Mergers & Acquisitions

Mergers & Acquisitions / en Fri, 25 Apr 2025 17:12:36 -0500 Mon, 31 Mar 25 16:01:51 -0500 DOJ launches Anticompetitive Regulations Task Force /news/headline/2025-03-31-doj-launches-anticompetitive-regulations-task-force The Department of Justice March 27 <a href="https://www.justice.gov/opa/pr/justice-department-launches-anticompetitive-regulations-task-force">announced</a> it is launching an Anticompetitive Regulations Task Force to advocate for “the elimination of anticompetitive state and federal laws and regulations that undermine free market competition.” The DOJ said its Antitrust Division is seeking <a href="https://www.regulations.gov/">public comments</a> until May 26 on laws and regulations considered to be the most significant barriers to competition in markets such as health care, housing, transportation, food and agriculture, and energy.&nbsp; Mon, 31 Mar 2025 16:01:51 -0500 Mergers & Acquisitions AHA, Other Organizations in Support of Congressional Review Act /lettercomment/2025-02-12-aha-other-organizations-support-congressional-review-act February 12, 2025<table><tbody><tr><td>The Honorable Jim Jordan Chair Committee&nbsp;on&nbsp;the&nbsp;Judiciary U.S. House of Representatives Washington, D.C. 20515</td><td>The&nbsp;Honorable Scott Fitzgerald&nbsp; Chair Subcommittee on the Administrative State,&nbsp; Regulatory Reform, and Antitrust U.S.&nbsp;House&nbsp;of&nbsp;Representatives Washington, D.C. 20515</td></tr><tr><td>The Honorable Jamie Raskin&nbsp; Ranking Member, Committee on the Judiciary United States House of Representatives Washington, D.C. 20515 &nbsp;</td><td>The&nbsp;Honorable&nbsp;Jerrold Nadler Ranking Member, Subcommittee on the&nbsp; Administrative&nbsp;State, Regulatory Reform,&nbsp;and Antitrust United States House of Representatives&nbsp; Washington, D.C. 20515</td></tr></tbody></table>Dear Chairman Jordan, Subcommittee Chair Fitzgerald, Ranking Member Raskin, and Ranking Member Nadler:The undersigned organizations&nbsp;write to express our support for the use of the Congressional Review&nbsp;Act&nbsp;(CRA)&nbsp;to overturn&nbsp;the&nbsp;Federal&nbsp;Trade&nbsp;Commission's (FTC) recent premerger notification rules ("Rules").&nbsp;The&nbsp;Rules have also&nbsp;been&nbsp;challenged in court for violating the Administrative&nbsp;Procedures Act as being unnecessary and overly burdensome.&nbsp;Overturning the Rule would efficiently allow the FTC to&nbsp;restart the rulemaking&nbsp;process and promulgate&nbsp;rules that are less burdensome&nbsp;and more narrowly targeted.As a general matter, mergers and acquisitions (M&amp;A) often promote efficiency and competition by allowing companies of all sizes to put assets to their highest and best use.&nbsp;M&amp;A activity can also spur innovation: smaller companies, entrepreneurs, and early-stage investors&nbsp;benefit from opportunities&nbsp;for capital formation, liquidity, and growth, as well as the possibility of a future exit.&nbsp;&nbsp;Larger&nbsp;businesses utilize&nbsp;M&amp;A to&nbsp;unlock&nbsp;efficiencies,&nbsp;enhance&nbsp;research&nbsp;and&nbsp;development,&nbsp;and&nbsp;expand&nbsp;operations.When Congress passed the Hart-Scott-Rodino Act ("HSR Act") it explicitly wanted to avoid "deter[ring] ... the vast majority of mergers and acquisitions." Congress recognized that M&amp;A activity usually improves competition by "generat[ing] significant efficiencies and thus enhanc[ing] the merged firm's ability and incentive to compete, which may result in lower prices, improved quality, enhanced service, or new products."1 Thus, the Rules should be geared toward identifying the small percentage of mergers that may harm competition and avoid unduly burdening the vast majority of mergers that either help competition or are neutral.To accomplish this, the HSR Act establishes a two-stage process. An initial filing stage that applies to all HSR mergers above a certain size and provides the agencies high-level information about the transaction, and a "second request" stage that grants the FTC and the Department of Justice enormous power to request additional information for any merger that they wish to further scrutinize.2 More recently, the Consolidated Appropriations Act of 2023, directed the FTC to revise the form used for merger notifications for one specific purpose: to solicit data on foreign subsidies originating from countries of concern.But rather than simply updating the form as Congress directed, the FTC proposed sweeping changes. The Republican FTC commissioners, who were powerless to stop the rule, were successful in paring back the final Rule in exchange for their support, but both Republican Commissioners made clear in their statements that this was not a rule they would have written.3According to the government's own data, 98% of mergers do not raise competitive concerns. But the new Rule assumes that almost all M&amp;A activity is inherently problematic, and subjects businesses from small to large - and reportable transactions from simple to complex - to what is effectively the burdensome "second request" process normally reserved for M&amp;A activity that the FTC or DOJ have determined could violate the antitrust laws.The increased burden the final Rule imposes is unjustifiable: increased bureaucracy that has the effect of deterring mergers will stifle innovation, reduce market efficiencies, and ultimately harm consumers who benefit from the competitive dynamics that mergers can and do foster.4 Further, the agencies do not have the resources to make use of the additional information the Rule would demand from all merger filings. Informational overload will force the agencies to divert resources away from the handful of mergers that require closer scrutiny. Moreover, having digested the final Rule's 460 pages, merger filing experts agree that it provides little benefit for the overwhelming number of reportable transactions, fails to consider less burdensome alternatives, and affords the government too much discretion to reject filings based on political criteria.Moreover, the FTC made changes that are in direct violation of administrative law. For example:<ul><li>At no time during the rulemaking process did the FTC present any justification to support its finalized changes. The FTC cannot point to a single merger that was not thoroughly reviewed because information at the initial filing stage was lacking.</li><li>The FTC dramatically underestimates the costs of and cannot identify benefits associated with the additional burden imposed on every merger filing. This is a significant burden because roughly 98% of mergers do not currently undergo a "second request."</li><li>The FTC failed to appropriately consider alternatives that might keep the existing form for the vast majority of mergers, and subject only a subset of transactions to a reasonable additional initial filing burden.</li><li>The Rule was significantly changed from the proposed rule that was available for public comment. Administrative law requires that the FTC restart the rulemaking process and seek additional comment, given the dramatic changes made between the proposed and final Rule.</li><li>Because the public has not had an opportunity to comment on the Rule, the Rule's publication also runs afoul of the Administrative Procedure Act, the Paperwork Reduction Act, Regulatory Flexibility Act, and Small Business Regulatory Enforcement Fairness Act.</li></ul>To be clear, the business community has no objections to the Congressionally mandated changes to the HSR form related to the collection of information about foreign subsidies. Nor does the business community object to reasonable updates to the form beyond what Congress recently directed. However, additional changes must be justifiable and targeted to identify anticompetitive mergers, not to add sweeping and unnecessary requirements.A Congressional repeal of this Rule would allow the FTC to issue a new NPRM consistent with Congress's two-tier approach to merger review. With a new NPRM, the FTC could gather public comments on the Rule's costs and benefits, as well as options for less burdensome alternatives.Invoking Congress's prerogative as provided in the CRA will help clear the way toward re-establishing a predictable, efficient process for agency review of M&amp;A activity. Repeal also would save taxpayer money by mooting the legal challenges brought against the FTC by concerned plaintiffs. We therefore urge Congress to enact a resolution of disapproval to vitiate the FTC's Rule.Sincerely,ACT I The App Association AdvaMed Alternative Investment Management Association American Investment Council American Coatings Association �� Association&nbsp; Business Roundtable Biotechnology Innovation Organization (BIO) Center for American Entrepreneurship Computer &amp; Communications Industry Association (CCIA) Connected Commerce Council Connected Health Initiative Consumer Technology Association Energy Equipment &amp; Infrastructure Alliance&nbsp; Engine Federation of ��s Global Business Alliance Information Technology Industry Council (ITI) International Franchise Association Managed Funds Association Metals Service Center Institute National Association of Manufacturers National Industrial Transportation League National Parking Association National Pest Management Association National Retail Federation National Venture Capital Association (NVCA) NetChoice Partnership for the U.S. Life Science Ecosystem (PULSE) Pharmaceutical Research and Manufacturers of America (PhRMA) Retail Industry Leaders Association&nbsp; Silicon Valley Leadership Group Small Business &amp; Entrepreneurship Council Software Information Industry Association (SIIA) TechNet United States Hispanic Business Council U.S. Chamber of Commerce Western States Trucking AssociationCC: Members of the House Judiciary Committee__________&nbsp; 1 S. Rep. No. 94-803, at 66 (emphasis added) 2 The agencies also frequently use voluntary access letter to gather additional information from the merging parties before issuing a second request. 