The Weekly Gist: The Moose on the Loose Edition

What happened in healthcare this week—and what we think about it.

1. Mifepristone ruling saga escalates quickly through the courts. Last Friday, Texas federal judge Matthew Kacsmaryk ordered the Food and Drug Administration (FDA) to rescind its approval of mifepristone, a drug widely used in medication abortions with a proven safety record. That suit, brought by the Alliance Defending Freedom, alleges that the FDA did not properly review the safety risks of mifepristone. Later that day, Washington state federal judge Thomas Rice issued a conflicting ruling that forbade the FDA from rescinding approval in the 17 states and the District of Columbia where Democratic lawmakers have sued to protect access to the drug. Then late on Wednesday, the Fifth Circuit Court of Appeals ruled that mifepristone could remain partially available while the Texas case proceeds through the courts—but rolled back more recent decisions issued by the FDA which have made the drug easier to obtain and use, including mail-order access. In response, the Justice Department announced on Thursday that it was seeking emergency Supreme Court intervention, and Judge Rice issued a ruling on Thursday compelling the FDA to preserve full access to mifepristone in the plaintiff states. On Friday, the Supreme Court stayed the lower court’s ruling, restoring full access to mifepristone temporarily, to give the justices until Wednesday to resolve the matter.

The Gist: With the FDA now facing competing judicial orders, the fate of mifepristone rests in the hands of the Supreme Court. While many view this case as centered on questions of abortion rights, the consequences of these unprecedented rulings extend beyond mifepristone access: the FDA’s authority and autonomy in its drug and device approval process is at stake. This same process could potentially be applied to other politically charged drug approvals, like birth control and COVID vaccines, to similarly disruptive effects. Even temporary bans that are ultimately reversed could have a chilling effect on drug production, development, and access.

2. UnitedHealth Group (UHG) quietly acquired Crystal Run Healthcare. In late February, Crystal Run Healthcare, a Middletown, NY-based physician group with nearly 400 providers, became part of UHG’s Optum division. A local paper broke the news after obtaining an email from Crystal Run’s CEO, as neither company issued a press release, though UHG has since confirmed the acquisition. Crystal Run expands Optum’s footprint in the Hudson Valley region north of New York City, following the acquisition of Mount Kisco, NY-based Caremount Medical in 2022. The company’s broader New York metro area footprint includes Connecticut-based ProHEALTH and New Jersey-based Riverside Medical Group, the three of which Optum has since integrated into a single tri-state medical group.

The Gist: Optum continues to secure its place as the country’s largest aggregator of physicians, now employing or aligning with over 70,000 doctors nationwide. Not only does every new deal by UHG bolster its vertical integration strategy, but they also shine a light on gaps in federal antitrust regulations. UHG must only disclose deals that comprise a “significant” portion of its business, a threshold that excludes physician groups as large as Crystal Run—making it difficult to fully examine transactions that are subscale according to regulations, but may be significant for healthcare delivery in a local market. Some state governments, including New York, are exploring ways to increase state antitrust scrutiny of provider acquisitions. But in multi-state markets where only the federal government has the authority for full oversight, UHG’s acquisition strategies are proving difficult to even monitor, much less intervene. 

3. Froedtert Health and ThedaCare announce intent to merge. On Tuesday, Milwaukee, WI-based Froedtert Health and Neenah, WI-based ThedaCare shared they have signed a letter of intent to form a $5B, 18-hospital system. The merger would unite Froedtert’s southeast Wisconsin service area with ThedaCare’s northeast and central Wisconsin footprint, linking tertiary care patients in ThedaCare’s high-growth service areas in the Fox Valley to Froedtert’s Medical College of Wisconsin in Milwaukee. As the systems serve non-overlapping markets, the merger is not expected to receive challenge from federal regulators.

The Gist: These two systems have partnered previously, striking a joint venture last fall to build two health campuses with micro-hospitals, which likely served as the operational test case for merger plans already in the works. The pace of consolidation has quickened in the Badger State, with Gundersen Health System and Bellin Health completing a merger last fall to form an 11-hospital system. While interstate mega-mergers have defined recent health system M&A trends, these types of regional mergers, which bring together systems in adjacent but non-overlapping markets, could serve to bolster the combined system’s value proposition as a partner to employers and other healthcare entities in the state and beyond.

Plus—what we’ve been reading.

4. What’s driving the bidding war for primary care practices? Published in the April edition of Health Affairs Forefront, this piece unpacks why payers and other corporations have replaced health systems as the top bidders for primary care practices, driving up practice purchase prices from hundreds of dollars to tens of thousands of dollars per patient. While corporate players like UnitedHealth Group, Amazon, and Walgreens have spent an estimated $50B on primary care, it pales in comparison to the potential “$1T opportunity” in value-based care projected by McKinsey and Company. The authors argue that this tantalizing opportunity exists because the Centers for Medicare and Medicaid Services (CMS) invited corporations to “re-insure” Medicare through capitated arrangements in Medicare Advantage (MA) and its Direct Contracting program. While CMS intended to promote risk and value-based incentives to improve care quality and costs, the incentive structures baked into these programs have afforded payers record profits, despite neither improving patient outcomes nor reducing government healthcare spending.

The Gist: While the critiques of MA reimbursement structures in this piece are familiar, they are woven together into a convincing rebuke of the “unintended consequences” of CMS’s value-based care policy. Through poorly designing incentives, CMS paved a runway for corporate America to capture the lion’s share of the financial returns of value-based care, paying prices for primary care that health systems can’t match. Meanwhile, despite skyrocketing valuations for primary care practices, primary care services remain underfunded and inadequately reimbursed, pushing primary care groups closer to payers with excess profits to invest.