Healthcare Prices and Payments
UnitedHealthcare Pays Optum Providers More Than Non-Optum Providers
Health Affairs
Daniel R. Arnold, Brent D. Fulton
Optum has a history of increasing market power through aggressive acquisitions of healthcare services and has been accused of using that market power to impede provider competition for financial gain. UnitedHealthcare and Optum are parts of the same company, with UnitedHealthcare serving as the insurance arm, and Optum providing healthcare services. In 2024, Optum, which includes a variety of smaller entities such as a pharmacy benefit manager (PBM) and software for services and analytics, raked in revenues over $250 billion. The United-Optum business model, described as vertical integration, may have beneficial characteristics, but can also raise substantial concerns for patients including "regulatory gaming" (inflating the cost paid by the insurer to its own doctors to make it appear that more money is going to medical care when it is actually going to the doctors it owns) and "partial foreclosure" (disadvantaging rival physicians by paying its own providers more to help themselves grow larger while simultaneously making independent providers suffer). To test this hypothesis, the authors compared CMS price data for fourteen common procedures across four different insurers for both Optum and non-Optum physicians. The study found that UnitedHealthcare payments to Optum providers are 17% higher than those made by its competitors, and in markets where UnitedHealthcare has a higher market share, the payments become 61% higher. The study suggests that this data shows intercompany healthcare financial transactions warrant additional scrutiny.
Does price disclosure promote competition in private MRI markets? A difference-in-differences analysis
Health Economics Review
Riina Hiltunen
This paper examines healthcare markets in Finland, which have traditionally lacked price transparency. Online price comparison tools have recently been introduced, and the author is specifically examining the effect of these disclosures on the price of magnetic resonance imaging services. The author concludes that the transparency lowered prices, with a more substantial impact in concentrated markets, suggesting that price transparency limits providers' ability to exert monopoly power.
Antitrust Enforcement
Monopolectomy: An Antitrust Analysis of Healthcare Facilities Mergers Under the FTC's 2023 Merger Guidelines
Journal of Law & Commerce
George Balchunas
In December 2023, the two major federal antitrust enforcement agencies, the Federal Trade Commission (FTC) and the Department of Justice (DOJ), released new merger guidelines that adopt a more aggressive approach to seeking injunctions against such actions. The guidelines require less evidence to prove future detrimental impacts on consumers in merger challenges. The authors suggest that these changes will significantly strengthen antitrust enforcement in the healthcare field by shifting from an economic-outcome-focused regulatory scheme to a market-structure-focused one. Additional guidelines implemented by the rule updates include oversight of entrenching or advantaging dominant firms; industry trajectories towards consolidation; and examination for patterns of serial acquisitions by single firms. The article highlights the healthcare market's rigid makeup, making it difficult for consumers, or in this case, patients, to shop around for better prices due to a lack of transparency. Additionally, healthcare consolidation is even more sensitive to compounded effects due to close collaboration with competitors across sub-systems such as referrals and joint services. The authors feel that, since the guidelines will make hospital mergers more difficult, hospitals should consider achieving efficiencies through alternative means other than mergers. If mergers are still being pursued, the authors feel that hospitals should emphasize both the benefits to patients and the potential to positively affect competitors' behavior.
Evaluating Substitutes for Federal Antitrust: The Case of COPAs
National Bureau of Economic Research
Seungwhan Chun, Marco Duarte, Cici McNamara, Jason M. Lindo
The authors note that federal and state regulators of healthcare markets often have misaligned priorities, making enforcement of antitrust law a challenge. This paper examines whether state use of Certificates of Public Advantage (COPA) can be an adequate substitute for federal antitrust enforcement. COPAs are agreements sanctioned by the state that make hospital mergers permissible even where they would otherwise violate federal antitrust guidelines. In place of federal enforcement, the state promises to actively regulate the merger to mitigate harm and/or reduce competition. This promise of regulation often takes the form of behavioral expectations imposed by the state through price caps, service mandates, and required reporting. In a longitudinal study of hospitals from 1996 to 2022, the authors compared merged hospitals under COPA agreements to those without a COPA. Overall, the study found that COPAs are successful in price capping with an approximate seven to eleven percent price growth rate lower than those systems without a COPA. Despite reduced prices, COPA hospitals received lower quality-of-care ratings and higher 30-day mortality rates among patients with severe heart conditions. The decrease in the cost of care, coupled with an increased mortality rate, suggests that capped prices under COPA agreements cut costs in ways that reduce quality, such as reductions in staff. In general, the authors suggest that state-sanctioned COPAs are not an adequate substitute for federal antitrust enforcement because while one measure is suppressed, another will be amplified, and the loss of value in care does not outweigh financial savings.
Healthcare Reform
A Promising Step Toward Site Neutrality: What The 2026 OPPS And ASC Rule Gets Right—And What's Still Missing
Health Affairs Forefront
Corrie Mook, Roslyn Murray, Christopher M. Whaley
The Centers for Medicare and Medicaid Services (CMS) proposed updates to the Hospital Outpatient Prospective Payment System (OPPS) and the Ambulatory Surgical Center Payment System (ASC) that focus on reforms to advance site-neutral payments, increase transparency, and cut costs. The proposed rules eliminate the inpatient-only list, giving patients greater choice in where to get care. The proposed regulations would also align payments for the administration of drugs in hospital outpatient departments with those in non-hospital settings and mandate reporting of actual negotiated prices for commercial hospital pricing. To further strengthen transparency efforts, the authors of the article call for the reporting of pricing formulas and increased oversight to ensure adequate compliance in the face of limited oversight. The authors recommend that CMS implement increased oversight to ensure accuracy and compliance as the new rules roll out. The authors feel the proposed rule changes represent progress, but that more work on evidence-based expansion of site-neutrality is needed, as is a more comprehensive approach to transparency.
Private Equity Acquisition of Substance Use Treatment Centers Increases Probability of Public Health Insurance Acceptance
Health Affairs
Jackson Reimer, Marissa King, Susan H. Busch
Many substance use treatment centers do not accept Medicare and Medicaid, making access to treatment challenging for some. However, a national survey of private equity acquisitions of many of these facilities found that they are more likely to accept public insurance plans after being acquired. Private equity firms inherently have the capital and administrative capacity to obtain accreditation for Medicare and Medicaid expansion that independent centers often lack. While beneficial to patients, the authors point to financial and business incentives to expand coverage under these plans – when a treatment facility is credentialed to accept public insurance, it also expands revenue streams. Despite this incentive, private equity ownership did not alter, over time, the likelihood that a facility would provide evidence-based treatments, including prescribed medications or counseling models typically used with substance use communities. Authors posit, instead, that acquisition by a private equity firm could signal a change in how substance use disorder care is financed. Recommendations for future studies of private equity-acquired substance use treatment facilities include examining access and the quality of care for patients, in conjunction with expanding public insurance plans, especially as private equity-acquired centers unintentionally become favored.
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