3 See. Concurring Statement of Commissioner Andrew N. Ferguson in the Matter of Amendments to the Premerger Notification and Report Form and Instructions, and the Hart-Scott-Rodino Rule 16 C.F.R. Parts 801 and 803, U.S. Federal Trade Comm., October 10, 2024, at 5, "[t]he Final Rule is not perfect, nor is it the rule I would have written if the decision were mine alone." See a/so. Statement of Commissioner Melissa Holyoak Regarding Final Premerger Notification Form and the Hart-Scott-Rodino Rules. Federal Trade Comm., October 10, 2024, at 1, "[t]o be clear, this Final Rule does not align exactly with my preferences." 4 Evidence of Efficiencies in Consummated Mergers, Maureen K. Ohlhausen &amp; Taylor M. Owings (June 2023), available at <a class="ck-anchor" href="https://www.uschamber.com/assets/documents/20230601-Merger-Efficiencies-White-Paper.pdf" id="https://www.uschamber.com/assets/documents/20230601-Merger-Efficiencies-White-Paper.pdf">https://www.uschamber.com/assets/documents/20230601-Merger-Efficiencies-White-Paper.pdf</a> &nbsp;(A survey of research on consummated mergers demonstrates mergers "can and do advance procompetitive business objectives.") &nbsp; Wed, 12 Feb 2025 14:13:56 -0600 Mergers & Acquisitions Report: Hospitals and health systems stabilized in 2024 but continue to face distress /news/headline/2025-01-16-report-hospitals-and-health-systems-stabilized-2024-continue-face-distress A <a href="https://www.kaufmanhall.com/insights/research-report/hospital-and-health-system-ma-review-despite-industry-stabilization" title="research report">report</a> released Jan. 9 by Kaufman Hall highlights hospital and health system merger and acquisition activity from last year.&nbsp; &nbsp;The report said that announced transactions involving a financially distressed party hit a record high 30.6%. It also found that 62.5% of the announced transactions involved a divestiture, the highest percentage the industry has experienced and more than double the percentage from 2023. The percentage of announced transactions in which the smaller party had a credit rating of A- or higher dropped to an all-time low of 2.8%.&nbsp; Thu, 16 Jan 2025 15:26:31 -0600 Mergers & Acquisitions Chamber of Commerce files lawsuit against FTC for changes to premerger notification rules /news/headline/2025-01-13-chamber-commerce-files-lawsuit-against-ftc-changes-premerger-notification-rules The U.S. Chamber of Commerce Jan. 13 filed a <a href="https://www.uschamber.com/assets/documents/Complaint-Chamber-of-Commerce-v.-FTC-E.D.-Tex.pdf">lawsuit</a> against the Federal Trade Commission, saying changes made by the FTC to premerger notification rules under the Hart-Scott-Rodino Act are “unnecessary and unlawful.”In a statement, the Chamber said the FTC “has failed to justify the need to subject every merger filing to its new burden. During the rulemaking process it never contemplated alternative, less burdensome approaches and understates the costs and overstates the benefits of changing the rule as part of its final analysis. Subjecting thousands of routine mergers and acquisitions to these additional burdens will slow down normal business transactions and increase costs, hurting the economy in the process.”The FTC finalized changes to the premerger notification rules, form and instructions under the HSR Act in October. The AHA expressed disappointment with the FTC's changes, <a href="/news/headline/2024-10-11-ftc-issues-ruling-premerger-notification-rules-increases-burden-merging-organizations">saying</a> that the rule “functions as little more than a tax on mergers... The agency already has more than enough information about hospital transactions, and it has shown no hesitation in challenging them. The final rule will just require hospitals to divert time and resources away from patient care towards needless compliance costs.” Mon, 13 Jan 2025 17:02:45 -0600 Mergers & Acquisitions FTC issues ruling on premerger notification rules, increases burden on merging organizations /news/headline/2024-10-11-ftc-issues-ruling-premerger-notification-rules-increases-burden-merging-organizations The Federal Trade Commission Oct. 10 finalized <a href="https://www.ftc.gov/legal-library/browse/federal-register-notices/final-rule-premerger-notification-reporting-waiting-requirements" target="_blank" title="Federal Trade Commission: Final Rule: Premerger Notification; Reporting and Waiting Requirements">changes to the premerger notification rules</a>, form and instructions under the Hart-Scott-Rodino Antitrust Improvements Act. The final rule, while less burdensome than the proposed rule, increases the reporting requirements on the current HSR form, particularly for the buyer.“The AHA is disappointed that the FTC moved forward with this flawed and pointless rule,” stated Chad Golder, AHA general counsel and secretary. “As we explained in our comment letter, it functions as little more than a tax on mergers. The FTC still has not sufficiently explained why all this information is needed. The agency already has more than enough information about hospital transactions, and it has shown no hesitation in challenging them. The final rule will just require hospitals to divert time and resources away from patient care towards needless compliance costs.” When the FTC issued the proposal in 2023, the <a href="/lettercomment/2023-09-05-aha-urges-ftc-withdraw-proposed-changes-premerger-notification-rules">AHA urged the FTC to withdraw its proposed changes</a>, stating it would add unnecessary burdens and increase costs without adding benefits. The final rule and HSR form will go into effect 90 days after publication in the federal register. Fri, 11 Oct 2024 13:04:24 -0500 Mergers & Acquisitions AHA Statement to House Budget Committee on the Value of Hospital Systems /testimony/2024-05-23-aha-statement-house-budget-committee-value-hospital-systems Statement of the �� Association for the Committee on the Budget of the U.S. House of Representatives“Breaking Up Health Care Monopolies: Examining the Budgetary Effects of Health Care Consolidation”May 23, 2024On behalf of our nearly 5,000 member hospitals, health systems and other health care organizations, our clinician partners — including more than 270,000 affiliated physicians, 2 million nurses and other caregivers — and the 43,000 health care leaders who belong to our professional membership groups, the �� Association (AHA) writes to share the hospital perspective on the ways hospital mergers and acquisitions can expand and preserve access to quality care.<h2>MERGERS AND ACQUISITIONS HELP HOSPITALS MANAGE ONGOING FINANCIAL PRESSURES</h2>Hospitals and health systems continue to experience significant financial pressures that challenge their ability to provide 24/7 care for the patients and communities they serve. Mergers and acquisitions allow some hospitals use to manage these pressures and increase access to care for patients.A&nbsp;<a href="/system/files/media/file/2024/05/Americas-Hospitals-and-Health-Systems-Continue-to-Face-Escalating-Operational-Costs-and-Economic-Pressures.pdf">recent report</a> released by the AHA details the extraordinary financial pressures continuing to affect access to patient care. In 2023, hospitals and health systems again sustained substantial expenses due to high costs for labor, drugs and supplies, ongoing workforce challenges and growing administrative burdens. At the same time, hospitals and health systems increasingly encounter the twin challenges of navigating onerous commercial insurer practices that deny and delay payment for care provided to patients, while reimbursements from Medicare and Medicaid have failed to keep pace with mounting costs.Merging with a hospital system can help some hospitals ease these financial burdens and improve patient care. Among other benefits, mergers are a tool that expand access to care for patients and allow hospitals to achieve the scale and increase the efficiency in purchasing medical services, supplies and prescription drugs. Mergers also help to reduce other operational costs through shared service models for departments like information technology (IT), human resources, finance and compliance. Hospitals and health systems should be permitted to pursue the type of arrangements that work best for their patients and community, including independent status, mergers or other partnerships.