Kaiser Health News

FTC Chief Gears Up for a Showdown With Private Equity

Published

8 months ago

November 30, 2023

Harris Meyer
Thu, 30 Nov 2023 10:00:00 +0000

A recent Federal Trade Commission civil lawsuit accusing one of the nation's largest anesthesiology groups of monopolistic practices that sharply drove up prices is a warning to private equity investors that could temper their big push to snap up physician groups.

Over the past three years, FTC and Department of Justice officials have signaled they would apply more scrutiny to private equity acquisitions in health care, including roll-up deals in which larger provider groups buy smaller groups in a local market.

Nothing happened until September, when the FTC sued U.S. Anesthesia Partners and the private equity firm Welsh, Carson, Anderson & Stowe in federal court in Houston, alleging they had rolled up nearly all large anesthesiology practices in Texas. In the first FTC legal challenge against a private equity purchase of medical practices, the federal agency targeted one of the most aggressive private equity firms involved in building large, market-dominating medical groups.

In an interview, FTC Chair Lina Khan confirmed that her agency wants to send a message with this suit. Welsh Carson and USAP “bought up the largest anesthesiology practices, then jacked up prices and entered into price-setting and market-allocation schemes,” said Khan, who was appointed by President Joe Biden in 2021 to head the antitrust enforcement agency, with a mandate to combat health care consolidation. “This action puts the market on notice that we will scrutinize roll-up schemes.”

The large and growing volume of private equity acquisitions of physician groups in recent years has raised mounting concerns about the impact on health costs, quality of care, and providers' clinical autonomy. A JAMA Internal Medicine study published last year found that prices charged by anesthesiology groups increased 26% after they were acquired by private equity firms.

“Now we're seeing that scrutiny with this suit,” said Ambar La Forgia, an assistant professor of business management at the University of California-Berkeley, who co-authored the JAMA article. “This suit will cause companies to be more careful not to create too much local market power.”

The FTC's lawsuit alleges that USAP and Welsh Carson engaged in an anti-competitive scheme to gain market power and drive up prices for hospital anesthesiology services. The FTC also accuses USAP and Welsh Carson — which established the medical group in 2012 and has expanded it to eight states — of cutting deals with competing anesthesiology groups to raise prices and stay out of one another's markets.

USAP now controls 60% of Texas' hospital anesthesia market, and its prices are double the median rates of other anesthesia providers in the state, according to the lawsuit. Learning that USAP would boost rates following one acquisition, a USAP executive wrote, “Awesome! Cha-ching,” the civil complaint said.

In a written statement, Welsh Carson, which also holds sizable ownership shares in radiology, orthopedic, and primary care groups, called the FTC lawsuit “without merit in fact or law.” It said USAP's commercial rates “have not exceeded the rate of medical cost inflation for close to 10 years.”

The New York firm also said its investment in USAP “has allowed independent anesthesiologists to deliver superior clinical outcomes to underserved populations” and that the FTC's action will harm clinicians and patients. Welsh Carson declined a request for interviews with its executives.

“This is a pretty common roll-up strategy, and some of the big private equity companies must be wondering if more FTC complaints are coming,” said Loren Adler, associate director of the Brookings Schaeffer Initiative on Health Policy. “If the FTC is successful in court, it will have a chilling effect.”

Since the FTC filed the USAP lawsuit, Khan said, the agency has received information from people in other health fields about roll-ups it should scrutinize. “We have limited resources, but it's an area we are interested in,” she said. “We want to focus on where we see the most significant harm.”

In physician acquisition deals, PE firms typically use mostly borrowed money to acquire a controlling interest in a large medical group, pay the physician owners a substantial upfront sum in exchange for sharply cutting their future compensation, and install a management team. Then they seek to acquire smaller groups in the same geographic market and bolt them onto the original medical group for more bargaining clout and operating efficiencies.

