|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
Taking aim at consolidation in California
California’s Attorney General filed an antitrust suit against Sutter Health, which operates 24 hospitals and owns a wide array of surgery centers, clinics, and other delivery assets in Northern California. The suit alleges that Sutter engaged in anti-competitive behavior, with restrictive commercial contracting practices and “punitively” high rates for its services. Healthcare market concentration has long been a concern of regulators in California, and this latest suit is likely to intensify scrutiny of M&A activity there and around the nation. Notably, it may spark heightened antitrust activism at the state level, at a time when the federal antitrust enforcement agencies are in transition. We wrote about hospital consolidation and mega-mergers recently, and whatever the merits of the California suit, our larger point stands—high prices are a feature, not a bug, in health system consolidation. In fact, most multi-hospital systems came together precisely for this reason: to exercise negotiating leverage against consolidating insurance companies. Playground-logic scale—getting bigger in order to beat up on the other guy—is endemic in American healthcare, and it doesn’t create value.
Physicians opt-out of system integration
Atrium Health (formerly Carolinas HealthCare) has agreed to part ways with Mecklenburg Medical Group (MMG), a large multispecialty group practice that has been part of the system since 1993. 92 of the group’s 104 doctors sued to break away from the system, citing system moves to alter staffing, realign specialists, mandate in-network referrals and potentially change physician compensation. Doctors accused Atrium of repeatedly complaining of losing millions of dollars annually on MMG doctors, despite having “a bloated management infrastructure”.
This split highlights the challenges of vertical integration between health systems and large physician groups. Atrium’s moves toward improving network integrity, centralizing staffing and aligning physician compensation surely hold promise in making care more coordinated and affordable. But from the physician point of view, each could be also seen as an intrusion on the autonomy of practice. In their quarter-century as Atrium employees, MMG physicians maintained key elements of their own brand and structure. True integration requires physicians to cede some aspects of their practice once considered sacrosanct. Systems who believe that integrated care creates value for patients will have to navigate uncomfortable boundaries of physician practice and, working with physician leaders, clearly define what it means to be a “member” of the integrated group.
Making air conditioners a covered Medicare benefit
This week, Medicare announced that it plans to broaden the definition of “health-related benefits” for Medicare Advantage plans, making it possible for insurers to pay for such services as transportation, air conditioners, and healthy groceries for MA enrollees. Advocates of the move argue that plans will now be able to address some of the underlying drivers of poor health, potentially enabling a reduction in overall spending on healthcare services for at-risk seniors. Critics say it also allows plans to add benefits like gym memberships that preferentially target healthier patients.
Notably, the new policy comes on the heels of recent news that retailers CVS and Walmart are planning aggressive moves into the MA space, and this may make those strategies even more attractive. Creating more alignment between traditional healthcare services and social care investments will be a critical element of capturing the promise of population health management, and the new CMS policy signals an important step forward on that front.