Federal Agencies Should Adopt Meaningful Yardsticks for Evaluating Effects of Consolidation in Health Care

May 21, 2024

WASHINGTON, DC — Responding to a request for information (RFI) from three federal agencies – the Departments of Justice and Health and Human Services (HHS), and the Federal Trade Commission – America’s Physician Groups (APG) commended their focus on consolidation in health care but said that they needed a more nuanced perspective than exhibited to date. APG recommended that the agencies adopt a better capacity to measure and evaluate the outcomes of consolidation – and specifically, the degree to which changes in ownership are achieving important goals of health care transformation.

“There are many reasons to stay alert to excessive market consolidation in health care,” APG’s President and CEO, Susan Dentzer, wrote in APG’s response to the agencies’ information request. Yet she added that “there are far more fundamental drivers of ownership changes in health care” than what has been characterized by at least one of the agencies as “corporate greed.” The agencies should “develop a unified federal approach” to achieving policy goals of health care transformation and then evaluate the effects of consolidation in that context. True “consumer welfare” in health care should comprehend a range of outcomes – price and affordability, but also quality, achievement of key patient-reported outcomes, meeting consumer preferences, assuring access to the most effective interventions, achieving the overall cost effectiveness of care, and enabling health systems to innovate in and adapt to the use of technologies such as artificial intelligence.

For example, Dentzer wrote, independent physician groups need substantial capital, both to make the investments in infrastructure needed to provide advanced primary care as well as to accept the downside risk inherent in capitation or two-sided risk arrangements – important goals fully embraced by HHS and the Centers for Medicare & Medicaid Services. As a result, agencies should “do no harm” by not standing in the way of consolidation and ownership changes among physician practices if the purpose is to better position these practices to thrive in value-based care models.

In other recommendations to the agencies, APG said the following:

  • Aspects of consolidation that may warrant concern are “roll-ups” of specialty physician practices that may be designed to exploit higher fee-for-service payments for certain health care services and can be anti-competitive in their operations or intent. These arrangements can contradict the spirit of value-based health care, and do not align with APG member groups’ focus on being held accountable for the costs and quality of health care, including through specialty-focused alternative payment models.

  • Transparency about consolidation trends is important, and a potential federal reporting requirement may also be appropriate to allow broader monitoring and understanding of consolidation. However, such a requirement should be limited to retrospective reporting of material changes in ownership that took place in the prior year and should set reasonable boundaries on the size of transactions that must be reported (e.g., a price of more than $100 million for an acquired entity).

  • The agencies should recognize the many fundamental forces at work that are driving consolidation in health care and across the economy and consider the potential limits on their ability to act because of these far-reaching forces. In particular, they should consider the degree to which any actions taken to thwart consolidation could impede the needed transformation in health care.

  • The agencies should not undertake actions that impede attempts by the private sector to create new, sustainable models of primary care. Examples of private-equity-backed primary care entities that have been members of APG are Iora Health, which was absorbed by One Medical, itself now a division of Amazon; Oak Street Health, now a division of CVS Health; VillageMD, a division of Walgreen; and WellBe Senior Medical. The fact that several of these organizations have been absorbed by public companies, rather than undergoing initial public offerings themselves, underscores the ongoing difficulties of earning meaningful returns in primary care, but any efforts to block or slow private-equity-backed or other private-sector attempts to create sustainable models of primary care delivery will ultimately be harmful to the nation.

  • The RFI notes that the agencies seek to learn more about such transactions as occur “when insurers purchase primary care practices outright.” Although these organizational strategies are sometimes mischaracterized as aspects of vertical integration, they are better understood as diversification within the broad health care sector. Multiple organizations formerly thought of as “health insurers” now refer to themselves as health care or “health solutions” companies,” reflecting diversification into other services – particularly involving data, information, and analytics to support the provision of health care, as well as direct care delivery through ownership of physician groups, home care entities, ambulatory surgery centers, and more. To the degree that these organizational strategies drive toward alignment of care delivery and financing, as through value-based payment models, they can help to achieve the expanded definition of “consumer welfare” described above. The agencies should develop new methodologies for measuring these broader aspects of consumer welfare across the health care system, including to understand the performance of these newer care arrangements and the results.

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About America’s Physician Groups
APG’s approximately 360 physician groups comprise 170,000 physicians, as well as thousands of other clinicians, providing care to nearly 90 million patients, including about 1 in 3 Medicare Advantage enrollees. APG’s motto, ‘Taking Responsibility for America’s Health,’ represents our members’ commitment to clinically integrated, coordinated, value-based health care in which physician groups are accountable for the costs and quality of patient care. Visit us at www.apg.org.

Contact: Greg Phillips, APG Director of Communications, 202-770-1901