<h2>BENEFITS OF HOSPITAL MERGERS AND ACQUISITIONS TO PATIENTS AND COMMUNITIES</h2>Hospital mergers and acquisitions bring measurable benefits to patients and communities, including increased access to care, improved quality and lower health care costs.<h3>Better Access to Care</h3>Mergers and acquisitions also play a critical role in preserving access to care, especially for patients and hospitals in rural or other underserved communities. In particular, they help hospitals improve access to care by expanding the types of specialists and services available to patients. According to an analysis by the health care consulting firm Kaufman Hall, nearly 40% of affiliated hospitals added one or more services post-acquisition. Almost half of all hospitals acquired by an academic medical center added one or more service. Patients at hospitals acquired by academic medical centers or large health systems also gained improved access to tertiary and quaternary services.1Mergers and acquisitions also are a vital tool that some health systems use to keep financially struggling hospitals open and serving their communities, thereby averting bankruptcy or even closure.&nbsp;When hospitals become part of a health system, the acquired hospital can more easily and cohesively access services and specialties available at other hospitals within the system. As a result, the continuum of care is strengthened for patients and the community, resulting in better care, increased access to specialty care and decreased readmission rates overall.This is particularly true in rural and underserved communities. Health systems typically acquire hospitals in these communities when the hospitals are under financial distress.&nbsp; The results are demonstrable. Research has shown that rural hospitals are less likely to close after acquisition compared to independent hospitals and that mergers have improved access and quality of care for rural hospitals.2<h3>Improved Quality</h3>Emerging research has demonstrated a clear association between consolidation and quality improvement, indicating that hospital mergers and acquisitions may lead to better quality of care. For example, one study found that a full-integration approach is associated with improvements in mortality and readmission rates, among other quality and outcome improvements.3&nbsp;This is due to quality improvement in part due to the integration of information technology and analytic-driven interventions, both made possible by leveraging the health systems resources in the acquired hospital. Another study found significant reductions in mortality for a number of common conditions — including acute myocardial infarction, heart failure, acute stroke and pneumonia — among patients at rural hospitals that had merged or been acquired.4<h3>Lower Health Care Costs</h3>Mergers and acquisitions help reduce health care costs and are an effective tool for hospitals to operate more efficiently and cope with escalating costs. For example, a Charles River Associates analysis for the AHA shows that hospital acquisitions are associated with a statistically significant 3.3% reduction in annual operating expenses per admission at acquired hospitals, along with a 3.7% decrease in net patient revenue per adjusted admission.5The same report shows that additional benefit come from improved IT systems and advanced data analytics. Merged hospitals can often better invest in IT infrastructure for both clinical and financial data that can be used to identify best practices for more cost-effective, integrated and streamlined care. These data systems have substantial, but largely, fixed costs, making them effectively inaccessible to independent hospitals but scalable for larger systems.<h5>INSURERS LEVERAGE THEIR MARKET POWER AT THE EXPENSE OF HOSPITALS AND HEALTH SYSTEMS</h5>Hospitals and health systems face significant pressure from health insurance companies, which are leveraging their market power in a way that drives up hospital and health system costs. For example, in nearly half of all markets, a single health insurer controls at least 50% of the commercial market.6 Commercial health insurers can — and do — use this market power to increase health insurance premiums as research has found that marketplace insurance premiums grow faster in areas with less insurer competition.7 Commercial insurers also have used their market power to implement policies that compromise patient safety and raise costs for hospitals and patients alike, such as prior authorization delays, denying coverage for medically necessary care, or forcing patients to try potentially ineffective treatments or therapies.8Due to burnout associated with commercial insurer policies like prior authorization and low reimbursement rates, most physicians are choosing to become employed rather than operate their own practices. While a disproportionate amount of attention has been placed on hospitals’ acquisition of physician practices, large commercial insurers including CVS Health and UnitedHealth Group have recently spent billions of dollars acquiring practices. In fact, non-hospital entities including health insurers have acquired 90% of physician practices over the last five years. 9 We urge this committee to examine the costs and impact on health care access and affordability associated with this widespread acquisition of America’s physicians by corporate health insurance companies.We are concerned that the scope of major commercial insurers increases costs in the heath care system. Studies have shown that highly concentrated insurer markets are associated with higher premiums and that insurers are not likely to pass on to consumers any savings achieved through lower provider rates.10 We urge Congress to examine these issues and their impact on health care delivery for patients across the country.<h5>MISGUIDED LEGISLATIVE PROPOSALS WILL REDUCE ACCESS TO CARE</h5>We are concerned that certain legislative proposals that claim to increase competition in health care — including those that would create additional Medicare site-neutral payment cuts and ease growth restrictions on physician-owned hospitals — would jeopardize access to care for patients.<h3>Site-neutral Payment Reductions</h3>The AHA strongly opposes efforts to expand site-neutral payment cuts. Current Medicare payment rates appropriately recognize that there are fundamental differences between patient care delivered in hospital outpatient departments (HOPDs) compared to other settings. HOPDs provide important access to care for Medicare beneficiaries, many of which are more likely to be sicker and more medically complex than those treated at physicians’ offices, while also being held to stricter safety and regulatory requirements.The cost of care delivered in hospitals and health systems considers the unique benefits they provide to their communities, which are not provided by other sites of care. This includes investments made to maintain standby capacity for natural and manmade disasters, public health emergencies and unexpected traumatic events, as well as delivering 24/7 emergency care to all who come to the hospital.Existing site-neutral payment cuts have already created significant financial challenges for many hospitals and health systems. This is largely because Medicare underpays hospitals for the cost of caring for patients. The latest <a href="/2024-01-10-infographic-medicare-significantly-underpays-hospitals-cost-patient-care">analysis</a> shows that on average Medicare pays only 82 cents for every dollar of hospital care provided to Medicare beneficiaries, leaving hospitals with nearly $100 billion in Medicare shortfalls in 2022 alone.&nbsp;As a result, two-thirds of all hospitals reported negative Medicare margins in 2022. Any additional site-neutral cuts would exacerbate these financial challenges and further reduce access to essential care and services in communities.<h3>Physician-owned Hospitals</h3>America’s community hospitals and health systems welcome fair competition, where health care entities can compete based on quality, price, safety and patient satisfaction. But physician-owned hospitals (POH) — where physicians select the healthiest and best-insured patients and self-refer those patients to facilities in which they have an ownership interest — represent the antithesis of competition.POHs provide limited emergency services, are ill-equipped to respond to public health crises, and they increase costs for patients, other providers, and the federal government. The&nbsp;<a href="https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/amendreconprop.pdf" target="_blank">Congressional Budget Office</a>, the&nbsp;<a href="https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/Mar05_SpecHospitals.pdf" target="_blank">Medicare Payment Advisory Commission</a>&nbsp;and the&nbsp;<a href="https://public-inspection.federalregister.gov/2023-16252.pdf" target="_blank">Centers for Medicare &amp; Medicaid Services</a>&nbsp;all have concluded that physician self-referral leads to greater per capita utilization of services and higher costs for the Medicare program, among other negative impacts.The AHA strongly opposes any changes to current law that would either expand the number of POHs or ease restrictions on the growth of existing facilities. Allowing more POHs in rural areas could be particularly destabilizing because these areas already have a limited patient population, with hospitals struggling to maintain fixed-operating costs.