The PE firm's goal is to garner at least 20% dividends a year and then sell the group to another investor for at least three times the purchase price in three to seven years. Critics say this short-term investment model spurs the investors and medical groups to boost prices and cut staffing to generate large profits as fast as possible.

“Private equity is trying to extract value quickly and sell the company for a profit, so there's a lot more incentive to increase prices quickly and extract higher revenue,” La Forgia said.

In the two years after a sale, PE-owned practices in dermatology, gastroenterology, and ophthalmology charged insurers 20% more per claim on average than did practices not owned by private equity, according to a JAMA study published last year.

There are similar concerns about hospital systems acquiring physician practices, which also have raised prices. “The evidence shows that both private equity and hospital acquisitions of physician practices are bad for consumers, and scrutiny should be applied to all acquirers,” Adler said.

Critics warn that private equity roll-ups of medical groups can jeopardize quality of care, too. Chris Strouse, a Denver anesthesiologist who served on USAP's national board of directors but left the company's Colorado group out of disapproval in 2020, cited patient safety issues arising from short staffing and mismanagement. He said USAP would schedule shifts so that three or four providers would hand off to each other a single surgical procedure, which he said is risky. In addition, USAP frequently asked anesthesiologists to work the day after working a 24-hour on-call shift, he said. “The literature shows that's outside the safety range,” he said. As a result, many providers have left USAP, he added.

The FTC has long been lax in monitoring roll-ups of physician groups, in part because federal law does not require public reporting of these deals unless they exceed $111.4 million in value, a threshold adjusted over time. Lowering the threshold would require congressional action. As a result, regulators may be unaware of many deals that lead to gradual market concentration, which allows providers to demand higher prices from insurers and employer health plans.

Recognizing that problem, the FTC proposed in June to beef up its reporting requirements for companies planning mergers, in hopes of spotting previous acquisitions of smaller groups that could lead to excessive market power and higher prices. In addition, in a draft of their merger review guidelines, issued in July, the FTC and the Department of Justice said they would consider the cumulative effect of a series of smaller acquisitions.

“The ways PE firms are making serial acquisitions, each individual acquisition is under the radar, but in aggregate they roll up the whole market,” Khan said. “Between the merger reporting form and the new merger guidelines, we want to be able to better catch unlawful roll-up schemes. … This would enable us to stop roll-ups earlier.”

But Brian Concklin, a lawyer with the law firm Clifford Chance, whose clients include private equity firms, said the FTC's proposed reporting requirements would hamper many legitimate mergers. “The notion that they need all that information to catch deals that lessen competition seems overblown and false, given that the vast majority of these deals do not lessen competition,” he said. “It will be a substantial burden on most if not all clients to comply.”

Researchers and employer groups, however, were encouraged by the FTC's action, though they fear it's too little, too late, because consolidation already has reduced competition sharply. Some even say the market has failed and price regulation is needed.

“Providers have been able to extort higher prices on services with no improvement in quality or value or access,” said Mike Thompson, CEO of the National Alliance of Healthcare Purchaser Coalitions. “The FTC stepping up its game is a good thing. But this horse is out of the barn. If we don't have better enforcement, we won't have a marketplace.”

——————————
By: Harris Meyer
Title: FTC Chief Gears Up for a Showdown With Private Equity
Sourced From: kffhealthnews.org/news/article/ftc-chair-lina-khan-private-equity-regulation/
Published Date: Thu, 30 Nov 2023 10:00:00 +0000

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Union With Labor Dispute of Its Own Threatens to Cut Off Workers’ Health Benefits

Published

15 hours ago

July 26, 2024

Staff Editor

Phil Galewitz, KFF Health News
Fri, 26 Jul 2024 09:00:00 +0000

The National Education Association, the nation's largest union, is threatening to cut off health insurance to about 300 Washington, D.C.-based workers on Aug. 1 in an effort to end a bitter contract dispute.

It's a tactic some private employers have used as leverage against unionized workers that has drawn scrutiny from congressional Democrats and is prohibited for state employers in California. Experts on labor law say they've never seen a union make the move against its own workers.

