Vertical
integration in health care has set off alarm bells.
WASHINGTON –
The country’s largest health insurer, UnitedHealth Group, received permission
last week from federal regulators to buy about 225 medical clinics across the
country. The purchase will add to a health care empire that already includes
large medical groups in 10 states, a specialty pharmacy, a pharmacy benefits
manager, 200 outpatient surgical facilities and a 20-state chain of urgent-care
centers.
UnitedHealth,
America’s sixth-largest publicly traded company and Minnesota’s biggest
corporate citizen, is hardly alone in this health care trend. In 2018, Aetna
health insurance merged with CVS Health, a huge national pharmacy chain.
Another major health insurer, Cigna, merged with Express Scripts.
Big
corporations buying different links in the health care chain — a process known
as vertical integration — has set off antitrust alarms on Capitol Hill.
Democratic
Sen. Amy Klobuchar of Minnesota has introduced two bills that will make it
easier to monitor and challenge all kinds of mergers, especially vertical
consolidations like those seen recently in the health care industry.
“We
all know that corporate interests and consumer interests are often very
different,” Klobuchar said at a recent Senate subcommittee hearing on health
system consolidation. “The stakes couldn’t be higher. This is about nothing
less than the future of health care in our country.”
The
health care corporations counter that they are consolidating services to
streamline and make care delivery more effective and efficient.
“UnitedHealth
Group delivers a wide range of comprehensive, coordinated health benefits and
services to employers, individuals, and government agencies,” a company
spokesman said. “We work closely with more than 80 health plans, 67,000
pharmacies and 1.3 million physicians and other health care professionals to
improve patient outcomes and experiences and lower costs.”
The
company did not address questions about Klobuchar’s proposal for more rigorous
scrutiny of vertical mergers.
Government
regulators have traditionally paid little attention to vertical mergers,
presuming that they are more about efficiency than monopoly. Merger specialists
agree that can be the case. But many said each acquisition should be weighed
individually for its potential to help deliver good, affordable products and
services against its potential to stem competition and raise consumer costs.
Law
professor and former U.S. Justice Department antitrust attorney Thomas Greaney
was more direct. He warned the recent subcommittee hearing on health care
consolidation that “concentration begets anticompetitive conduct.”
At
an investor conference in November, UnitedHealth said it now “serves” more than
14 million patients through primary-care practices, surgery centers,
urgent-care centers and its network of hospitalists and nurse practitioners.
OptumCare, United’s medical-care arm, has 36,000 aligned physicians, the
company said, and 8,000 advanced-practice clinicians.
Size
does not necessarily mean higher prices for individuals, explained Pinar
Karaca-Mandic, a professor of health economics and health insurance at the
University of Minnesota’s Carlson School of Management.
Streamlined
record sharing between insurers and physicians working for the same company
could reduce transaction costs, she said. Other forms of cost-cutting
coordination have the potential to increase the quality of care and the
efficiency of care without raising the charge to consumers.
However,
without more scrutiny than currently exists, Karaca-Mandic and others said it
will be hard to tell where economies of scale end and exclusion of competitors
begins. Karaca-Mandic pointed to secrecy in the negotiation of drug prices
between pharmacies and pharmacy benefit managers as a source of concern. If
rebates remain shrouded, no one knows how much of a negotiated price cut
consumers get.
Among
other ongoing concerns is limiting consumer choices of care providers and
treatment facilities and driving up patient prices and copays in markets
dominated by a single company.
Scholars
at American University, Georgetown University, Massachusetts Institute of
Technology and Yale University have collaborated on a proposal to change the
burden of proof in approval of vertical mergers. Neither “economic theory” nor
“empirical evidence” supports the 35-year-old standard the government now
applies that vertical integrations are presumed to be helpful and therefore
need less scrutiny than horizontal mergers, they said.
Regulatory
agencies “should require the merging parties to show that the efficiencies are
verifiable, merger-specific and sufficient to reverse the potential
anticompetitive effects,” the scholars wrote.
Klobuchar
sounded a similar theme in discussing legislation that would increase merger
fees to fund more aggressive government scrutiny of vertical integration and a
second bill where “parties involved in a mega-merger ... would have to prove
simply that their merger did not harm competition instead of having the
government have to prove it.”
Both
of Klobuchar’s bills have been assigned to the Senate Judiciary Committee on
which she sits. Neither has come to a vote.
As
vertical consolidation continues, medical costs are rising at more than three
times the rate of inflation, Klobuchar said.
“It
is no wonder,” she added, “that people who still struggle to pay their health
insurance premiums, copays and prescription-drug costs grow skeptical of
promises that large health care mergers will produce cost savings.”
Washington correspondent Jim
Spencer examines the impact of federal politics and policy on
Minnesota businesses, especially the medical technology, food distribution,
farming, manufacturing, retail and health insurance industries.
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