Investigations into health care consolidation, profiteering lack necessary insurer angle
There are bad actors in private equity. But Wall Street - controlled insurers owned more physician practices – and drive more aggressive short-term profits–than private investors.
In April, my hometown newspaper, The Philadelphia Inquirer, ran an article with a key takeaway that further troubled those of us nervous about consolidation in health care. Citing researchers from the University of California-Berkeley, the Inquirer reported more than 40 percent of urology practices in the Philadelphia area are now private equity-backed. “The findings raise concerns about competition and call for closer scrutiny by the Federal Trade Commission (FTC), state regulators, and policymakers,” one of the study’s authors wrote.
The FTC is already headed down scrutiny road, and Capitol Hill is following suit. Senators Elizabeth Warren and Ed Markey last month blasted private equity-funded Steward Healthcare for its actions in Massachusetts, which are putting eight hospitals in the state in jeopardy.
There are many who have sounded the alarm about increased profiteering in health care and the government is responding, so I do not feel a need to add further fuel to that fire. But, a detail buried in the Steward Healthcare situation is, to me, a canary in the coal mine for health care in America that is dangerous – and to my eyes, being overlooked by leaders in Washington who focus too narrowly on private equity.
To bail itself out, Steward is looking to sell its large physician group in Massachusetts to Optum, a subsidiary of UnitedHealth Group that is increasingly responsible for America’s largest health insurance conglomerate’s significant earnings growth. I can’t pass judgment on whether continued ownership by Steward or new ownership by Optum is better for Massachusetts; both are likely bad options. (And regular readers will remember we highlighted the Steward debacle earlier this year.) But the move calls attention to the larger trend that has gone less noticed than scrutiny of private equity in health care: direct ownership of physician groups and health care facilities by health insurance companies.
The American Medical Association said in 2023 that fewer than five percent of doctors in the U.S. are employed by all private equity firms. The same year, one health insurance company, UnitedHeath, disclosed it employs or otherwise controls roughly ten percent of American doctors.
That statistic speaks for itself. I support scrutiny of private equity’s role in health care and encourage aggressive oversight by Washington industry-wide. I’ve followed regularly cited statistics that say private equity acquisitions in health care have exploded over the past ten years. In 2021 alone, 484 physician practices were acquired by private equity firms for $200 billion.
Yet, the recent pile-on focused largely on private equity, and not insurers, seems to miss an important – if not larger – problem.
Case in point: The three-agency federal inquiry into private equity deal growth in health care is focused specifically on transactions that might not otherwise trigger an antitrust review. That is a valid endeavor. But where is the joint agency, high-profile federal review of how Optum has come to encompass 90,000 physicians and counting? And the associated impact that may have had on helping UnitedHealth drive higher returns to shareholders on Wall Street? Is it really fair to assume that because UnitedHealth’s activities are regulated by the Securities and Exchange Commission, and private equity’s are not, UnitedHealth and other publicly traded insurers have received sufficient scrutiny?
I commend recent Congressional review of UnitedHealth’s actions by calling CEO Andrew Witty to testify on Capitol Hill about the cyberattack on one of the company’s thousands of subsidiaries, Change Healthcare, and an inquiry around stock sales by UnitedHealth executives shortly before public disclosure of a federal inquiry into the attack sent the company’s stock down.
But, respectfully, I know these are the public fights the insurance industry usually manages to deal with to Wall Street’s satisfaction. (UnitedHealth’s stock price actually went up on the day Witty testified.) Promising to do better next time – as Witty told lawmakers about the Change Healthcare hack, during the first testimony by a UnitedHealth CEO on Capitol Hill since the Affordable Care Act debate – and haggling over how executives are compensated, does not make investors anxious. Those are the kinds of battles I helped waged when I worked at Cigna, which drove little long-term accountability or change, much to the glee of the industry’s C-suite executives who saw little consistent regulatory scrutiny of insurers’ more nefarious business practices.
Given the choice to be grilled by Congress over the cyberattack or UnitedHealth’s increasing consolidation of doctors under its umbrella, in my old job, I would have advised Witty to choose the hack every time.
And the more scrutiny Witty and other insurance executives can avoid of their vertical integration – where they increasingly process claims, manage pharmacy benefits, and control doctors – the more time they’ll have to further consolidate their corporate empires. All while under the “watchful” eye of federal regulators who have jurisdiction over corporate mergers and acquisitions but who, to date, have focused more on private equity.
All that said, that might be beginning to change. The recently announced DOJ task force on “Health Care Monopolies and Collusion” presents an important new opportunity for scrutiny of insurer acquisitions of physician practices and other parts of the U.S. health care delivery system. When announcing the task force, Assistant Attorney General Jonathan Kanter specifically mentioned “payers” as entities that have consolidated too much market control. Bravo, Kanter. Keep the spotlight on them.