<h2>GREATER COMMERCIAL INSURER ACCOUNTABILITY IS NEEDED</h2>We urge Congress to address harmful practices from commercial insurers like prior authorization that lead to delays in patient care and increase costs and burdens to hospitals and health systems. Inappropriate denials for prior authorization and coverage of medically necessary services are a pervasive problem among certain plans in the Medicare Advantage program. This results in delays in care, wasteful and potentially dangerous utilization of fail-first requirements for imaging and therapies, and other direct patient harms. These practices also add financial burden and strain to the health care system through inappropriate payment denials and increased costs to comply with plan requirements.The AHA supports regulations and legislative solutions that streamline and improve prior authorization processes, including the Improving Seniors’ Timely Access to Care Act, which would codify many of the reforms in the Interoperability and Prior Authorization final rule.<h2>CONCLUSION</h2>The AHA appreciates your efforts to examine this issue and looks forward to continuing to work with you.__________1&nbsp;<a href="/system/files/media/file/2021/10/KH-AHA-Benefits-of-Hospital-Mergers-Acquisitions-2021-10-08.pdf">/system/files/media/file/2021/10/KH-AHA-Benefits-of-Hospital-Mergers-Acquisitions-2021-10-08.pdf</a>&nbsp; 2&nbsp;<a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9250050/">https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9250050/</a>&nbsp;3<a href="https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2787652">https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2787652</a>4<a href="https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2784342">https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2784342</a>5<a href="/guidesreports/2021-08-18-hospital-merger-benefits-econometric-analysis-revisited-executive-summary">/guidesreports/2021-08-18-hospital-merger-benefits-econometric-analysis-revisited-executive-summary</a>6<a href="https://www.ama-assn.org/delivering-care/patient-support-advocacy/competition-health-care-research">https://www.ama-assn.org/delivering-care/patient-support-advocacy/competition-health-care-research</a>&nbsp;7&nbsp;<a href="https://www.healthaffairs.org/doi/10.1377/hlthaff.2018.0054">https://www.healthaffairs.org/doi/10.1377/hlthaff.2018.0054</a>8<a href="/white-papers/2022-07-28-commercial-health-plans-policies-compromise-patient-safety-and-raise-costs">/white-papers/2022-07-28-commercial-health-plans-policies-compromise-patient-safety-and-raise-costs</a>9<a href="/system/files/media/file/2023/06/Private-Equity-and-Health-Insurers-Acquire-More-Physicians-than-Hospitals-Infographic.pdf">/system/files/media/file/2023/06/Private-Equity-and-Health-Insurers-Acquire-More-Physicians-than-Hospitals-Infographic.pdf</a>&nbsp;10<a href="https://www.healthaffairs.org/doi/10.1377/hlthaff.2015.0548">https://www.healthaffairs.org/doi/10.1377/hlthaff.2015.0548</a>&nbsp; &nbsp; Thu, 23 May 2024 08:30:54 -0500 Mergers & Acquisitions AHA Statement to House Ways and Means Subcommittee on Physician Practice Consolidation /2024-05-22-aha-statement-house-ways-and-means-subcommittee-physician-practice-consolidation Statement of the �� Association for the Committee on Ways and Means Subcommittee on Health of the U.S. House of Representatives“The Collapse of Private Practice: Examining the Challenges Facing Independent Medicine”May 23, 2024On behalf of our nearly 5,000 member hospitals, health systems and other health care organizations, our clinician partners — including more than 270,000 affiliated physicians, 2 million nurses and other caregivers — and the 43,000 health care leaders who belong to our professional membership groups, the �� Association (AHA) appreciates the opportunity to provide our perspective on the financial and regulatory burdens facing physician practices.<h2>FACTORS DRIVING PHYSICIAN PRACTICE ACQUISITIONS</h2>Much like hospitals and health systems, physicians across the country are facing increased costs, inadequate reimbursements and administrative burdens from public and private insurer practices. These factors create major barriers to operating an independent physician practice. As a result, physicians are increasingly looking for alternative practice settings that will provide financial security so they can focus more on clinical care and less on managing their own practice.&nbsp;Hospitals and health systems are an appropriate partner to help physicians alleviate many of these burdens.<h3>Commercial Insurer Policies and Practices</h3>Onerous policies from commercial health insurers have spurred many physicians to seek employment instead of maintaining their own practices. According to a recent survey of physicians conducted by Morning Consult on behalf of the AHA, 84% of employed physicians reported that administrative burden from payers — including prior authorization and reporting requirements — has adversely impacted their ability to operate an independent practice.1 In the same survey, 81% of physicians reported that commercial insurer policies and practices interfered with their ability to practice medicine.2Excessive prior authorization requirements and inappropriate denials of coverage for medically necessary services are a pervasive problem among certain plans in the Medicare Advantage (MA) program. These insurer practices result in delays in care and add financial burden and strain to the health care system, including increased staffing and technology costs to comply with plan requirements. Additionally, the administrative burden of prior authorization requirements and processes further strain the health care workforce and contribute to provider burnout. In fact, Surgeon General Vivek Murthy, M.D., issued a recent&nbsp;advisory&nbsp;that notes that burdensome documentation requirements, including the volume of and requirements for prior authorization, are drivers of health care worker burnout.3<h3>Escalating Costs</h3>Managing a physician practice often includes significant operational costs associated with maintaining electronic health records and patient portals, processing billing and claims submissions, including managing prior authorization requirements, and office rent, among other expenses. The costs associated with these requirements range from $20 for a primary care office visit to as high as $215 for a procedure at an inpatient surgical center.4Compounding that problem, low reimbursement rates from public payers like Medicare and Medicaid are another barrier to the practice of medicine in a private practice setting. Reimbursement updates have failed to account for rising inflation and increasing input costs like supply chain disruptions and workforce shortages. Appropriately accounting for these trends is essential to ensure that Medicare payments for professional services more accurately reflect the cost of providing care. Medicare physician payment was effectively cut 26%, adjusted for inflation, from 2001 to 2023.5 The widening gap between inflation and physician reimbursement rates poses significant threats to patient access and provider financial stability, particularly for safety net providers.&nbsp;As a result of these factors, 94% of physicians believe it has become more financially and administratively difficult to operate a practice in recent years.6<h2>SETTING THE RECORD STRAIGHT ABOUT PHYSICIAN ACQUISITIONS</h2>While a disproportionate amount of attention has been placed on hospitals’ acquisition of physician practices, the reality is that large commercial insurers including CVS Health and UnitedHealth Group have recently spent billions of dollars to acquire physician practices. In fact, non-hospital entities including health insurers have acquired 90% of physician practices over the last five years.7UnitedHealth Group is now the single largest employer of physicians in the country with over 10% of physicians in the U.S. employed or affiliated. We urge this committee to examine the costs and impact on health care access and affordability associated with this widespread acquisition of America’s physicians by corporate health insurance companies.