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Over the years, health insurers have increasingly purchased health care providers, creating monolithic “payvider” organizations. This consolidation has captured the home health industry’s careful attention, and several stories on this trend have been among the most-read on Home Health Care News in the last month.
Some of those stories have reflected the ongoing growth of payviders and their advantages from a business and care standpoint. For example, The Pennant Group (Nasdaq: PNTG) earlier this month closed on an acquisition of former Amedisys assets, in a deal that helped pave the way for Amedisys to become part of UnitedHealth Group (NYSE: UNH), one of the nation’s largest payviders. We also covered comments from payvider executives at our recent FUTURE Conference, where they touted the virtues of integrated payment and care models.
But another of our most popular stories focused on efforts to stop the payvider model through proposed federal legislation. The lawmakers behind the bill argue that payviders are harming consumers.
In my estimation, this specific proposed bill is unlikely to be passed. But it is an example of how legislation will nip at the evolution of the payvider, while failing to stop it in its tracks – and it points to a conundrum, as policymakers seek both to spur more coordinated health care while being wary or outright critical of companies that are baking coordination fully into their business models.
In this week’s exclusive, members-only HHCN+ Update, I’ll share my take on the proposed payvider-blocker bill and offer analysis and key takeaways, including:
– The pros and cons of the payvider model for the home health industry and its patients
– The bill’s implications
– The role payviders will play in the future
The payvider risk/benefit analysis
HHCN recently had the opportunity to speak to several payviders at our FUTURE event in September (and will be speaking to Bill Gammie, the senior director of post-acute utilization at payvider pioneer Kaiser Permanente, in the next HHCN+ TALKS episode). Executives from Humana Inc. (NYSE: HUM) and VNS Health painted a clear picture of the benefits of the payvider model.
“You have the potential of a much better experience for the patient or member who’s receiving care,” Kirk Allen, president of Humana Home Solutions, said at FUTURE. “I think you also have the opportunity to take advantage of plan design, meaning your providers and your payer know what is in the plan design, and can even alter it to benefit the population that you’re serving, because you’ve got that closed loop of information to say, ‘This is what we’re seeing in the home.’”
Allen also attested that an insurer with its own home- and community-based service arm has a better understanding of these offerings, and that the payvider model enhances communication between plan and provider.
Payviders, with their integrated care models, are playing a role in the evolution of home-based care to value-based, risk-bearing payment models.
Humana’s service arm, CenterWell, which operates senior care and home health programs, has developed a risk model around 65,000 of its members, Allen said.
But while payviders tout improved patient experiences and reimbursement innovation, research has demonstrated a list of less positive consequences of vertical integration in the health care industry.
For instance, some findings have challenged the cost and access benefits created by payviders.
Insurers with service arms sometimes report that M&A growth allows them to negotiate more favorable rates with providers, and thereby pass on savings to their members, and that having access to the full care continuum improves care coordination and clinical innovation.
“The evidence does not bear out these assertions, however, suggesting instead that insurers are the primary beneficiary of consolidating transactions, while consumers ultimately face increased prices and diminished choices for care and some providers or pharmacies wind up undercompensated,” an article from independent nonpartisan policy institute the Center for American Progress (CAP) read.
Insurer consolidation reduces the number of payers in a market, increasing market power for the remaining organizations, and therefore reducing provider prices, CAP wrote. Theoretically, this could result in lower premiums for consumers, but evidence does not suggest that is the case.
Additionally, an article published in Health Affairs found that payviders often utilize a loophole to conceal inflated care prices and avoid paying expensive rebates to consumers. Insurers are required to spend a minimum percentage of premium dollars on medical care and quality improvement initiatives, rather than overhead costs or profit. According to the article’s authors, payviders funnel spending to their affiliated provider practices, which allows them to mask the percentage of premium dollars that the insurer spends on initiatives that actually improve care for patients.
Moving parts
Researchers are not the only people who have raised doubts about payvider benefits; some lawmakers have set their sights on breaking up these organizations. Senate and House lawmakers introduced the Patients Over Profits Act, or the POP Act, in September. If passed, the bill would prevent insurance companies from owning health care providers that are reimbursed through Medicare Part B or Part C.
