Mar 10, 2025
On February 27, The Capitol Forum held a conference call with Hayden Rooke-Ley to discuss vertical consolidation in health care markets, UnitedHealth Group’s outsized lead in this trend with Medicare Advantage, and the capitated payment model undergirding this shift. The full transcript, which has been modified slightly for accuracy, can be found below.
TEDDY DOWNEY: Good afternoon and welcome everyone to our conference call today with Hayden Rooke-Ley. I’m Teddy Downey, Executive Editor here at The Capitol Forum. Hayden is a health law and policy fellow at the Brown University School of Public Health and a senior fellow at the American Economic Liberties Project.
Today we’ll be discussing his exhaustive work in the past on not just UnitedHealth, but Medicare Advantage, vertical integration, and we’re going to talk about some of the recent reporting that we’ve done on UnitedHealth as well as reporting in the Wall Street Journal about ongoing investigations. Hayden, thank you so much for doing this today.
HAYDEN ROOKE-LEY: It’s good to be here.
TEDDY DOWNEY: Before we get started, if you have questions, please email editorial@thecapitolforum.com or you can just type the question into the questions pane in the control panel.
Maybe a good way to start Hayden is to talk about your work on vertical integration broadly so we can just have a little background on the conversation before we kind of get into some of the perverse incentives and some of the gaming that has stemmed from that vertical integration.
HAYDEN ROOKE-LEY: Yeah, much of my work in the last year, couple of years has been focusing on what I’ve called this new frontier of consolidation in the healthcare sector. Particularly focusing on how the nation’s largest health insurance companies are really restructuring into really vertically integrated conglomerates.
They are no longer just insurance companies; they own various aspects of the health care delivery system both on the pharmacy and medical delivery side. So United, Humana, CVS, other big payers are acquiring primary care practices, independent physician associations, multi-specialty groups, post-acute care, accountable care organizations, and then as I mentioned, aspects of the pharmacy benefit managers and pharmacies.
So, we’re seeing this wave of consolidation that’s really occurred in the last few years and dates back actually a few decades. But we’ve seen a real acceleration of it. The first thing I’ve tried to do in my work is just explain how we got here. And describe mostly from a policy perspective, from a health policy perspective, the ways in which the prevailing approaches or paradigms to healthcare policy has essentially facilitated and enabled this wave of consolidation. This dates back three or four decades, but I particularly focused on the last few decades, and particularly on our public programs, Medicare and Medicaid.
Essentially, we’ve opted for an approach to health policy where we are delegating the administration of our public benefits to insurance companies. Specifically, the approach is to have them try to manage the overall use of the healthcare system. This idea of basically enabling what are called risk-bearing entities, typically insurance companies, paying them a budget to administer Medicare and Medicaid. What I describe here is that these programs are struggling to succeed on their own terms of cost savings, but they’re also in a number of ways fueling this wave of consolidation.
The second big thing I do is describe the ways in which we might be concerned about this new wave of consolidation driven by health insurance companies in the myriad ways in which it enables forms of gaming regulatory programs, anti-competitive abuses, and concerns about corporate control of medical care delivery. So that’s kind of a broad overview.
TEDDY DOWNEY: That’s a great way to start. And you know, there’s been reporting in the Wall Street Journal that there is an ongoing investigation in a DOJ civil fraud investigation into Medicare Advantage payments by UnitedHealth and then a follow-up investigation from Senator Grassley.
I was wondering if maybe you could start off by putting those investigations into the context of some of the findings that you’ve had when it comes to gaming the payment system. How does that stem from vertical integration? And then maybe we can go from there.
HAYDEN ROOKE-LEY: This is one of the primary ways that these insurance conglomerates have figured out a way to game the Medicare Advantage program to the tune of tens of billions of dollars. So, the Medicare Advantage program specifically, recent evidence shows from MedPAC that relative to the traditional Medicare program, so Medicare Advantage is now over half of Medicare administered by the nation’s largest insurance companies, United being the largest one. Research is showing that it’s significantly more expensive than traditional Medicare, entirely contrary to the purpose of this program.
