ftc

Doubling down on private equity and Big Physician

FTC building; Alex Brandon/AP

Dominant physician groups don’t command the same attention as, say, Big Tech firms with national omnipresence like Google and Facebook. But they could severely warp the economics of local markets for patients, employers, and insurers — and Lina Khan’s Federal Trade Commission is eager to make Big Physician a lot smaller.

Last September, the FTC sued private equity firm Welsh, Carson, Anderson & Stowe and U.S. Anesthesia Partners, alleging the two parties conspired to create monopolies for anesthesia services. Both Welsh Carson and USAP have tried to get the case thrown out, but the FTC recently doubled down. The agency asked a judge last month to ignore those companies’ pleas, calling their arguments “unavailing” in recent legal filings — akin to smack talk in the courtroom. 

It’s not surprising the FTC is spending more time and resources on a lawsuit it initiated. But experts say the agency’s meticulous arguments and persistence to put Welsh Carson and USAP’s business strategy on ice sends the clearest warning yet: Firms that try to consolidate markets for physician services as a means to jack up prices won’t get away without a fight.

“It’s sending a political signal, at least in this administration, that the legal and regulatory risk of private equity in health care has heightened,” Jane Zhu, a physician and professor at Oregon Health & Science University, told me. Read the story for more.

employer coverage

The Big One

There was a collective gasp in the health insurance and employer benefits community last week when a Johnson & Johnson employee sued the conglomerate for mishandling workers’ drug benefits. 

People have been waiting for years for this type of lawsuit to drop. My colleague Ed Silverman and I read through the complaint, which was filed by Fairmark Partners, a law firm funded by Arnold Ventures. This particular lawsuit alleges J&J violated its status as a “fiduciary” by allowing itself, and therefore its employees, to be drastically overcharged for prescription drugs. The suit cites a STAT investigation from last year that found pharmacy benefit managers and big consulting firms often have secret financial deals that could create egregious conflicts of interest — which potentially opens employers up to legal liability, under the federal law known as ERISA, for not sniffing out those conflicts.

There’s a lot more to come from this. In the near term, we’ll be watching for J&J’s motion to dismiss the case. That will take some time. But if a judge ultimately allows the case to proceed, will J&J drag in its PBM (Express Scripts) and consulting firm (Aon) — and hoist the blame on them? And will every ERISA attorney in the country copy-paste this lawsuit against other employers who are getting ripped off on drug prices?  

“There’s nothing unique in the complaint and the facts alleged that would make this case any different from any other group health plan that uses Express Scripts or any other client that uses Aon,” said Chris Deacon, an independent consultant who used to oversee health benefits for New Jersey’s state employee plan.

medicare advantage

The MA rate zeitgeist

There is not a single publicly traded health insurance company that is pleased with the government’s initial pitch for 2025 Medicare Advantage payment rates — and that annoyance leached into several earnings calls and regulatory filings last week.

• Humana’s actuaries expected flat MA payments for 2025, but the company told investors the proposal was actually 1.6 percentage points worse than expected.
• CVS CEO Karen Lynch: “We do not believe it covers overall cost trends that have been emerging in Medicare Advantage.”
• Centene CFO Drew Asher: “The [MA] products may be a little bit less attractive for seniors from an industry standpoint if we don’t make a lot of progress on the final rates.”

CMS has already told the industry that a key component of its proposed rates — the projected spending of people enrolled in traditional Medicare — was only based on data through Sept. 30, 2023. That data will get updated, and you better believe insurers will be throwing their spreadsheets at CMS to make sure the agency uses the data that they like the most.