|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
- West Coast nonprofit health plans announce agreement to combine. Two nonprofit insurers, Long Beach, CA-based SCAN Group and Portland, OR-based CareOregon, have agreed to merge. The new organization—which will take the name HealthRight Group, while retaining the SCAN and CareOregon brands in local markets—will have $6.8B in annual revenue and cover around 800K lives. Continuing their previous areas of focus, SCAN will cater primarily to Medicare Advantage (MA) beneficiaries, and CareOregon will prioritize serving managed Medicaid enrollees. Executives from both companies cited scale as the primary motivation for the merger, with the companies aiming to both strengthen their foothold in current markets and expand their reach into new ones. The deal, which still needs approval from state regulators, is expected to close in 2023.
The Gist: HealthRight stands to be a strong player in the booming government-backed, managed care market in states currently dominated by large payers like Kaiser Permanente and UnitedHealthcare. SCAN has differentiated itself with services dedicated to underserved populations, including creating a MA plan designed for LGBTQ+ seniors, and offering California’s only integrated dual-eligible, special needs plans. We expect the addition of CareOregon’s 319K managed Medicaid members to provide a larger platform for these targeted initiatives, and we wouldn’t be surprised to see more nonprofit insurers joining forces with HealthRight to better compete with current market heavyweights.
- University of Michigan Health to buy Sparrow Health. Ann Arbor, MI-based University of Michigan Health (UM Health), part of Michigan Medicine, announced last Thursday that it will acquire Lansing, MI-based Sparrow Health System, forming a $7B health system with over 200 care sites across southeast and mid-Michigan. The acquisition will connect Sparrow’s six hospitals to UM Health’s flagship academic medical center (AMC) and sole hospital, while extending the reach of Sparrow’s 70K-member health plan, in which UM Health had previously invested. Pending regulatory approvals, the deal is expected to be completed in the first half of 2023.
The Gist: Given Sparrow’s recent financial struggles—the system announced hundreds of layoffs in September after posting a $90M loss in the first half of 2022—this was a sensible pickup for UM Health, extending its reach into lower-cost community healthcare adjacent to its current market. Other AMCs have made similar moves in recent years, as the differentiated services of an AMC and the local patient reach of community hospitals make for a strong pairing—and this deal will go far toward advancing UM as a truly regional system. But even if UM Health got a good deal on the acquisition, the current status of Sparrow’s infrastructure and workforce will require considerable investment (UM Health has already committed $800M in the deal’s announcement).
- CMS proposes key reforms to marketplace exchanges. On Monday, the Centers for Medicare and Medicaid Services (CMS) released draft regulation that aims to improve consumer protections and navigation in the Affordable Care Act (ACA) insurance marketplace. Among other changes, the new rule would require greater availability of providers in insurers’ networks, limit the number of non-standard policies offered on the exchanges, establish new special enrollment period timeframes, and allow exchange navigators to conduct door-to-door enrollment on their initial visits.
The Gist: Driven by increased subsidies, enrollment in ACA marketplace plans reached an all-time high of nearly 14M in 2022. CMS stated that it proposed these changes partly in anticipation of millions of Americans losing Medicaid coverage at the end of the federal COVID public health emergency. Currently, over 60 percent of surveyed Medicaid enrollees are unaware of the impending redetermination process.
Plus—what we’ve been reading.
- Do hospitals share the blame for the COVID staffing crisis? The latest piece in the New York Times’ “Profits over Patients” series focuses on the staffing policies of Ascension, one of the nation’s largest nonprofit health systems, drawing a straight line from its cost-cutting practices over the last decade to its current staffing woes. Like previous articles in the series, the piece hones in on Ascension’s profit-seeking motives, pairing pre-pandemic accounts of Ascension executives boasting about savings from slashed labor costs with story after story of its frontline clinicians struggling to provide adequate patient care once COVID hit. In responses included in the article, an Ascension spokesperson rejected the idea that the system’s workforce policies were responsible for its current staffing crisis, claiming that Ascension has maintained better staff-to-patient ratios than many of its peers.
The Gist: Yet again, the New York Times is shining a harsh light on a health system that has been engaged in management practices common across the industry. While the piece omits some relevant information, such as the recent spike in labor costs, it’s useful to point out that many hospitals were so thinly staffed prior to COVID that they had virtually no slack in their labor pools, hindering their response to the crisis. In our experience, the reasons for this have less to do with lining executives’ pockets, and more to do with the realities of dealing with a worsening payer mix and rising input costs. While future hospital workforce strategy is going to have to focus on reducing dependency on nurses—especially in the inpatient setting—any effort to that end must augment nurses with team-based care models and technology solutions, rather than pushing further on already-tight nurse-to-patient ratios.