Again, Medicare Advantage has long existed. But it was particularly bolstered in 2003 in the Bush administration. The idea has been, again: “We’re gonna delegate the administration of the Medicare benefit to private insurance companies. They’re gonna compete with each other. They’re gonna be more efficient because this is the private market. And they’re gonna administer a better and cheaper benefit.”
What we’ve seen actually from day one is that MA has been more expensive and initially we sort of justified it as well: “We got to make this attractive to insurance companies. We want them to play in the government game.” But what’s happened over time is it’s become significantly more expensive than traditional Medicare to the tune of 15, 20, 30 percent. And we’re talking here conservatively, overpayments to the tune of 80 or 90 billion dollars a year. And the biggest reason we see these overpayments, this is due to a number of selection and gaming effects, but the biggest one is the gaming of what’s known as risk adjustment.
So north of at least 50 billion dollars a year are paid to insurance companies in excess of what’s paid in traditional Medicare because they figured out a way to arbitrage the risk adjustment system. And the risk adjustment system is the component of the MA program in which the government, when they pay insurance companies to administer the Medicare benefit, they modify the payment, they adjust the payment on the basis of some predicted acuity of the patients. You wanna pay United or Humana more money if they’re going to provide the Medicare benefit for a sicker patient rather than a less sick patient.
The primary way that Medicare does this is by looking at the diagnosis codes that the patient gets over the course of the year and saying that’s going to tell us how sick this patient is and that’s going to allow us to modify, us as the government, modify the payment we give to the insurance company.
What these plans quickly figured out is that there’s a whole bunch of money to be made if they can make their patients look sicker than the patient otherwise would look in traditional Medicare. And this is where we get into all sorts of fraud investigations, increased regulatory scrutiny from Congress, sometimes from CMS around cracking down on this game of what’s really upcoding. And what’s critical to understand is that recent evidence has really borne out, and I’ve written about this, you know, a while ago, and a number of folks have sort of suspected that part of the vertical integration strategy is to control physicians, so they will increase the number of diagnoses that they submit and make those patients look sicker.
So that’s what a lot of the recent Wall Street Journal reporting has shown. When big insurance companies, particularly United, acquire these practices, they’re able to control physicians and document these diagnoses, that results in higher payments to the insurance company. And then there’s this question that’s bubbling up of whether that reaches into actual fraud.
We can discuss sort of the details of that, but I hope that’s helpful as sort of an overview.
TEDDY DOWNEY: Yeah, that’s great. And we’d love to hear your thoughts about whether or not that, you know, what constitutes fraud or how it could be deemed fraudulent. There’s been some, as you mentioned, Wall Street Journal reporting that there are payments made, and no additional related medical coverage provided. And then you also have in your research all sorts of different ways of the upcoding happening. Maybe you can talk about that as you kind of address how this could be seen as fraud and the evidence there.
HAYDEN ROOKE-LEY: Yeah, so the upcoding takes a couple different forms. One if we think about it in the sort of medical practice acquisition context. Reporting, anecdotal evidence, lots of evidence shows that when medical practices are acquired by these insurers or are incentivized in various ways through contracting, they can again get these clinicians to submit these diagnoses.
This might mean everything from embedding suggested diagnoses in the EMR of a practice.
So when a physician sees a patient, they basically can’t click out of their medical record unless they address all the suggested diagnoses that the insurance company has told the physician, “hey, we think that this diagnosis might exist and we want to document it because it’s going to result in more money for the government.”
It might be requiring—
TEDDY DOWNEY: Can we actually talk about that for a second? So, it’s like software that compels you to upcode?
HAYDEN ROOKE-LEY: Well, compel is maybe the disputed word here, and this is at the heart of some of these False Claims Act Qui Tam cases.
So, all these companies, yes, are using software, are embedding in the EMR, and again, this is a huge advantage of owning the medical practice, because then you own how the clinical and technological workflows in the practice. So, you can configure your medical record to have a bunch of diagnoses listed for the doctor every time they come in and see the patient. And you can also structure the note, as the Wall Street Journal recently reported, to where the physician actually can’t get out of it until the physician addresses these diagnoses, basically clicking on them.