“This is like a man-bites-dog situation where the union is now in a position as the employer,” said Paul Clark, a professor of labor and employment relations at Penn State University. “It's not a good look for a union.”

NEA workers with pressing health needs are worried but say they won't fold. Joye Mercer Barksdale, a writer on the NEA's government relations team, said she needs coverage for a medical procedure to address atrial fibrillation, a cardiac disorder. “This is insane for the NEA to use our health benefits as a bargaining chip,” she said.

But Barksdale said the threat isn't enough to force her to agree to an unacceptable contract. “I am not ready to give in,” she said.

The NEA Staff Organization, the union representing workers at the NEA's headquarters, launched a strike on July 5 in Philadelphia, during the union's annual delegate assembly. It was its second walkout this summer as the two parties negotiate a new contract, navigating sticking points such as wages and remote work.

In response, the NEA ended the conference early. President Joe Biden was supposed to speak at the event but withdrew, refusing to cross the picket line. The NEA on July 24 endorsed Kamala Harris for president.

On July 8, the day after the conference had been scheduled to end, the NEA locked out workers. In a letter the day before, the NEA informed its unionized workers that they would not be paid, effective immediately, and their health benefits would expire at the end of July unless a new deal were reached.

“NEA cannot allow NEASO to act again in a way that will bring such lasting harm to our members and our organization,” Kim Anderson, the NEA's executive director, wrote in the letter, obtained by KFF Health News. “We are, and have always been, committed both to our union values and to the importance of conducting ourselves as a model employer.”

Democrats in Congress, including Sens. Sherrod Brown of Ohio and Bob Casey of Pennsylvania, introduced legislation last year to protect striking workers from losing their health benefits, after several large companies, including General Motors, John Deere, RTX (formerly Raytheon Technologies), and the maker of Kellogg's cereals, threatened to or did cut off coverage during labor disputes.

“Workers shouldn't have to choose between their family's health and a fair contract,” Brown said in a statement to KFF Health News.

The legislation was endorsed by large labor unions including the Service Employees International Union and United Steelworkers, according to a press release from Brown's office. The NEA wasn't among them.

“This tactic is immoral, and it should be illegal,” United Steelworkers' president at the time, Thomas Conway, said in the release.

Officials at the NEA, which represents teachers and other administrators, declined an interview request. In a statement, the organization's president, Becky Pringle, said “we are making every effort to reach an agreement as quickly as possible” with its staff union.

“As union leaders who have been on strike, we recognize the significance and impact of these important decisions on a personal and family level. We truly value our employees and look forward to continued collaboration with NEASO to develop a new contract that benefits us all,” she said.

Kate Hilts, a digital strategist who works for the NEA, said she fears losing her coverage will leave her unable to afford treatment for a rare autoimmune disease that attacks her kidneys. Her next treatment was slated for August.

“I wake up every day and can't believe this is happening,” she said. “You would expect this from an employer that is antiworker or has a terrible labor record, but I am totally flabbergasted that a labor union would do this that bills itself as pro-worker, pro-family, pro-education, and pro-children.”

The NEA staff union has filed multiple charges with the National Labor Relations Board this year, including allegations that the NEA withheld holiday overtime pay and failed to provide information on the outsourcing of millions of dollars in bargaining unit work.

California is one of the only states that protect striking workers from losing health coverage. The state legislature passed a law in 2021 that blocks the tactic from being used against public employees and another law in 2022 that allows any striking workers who lose their insurance to immediately get heavily discounted coverage through the state's Affordable Care Act marketplace.

If they remain locked out, the NEA workers would be eligible for coverage under COBRA, a federal program that allows people who are fired or laid off to maintain their employer-sponsored insurance for 18 months.

But the coverage can be a financial hardship, as individuals often must pay the entire cost of their insurance premiums, plus a 2% administrative fee.