Another person who has been shining a light on our health care system suddenly died yesterday from a heart attack - here is a nice comment that was published about Marshall Allen:
Marshall Allen: A Relentless Voice for the Little Guy
Dave Chase, Health Rosetta-discovering archaeologist
Healthcare Transformation Author & Speaker | Chief Archaeologist at Health Rosetta
274 articles
May 19, 2024
On Sunday, May 19, we lost an extraordinary man, Marshall Allen, a dedicated journalist and former member of the clergy, whose unwavering commitment to investigative journalism has left an indelible mark on the healthcare industry. His tireless work exposed the deep-seated issues within the healthcare system, shedding light on price gouging, sloppy billing, fraud, insurance denials, and unnecessary treatments that preyed on vulnerable Americans.
Marshall's passion for justice and transparency was not just a professional pursuit; it was a personal mission. As he described on his website, "I’ve spent more than fifteen years investigating the healthcare industry as a journalist, exposing the insidious ways the system preys on vulnerable Americans." His work was driven by a deep-seated desire to help individuals and employers understand and navigate the convoluted healthcare system, empowering them to overcome its injustices and win.
Allen's Impact on Healthcare Legislation
One of Marshall's most significant contributions was his year-long investigation into the health insurance brokerage industry, which culminated in the publication of a pivotal article on ProPublica. This investigation caught the attention of Senator Lamar Alexander (R-TN) and Senator Patty Murray (D-WA), who were seeking bipartisan areas of agreement. The insights from Marshall's work played a crucial role in the drafting and eventual passage of the Consolidated Appropriations Act of 2021 (CAA), regarded by many as the most consequential employee healthcare legislation since 1943. Marshall's reporting on the CAA's implications was instrumental in shaping public understanding and policy.
His piece entitled "Behind the Scenes, Health Insurers Use Cash and Gifts to Sway Which Benefits Employers Choose" directly led to the passage which he reported on in his follow-on piece entitled "Lavish Bonus? Luxury Trip? Health Benefits Brokers Will Have to Disclose What They Receive From the Insurance Industry."
"Never Pay the First Bill" and The Allen Healthcare Academy
Marshall's influence extended beyond journalism. His book, "Never Pay the First Bill," is a tremendous resource for patients navigating the complexities of the healthcare system. It equips families and employers with the knowledge and strategies to fight back against unjust medical bills and practices, promoting a sense of empowerment and advocacy. Additionally, Marshall edited healthcare books by Dr. Marty Makary, further cementing his legacy as a thought leader in the field.
After the success of his book, Marshall founded the Allen Healthcare Academy, a platform dedicated to educating and empowering individuals to take control of their healthcare experiences. This initiative reflects Marshall's enduring commitment to making healthcare more accessible and fair for everyone.
A Moral Mission Rooted in Faith
Marshall's faith played a significant role in shaping his character and work. In his New York Times piece, "The Biblical Guide to Reporting," he shared how his five years in Christian ministry enriched his journalistic practice, fostering a sense of compassion, integrity, and dedication to truth. What drove Allen's work was a profound moral calling rooted in his Christian faith. As he wrote, his years in ministry instilled in him "a sense of justice and empathy" that made him "a better journalist because I am a Christian, not in spite of it." It soured him to see people "getting beaten down by the system," and he made it his "personal mission to help individuals and employers understand the health care system and show how they can overcome the bullying and win." His faith-inspired approach to journalism endeared him to many and underscored his deep sense of duty to serve the public good.
Marshall Allen, RIP
Marshall Allen's legacy is one of courage, integrity, and relentless pursuit of justice. His work has not only illuminated the dark corners of the healthcare industry but has also inspired countless individuals to stand up for their rights and demand better. As we mourn his loss, we celebrate the remarkable impact he had on the world and take solace in the lasting changes he brought about. He will be deeply missed, but his contributions will continue to resonate for years to come.
One of the people Marshall was closest to as a friend and his editor was Marty Makary M.D., M.P.H.. Marty shared the following:
In his final hours, this is what I told him: Marshall, we watched you fight tireless for the voiceless and become a fierce advocate for the defenseless--a fight many will continue. At every step along the way, you reminded many of us of what's really important--that our treasure is in heaven, not on earth. Thank you my friend for being a role model to so many, a great husband, father, leader to your family and faithful child of God. We will miss you dearly. I love you brother. Friends, you can support his family by donating here: https://gofund.me/8f539269. Thank you!
I think it’s important to understand what bought us to the current situation of consolidation in health care. None other than the PPACA. This problem more or may not have occurred had the government not became heavily involved in health insurance.