Now, these insurance companies, it would be flagrantly fraudulent to require the physician to document these things. But what they do is basically say: “here’s what we think that you have,” and then they couple that with a number of other things. They give these physicians significant bonuses for basically increasing risk scores. They require physicians to go to risk coding trainings on a Friday, for example. They structure which patients come in for visits based on their opportunity to basically have codes written down and exploit these payments.
So again, owning the practice allows you to configure it in a way that you can really exploit this sort of risk adjustment. Now, there are a couple other ways that this gets carried out. Another is through what’s in Wall Street Journal‘s report on this, there’s a lot of reporting on this. We wrote about it. I’ve written about it in a few venues. And this is doing health risk assessments or home visits.
So United and all the other payers have acquired these health risk assessment home visit companies where they just send nurses into a patient’s home to collect these diagnoses. I think OIG has looked at this as well. This has long been known as a huge source of gaming the risk adjustment system. The other thing that these insurance companies do is a lot of retroactive review of medical records. They have armies of staff in these insurance companies. These are massive companies. They have armies of staff that scour medical records, and they look to see if there’s any indication of a diagnosis, and if they see that, some private bureaucrat in Minneapolis will go back to the physician and say: “Hey, I think this diagnosis exists. Can you code this patient with a given diagnosis? Because it looks like there’s substantiation clinically for it.”
Those are kind of the big ways that this risk adjustment system gets gamed. When we talk about the False Claims Act, the central question here is whether diagnoses are being submitted that don’t actually exist. So, conditions that the patient doesn’t actually have, whether these insurance companies and their subsidiaries are knowingly submitting this documentation, or these codes that they know the patients don’t have. None of this litigation is new, by the way.
All insurance companies, basically, all the major MA plans have been subject to Qui Tam cases that DOJ has intervened on. Muchof them have settled. A lot of those that have settled have been cases where it was clear that the code that was submitted from the insurance company to the government was not substantiated in the medical record. It was pretty much just actually fabricated. The patient didn’t have the diagnosis, because again, the important question from a False Claims Act perspective: was the diagnosis, what is the condition actually there? One of the interesting cases that’s actually working its way through the court now is against Kaiser.
Kaiser gets less attention, but they do all these same things as a vertically integrated Medicare Advantage plan. One of the cases that’s working through the Ninth Circuit right now that I think bears on some of the reporting we’ve seen lately and some of what Grassley is talking about when these companies engage in these kind of systematic pressure tactics, these systematic efforts to get their clinicians to upcode, does that amount to basically knowingly fabricating diagnoses?
That’s kind of the central question here: to what degree does asking physicians to look at codes, to suggest codes, to what degree can that be shown to be knowingly basically a fabrication of codes.
And this gets to the second major point, and I’ll stop here, because it’s a really important distinction to draw. Much of the arbitrage opportunity here when it comes to risk coding doesn’t have to do with actually making up codes that a patient doesn’t have. It’s just documenting codes that otherwise wouldn’t be documented in a traditional fee for service system.
That’s how these plans are gaming these access payments. They’re jotting down diagnoses that a patient may actually have but isn’t going to get registered in the traditional Medicare program and creates this difference in how much risk adjustment payments get paid. So, even if there’s not fraud here, even if a substantial element of what’s happening here is not fraudulent in that the patient actually has the diagnosis. It doesn’t mean that it’s not wasteful and it’s not bad policy. This is where someone like Senator Grassley, it’s fine if he’s looking into whether there’s fraud here. Again, whether there’s a systematic effort to fabricate codes that don’t exist. But we’ve long known that the program primarily is just being arbitraged in legal ways. And Senator Grassley, if he wanted, could fix this tomorrow.
This is just bad governance, it is bad policymaking where we’re deliberately, every year, paying MA programs hundreds of billions of dollars in excess, the biggest reason this arbitrage opportunity. He can stop that tomorrow with better legislation.