Another option for workers would be coverage through the Affordable Care Act marketplace, though that also could be costly. And it may be unclear how soon that coverage would begin or whether insurers would cover their existing doctors.

“I'm hoping the NEA will be so ashamed of what they are doing that, at the very least, they will not take away our health benefits,” Barksdale said.

——————————
By: Phil Galewitz, KFF Health News
Title: Union With Labor Dispute of Its Own Threatens to Cut Off Workers' Health Benefits
Sourced From: kffhealthnews.org/news/article/nea-national-education-association-union-threatens-health-insurance-benefit-lockout/
Published Date: Fri, 26 Jul 2024 09:00:00 +0000

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Kaiser Health News

The CDC’s Test for Bird Flu Works, but It Has Issues

Published

17 hours ago

July 26, 2024

Staff Editor

Arthur Allen and Amy Maxmen
Fri, 26 Jul 2024 09:00:00 +0000

The Centers for Disease Control and Prevention says a glitch in its bird flu test hasn't harmed the agency's outbreak response. But it has ignited scrutiny of its go-it-alone approach in testing for emerging pathogens.

The agency has quietly worked since April to resolve a nagging issue with the test it developed, even as the virus swept through dairy farms and chicken houses across the country and infected at least 13 farmworkers this year.

At a congressional hearing July 23, Rep. Brett Guthrie (R-Ky.) asked about the issue. “Boy, that rings of 2020,” he said, referring to when the nation was caught off guard by the covid-19 pandemic, in part because of dysfunctional tests made by the CDC. Demetre Daskalakis, director of the CDC's National Center for Immunization and Respiratory Diseases, responded that the agency rapidly developed a workaround that makes its bird flu test reliable.

“The tests are 100% usable,” he later told KFF Health News, adding that the FDA studied the tests and came to the same conclusion. The imperfect tests, which have a faulty element that sometimes requires testing a sample again, will be replaced soon. He added, “We have made sure that we're offering a high-quality product.”

Still, some researchers were unnerved by the news coming four months after the government declared a worrisome bird flu outbreak among cattle. The CDC's test is the only one available for clinical use. Some researchers say its flaws, though manageable, underscore the risk of relying on a single entity for testing.

The problem came to light in April as the agency prepared to distribute its test to about 100 public health labs around the country. CDC officials detected the issue through a quality control system put in place after the covid test catastrophe of 2020.

Daskalakis said the CDC's original test design was fine, but a flaw emerged when a company contracted by the agency manufactured the tests in bulk. In these tests, one of two components that recognize proteins called H5 in the H5N1 bird flu virus was unreliable, eliminating an important safeguard. By targeting the same protein twice, tests have a built-in backup in case one part fails.

The agency developed a fix to ensure a reliable result: If only one of the two parts detected H5, the test was considered inconclusive and would be run again. With the FDA's blessing, the CDC distributed the tests — with workaround instructions — to public health labs.

Kelly Wroblewski, director of infectious diseases at the Association of Public Health Laboratories, said the results of the tests have not been ambiguous, and there is no need to discard the tests.

Still, the agency has asked a different manufacturer to remake the faulty component so that 1.2 million improved tests will be available soon, Daskalakis said. Some of the updated tests are already in stock at the CDC, but the FDA hasn't yet signed off on their use. Daskalakis declined to name the manufacturers.

Meanwhile, the outbreak has grown. Farmworkers continue to lack information about the virus and gear to protect them from it. Rural clinics may miss cases if they don't catch a person's connection to a farm and notify health officials rather than their usual diagnostic testing laboratories.

Those clinical labs remain unauthorized to test for the bird flu. Several of those labs have spent months working through analyses and red tape so that they can run the CDC's tests. As part of the licensing process, the CDC alerted them to the workaround with the current test, too.

But outside select circles, the news was largely overlooked. “I'm totally surprised by this,” Alex Greninger, assistant director of the University of Washington Clinical Virology Laboratory, told KFF Health News this week. Greninger's lab is developing its own test and has been trying to obtain CDC test kits to evaluate.

