Chapter 9: Regulation of Health Care Facilities and Transactions
For broad discussions of the health care industry, see, e.g., L. Rob Burns, The U.S. Healthcare Ecosystem: Payers, Providers, Producers (2021); Lawton R. Burns & Mark V. Pauly, Transformation of the Health Care Industry: Curb Your Enthusiasm? 96 Milbank Q. 57 (2018); Einer Elhauge ed., The Fragmentation of U.S. Health Care: Causes and Solutions (2010); James C. Robinson, The Corporate Practice of Medicine (1999); Jessica Mantel, The Myth of the Independent Physician: Implications for Health Law, Policy, and Ethics, 64 Case W. Res. L. Rev. 455 (2013); Abbe R. Gluck, The New Health Care Industry: Consolidation, Integration, Competition in the Wake of the ACA, Health Aff. Blog (Feb. 24, 2016); Symposium, 36 Health Aff. 1527 (2017); Symposium, 29 Health Aff. 1284 (2010); Symposium, 25(6) J. Gen. Intern. Med. 584 (June 2010); Symposium, 67(4) Med. Care Res. Rev. (Aug. 2010); Symposium, 27 Health Aff. 1218 (2008).
Useful general treatises on health care law include: Wolters Kluwer’s Hospital Law Manual and Managed Care Law Manual; Carol Colborn-Loepere et al., Health Care Financial Transactions Manual; Hooper Lundy & Bookman, Treatise on Health Care Law; American Health Lawyers Association, Health Law Practice Guide.
For the latest on ACO’s, see:
https://www.commonwealthfund.org/trending/accountable-care-organizations
http://acowatch.wordpress.com/
Here’s a funny XtraNormal cartoon: http://www.youtube.com/watch?v=ULy5vjcGuDc
For Further Readings on ACOs, see Stephen Shortell et al., A Taxonomy of Accountable Care Organizations for Policy and Practice, 49(6) Health Serv. Res. 1883 (2014); Steven Spivack et al., A Decade of ACOs in Medicare: Have they Delivered on Their Promise?, 48 J. Health Politics Pol’y & L. 63 (2023); Bruce Fried et al., Accountable Care Organizations: Navigating the Legal Landscape, 4 J. Health & Life Sci. L. 88 (2010); Douglas A. Hastings, Constructing Accountable Care Organizations: Some Practical Observations at the Nexus of Policy, Business, and Law, 19 BNA Health L. Rep. 883 (2010); John Hoff, How CMS’s Final Regulations for Accountable Care Organizations Fall Flat (2012); Sara Kreindler et al., Interpretations of Integration in Early Accountable Care Organizations, 90 Milbank Q. 457 (2012); State Actions to Promote and Restrain Commercial Accountable Care Organizations (UC Berkeley, Oct. 2015); Symposium, 73(6) Med. Care Res. & Rev. 643 (2016); Symposium, 40(4) J. Health Pol. Pol’y L. 637 (2015); Symposium, 28 J. Contemp. Health L. & Pol’y 224 (2012); Symposium, 31 Health Aff. 2362 (2012); Symposium, 42 Seton Hall L. Rev. 1371 (2012).
On medical homes, see generally Anna D. Sinaiko et al., Synthesis of Research on Patient-Centered Medical Homes Brings Systematic Differences Into Relief, 36 Health Aff. 500 (2017); Symposium, 25(6) J. Gen. Intern. Med. 584 (June 2010); Symposium, 67(4) Med. Care Res. Rev. (Aug. 2010). On retail clinics, see William Sage, The Wal-Martization of Health Care, 28 J. Leg. Med. 503 (2007); William Sage, Out of the Box: The Future of Retail Medical Clinics, 3 Harv. L. & Pol’y Rev. 1 (online) (2009); Kaj Rozga, Retail Health Clinics: How the Next Innovation in Market-Driven Health Care Is Testing State and Federal Law, 35 Am. J. L. & Med. 205 (2009); Julie Muroff, Retail Health Care: “Taking Stock” of State Responsibilities, 30 J. Leg. Med. 151 (2009); Kristin Schleiter, Retail Medical Clinics: Increasing Access to Low Cost Medical Care Amongst a Developing Legal Environment, 19 Ann. Health L. 527 (2010); Symposium, 27(5) Health Aff. 1271 (Oct. 2008).