It’s a much bigger question as to whether DOJ and the civil fraud unit can take care of a lot of this. And again, that gets back to this question of how much of these diagnosis codes are actually fabricated, the patient doesn’t have them, or are they just being documented in excessive ways that drive these overpayments?
TEDDY DOWNEY: As you mentioned, it seems like to the extent that the DOJ Civil Fraud investigation mirrors that Kaiser case and sort of tells a broader story about just kind of creating this ecosystem for fraud is really going to help us get a sense of how big of a problem this litigation is going to be.
As you mentioned, I mean, if they’re able to argue that “hey, a lot of this is actually legal upcoding, legitimate up-coding versus fraudulent” that’s really where maybe the scope of the problem for UnitedHealth is going to be. Before we talk about antitrust, which I’m excited to talk about with you, can you also walk through the quality payment gaming in your work? Can you also walk through how that works? That’s sort of another side of this that I think people don’t understand that, you know, you benefit from being vertically integrated when you’re doing that.
HAYDEN ROOKE-LEY: Sure. Another way that these MA plans get money from the government in a significant one, about $10 billion a year, is what’s known as the Medicare STARS program. This is a program that tries to measure essentially, what’s the quality of the care and the insurance plan that patients are getting, so they have some way to shop for a better plan. Again, this is an attempt to sort of try to measure quality in the MA program.
All of these managed care programs or these capitation-based programs, whether it’s the value-based care programs in fee-for-service, whether it’s Medicaid managed care, whether it’s Medicare managed care and MA, adjust payments to these risk-bearing entities, to insurers or provider entities for some metric of quality.
And the point I make in the piece you’re referencing is that the quality payment system is also highly gameable. A significant amount of these metrics that these plans are measured upon can be gained through various just sort of administrative tactics. Or through essentially trying to send different types of pills and refills to patients because one of the metrics that is important here is medication adherence which is measured by how often patients actually get their medications. This is another aspect of the quality program that research has shown doesn’t actually result in better care or better health for patients. Again, what it begins to look like is just another sort of program for administrative gaming that can be exploited by these massive insurance companies and can be turbocharged when they actually own practices.
It’s not as big of a kind of arbitrage or gaming opportunity as risk adjustment, but I think it fits in this overall picture of where these overpayments are coming from. The other massive one here is selection effects. Essentially selecting patients that, despite the risk adjustment program, actually have cheaper spending in MA. So, plans can essentially make money without actually lowering costs, again, if you just are able to cherry pick the right patients. All of this, of course, is enabled, facilitated by having data and mass sums of data. As policymakers, when we’re thinking about structuring these programs and structuring these markets, we should be thinking about the size and scope of these companies and whether they’re able to engage in these tactics in a more acute way if they have, if they’re equipped with so much data on basically what patients cost, what diagnoses they could be coded with, where their quality gaps are. This data can be used in ways that I think we should be thinking critically about.
TEDDY DOWNEY: I want to come back to this later when we’re talking about antitrust, but obviously Change Healthcare was a big acquisition for UnitedHealth. Maybe you can talk about how the data acquired from that helps UnitedHealth with how they do their gaming or would help them or enable them.
HAYDEN ROOK-LEY Sure. So, I mean Change Healthcare is a company that serves as the claims processor for, and I’m forgetting the precise numbers, but something like 70% of all claims get processed through this company in the US. So, the concern that was at issue here in the antitrust case is like, well, why does United want to own this claims processor? And to what degree could owning this data facilitate forms of anti-competitive abuse, whether they were looking at data from their competitors? Or, I think, and this actually is a less of sort of an antitrust concern, whether, well, it would be an antitrust concern insofar as we’re talking about infirm conduct, just whether this data again allows them to find more diagnosis codes that might be coded for a patient or find where patients who are aging into Medicare who might have lower spending, just being able to actuarially just like look at the system and basically say, here are the markets we want to enter, here are the markets that we don’t want to enter. So those are some of the risks of deploying this data that was acquired with the Change deal.
