consolidation

Looking deeper into the Kaiser-Geisinger deal

Lisa Lake/Getty Images for Geisinger

There was a collective gasp last week when Kaiser Permanente announced it was acquiring Geisinger. Kaiser is putting its hospitals and all of Geisinger into a new organization called Risant Health, with the goal of adding at least another four health systems. 

Two of the biggest names, when people think of integrated health systems and coordinated care, combining? Just like that? Why would Geisinger need Kaiser’s help on anything, especially when it comes to “value-based care”?

The answer, like usual, has money at the core. Looking deeper at the transaction, it became clear Geisinger was actually stuck for years on a troubled path full of failed transactions, antitrust problems, and competition. Our new story today explains how the deal is raising the curtains to an even more aggressive era of consolidation among hospitals, doctors, and insurers — even among those considered to be sophisticated.

“What you’re seeing is the real changing nature of competition,” said Sachin Jain, CEO of SCAN Group, a health insurer in California, Arizona, and Texas that is in the process of its own merger with an insurer in Oregon. “Competition in health care has been really regional. It’s going to be increasingly national.”

Read the story to get more details about Geisinger’s litany of problems, why success is not guaranteed with Kaiser, potential targets for Risant, and what the antitrust angle is.

medicaid

A Medicaid pay raise for home care workers?

The federal government unveiled a beefy set of regulations last week that would more tightly regulate Medicaid and the cornucopia of state managed care rules. 

There’s a ton in these rules (you can read them here and here). One proposal has already rankled investors. CMS pitched the idea of having at least 80% of all Medicaid payments go toward the compensation of “direct care workers” who perform “homemaker services, home health aide services, and personal care services.” 

That would essentially cap the gross profit margin of home health companies at 20%. Publicly traded home care companies usually have gross margins well above that amount. CMS justified that threshold because other states have tried it, and since it’s focused on those workers and services, there aren’t really any major facility costs.

The stock price of Addus HomeCare, a large home health and hospice chain, plunged 27% Friday on the news. Addus is holding its earnings call today after the stock markets close, for those interested in hearing the industry’s first reaction to the rules.

hospitals

This is what happens when you don’t listen to voicemails

CMS is going to start cracking the whip more on hospitals that are not publishing their prices publicly — which, I feel the need to repeat, is required under federal law.

A couple weeks ago, CMS levied new fines on two hospitals: Kell West Regional Hospital in Texas and HCA’s Frisbie Memorial Hospital in New Hampshire. The situation at Frisbie was especially egregious: Not only did the hospital not post prices, it also did not submit a formal plan on how it would be compliant, and just flat-out ignored CMS, according to the federal notice outlining Frisbie’s penalty. CMS left three voicemails (three!), and the hospital just … never returned the federal government’s calls.

By the government’s own calculations, roughly 30% of hospitals still are not complying with the price transparency law. So, CMS has had enough and made some changes last week. 

Hospitals that have to submit a “corrective action plan” will have 90 days to come into compliance (previously, hospitals could propose their own timeline). Hospitals that also don’t submit a corrective action plan within 45 days will automatically get fined. Read the full set of changes.