“The Patients Over Profits Act stops multi-billion-dollar companies from buying up every part of the system and tying our health care access to their profit margins and shareholder returns,” Rep. Val Hoyle (D-Ore), said in a statement. “The message we are sending in response is clear: Americans should be able to expect quality, affordable, and appropriate care when they need it and that should be the focus of our health care system.”
Should the POP Act become law, insurers would be unable to legally purchase applicable provider organizations, and they would also have to divest those they currently own. The Federal Trade Commission, state attorneys general, the U.S. Department of Health & Human Services (HHS) Office of the Inspector General or the U.S. Justice Department would be able to file lawsuits against insurers that fail to divest their Parts B or C provider companies.
Yes, that would mean the breakup of UnitedHealth Group and its services arm, Optum, as well as similar moves from other payviders, such as the separation of CenterWell from Humana.
The future of payviders
The lawmakers supportive of the POP Act specifically pointed to the health care behemoth UnitedHealth as an example of the consequences of the payvider model.
“UnitedHealth has gobbled up our local health care practices, creating a monopoly that directly hurts everyone in our community,” Rep. Pat Ryan (D-N.Y.) said in a statement. “In their greedy pursuit of profits, they now own the insurance company, they own your doctor, they own the pharmacy and they own the software that processes all of your information – and they use it all to keep prices high and drive quality down. Enough – it’s time to break up UnitedHealth and put you back in control of your own health care.”
UnitedHealth has been subject to intense scrutiny (as well as a slew of negative publicity) over the last few years. In 2023, one of the POP Act’s introducers, Sen. Elizabeth Warren (D-MA), pushed for investigations of UnitedHealth.
Perhaps it’s true that profit-minded businesses are not well suited to serving patient interests or lowering health care costs. But the criticism of “greedy” companies strikes me as overlooking a key element at play, which is that the government’s own policy agenda has been the driving force behind the payvider trend. Going back at least to the passage of the Affordable Care Act (ACA), the government has sought to create an increasingly integrated health care system, with payments tied less to the volume of services delivered and more to how well population health is managed.
These goals have given rise to multiple models of care and also have driven the growth of Medicare Advantage, as a program that at least on paper should incentivize insurance companies to deliver more coordinated care that benefits patients while keeping costs down. Of course, to meet these goals, it stands to reason that payers and providers need to collaborate more closely, and the payvider model comes into focus as a means to achieving this coordination.
In other words, the line between greedy overreach and laudable innovation has become a difficult one to define. Actions to draw the line have tended to favor companies’ efforts to drive more integrated models, at least so far.
Of course, one of these actions involved home health, with UnitedHealth’s Optum experiencing challenge that it ultimately won. After the U.S. Department of Justice (DOJ) sued UnitedHealth and Amedisys, and the companies’ plans to divest home health and hospice locations to VitalCaring were halted, the deal was suspended in uncertainty. But the acquisition eventually went through, and was finalized in August, with relatively few concessions required of the companies.
While I think lawmakers’ calls to investigate UnitedHealth and companies like it are based in evidence, their efforts to strip such companies of their vertical integration capabilities are unlikely to result in drastic changes to the status quo. The Amedisys deal serves as a precedent for the government questioning such consolidation – and maybe singing it at the edges, as with its requirements for divestitures – but failing to deal any significant damage.
Especially under the pro-business second Trump administration, anything like the POP Act seems destined to be a symbolic effort at best.
Another example of the government questioning monolithic companies, but failing to take significant action, presents itself in the recently closed Google antitrust suit. Sure, the DOJ bragged about winning “significant remedies against Google,” but it stopped short of breaking up the company by requiring it to sell its Chrome browser.
These cases set the stage for the payvider trend to continue mostly unharried, reshaping the home-based care industry. I don’t have high expectations for legislation like the POP Act, at least in the next few years. I anticipate that payviders will continue to push at the boundaries of what is considered to be, and prosecuted as, a monopoly in America. The swelling payvider trend will bump against some limitations – but those constraints will require only the smallest of concessions from payviders.
For home health providers, this could mean the hastened evolution of payment models and other innovations, and/or increased competition from insurance monoliths with their own home health services. For patients, it is unlikely to result in any meaningful reduction in premiums, but hopefully the ideals and benefits described by leaders like Humana’s Allen will continue to be realized and expand – if not, the calculus around the long-term sustainability of payviders could change, with future versions of the POP Act or similar bills more likely to gain traction.
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