TEDDY DOWNEY: I want to talk about antitrust here. Obviously, we’ve got these investigations going on the fraud side, but you also have a DOJ monopolization investigation, and you have a merger challenge to UnitedHealth-Amedisys. How do you see the gaming issue as relating to the Amedisys merger? And do you think any of these recent developments add any weight or affect any of the evidence or analysis in that and how that might play out in court? Or is it relevant to that vertical relationship?
HAYDEN ROOKE-LEY: Yeah, I think with the Amedisys, I mean, the case there is really a horizontal case. And for understandable reasons, maybe we’ll get into this when we talk about a monopolization, you know, given where antitrust doctrine has been and has gone over the last few decades, it’s understandable that DOJ brought this claim as a head-to-head competition, horizontal claim of just of market power in the home health market. You potentially could begin to see more of this as these big insurance conglomerates consolidate vertically and then horizontally. At some point, even if they’re engaging in anti-competitive vertical conduct to monopolize or gain an advantage in an adjacent market if they get big enough in that market then of course you have a horizontal claim. That’s what we see here with the Amedisys.
United bought LHC group, I think a couple of years ago. Amedisys would make it the largest provider of home health nationally, eclipsing Humana. Again, this is a lot of the market developments that we survey in our work, just the degree to which we’re seeing these big insurance conglomerates owning selective aspects of the delivery system. There absolutely is a vertical story we can start to talk about. These big insurance conglomerates are keenly interested in controlling the post-acute process.
So the post-acute, once a patient’s discharged, all sorts of contracting and decisions about basically where that patient goes. If you’re an insurance company, you’re keenly interested in whether that patient goes to a more expensive or less expensive provider or site of care, and you’re interested in basically your touch points to those patients. To tie this back, if we want to talk about risk gaming, I think there is a question about whether, how much of United’s interest in the post-acute space, particularly home health is more touch points to the patients, which potentially can be another opportunity to risk code patients.
The post-acute process, particularly in home health is another area where there’s a lot of decisions around medications that are made. So if these insurance companies, which also own PBMs and pharmacies, can control, can have touch points to patients there. There’s all sorts of steering and self-preferencing that they can engage in, in terms of controlling which medications go to which patients.
But the Amedisys claim is really just a horizontal antitrust claim that had a couple of interesting components. One, the Biden DOJ, and I’ll be curious to see whether the Trump DOJ carries this forward, was keenly interested in potential effects on the workforce, so the monopsony question here. And I was really glad to see them do that.
The home health space is probably the most vivid example of the kind of central paradox in American health care. Which is that we spend far more than any other country in the world on health care, yet much of the caretaking workforce is paid very little for grueling, heroic work.
When we talk about home care workers, they’re often paid not much more than minimum wage to do what is just an absolutely vital, and heroic job in our economy to take care of our elderly folks. And when those markets get, as the DOJ said, you have a monopsony problem when these markets get too consolidated and these providers can press, can cut labor costs in these businesses. Again, like much of healthcare, this is a very labor-intensive sector.
Much of the profiteering you see in healthcare delivery is not just playing games on coding and diagnoses and arbitrarily raising prices. But it’s suppressing labor as much as you can and of course when you have more labor power or when you have more monopsony power you can do that. So, I was glad to see the DOJ push on that element
I have seen some commentary there that I think is erroneous, that there’s like somehow not a pricing claim here, there’s not some concern about increased prices. I’ve seen some folks talk about the fact that we’re talking about mostly the Medicare program, where prices are set and so there’s no concern here for increased prices. This ties back to a lot of the other stuff we talked about around Medicare Advantage. So that’s actually not true that prices are set in Medicare. Because we’ve opted for outsourcing, privatizing our Medicare program, again, much of the Medicare program, over half of it is administered by these private insurance companies who are interested to some degree in negotiating prices.
Some of these insurance guys who are getting into home health are actually notorious for squeezing home health providers with really low rates before they acquire them. So this idea that there’s not a question of aggregating market power to increase prices I think is a faulty analysis. The DOJ made that argument, I saw in their complaint. I think it’s a valid one.
