 2.2% of overall hospital spending, and the average price for hospital services declined as Rand added more claims in the latest report compared to past reports. Pollack said in the statement “you simply cannot draw credible conclusions from such a limited and biased set of claims.”

The Advocate Aurora Health and Atrium Health merger is likely to get a close review from the Federal Trade Commission as the Biden administration has taken a tougher stance on healthcare consolidation, antitrust and legal experts say.

"I don't think anything of this size in a healthcare transaction today is going to get rubber stamped," said Bill Horton, a partner at Jones Walker who focuses on healthcare transactions.

Antitrust regulators have challenged hospital deals when close competitors seek to merge within the same market.

"Historically, the FTC concern in hospital and healthcare institution mergers has been the geographic overlap," Horton said.

Advocate Aurora and Atrium do not have any geographic market overlap. The systems span six separate states through the Midwest and South.

"It doesn't raise the same red flags, but it doesn't mean that it gets waved through," said Leemore Dafny, a Harvard Business School professor and former deputy director of healthcare and antitrust at the FTC.

The FTC is likely to examine whether the two systems negotiate with the same insurers even if they're in different geographic locations, Dafny said.

Employers with multiple locations and employees in these states "might have a reason to be concerned about any potential change in bargaining leverage of these two systems when it comes to negotiating with, say, UnitedHealthcare," Dafny said.

Dafny has published research in the RAND Journal of Economics on this topic, examining the effects of cross-market mergers, noting there has been "very little regulatory activity" in this area despite the pace of these mergers.

Dafny found hospitals acquiring another in-state facility does raise prices by 7% to 10%. The research found out-of-state acquisitions did not result in a meaningful change in price. The results focus on the effects of mergers when there are common insurers, however.

"The research doesn't let them off the hook," Dafny told Healthcare Dive.

The FTC's scrutinization does not necessarily mean the agency will move to block it.

Beaumont Health and Spectrum Health in Michigan recently finalized a cross-market merger after the FTC requested additional information to review the deal, according to prior Healthcare Dive reporting.

The deal brought together Spectrum Health’s 14 hospitals lining the western side of the state, while Beaumont’s eight hospitals hug the Detroit area on the opposite side of the state.

Wednesday's merger announcement comes as the Biden administration has called out consolidation in the healthcare industry, and instructed regulators to take a tougher stance in an executive order issued last summer.

Dive Brief:

• Humana plans to open about 100 new value-based primary care clinics for Medicare patients between 2023 and 2025 through its second joint venture with private-equity firm Welsh, Carson, Anderson & Stowe, according to a Monday release from the payer.
• The clinics will be managed and operated under Humana’s CenterWell Senior Primary Care brand, and WCAS will have majority ownership while Humana will have a minority stake.
• The $1.2 billion expansion builds upon an existing venture with the same firm to open 67 clinics by early 2023.

Dive Insight:

The move comes as traditional payers compete with rival startup insurtechs for lucrative Medicare Advantage members, for which the government provides a flat fee, rather than fee-for-service payments, with payers taking on the risk of caring for those seniors.

Humana slashed its outlook for MA plan member growth earlier this year as members actively shopped and generated churn in the industry during the latest open enrollment period, and the payer lost members to other insurance carriers, CEO Bruce Broussard said at the time.

It’s now looking to boost its offerings by expanding its primary care clinics into more markets, and by the end of 2022 it expects to serve Medicare patients in about 250 clinics, according to the release.

As of March 31, Humana operated a total of 214 clinics, including 37 under the current joint venture and 177 other wholly-owned centers.

The clinics will operate under Humana’s CenterWell Senior Primary Care and Conviva Care Solutions brands.

Humana’s health services division Centerwell was recently rebranded, and its senior-focused primary care clinics previously operated as Partners in Primary Care in several states and Family Physicians Group in the Orlando area.

The payer will receive a management fee, including performance-based incentives, for the management of all joint venture clinics.

The agreement also includes put and call options through which Humana may buy WCAS’ interest.

Humana can do so beginning in 2028 or five years after the opening of each cohort of clinics.

WCAS may require Humana to purchase its interest beginning in 2030 or seven years after the opening of each cohort of clinics.

Although Humana lowered MA growth forecasts for the year, it did see total MA membership grow 5.2% year over year, according to the payer’s first quarter earnings results.

MA has continued to see growth in membership every year since the early 2000s, and in 2021 MA enrollees made up 42% of the total Medicare population. That figure is projected to rise to 51% by 2030, according to the Kaiser Family Foundation.

The number of MA plans rose 8% from 2021 to 2022, with a total of 3,834 plans available nationwide. That's the largest number of available plans in more than a decade, according to KFF.

As increased costs weighed on hospital operators in the first quarter, the nation's largest insurers saw profits and revenues rise alongside growing membership bases.

The performance spurred payers to raise financial expectations, painting an improved financial outlook for the full year compared to earlier estimates for 2022.

On the other hand, the omicron variant exacerbated challenges for providers as both COVID-19 cases and hospitalizations reached all-time highs in January. Facing increased cost pressure, partly due to pricier labor, some for-profit health systems have lowered financial estimates for the year, including HCA Healthcare, one of the largest systems with 182 hospitals.

The January spike in cases seemed to somewhat disrupt normal patient volume, though payers report volumes were largely back to normal by the end of the quarter.

UnitedHealth Group, parent company to the nation's largest private insurer with more than 50 million members, noticed "considerable variation in care patterns," CFO John Rex told investors during the first-quarter call. But by the end of the quarter, volumes were largely back to normal.

United's medical loss ratio increased compared to the first quarter of last year, a potential signal that care patterns are returning to normal. The payer's MLR — an important measure that compares the amount an insurer brings in from premiums to the amount it spends on care — was 82% in the quarter, an increase from 80.9% a year earlier.