Literature on private equity investment in medical care is beginning to burgeon. See, e.g., Robert Field, et al., Private Equity in Health Care: Barbarians at the Gate? Neurotech, 15 Drexel L. Rev. 821 (2023); Barry Furrow, The Future of Behavioral Health: Can Private Equity and Telehealth Improve Access?, 49 Am. J.L. & Med. 314 (2023); Note, 49 Am. J.L. & Med. 120 (2023); Comment, 28 N.C. Banking Inst. 527 (2024).
The following provides a broad, insightful overview, from Hayden Rooke-Ley, Medicare Advantage and Vertical Consolidation in Health Care (Am. Econ. Liberties Project, April 2024):
A new wave of health care consolidation is underway. Health insurance and retail conglomerates are rapidly acquiring providers, from primary care practices and surgery centers to home-based and post-acute care. UnitedHealth Group (UnitedHealth), for example, is now the nation’s largest insurer and the largest employer of physicians. Humana is now the largest provider of “senior-based” primary care and in-home care. CVS Health, Walgreens, and Amazon, which have been aggressively consolidating the prescription drug supply chain, are now acquiring physician practices. And private equity investors—looking to consolidate industry segments and then sell to these conglomerates as an eventual exit—are accelerating these rollups.
With dominant market power, the new health care conglomerates can dictate which physicians patients can see, which medications are prescribed to them, and which insurance plans they enroll in. By acquiring medical practices, these corporate employers can shorten visit times, require more clinical coding and box-checking, and replace physicians with lower-cost clinicians. Meanwhile, by coordinating across lines of business, conglomerates like UnitedHealth can squeeze out independent practices and community pharmacies. They can also shuffle money between subsidiaries and use other financial tactics to skirt regulations and exploit payment loopholes, increasing health care costs.
This paper details the causes and costs of this new frontier of consolidation and offers a set of solutions to address it. In short, sweeping changes in health care financing policy are causing insurers and retailers to restructure as vertically integrated conglomerates. While technical, how the government pays providers and insurers fundamentally shapes the business strategies of health care companies. As the government continues to privatize Medicare and Medicaid, it is significantly overpaying insurance companies to administer benefits. With this excess capital, these insurers are acquiring providers, gaining control of key points in the delivery system that enable them to capture greater government payments and minimize spending on patient care. To take one prominent example, control over primary care clinicians allows these corporate owners to manipulate billing and coding practices to make patients appear sicker to the government, thereby increasing payments.
Part I of this paper explains how government policy over the last two decades has transformed health care financing. In an attempt to solve health care’s value problem— high spending and poor health outcomes—policymakers have steadily abandoned “fee- for-service” financing, in which medical providers are reimbursed for each service that a patient receives. Instead, public programs have increasingly adopted [an] … underlying ideological framework referred to as health policy’s “Capitation Consensus.”
Part II of this paper explains how the Capitation Consensus is driving vertical consolidation. With excess capitation payments, … insurance conglomerates are plunging capital into provider acquisitions, and retailers and private equity investors are following suit. As noted above, owning physician practices enables conglomerates to inflate the perceived disease burden of patients, thereby enhancing capitation-based payments from the government. Vertical consolidation also enables patient steering: conglomerates can push patients to receive care at their own provider subsidiaries. In doing so, these companies squeeze out local providers, such as independent physician practices and community pharmacies. Steering also generates “captive revenue,” which allows conglomerates to game federal regulations requiring that government payments are spent on patients, not profits. Further, these conglomerates use their insurance-side subsidiaries to pressure independent practices to sell to their provider-side subsidiaries, effectively “flipping” new patients to their own medical practices and insurance plans.
Turning to solutions, Part III of this paper argues for an alternative policy framework— aimed at a new “industrial policy” for health care—that would depart from the Capitation Consensus and center at least three principles. First, this approach would be suspicious of concentrated corporate power—whether horizontally or vertically combined—and would promote the autonomy and collective power of clinicians. Second, it would revive a legal and policy focus on the ownership structure and governance of health care providers, protecting the medical profession from corporate influence and minimizing financial strategies that increase prices and administrative costs. Third, a proactive health care industrial policy would emphasize the “supply side”: how policymakers, particularly in Medicare, can exercise greater control of public money and directly rationalize the production and allocation of health care capacity.
The paper offers two sets of policy recommendations. The first would directly combat the emerging forms of vertical consolidation that are fueled by the Capitation Consensus. The second set of policies offers alternatives to large-scale, investor-driven health care. These proposals are geared toward building robust health care infrastructure—owned by clinical providers and local communities—that meets growing care needs and is insulated from corporate consolidation.