“It's not a red alarm,” he said, but he's worried that as the CDC and the FDA spend months developing and evaluating an updated test, the only one available relies on a single component. If the genetic code underlying that fragment of the H5 protein mutates, the test could give false results.

It's not uncommon for academic and commercial diagnostic labs to make mistakes and catch them during quality control checks, as the CDC did. Still, this isn't the agency's first mishap. In 2016, well before the covid debacle, CDC officials for months directed public health labs to use a Zika test that failed about a third of the time.

The CDC caught and worked to remediate the situation far more quickly and effectively in this case. Nonetheless, the mishap raises concern. Michael Mina, chief science officer of the telemedicine company eMed.com, said diagnostic companies may be better suited to the task.

“It's a reminder that CDC is not a robust manufacturer of tests” and lacks the resources that industry can marshal for their production, Mina said. “We do not ask CDC to make vaccines and pharmaceuticals, and we do not ask the Pentagon to manufacture missiles.”

The CDC has licensed its updated test design to at least seven clinical diagnostic labs. Such labs are the foundation of testing in the U.S. But none have FDA clearance to use them.

Diagnostic labs are developing their own tests, too. But that has been slow-going. One reason is the lack of guaranteed sales. Another is regulatory uncertainty. Recent FDA guidance could make it harder for nongovernmental laboratories to issue new tests in the early phase of pandemics, said Susan Van Meter, president of the American Clinical Laboratory Association, in a July 1 letter to the FDA.

Transparency is also critical, scientists said. Benjamin Pinsky, medical director of the clinical virology laboratory at Stanford University, said as a public agency the CDC should make its protocol — its recipe for making the test — easily accessible online.

The World Health Organization does so for its bird flu tests, and with that information in hand, Pinsky's lab has developed an H5 bird flu test suited to the strain circulating this year in the U.S. The lab published its approach this month but doesn't have FDA authorization for its broad use.

The CDC's test recipe is available in a published patent, Daskalakis said.

“We have made sure that tests are out there, and that they work,” he added.

As the CDC came under fire at the July 23 congressional hearing, Daniel Jernigan, director of the CDC's National Center for Emerging and Zoonotic Infectious Diseases, noted that testing is just one tool. The agency needs money for another promising area — looking for the virus in wastewater. Its current program uses supplemental funds, he said: “It is not in the current budget and will go away without additional funding.”

——————————
By: Arthur Allen and Amy Maxmen
Title: The CDC's Test for Bird Flu Works, but It Has Issues
Sourced From: kffhealthnews.org/news/article/bird-flu-test-cdc-flaws/
Published Date: Fri, 26 Jul 2024 09:00:00 +0000

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Kaiser Health News

KFF Health News’ ‘What the Health?’: Harris in the Spotlight

Published

1 day ago

July 25, 2024

Staff Editor

Thu, 25 Jul 2024 18:45:00 +0000

The Host

Julie Rovner
KFF Health News

@jrovner

Read Julie's stories.

Julie Rovner is chief Washington correspondent and host of KFF Health News' weekly health policy news podcast, “What the Health?” A noted expert on health policy issues, Julie is the author of the critically praised reference book “Health Care Politics and Policy A to Z,” now in its third edition.

As Vice President Kamala Harris appears poised to become the Democratic Party's presidential nominee, health policy in general and reproductive health issues in particular are likely to have a higher profile. Harris has long been the Biden administration's point person on abortion rights and reproductive health and was active on other health issues while serving as California's attorney general.

Meanwhile, Congress is back for a brief session between presidential conventions, but efforts in the GOP-led House to pass the annual spending bills, due by Oct. 1, have run into the usual roadblocks over abortion-related issues.

This week's panelists are Julie Rovner of KFF Health News, Stephanie Armour of KFF Health News, Rachel Cohrs Zhang of Stat, and Alice Miranda Ollstein of Politico.