TEDDY DOWNEY: How do you feel about DOJ pushing ahead? Assefi, the interim AG, decided to sue HPE-Juniper, that merger, and then recently the comments out of Ferguson on being a worker-centric enforcement agency. And launching that labor focused probe or working group, I think he called it.
Are you encouraged by what you’ve seen so far? Would this likely be continued? Or do you have reservations? You say you’re interested in seeing how it goes, but what have you seen?
HAYDEN ROOKE-LEY: Yeah, some of the comments around, you know, worker power are important. But at this point, it’s all just rhetoric. We’ll see on the FTC side. I think the cases that have, in health care, that have involved concerns about labor power have come out of the DOJ, at least the ones that popped to mind. You know, I’m thinking of Amedisys and the UPMC case that I also think really had strong arguments and it’s trying to push the law in the right direction in that way. But I really can’t speculate where the administration is going to go from here.
Obviously, have some folks at DOJ who seem to come out of the sort of ideological ilk of the last administration or the enforcement agencies. But of course you have a larger administration that’s in control here. We’re talking in healthcare, and specifically this issue, we’re talking about Medicare Advantage. And I see no signs from leadership elsewhere in the administration that folks are concerned about the Medicare Advantage program.
MA is institutionally embedded in the Republican Party. This is their baby. This is what they want. They have long wanted health care to look like private insurance companies administering the Medicare benefit. The big mistake has been that Democrats have basically bought that strategy and versions of it this gets into some of my work around value-based care. We sort of adopted, both parties bought the underlying ideology here. But when we talk about Medicare Advantage particularly, you know, it would be a reversal, of course, for Republicans to not support this program.
Dr. Oz has said previously that he wants everyone on Medicare Advantage in the US. RFK Jr. in his testimony in front of the Senate said he wants more patients in Medicare Advantage. A number of the appointments and important places in the cabinet below those folks I’ve seen provide no indication that they’re going to be worried about the MA program.
So we’ll just, we’ll have to see.
TEDDY DOWNEY: It’s not exactly a coherent approach at this point with the antitrust enforcement. It’s still seemingly guns blazing. But with all those appointments that you mentioned, let’s talk a little bit about the broader antitrust case. How could all of this gaming, make its way, and let’s talk about United Health in particular. How could all this concern with gaming ultimately make its way into, as you know, we’re expecting some kind of litigation on UnitedHealth this year—a monopolization case unless the DOJ changes course on that. How could gaming or what we’ve talked about so far sort of make its way into a monopolization case? We can go from there after that.
HAYDEN ROOKE-LEY: What I’ve tried to illuminate in my work is really at a high level just how these markets work. What’s actually going on here? What are the reasons why we are seeing forms of vertical consolidation? And at the end of the day, I mean, that’s central to any sort of antitrust claim here. Whether we’re talking about challenging a merger, whether we’re talking about a Section 2 in-firm conduct case, or even plausible theories of Section 1 conduct, given the really complicated corporate structures of these acquisitions.
I’ve talked about this a lot of times sort of in the policy idiom, but alongside this kind of managed care paradigm that we’ve adopted for the last 40 years where we really tried to outsource basically the management of our healthcare system, the rationing of our healthcare system to these large vertically integrated entities. It’s not a coincidence that alongside that we’ve seen, the retreat of antitrust law generally and vertical antitrust law in particular. Of course, this was one of the main things, vertical in-firm conduct is one of the main things that the Biden enforcement agencies have tried to revive. But nonetheless, we’ve had decades of a permissive approach, both in antitrust and in the health policy world towards these forms of integration.
Again, this has been deliberately facilitated. The idea has been we want these integrated entities to coordinate with themselves, to integrate, to reduce the cost of care for patients, take better care of them, reduce the cost of the system, and everybody’s going to benefit. As I frequently say, we tried to build Kaiser, and we got Optum. This has been a deliberate policy strategy, but also one that’s been enabled by antitrust law.
