June 09, 2023

ICYMI: At Hearing, Warren Warns Against Corporate Consolidation in Health Care

“I am committed to reining in this aggressive profiteering to protect taxpayer dollars and make sure patients get the care they need”

Video of Hearing Exchange (YouTube)

Washington, D.C. – At a hearing of the Senate Finance Committee, U.S. Senator Elizabeth Warren (D-Mass.) raised concerns about how profiteering in Medicare Advantage (MA) is driving vertical consolidation in health care. Senator Warren explained that the potential for “upcoding” in MA, which allows insurance companies to collect higher payments from the government without spending more on patient care, has led insurance companies to purchase physician practices and other related businesses in multi–billion dollar acquisitions. 

When insurance companies own physician practices, physicians may be pressured to prioritize insurer profits over patient care, increasing health care costs for patients and taxpayers and interfering with providers’ clinical autonomy. 

As Shawn Martin, Executive Vice President and Chief Executive Officer of the American Academy of Family Physicians (AAFP) explained, primary care physicians “express a lot of frustration and concern about the loss of clinical autonomy that (is) created through incentive programs” that corporate owners employ to increase volume, referrals, and utilization.

This business model has been wildly profitable for insurance companies, but has left patients and taxpayers footing the bill through increased premiums and government overpayments to MA insurers. According to Mr. Martin, “consolidation increases costs and reduces quality” in health care. Misaligned incentives and a lack of oversight in MA have allowed this profiteering to accelerate, and Senator Warren called for cracking down on these abuses.

Transcript: Consolidation and Corporate Ownership in Health Care: Trends and Impacts on Access, Quality, and Costs
U.S. Senate Committee on Finance
Thursday, June 8, 2023

Senator Elizabeth Warren: Thank you, Mr. Chairman. 

So, all across the economy, giant corporations buy up their competition in order to get bigger and rake in more profits. And our health care system is no exception on that, particularly when it comes to Medicare Advantage, or MA, which lets private insurers administer the Medicare coverage.

The government pays insurance companies a set amount each year to cover an MA enrollee’s health costs and for sicker beneficiaries, the government pays at a higher rate. Makes sense – sicker patients cost more to insure. Except, the insurers have figured out that they make a lot more money by making all of their patients look sicker on paper. And they do this by loading up their beneficiaries charts with as many diagnoses as possible – a practice that is called upcoding.

Whatever the MA plan doesn't spend on care then, the company gets to profit. So in the last few years, the insurance companies that dominate MA have been gobbling up private care practices in multibillion dollar acquisitions. 

Mr. Martin, you represent the Association of Family Physicians, so your members are on the front line of primary care. When an insurance company owns a primary care practice, it can push providers to squeeze out more profits per patient, often through games like the one I just described. Are your members experiencing this kind of pressure?

Shawn Martin, Executive Vice President and Chief Executive Officer, American Academy of Family Physicians (AAFP) :  I can't directly mention a member that has expressed to us that they're feeling this kind of pressure. But what we do know, Senator Warren, is that our members express a lot of frustration and concern about the loss of clinical autonomy that are created through incentive programs, either explicit or, you know, indirect, that can occur in certain arrangements with, you know, employers of all types, whether that be an insurance company or private equity or others.

Senator Warren: So are they talking about things like pressures to meet quotas, for example?

Mr. Martin: I've never heard that term specifically, but there are volume pressures. There are referral pressures. There are utilization, both increased utilization and reduced utilization, pressures.

Senator Warren: So volume pressures. In other words, find ways to get more action, get more things you can code and I see other people nodding yes. And have seen this. Is that right? So the insurance company buys up doctors’ offices in order to own the link in the chain where doctors actually see patients. And then they give doctors bonuses, for example, if they add more diagnosis codes to the patient's chart.

And one of these giant conglomerates, CVS Health, even paid $8 billion for a chart review company to send people into patients homes, in search of adding more codes to their files. Now, this business model is wildly profitable for the insurance companies. 

Take UnitedHealth, the biggest health conglomerate in the US and a major Medicare Advantage insurer. It is also the largest employer of physicians in the country. The HHS Inspector General found that in 2017 alone, UnitedHealth brought in $3.7 billion in MA overpayments, money it received in excess of what it was legally justified by the actual health of their patients. Today, it brings in even more revenue than America's largest bank. 

The insurance companies justify this consolidation by saying even if they make more money, they also make the overall health system more efficient. 

Senator Warren: Dr. Martin, when insurance companies own doctors’ offices, does it raise or lower health care costs overall?

Mr. Martin: I think that would be – there's other experts here. I think that would depend upon the location. I think generally speaking, it would increase costs and consolidation increases costs and reduces quality.

Senator Warren: Yeah. All right, like it does in other fields, right?

Mr. Martin: Yeah.

Senator Warren: So we're watching costs go up here. And in the case of Medicare Advantage, those higher costs are borne by taxpayers by and large, through higher premiums and hundreds of billions of dollars in overpayments to the MA plans. So if vertically integrated insurers aren't lowering costs, how about another angle? Dr. Martin, when doctors are having to focus on prioritizing profits for insurance companies through tactics like upcoding or quotas? How does that affect the ability to provide quality care to patients?

Mr. Martin: Well, Senator Warren, I would go back. I do want to acknowledge – I think investments in primary care that are taking place are really important. And I think that is an aspect that I would want to speak in favor of. I think it oftentimes comes with a reduction in clinical autonomy. And I know I sound like a broken record. But regulations, whether explicit or inexplicit, that interfere in physicians’ ability to engage or the care team to engage in the best interests of the patient are negative things and we would encourage and support guardrails and guidelines that restore clinical autonomy.

Senator Warren: So we’re talking about higher costs and worse patient outcomes and worse delivery of health care to patients. It is time for regulators to end this kind of vertical integration in health care. I am committed to reining in this aggressive profiteering to protect taxpayer dollars and to make sure that patients get the care they need. Thank you, Mr. Chairman.