<h3>Hospitals and Health Systems Preserve Access to Care</h3>Hospitals have offered a lifeline to physician practices struggling to keep their doors open, especially in rural areas. The challenging economics of providing care in rural communities contribute to gaps in access. Rural communities, by nature, generally have fewer people and therefore do not generate the health care utilization to finance the full range of health care services. In addition, caring for rural patients can be more costly on a per patient basis as patients in rural communities tend to have more complex health care needs, are much more likely to be uninsured, and are more likely to rely on public programs when they do have coverage. As such, many providers have struggled to stay open and provide care to their patients and community.Hospitals have stepped in to support these access points for rural patients. Despite the fact that hospital have only acquired 6% of all physician practices in the last five years, hospitals were 2.5 times more likely than other entities to acquire practices in rural areas.8 Commercial insurers in particular are overwhelmingly focused on larger, more profitable markets where the financial upside is greater. Median household income was on average 18.4% higher in counties where insurers acquired physician practices compared to counties where hospitals acquired physician groups.9 Additionally, the county level population where commercial insurers acquired physician practices was on average 61.4% larger than it was for hospitals.<h2>POLICY RECOMMENDATIONS</h2>The AHA supports the following policies to address the burdens and costs associated with operating independent physician practices.Commercial Insurer Accountability. Reduce administrative burdens like prior authorization that contribute to provider burnout and delay access to care.<ul><li>The AHA supports regulations and legislative solutions that streamline and improve prior authorization processes, including the Improving Seniors’ Timely Access to Care Act, which would codify many of the reforms in the Interoperability and Prior Authorization Final Rule.</li><li>Gold-carding programs substantially reduce administrative burdens and costs by streamlining access to care for Medicare beneficiaries. The AHA supports the GOLD Card Act of 2023 (H.R. 4968), which would exempt providers from requiring prior authorization for a MA plan year if the provider had at least 90% of prior authorization requests approved the preceding year.</li></ul>Physician Payment Reform.&nbsp;Current reimbursement for physicians is woefully inadequate and fails to account for inflation. The AHA supports legislative and regulatory changes to ensure more sustainable physician reimbursement and to facilitate transition to value-based care.<ul><li>The current conversion factor updates scheduled in MACRA are insufficient since they are scheduled to begin in 2026 and will only result in a .75% conversion factor update for qualifying advanced Alternative Payment Model (APM) participants and .25% for all other providers. This will exacerbate the widening gap between inflation and physician reimbursement rates. While the one-time conversion factor updates provided in the Consolidated Appropriations Acts of 2022, 2023 and 2024 have provided needed relief in the interim, we encourage more sustainable, real-time approaches to updating the conversion factors in pace with inflation. Annual conversion factor updates should be made to reflect changes in input costs and inflation outside of budget neutrality.</li><li>To support the transition to value-based payment, the AHA urges Congress to extend APM incentive payments and for CMS to remove problematic high/low revenue thresholds that preclude rural and critical access hospitals from obtaining necessary resources for infrastructure investment. We support the Value in Health Care Act (H.R. 5013/S. 3503), which would extend incentive payments, remove revenue distinctions and improve financial benchmarks to ensure participants are not penalized for their own success.</li></ul>Provider Well-being.&nbsp;We urge Congress to continue to address health care worker well-being by supporting the Dr. Lorna Breen Health Care Provider Protection Reauthorization Act (H.R. 7153/S. 3679), which would provide grants to help health care organizations offer behavioral health services to prevent burnout and suicide for health care workers through 2029.<h2>CONCLUSION</h2>The AHA appreciates your efforts to examine the increased burdens and costs facing physician practices and looks forward to working with you to address these issues.__________1&nbsp;<a href="/system/files/media/file/2023/07/The-Majority-of-Nurses-and-Physicians-Say-That-Health-Insurer.pdf">/system/files/media/file/2023/07/The-Majority-of-Nurses-and-Physicians-Say-That-Health-Insurer.pdf</a>2 <a href="/fact-sheets/2023-06-07-fact-sheet-examining-real-factors-driving-physician-practice-acquisition">/fact-sheets/2023-06-07-fact-sheet-examining-real-factors-driving-physician-practice-acquisition</a>3 &nbsp;<a href="https://www.hhs.gov/sites/default/files/health-worker-wellbeing-advisory.pdf">https://www.hhs.gov/sites/default/files/health-worker-wellbeing-advisory.pdf</a>4 <a href="https://jamanetwork.com/journals/jama/fullarticle/2673148">https://jamanetwork.com/journals/jama/fullarticle/2673148</a>5&nbsp;<a class="ck-anchor" href="https://www.ama-assn.org/practice-management/medicare-medicaid/advocacy-action-leading-charge-reform-medicare-pay" id="https://www.ama-assn.org/practice-management/medicare-medicaid/advocacy-action-leading-charge-reform-medicare-pay">https://www.ama-assn.org/practice-management/medicare-medicaid/advocacy-action-leading-charge-reform-medicare-pay</a>6&nbsp;<a href="/system/files/media/file/2023/07/The-Majority-of-Nurses-and-Physicians-Say-That-Health-Insurer.pdf">/system/files/media/file/2023/07/The-Majority-of-Nurses-and-Physicians-Say-That-Health-Insurer.pdf</a>7&nbsp;<a href="/system/files/media/file/2023/06/Private-Equity-and-Health-Insurers-Acquire-More-Physicians-than-Hospitals-Infographic.pdf">/system/files/media/file/2023/06/Private-Equity-and-Health-Insurers-Acquire-More-Physicians-than-Hospitals-Infographic.pdf</a>8 AHA analysis of Levin Associates data on physician medical groups between 2019 and 2023.9&nbsp; Ibid. Wed, 22 May 2024 15:36:09 -0500 Mergers & Acquisitions AAMC study examines the impact of health care consolidation in states /news/headline/2024-05-01-aamc-study-examines-impact-health-care-consolidation-states The top three large-group insurers control an average of 82.2% of the market share in each state, nearly twice the combined average market share of each state’s largest health systems, according to a <a href="https://www.aamcresearchinstitute.org/our-work/data-snapshot/why-market-power-matters">study</a> about consolidation in health care released May 1 by the Association of American Medical Colleges.&nbsp; "When the market share of an insurer far exceeds the market share of an individual health system — as is the case in most states, according to our analysis — that can negatively impact the amount that insurers are willing to pay hospitals and health systems for patient care," the study notes.&nbsp; Wed, 01 May 2024 16:02:54 -0500 Mergers & Acquisitions AHA Response to Employee Retirement Income Security Act (ERISA) RFI /lettercomment/2024-03-15-aha-response-employee-retirement-income-security-act-erisa-rfi <div class="container"><div class="row"><div class="col-md-8">March 15, 2024The Honorable Virginia Foxx Chairwoman Committee on Education and the Workforce U.S. House of Representatives 2176 Rayburn House Office Building Washington, DC 20515-6100Re: Building and strengthening the Employee Retirement Income Security Act on its 50th anniversaryDear Chairwoman Foxx:On behalf of our nearly 5,000 member hospitals, health systems and other health care organizations, our clinician partners — including more than 270,000 affiliated physicians, two million nurses and other caregivers — and the 43,000 health care leaders who belong to our professional membership groups, the �� Association (AHA) writes in response to the questions posed by the Committee on Education and Workforce. We appreciate your efforts to examine ways to build upon and strengthen the Employee Retirement Income Security Act (ERISA).<h2>Vertical Integration and Consolidation</h2>Health insurers have gone through dramatic vertical consolidation since ERISA was signed into law. Over the last decade, the major corporate insurers have spent billions of dollars acquiring not only other plans, but also providers, pharmacy service companies, and health technology and claims adjudication systems. For example, UnitedHealth Group acquired dialysis provider DaVita Medical Group in 2019 for an estimated $4.3 billion and home health provider LHC Group in 2023 under its Optum subsidiary for an estimated $5.4 billion.<a href="#fn1">1</a> It is now the largest employer of physicians in the nation. Experts speculate that Elevance agreed to acquire infusion provider Paragon Healthcare for more than $1 billion earlier this year.