With a rise in revenue and members, UnitedHealth's profit climbed 3% to $5 billion, spurring the insurer to raise its financial outlook, increasing its earnings expectations for the full year.

Similarly, CVS, parent company to insurer Aetna with more than 24 million members, said care patterns were in line with pre-pandemic levels, though executives noted volumes in its government products were slightly below baseline.

Like United, CVS' medical loss ratio was higher compared to the first quarter of last year, again suggesting a return to pre-pandemic care patterns.

Meanwhile, Molina and Cigna were able to manage costs despite the early omicron surge.

Molina Healthcare said COVID-19 costs were almost entirely offset by patients deferring care in the quarter even as COVID-19 costs were the highest since the start of the pandemic.

Molina's profit increased 13% to $258 million alongside increased revenue and membership, prompting the primarily government-sponsored insurer to raise its financial outlook, expecting an additional $750 million in premium revenue.

For Cigna, treatment costs for infected patients were lower in the first quarter despite record case counts. Patients were far less ill compared to prior waves, executives said, as more patients were vaccinated.

Cigna's profit rose 2% to $1.2 billion on increased revenue and membership, leading the insurer to raise its full-year forecasts. It now expects adjusted operating income to reach $7.05 billion, an increase of $100 million from its prior guidance.

Insurers noted widespread membership growth in the first quarter.

Anthem's first-quarter membership of nearly 48 million grew by 3.4 million members, more than 7%, compared with the first quarter of last year. Executives attributed the growth to the strongest selling season in the company's history and the acquisition of an Ohio Medicaid plan.

Also, continued pandemic-era protections for patients helped fuel enrollment.

For Centene, membership increased nearly 8% to 26.2 million members due in part to a freeze on Medicaid eligibility checks.

To protect patient access to coverage during the pandemic, federal lawmakers barred states from kicking patients off coverage by mandating a pause in eligibility determinations. Centene said it expects redeterminations — when states check whether Medicaid members are still eligible for the subsidized insurance coverage — will begin in August.

Dive Brief:

• Controversy around a direct contracting model the Biden administration rebranded and redesigned earlier this year following pressure from progressive Democratic lawmakers and single-payer advocates was excessive and not based in fact, according to some members of the accountable care community.
• Grassroots opposition to the Trump-era model, in which physicians can accept either full or partial capitation as payment in traditional Medicare, ramped up late last year and reverberated up to Capitol Hill in 2022. Critics slammed direct contracting as a thinly veiled effort to privatize the Medicare fee-for-service program, even as hundreds of providers voiced their support.
• The National Association of Accountable Care Organizations felt these concerns were "very false and misleading," said David Pittman, NAACOS senior policy adviser, at NAACOS spring conference on Friday. "If politics could kill an ACO model, that would be devastating."

Dive Insight:

The Trump administration unveiled the original direct contracting model in 2019, with the goal of coordinating primary and specialty care, while allowing access to enhanced benefits. It offered a higher level of risk and reward than other ACO models at the time, which garnered it strong support from many health systems, physicians and medical group organizations.

Supporters said holding physicians accountable for outcomes meant patients would be more likely to receive team-based, preventative care that improved outcomes while lowering costs.

However, critics argued the model was a step toward privatizing Medicare by allowing a variety of entities, including those owned by private equity firms, to manage patient care, and would increase costs in the cash-strapped program while harming patient access.

Antagonistic rhetoric around the model grew in intensity late last year, with members of Physicians for a National Health Program, which supports a single-payer system, staging a protest in front of the HHS building in Washington, D.C., in December.

The issue eventually caught the attention of lawmakers. Direct contracting came under increased fire during a February hearing of the Senate Finance Committee.

Chairwoman Elizabeth Warren, D-Mass., called on the administration to end the model immediately, saying in opening remarks that direct contracting would open the door for "insurers that are already scamming Medicare and dozens of investor-owned organizations" to cover beneficiaries while pocketing "as much as 40% in profits."

"President Biden should not permit Medicare to be handed over to corporate profiteers," Warren said.

However, regulators maintained it would be disruptive to cull the model completely. More than 200 provider groups called on the government to amend direct contracting instead.

In late February, the CMS announced it would retain the model — albeit with numerous changes and a new name: Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) Model.

Now, ACOs are saying the issue was blown out of proportion.

The discussion on Capitol Hill was rooted in a "real lack of understanding" around the beneficiary protections and cost investments inherent in ACOs, said Melanie Matthews, CEO of physician group Physicians of Southwest Washington.

"The unfortunate thing is that a number of us share the opinion that a lot of that discussion was just not grounded in fact. And that was not a positive thing that came out of this," Corey Rosenberg, ACO REACH model lead at the CMS Innovation Center, said.

Gary Jacobs, executive director for VillageMD's Center for Public Policy, said that the value-based primary care network anticipated direct contracting would be a political issue after it was introduced late in the Trump administration.

But "the argument that we can game the system to make money is bullsh--," Jacobs said.

Panelists noted the negative rhetoric — which some argued was initially based on well-founded concerns around private equity in healthcare before snowballing — also challenged the ongoing push toward value-based care.

"This is just as threatening to the underlying ACO movement as it is to the underlying direct contracting model," Matthews said.

According to Andrew Allison, CEO of direct contracting entity On Belay Health Solutions, it's important for healthcare organizations to "never assume" that elected representatives understand the minutiae of their industry or the programs they're involved in. Many ACOs assumed the heat would blow over, but quickly found themselves on the wrong side of the messaging debate as public opinion swung against the model.

"We need to stay on the offensive and keep the rhetoric positive," Allison said.