Executives have said, at these insurance companies, we can’t acquire other insurance companies. It’s gotten more difficult to merge horizontally. So, their growth strategy, and again, there’s always just a growth imperative for these publicly traded companies, is to acquire aspects of the healthcare delivery system to integrate vertically. So, this question then of whether these combinations are pro or anti-competitive is central. And we’ve been, I think, taking an approach again in the courts and through policy that gives a presumption of efficiency to these forms of integration.
The approach as I said, I think we’ve seen this in the courts, and I think we’ve seen through policies really come together as a powerful alliance. And it said, “look, these combinations when an insurance company buys a physician practice, it’s probably efficient because again, they’re going to be able to coordinate care, manage care, and reduce costs.” What my work is trying to illustrate is that there’s very little evidence that that’s actually happening. There are a whole number of explanations why these insurance companies might want to acquire aspects of the care delivery system that have nothing to do with delivering better care or reducing costs. That’s where just explaining these aspects of how these markets work and what the incentives are, I think, is really critical for courts. That’s what I’ve tried to just kind of get out in my work is that there’s an incentive when you acquire this practice.
You can just arbitrage the MA program through risk coding, or you can gain what’s known as the Medical Loss Ratio requirement, which is basically a profit cap for insurance companies. And if they acquire related parties on the provider side, they can basically shift profits over, or just the growth that I talked about. Or, for example, the fact that if they raise costs, if they pay their own affiliates more, the way that these markets work, the multilayered and opaque nature of these markets, make it really unlikely, contrary again to sort of like classical Chicago school theory of vertical integration, make it really unlikely that the consumer is actually going to benefit if there’s actual cost reduction. Or whether the insurance company is going to get punished if these combinations are inefficient.
So, all these explanations, I think, factor into any sort of analysis as to whether it’s prospective looking at a merger or whether it would be some sort of Section 2 case where we’re looking at all the anti-competitive conduct that’s engaged in the squeezing or the self-preferencing or the foreclosure. Whether all these explanations to combat some argument that these combinations are pro-competitive, factor in directly here to explain to courts why we shouldn’t assume that this integration is redounding to the benefit of taxpayers or patients.
TEDDY DOWNEY: Yeah, I mean, there’s certainly a number of ways that can be relevant in an antitrust case. And one of the things that we try to think through here at Capitol Forum has been like, what would a Section 2 case, or if you were going to bring a case against United, help a vertical case, how would you expand the market to address more than just the markets where they have over a 50% MA share? Would it be looking at all of the roll-ups that they’ve done and challenging those transactions? How do you think about, because the obvious antitrust cases, hey, you have a 50% or greater share in these specific MA markets, but that misses these broader points that you’re making. I mean, it would be relevant in that analysis and that, as you mentioned, an efficiency defense might be a lot weaker. But how would you think about, you know, the DOJ ultimately bringing a case that would comprehensively factor in all these problems, all these vertical issues?
HAYDEN ROOKE-LEY Yeah, I think the kind of periphery here or the larger story is central to explaining to a court what’s going on, the ways in which acquiring all these aspects to the delivery system, all these data companies might have some sort of network effect here. But I do think keying in on the range of markets where there’s significant market power in one of the markets is important. And if we are talking about the Section 2 land, I think you’re right to identify a lot of these questions on market definition. We can expect that defendants will always raise all sorts of questions about whether the market’s being defined correctly and whether it raises to the level of monopoly power or attempted monopolization. Some of that dispute we’re already seeing a little bit with private plaintiffs in a case out in California against Optum for attempted monopolization of the physician market. This will be obviously tightly related back to the facts of the case.
At a high level, it might be useful to just explain what is widely reported to be going on in various different markets, which is forms of essentially monopoly leveraging. Although that doctrine, that’s one of the reasons, the demise of that doctrine is one of the reasons why these cases have gotten more difficult. There’s a refusal to deal element here, too. But largely what you’re seeing is basically an insurance company in an MA market or another insurance market that has market power, whether it’s 30, 50, 70%, leveraging that market power to gain some sort of an advantage in an adjacent market, like a physician market. So there’s been a lot of reporting, there’s been lawsuits alleging that essentially a United or another insurer will go to an unaffiliated practice and essentially squeeze them in various ways to try to force an acquisition to their sister company on the provider side.