<a href="#fn2">2</a>While it is difficult for external parties to determine just how much of the health care sector is controlled by corporate insurers and their subsidiaries, there are troubling indicators of the breadth and depth of commercial insurer control over the industry. Between the main brand and its subsidiaries, UnitedHealth Group claims to serve 152 million Americans — nearly half of all Americans — and employ or contract with 10% of the nation’s physicians.<a href="#fn3">3</a> The recent cyber-attack against UnitedHealth Group’s subsidiary Change Healthcare illustrates the risks of this consolidation. When one company controls such a large component of the health care infrastructure, there are serious risks to public health.From a competition perspective, the AHA is deeply concerned that vertical consolidation in the commercial insurance industry harms Americans and their communities by reducing overall access to services and providers and undercutting smaller providers that are seeking to provide services to communities who need them most. In the ERISA context, these kinds of mergers and acquisitions may result in prohibited transactions. For example, corporate insurers often serve as the third-party administrator for employers’ self-funded health insurance plans, in which role they may function as a plan fiduciary under ERISA. To facilitate the health insurance plan, plan fiduciaries then engage in transactions with parties in interest, i.e., a provider group, pharmaceutical service provider and other companies to ostensibly provide those benefits more efficiently. When commercial insurers engage in the kinds of acquisitions outlined above, they — in their role as plan fiduciaries — may offer favorable rates or contract terms to providers or servicers owned by the plan itself or by its subsidiaries.This harmful self-dealing creates significant issues for plan beneficiaries, including by reducing choice and access to care and delaying medically necessary care. For example, the insurer may direct patients to providers owned or operated by the plan and away from other providers, even if the patient might prefer or be closer to another option (called “patient steering”), or require beneficiaries to obtain medically necessary drugs from specialty pharmacies unrelated to, and far from the oversight of, their health care providers because of a favorable arrangement for the health insurer (called “white bagging”).The AHA also has concerns that self-dealing among vertically consolidated commercial insurers can be used to manipulate medical loss ratios (MLR) such that commercial insurers can keep a greater share of American’s hard-earned premium payments.<h2>340B Drug Pricing Program</h2>The 340B Drug Pricing Program was established by Congress in 1992 to mitigate the high cost of drugs — an issue that persists today and is of particular concern to employers and ERISA plans. The 340B program successfully helps hospitals support access to critical patient services such as behavioral health, medication therapy management, chemotherapy, and free or discounted drugs.Ordinary access to 340B discounts does not constitute self-dealing or violate prohibited transaction provisions under ERISA. 340B hospitals earn savings by purchasing drugs at a discounted price. It is this price difference that dictates how much they save, not the reimbursement they receive from plans or other payers for prescribing 340B drugs.However, there is a critical connection between drug pricing and anticompetitive conduct by large commercial insurers. As noted above, pharmacy steering is primarily a practice that plans and their pharmacy benefit managers (PBMs) engage in to pad their profits. The practice ensures patients receive drugs at pharmacies that are vertically integrated with the plans, their affiliated PBMs or their parent companies. For example, UnitedHealthcare, one of the nation’s largest insurers also owns Optum Rx, Genoa Healthcare and Avella specialty pharmacy, where patients can be steered to receive their drugs thereby capturing any drug company rebates, any dispensing fees for providing the drug to the patient, and the patient’s premium dollars and any copays or co-insurance.<h2>Hospital Price Transprency</h2>Hospitals and health systems are dedicated to improving price transparency for patients. As we have expressed previously to policymakers, however, the numerous and sometimes conflicting requirements have created an overwhelming landscape of pricing information that is challenging to utilize.There are three primary federal price transparency policies, each at different stages of implementation and each with different reporting and format requirements: Hospital Price Transparency requirements, Transparency in Coverage requirements, and No Surprises Act good faith estimates and advanced explanation of benefits.Under the Hospital Price Transparency requirements in effect since 2021, hospitals disclose a machine-readable file annually that includes chargemaster information, as well as negotiated and self-pay rates for all relevant items and services. Hospitals are also required to provide consumer-friendly information to patients on shoppable service prices, either through a spreadsheet or an online price estimator tool. CMS found that as of 2022, 70% of hospitals had complied with both federal requirements and over 80% had complied with at least one.<a href="#fn4">4</a> A more recent <a href="https://blog.turquoise.health/moving-into-2024-state-of-price-transparency/" target="_blank">report</a> by Turquoise Health shows that 90.7% of hospitals have met the requirement to post a machine-readable file, and 83.1% have included a substantial amount of negotiated rates.Due to the ongoing efforts of the hospital field, these numbers will continue to improve. However, utilization of the machine-readable files remains quite low, in large part because the complexity of the data can be challenging for those outside of the hospital finance field to understand. As a result, it may take some time before organizations, such as plan sponsors, can utilize the data. The recent changes CMS made to the requirements, including implementing a standardized format, may address some of these challenges. However, large scale changes such as these require time and financial resources to bring existing files into compliance and can further delay use as data consumers recalibrate their analysis to new data formats, layouts, variable changes, and other adjustments. Therefore, we urge Congress to avoid making further statutory changes to the Hospital Price Transparency requirements at this time.The Transparency in Coverage requirements in effect since July 2022 are similar to the Hospital Price Transparency requirements but apply to insurers. Under these requirements, insurers must publish monthly machine-readable files inclusive of all negotiated rates and out-of-network allowed amounts. Insurers are also required to provide personalized out-of-pocket cost estimates for all covered services, in addition to other information, through a consumer-friendly online tool. CMS has required insurers to use a standard format for the machine-readable files since these requirements went into effect.A concern remains though that there is a high potential for conflicting information between the insurer and hospital files, given different approaches to calculating negotiated rates. To ensure a single source of reference for negotiated rates, we recommend Congress direct CMS to maintain the requirement that insurers post all negotiated rates with providers, while allowing hospitals to focus solely on posting chargemaster rates and cash prices. In doing so, consumers, third party vendors, researchers and other interested parties would retain access to all negotiated rate information while reducing the risk of conflicting information.The third set of price transparency requirements was established by the No Surprise Act, which includes a process for patients to receive estimates based on their unique health care treatments plans. For uninsured and self-pay patients, providers have been required to provide good faith estimates for scheduled care since January 2022. For insured patients, the No Surprises Act requires providers and health plans to work together to develop these estimates. This process is technically complex, and industry stakeholders and CMS are developing the necessary technical specifications to effectively implement this provision. These estimates, much like the price estimator tools provided by hospitals and health plans noted above, provide resources for patients looking for information on their expected out-of-pocket costs prior to care. To ensure patients can access the information they most need as they plan for their care, we urge Congress to allow price estimator tools to continue to be used to meet the hospital shoppable service requirements.Before the new information available through the price transparency policies can be used effectively by the public, including plan sponsors, more needs to be done to align and streamline the various policies. We would therefore request that Congress refrain from advancing additional legislation that may further confuse or complicate providers’ ability to provide meaningful price estimates and potentially add unnecessary costs to the health care system.