CVS to Oklahoma: Let us steer people to our own pharmacies

You’re reading the web version of Health Care Inc., STAT’s weekly newsletter following the flow of money in medicine. Sign up to get it in your inbox every Monday. 

The 2025 Medicare Advantage Super Bowl

Federal law requires Medicare to publish its proposed 2025 payment rates and policies for Medicare Advantage plans this week. It will likely come no later than Thursday, and you can expect as much, if not more, drama as last year’s process.

There’s a lot at stake for the Biden administration. The final 2024 MA rates and policies incensed the industry, even though experts considered those policies to be a mild starting point. Biden’s 2023 pay increase was historically generous for MA insurers.

Now, there is the added pressure of rolling out new proposals in an election year. Will the administration put out industry-friendly terms to avoid an insurance-led fear-mongering campaign that would accuse Biden of cutting seniors’ Medicare benefits? Or will the administration continue to move further down the path of reining in MA, which has morphed into a $500 billion taxpayer-funded hot tub for health insurers?

If you’re looking for a list of things to watch for, aside from the proposed payment rates, you could start with a letter penned last Friday by Sen. Elizabeth Warren (D-Mass.) and Rep. Pramila Jayapal (D-Wash.) to CMS chief Chiquita Brooks-LaSure. Warren and Jayapal urged CMS to recoup overpayments and drastically change some payment calculations. Read our story on the lawmakers’ letter.

[FTC in DJ Khaled voice] Another one

Last year, we highlighted a smaller-scale hospital deal in North Carolina that posed some potential antitrust concerns. Well, it turns out the Federal Trade Commission doesn’t like the looks of that transaction either and now is suing to block it, my colleague Tara Bannow reports.

Novant’s bid to acquire two hospitals that are incredibly close to other Novant hospitals seemed to raise obvious anticompetitive questions. Novant would attain a near-monopoly on inpatient care in this part of North Carolina by taking out its most direct competitors. The FTC appears to have obtained emails from hospital executives who said Novant would be able to command much higher hospital prices from health insurers with this deal. The FTC redacted those details in the official complaint.

Novant said the FTC’s suit is flawed and that it will pursue available legal responses. But this is now the seventh transaction or piece of legislation involving hospitals/providers in the past year and a half that the FTC has either sued to block, or vigorously called out as being anticompetitive. You can read the FTC’s full complaint here. I also encourage you to read our story from last month on the biggest deals of 2023, where we specifically wrote that everyone should not sleep on the local deal-making (and also wrote about other acquisitions that are similar to this Novant one).

All AIs on Humana

Humana’s brutal start to 2024 got even worse last week, after the insurance company completely reset future profit projections because its Medicare Advantage members have been receiving way more care than it expected. You can read Tara’s story for all the details, including important comments about how providers and patients are winning more prior authorizations and getting care denials overturned.

But I want to focus on something Humana CFO Susan Diamond said during the earnings call. After an analyst asked how Humana could further reduce its administrative expenses to offset the higher medical expenses, Diamond said: “We do think there is additional opportunity, particularly leveraging technology, AI and some other tools, but we recognize they probably have longer time lines to get the full value realization.”

That made me pause immediately. Sure, that likely includes automating routine back-end functions. But will that also mean more AI-powered denials of both claims and care requests?

Humana already uses tech-based companies like UnitedHealth Group’s NaviHealth, which runs an algorithm that predicts how long Medicare Advantage members should stay in a nursing home or rehab facility. As my colleague Casey Ross and I have reported, Humana and other insurers use these algorithmic tools almost exclusively as a way to cut off care — and to keep their medical expenses down. Humana is also facing a class action lawsuit over its use of NaviHealth’s tool. A Humana spokesperson did not respond to questions about Diamond’s comment, and whether Humana will invest even more resources in technology that limits rehab care.

The state of dual-eligibles, charted

Some of the most vulnerable, highest-risk patients are the poor and elderly who qualify for both Medicare and Medicaid. There were 12.8 million of these “dual-eligibles” in 2021, and they represent a disproportionate share of government health care spending, according to a new data book from the advisory commissions that monitor Medicare and Medicaid.

The chart above encapsulates how this population has very serious health conditions, like kidney failure, and requires intensive care. The percentage of money spent on care for dual-eligible beneficiaries is double the percentage of their enrollment.

CVS to OK: Let us steer people to our own pharmacies

CVS Health’s pharmacy benefit manager, Caremark, is suing Oklahoma over a 2019 state law that aimed to expand Oklahomans’ access to pharmacies, my colleague Brittany Trang writes.

The Pharmaceutical Care Management Association, which lobbies on behalf of PBMs, sued over the law in 2019 and eventually won, with the court affirming that federal laws preempted most of Oklahoma’s insurance laws.

The Caremark situation is a little bit different: The PBM is specifically suing over provisions in the law that prohibit PBMs from favoring certain pharmacies over others, whether in written materials or in plan requirements. “It is good for all Americans when health plans are able to choose what benefit structures to offer,” the PBM said in its court filing.

However, Caremark failed to mention in its filing that it is owned by CVS and therefore has a very strong financial incentive to drive business to its own pharmacies. The PBM did note, though, that it has beef with Oklahoma because the state has already dinged Caremark for violating the law by — you guessed it — requiring customers to fill prescriptions at CVS.

Industry odds and ends

• Speaking of CVS: Tyson Foods has fired CVS Caremark, Bertha Coombs of CNBC reports. Tyson Foods has switched to the startup Rightway in what is one of the biggest employer PBM firings in recent memory.
• And speaking of Brittany: She’s also pivoting to video. Please check out her smashing-good TikTok about her recent story on the mess that is the White House’s pharmacy.
• This is what health policy researchers have been clamoring for: CMS wants to collect and release more Medicare Advantage data, “such as supplemental benefit costs and utilization, value-based payment arrangements between providers and plans, utilization management and prior authorization including denials and appeals and access to inpatient services and post-acute care, network adequacy and provider directory accuracy,” and more. Read CMS’ notice here.
• NYU Langone Health, among the most profitable tax-exempt hospital systems in the country, is on as solid financial footing as ever. NYU Langone posted a 9.2% operating margin in its most recent fiscal quarter, which ended Nov. 30, according to financial documents posted last week. That kind of margin is pretty much in line with publicly traded health care companies.
• TPG, a private equity giant, acquired an undisclosed stake in Compass Surgical Partners, a national chain of ambulatory surgery centers.
• The Massachusetts Health Policy Commission will review the proposed cancer hospital affiliation between Dana-Farber Cancer Institute and Beth Israel Deaconess because the deal “is likely to have a significant impact on the competitive market for cancer services in Massachusetts and is likely to impact health care spending.” The group voted in favor of this review last week. The commission can’t block a deal, but it can send its findings to the attorney general and other state agencies.
• Things are grim at the Massachusetts hospitals operated by Steward Health Care, Jessica Bartlett of the Boston Globe reports.
• Sen. Ron Wyden (D-Ore.) is probing further into Medicare Advantage marketing. In letters to five CEOs of MA brokerage firms, Wyden referred to them as “unscrupulous actors” leading a “race to the bottom” as they “put their own financial interests ahead of seniors’ health needs.”
• The highest-spending health care lobbying groups are filled with familiar names, but it’s worth pointing out the sizable uptick in spending at PCMA and the American Hospital Association. PBMs are trying to fend off congressional scrutiny, and hospitals are trying to kill site-neutral policies. Check out the top 10 spenders, charted by Megan Wilson of Politico.

The Meme Ward

Read this story from my colleague Rachel Cohrs for more.