Panelists

Stephanie Armour
KFF Health News

@StephArmour1

Read Stephanie's stories.

Rachel Cohrs Zhang
Stat News

@rachelcohrs

Read Rachel's stories.

Alice Miranda Ollstein
Politico

@AliceOllstein

Read Alice's stories.

Among the takeaways from this week's episode:

President Joe Biden's decision to drop out of the presidential race has turned attention to his likely successor on the Democratic ticket, Vice President Kamala Harris. At this late hour in the campaign, she is expected to adopt Biden's health policies, though many anticipate she'll take a firmer stance on restoring Roe v. Wade. And while abortion rights supporters are enthusiastic about Harris' candidacy, opponents are eager to frame her views as extreme.
As he transitions from incumbent candidate to outgoing president, Biden is working to frame his legacy, including on health policy. The president has expressed pride that his signature domestic achievement, the Inflation Reduction Act, took on the pharmaceutical industry, including by forcing the makers of the most expensive drugs into negotiations with Medicare. Yet, as with the Affordable Care Act's delayed implementation and results, most Americans have yet to see the IRA's potential effect on drug prices.
Lawmakers continue to be hung up on federal government spending, leaving appropriations work undone as they prepare to leave for summer recess. Fights over abortion are, once again, gumming up the works.
In abortion news, Iowa's six-week limit is scheduled to take effect next week, causing rippling problems of abortion access throughout the region. In Louisiana, which added the two drugs used in medication abortions to its list of controlled substances, doctors are having difficulty using the pills for other indications. And doctors who oppose abortion are pushing higher-risk procedures, like cesarean sections, in lieu of pregnancy termination when the mother's life is in danger — as states with strict bans, like Texas and Louisiana, are reporting a rise in the use of surgeries, including hysterectomies, to end pregnancies.
The Government Accountability Office reports that many states incorrectly removed hundreds of thousands of eligible people from the Medicaid rolls during the “unwinding” of the covid-19 public health emergency's coverage protections. The Biden administration has been reluctant to call out those states publicly in an attempt to keep the process as apolitical as possible.

Also this week, Rovner interviews Anthony Wright, the new executive director of the consumer health advocacy group Families USA. Wright spent the past two decades in California, working with, among others, now-Vice President Kamala Harris on various health issues.

Plus, for “extra credit,” the panelists suggest health policy stories they read this week that they think you should read, too:

Julie Rovner: NPR's “A Study Finds That Dogs Can Smell Your Stress — And Make Decisions Accordingly,” by Rachel Treisman.

Alice Miranda Ollstein: Stat's “A Pricey Gilead HIV Drug Could Be Made for Dramatically Less Than the Company Charges,” by Ed Silverman, and Politico's “Federal HIV Program Set To Wind Down,” by Alice Miranda Ollstein and David Lim.

Stephanie Armour: Vox's “Free Medical School Won't Solve the Doctor Shortage,” by Dylan Scott.

Rachel Cohrs Zhang: Stat's “How UnitedHealth Harnesses Its Physician Empire To Squeeze Profits out of Patients,” by Bob Herman, Tara Bannow, Casey Ross, and Lizzy Lawrence.

Also mentioned on this week's podcast:

States Newsroom's “Anti-Abortion Researchers Back Riskier Procedures When Pregnancy Termination Is Needed, Experts Say,” by Sofia Resnick.
KFF Health News' “Louisiana Reclassifies Drugs Used in Abortions as Controlled Dangerous Substances,” by Rosemary Westwood, WWNO.
The New York Times' “Biden and Georgia Are Waging a Fight Over Medicaid and the Future of Obamacare,” by Noah Weiland.

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Editor

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KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.

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Title: KFF Health News' ‘What the Health?': Harris in the Spotlight
Sourced From: kffhealthnews.org/news/podcast/what-the-health-357-kamala-harris-campaign-health-policy-july-25-2024/
Published Date: Thu, 25 Jul 2024 18:45:00 +0000

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