<h2>Cybersecurity</h2>The cybersecurity threats facing health care are serious and affect every entity in the sector. Recent events related to the attack on Change Healthcare make that pellucidly clear. With respect to the Health Insurance Portability and Accountability Act (HIPAA), all covered entities (including health plans governed by ERISA) have responsibilities to ensure the security of patient data that is described in the HIPAA Security Rule (45 CFR Part 160 and Subparts A and C of Part 164).The AHA believes that the current HIPAA rules generally offer an effective legal framework and any fundamental revisions would create more challenges than benefits. Congress should not make any major revisions to HIPAA nor should Congress introduce new privacy or cybersecurity principles directly into the ERISA statute as this would be unnecessarily confusing to the regulated community, which is already well-governed by HIPAA.The AHA has long advocated that HIPAA’s requirements be the uniform, nationwide standard for protecting the privacy and security of all patient information. Because the HIPAA framework is both effective and entrenched, Congress should enact full federal preemption for HIPAA, including for the ERISA-covered entities that are already subject to HIPAA.<h2>Oversight of Erisa-Regulated Insurers</h2><h3>Inappropriate Denials of Care</h3>Certain commercial insurers are erecting unfair and unnecessary barriers to care. These barriers have a human cost, including improper use of utilization management programs, inappropriate denial of medically necessary covered services, overly restrictive and opaque medical necessity criteria, unnecessary and unreasonable documentation requirements, and mid-contract changes to patients’ coverage.In fact, some commercial insurer policies and practices appear designed to simply create barriers to appropriate payment. They also contribute to clinician burnout and significantly drive-up administrative costs for the health care system. And the outcomes of these practices illustrate that much of this effort and cost is unnecessary. For example, among some insurers, most appealed prior authorization denials are ultimately overturned. Even if beneficiaries can ultimately receive the care they need, this appeal process comes with significant cost. Inappropriate payment delays and denials for appropriate care contribute to financial and emotional stress for enrollees, serious patient care delays, health care provider financial instability, and compounding fiscal challenges plaguing our health care system.Further, there is mounting evidence that these unfair practices are growing. Government agencies, as well as courts and arbitrators, have also uncovered concerning findings with respect to certain commercial insurer conduct. We strongly support increased scrutiny of insurer conduct under ERISA-regulated plans, especially with respect to practices that may routinely or inappropriately deny claims for services that should be covered. We also encourage Congress to consider whether commercial insurers are adhering to their fiduciary duties set forth in the statute. Greater oversight is needed to protect patients and consumers from cases of insurer misconduct and to ensure appropriate access to health care services that employers have provided payment to cover.<h3>Prompt Payment</h3>In addition to challenges with inappropriate denials of care, hospitals and health systems are increasingly reporting significant financial impacts from insurers’ failure to pay promptly. In fact, an AHA <a href="/infographics/2022-11-01-survey-commercial-health-insurance-practices-delay-care-increase-costs-infographic" target="_blank">member survey</a> found that 50% of hospitals and health systems reported having more than $100 million in unpaid claims that were more than six months old. Among the 772 hospitals surveyed, these delays amounted to more than $6.4 billion in delayed or denied claims that are more than six months old.These delays also add unnecessary cost and burden to the health care system, as combatting inappropriate delays and denials cost valuable time and resources, including resources needed to comply with insurer requests for additional documentation, physician peer-to-peer consultations and onerous appeal processes — and these processes may still be subject to other types of insurer audits or post-pay reviews that recoup payment to start the process all over again.Given these realities and the challenges health care providers face in securing prompt payment from insurers for covered services, it is troubling that there are no prompt payment requirements with which insurers must comply under ERISA-regulated health plans (except for limited provisions related to out-of-network claims subject to the No Surprises Act). Claims procedure rules that apply to ERISA-regulated insurance products are consumer protection rules that only apply to claims for benefits and not payment to providers. Most fully-insured insurance plans regulated at the state level contain some type of requirements for prompt payment for services.Accordingly, the AHA urges Congress to apply a federal prompt payment standard for ERISA-regulated insurance plans, either in the ERISA statute or separately, and to increase oversight and scrutiny of timely payments to health care providers for services delivered to enrollees under the contract.<h2>Medical Loss Ratio Requirements</h2>The MLR measures the amount of premium dollars that go toward health care services and quality improvement activities and caps the amount that insurers can spend on administrative activities or profits. The AHA believes that the MLR standard is an important tool to ensure sufficient resources are dedicated to paying for covered medical services and ensuring patient access to care, while also holding health plans accountable for how premium dollars are spent. The MLR is not a comprehensive solution to prevent health plans from prioritizing profits over patient care, and we recommend appropriate monitoring, enforcement and additional controls to help ensure that patients are receiving appropriate coverage for their premiums.<h3>Impact of Limiting Medical Loss Ratio</h3>The AHA does not believe limiting the MRL requirements will incentivize health plans to reduce spending for the benefit of patients. To the contrary, AHA believes that insurers will continue to enrich themselves even more in the absence an MLR standard. Congress created the MLR requirement to protect the value that consumers receive in exchange for their health insurance premiums. This oversight and regulation resulted from legitimate concerns that health plans were spending an inappropriate portion of patient premiums on administrative or self-serving expenses for their own financial enrichment, instead of paying for patients’ medical care.First implemented in 2011, the benefit of the MLR to patients was immediate, helping to control inappropriate or self-serving plan expenditures, revealing that plans, when left unchecked, spend premium dollars on expenses that do not benefit patient and consumers. Limiting or reducing MLR requirements runs the risk of compromising these advances in consumer protection and jeopardizing the progress we have made in ensuring that more health care dollars go toward beneficiaries’ medical care.<h3>MLR and Vertical Integration in the Health Care Market</h3>The AHA is deeply concerned about the ways in which insurers’ vertical integration practices enable plans to channel excessive health care dollars to their affiliated health care and data services providers at patients’ expense. While the AHA supports arrangements in which an integrated system’s health plan pays affiliated clinicians an appropriate rate for patient care, it is problematic when a plan directs excessive dollars to its own affiliated vendors and service entities in ways that inappropriately increase health system costs or steers patients to affiliated providers to benefit the insurer financially when not in the best clinical or financial interest of the patient.Although our concerns with vertical integration are broader than the implications in the MLR context, the AHA is concerned with how payments to affiliated vertically-owned entities (e.g., owned by the same parent company) can be used to effectively manipulate the MLR. For example, the three largest pharmacy benefit managers — CVS Caremark, Express Scripts and OptumRx — are owned by large national insurers that offer employer-sponsored coverage throughout the country. Pharmaceutical purchasing from PBMs is a prominent expense for these plans, and the dollars spent on such procurement are classified as qualified care expenses for MLR calculations. When insurers purchase these PBMs, directing these large sums to the PBMs is essentially the insurers paying themselves. This vertical integration then enables plans to manipulate their MLR calculations by counting these extraordinary dollars paid to themselves as qualified care expenses, rather than sending those dollars back to beneficiaries or otherwise directing them toward actual health care spending.Further, plans administered by vertically integrated insurer-PBM conglomerates can implement coverage or benefit design restrictions on where their enrollees can access certain covered drug therapies or services. Unsurprisingly, PBMs have been a primary enabler of site-of-service restrictions on physician-administered specialty drugs, often sprung upon beneficiaries through mid-year plan changes. Forcing patients to switch service providers can negatively impact the patient clinically or financially, as well as limiting access to covered services and patient choice.Ultimately, the use of vertical integration to circumvent the goals of the MLR requirements is concerning and potentially harmful for patients and consumers. We urge policymakers to pursue solutions to increase oversight of the MLR as it relates to vertically integrated insurer conglomerates and prevent inappropriate or excessive payments to aligned companies to ensure that the MLR continues to protect patients in the manner it was intended by Congress.<h2>Specialty Drug Coverage</h2>Specialty drugs, which now account for nearly 50% of total drug spending in the U.S. and approximately 80% of the drugs approved by the FDA in 2023, are an important driver of overall employer sponsored insurance (ESI) costs. This is largely because drug companies decide to introduce many of these drugs at sky-high prices and subsequently increase those prices further. In fact, a recent government report found that nearly 2,000 drugs experienced price increases faster than general inflation between 2022 and 2023. These high drug prices increase the costs hospitals and physicians incur to deliver patient care, and thereby drive-up overall ESI costs. The AHA supports initiatives geared toward reducing costs and increasing patient access, including efforts to reduce the cost of specialty drugs.<h2>Conclusion</h2>Thank you again for your interest in strengthening ERISA. We look forward to working with you to support and advance these important issues.Sincerely,/s/Lisa Kidder Hrobsky Senior Vice President, Advocacy and Political Affairs<hr><ol><li id="fn1"><a href="https://www.beckersasc.com/asc-transactions-and-valuation-issues/optum-deal-brings-2022-acquisition-spending-to-nearly-8b.html" target="_blank">https://www.beckersasc.com/asc-transactions-and-valuation-issues/optum-deal-brings-2022-acquisition-spending-to-nearly-8b.html</a></li><li id="fn2"><a href="https://www.reuters.com/markets/deals/elevances-deal-buy-paragon-healthcare-valued-over-1-billion-axios-2024-01-04/" target="_blank">https://www.reuters.com/markets/deals/elevances-deal-buy-paragon-healthcare-valued-over-1-billion-axios-2024-01-04/</a></li><li id="fn3"><a href="https://www.unitedhealthgroup.com/content/dam/UHG/PDF/investors/2023/ic23/Investor-Conference-2023-Book.pdf" target="_blank">https://www.unitedhealthgroup.com/content/dam/UHG/PDF/investors/2023/ic23/Investor-Conference-2023-Book.pdf</a></li><li id="fn4"><a href="https://www.healthaffairs.org/content/forefront/hospital-price-transparency-progress-and-commitment-achieving-its-potential" target="_blank">https://www.healthaffairs.org/content/forefront/hospital-price-transparency-progress-and-commitment-achieving-its-potential</a></li></ol></div><div class="col-md-4"><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/system/files/media/file/2024/03/AHA-Response-to-Employee-Retirement-Income-Security-Act-ERISA-RFI-Letter.pdf" target="_blank" title="Click here to download the AHA Response to Employee Retirement Income Security Act (ERISA) RFI letter PDF.">Download the Letter PDF</a></div><a href="/system/files/media/file/2024/03/AHA-Response-to-Employee-Retirement-Income-Security-Act-ERISA-RFI-Letter.pdf" target="_blank" title="Click here to download the AHA Response to Employee Retirement Income Security Act (ERISA) RFI letter PDF."><img src="/sites/default/files/inline-images/Page-1-aha-urges-more-congressional-action-to-help-providers-affected-by-change-healthcare-cyberattack-3-13-2024_0.png" data-entity-uuid="4db005b5-1843-4dd7-b99d-c1292efedb61" data-entity-type="file" alt="AHA Response to Employee Retirement Income Security Act (ERISA) RFI letter page 1." width="692" height="900"></a></div></div></div> Fri, 15 Mar 2024 06:00:00 -0500 Mergers & Acquisitions 4 Takeaways on General Catalyst’s Plan to Acquire Summa Health /aha-center-health-innovation-market-scan/2024-01-23-4-takeaways-general-catalysts-plan-acquire-summa-health <div class="container"><div class="row"><div class="col-md-8"><img src="/sites/default/files/inline-images/4-Takeaways-on-General-Catalysts-Plan-to-Acquire-Summa-Health.png" data-entity-uuid="1d885cd6-3738-4ae8-bac5-0700cb3307d7" data-entity-type="file" alt="4 Takeaways on General Catalyst’s Plan to Acquire Summa Health. Summa Health, Dr. Gary B. and Pamela S. Williams Tower." width="100%" height="595">Last October, the huge venture capital firm General Catalyst (GC) said it planned to buy a health system and use it as a transformation proving ground for technologies developed by its portfolio companies. The plan’s concept is simple. Finding a partner and executing such a deal figured to be another matter.But now, just several months later, GC’s recently formed business venture Health Assurance Transformation Corporation (HATCo) says that it has signed a nonbinding <a href="https://www.generalcatalyst.com/perspectives/our-acquisition-of-summa-health" target="_blank" title="General Catalyst: Our Acquisition of Summa Health">letter of intent to acquire</a> nonprofit Ohio-based Summa Health, one of the state’s largest integrated health care delivery systems, and convert it to a for-profit system.The aim is for HATCo, which is headed by former Intermountain CEO Marc Harrison, M.D., and Summa Health to lock arms on a long-term journey to reshape and improve the future of care delivery. This will involve a committed shift to value-based care and access to new revenue streams, resources and innovation. GC has long advocated for a fundamentally different approach to health care transformation, in which all transformational aspirations begin with keeping the patient experience in mind and how technology is deployed to enhance that experience.<h2>What You Need to Know about the Acquisition Plan</h2><h3>1 | Hurdles still must be cleared.</h3>Transforming a nonprofit organization to a for-profit system is expected to be a significant and complex challenge, with potential regulatory delays. Ben Sutton, Summa’s chief operating officer, told Axios that the process will require a lot of work, adding, “I don’t think there’s anyone actually here at the table who has worked in a for-profit system.”<h3>2 | The focus will be on putting innovation in, not taking cost out.</h3>GC and HATCo intend to build “modern, tech-enabled health care delivery platforms at scale, across all points of care,” noted a blog co-authored by Harrison and Hemant Taneja, GC’s CEO and managing director.<h3>3 | Don't look for a quick flip.</h3>GC states that it will operate on a longer time horizon than typically is found in private-equity deals. Harrison also has emphasized that he does not envision reductions in workforce or job loss. The commitment is to a transformation that benefits the entire community.<h3>4 | This is not an isolated transaction.</h3>It is part of a broader engagement strategy with the wider health care ecosystem. GC now has more than 20 health care system partners, innovators and leaders who ascribe to its principles of health assurance — making care more proactive, accessible and affordable. The planned Summa acquisition will be the most significant step in moving from thesis to application.</div><div class="col-md-4"><a href="/center" title="Visit the AHA Center for Health Innovation landing page."><img src="/sites/default/files/inline-images/logo-aha-innovation-center-color-sm.jpg" data-entity-uuid="7ade6b12-de98-4d0b-965f-a7c99d9463c5" alt="AHA Center for Health Innovation logo" data-entity- type="file" class="align-center"></a><a href="/center/form/innovation-subscription"><img src="/sites/default/files/2019-04/Market_Scan_Call_Out_360x300.png" data-entity-uuid data-entity-type alt></a></div></div></div>.field_featured_image { position: absolute; overflow: hidden; clip: rect(0 0 0 0); height: 1px; width: 1px; margin: -1px; padding: 0; border: 0; } .featured-image{ position: absolute; overflow: hidden; clip: rect(0 0 0 0); height: 1px; width: 1px; margin: -1px; padding: 0; border: 0; } Tue, 23 Jan 2024 08:08:58 -0600 Mergers & Acquisitions