So this might be cutting reimbursements, might be terminating a contract that they used to have with the provider group, it might be, as I said, forms of steering patients away from that practice. Right there, you have a question of whether that’s anti-competitive conduct that can lead to some form of, if we’re talking about Section 2, some form of like attempt and monopolization in the provider market. And that’s where we’re seeing out in California, you have these questions about, is the market share enough there to rise to attempt and monopolization? However, and this ties to a lot of the tech cases we’re seeing, you can also plausibly argue. And again, we have to get to like the facts on all these things. We’re piecing together so much anecdotes here.
The question, the stronger legal case is whether there’s monopoly maintenance on the insurance side and that gets to a question of whether you’re seeing, I think, a lot of foreclosure of the insurance market by acquisition of providers. So when one of these insurance companies acquires these providers, are they, for example, embedding insurance brokers in their practice to sell their insurance plan to them? Are they doing risk coding in a way? Are they, you know, the Wall Street Journal reporting showed that basically, United, when they buy a practice, they differentially upcode their own patients. So is this a form or somewhat of a barrier to competition to non-MA payers whose patients go to those practices because they’re basically getting less of the arbitrage money from the government than United does. Or does United, when they purchase a practice, again, you hear this stuff anecdotally, do they just terminate contracting with United’s rivals on the payer side? So, if you have, and all of that, of course, amounts to, potentially amounts to foreclosure on the insurance side. So in that way, I mean, I think those two, those are some of the questions of how I think you’d think about the two different markets.
And then therein, I think there’s some (sic) questions about what sorts of markets are we talking about when we discuss forms of contracting. So basically, like fee-for-service versus value-based care contracting, setting up HMO networks. I think the plaintiffs in the Optum case tried to get somewhat creative about that, again, trying to make the case of monopolization on the provider side. And that’s where I think there’s going to be, again, we’re talking about Section 2 cases where there’s going to be certainly a lot of disputes.
TEDDY DOWNEY: And then really quickly, what would you think about just sort of extrapolating what you saw in Amedisys on labor? How could that factor into a Section 2 case, assuming that DOJ continues with their labor focus in these concentrated markets?
HAYDEN ROOKE-LEY: Yeah, I think the question there would be if there’s a market, and I’m just not aware of this, the kind of horizontal density of some of these practices that, in a given market. So you could certainly see a labor case being made or an argument being made if the claim is just some sort of horizontal consolidation, it’s certainly plausible.
A lot of my work has talked about the labor implications of these acquisitions, not always in the antitrust context. But a lot of times in the context of violation of state corporate practice and medicine laws. The general issue here, again, is the kind of changing nature of power in our healthcare system and the concentration of power into these large conglomerates and the demise of sort of the dispersion of power in the form of physician, clinician, community-owned medical practices and what that means for clinicians and their sense of autonomy and frankly dignity in delivering medicine. A lot of the reporting, a lot of the anecdotes out there are just consistent with largely the changes in the medical profession we’re seeing now. Particularly the physicians in primary care and like specialties are really experiencing a level of alienation that’s causing efforts to unionize or efforts just to revitalize state corporate practice of medicine laws.
I think a lot of this is in response to the types of management that we’re seeing when these large corporations become their employer. So I think the labor question in all of this is really interesting and really important and could factor in various ways into antitrust claims.
TEDDY DOWNEY: Let’s talk for a second before we let you go about just the general environment for UnitedHealth and Medicare Advantage companies, insurers going to court. As you mentioned, there’s sort of waves of litigation here. I imagine this UnitedHealth monopolization case will ask for a jury trial. What is the environment to your mind?
I mean, obviously we had the public reaction to the murder of the UnitedHealth executive. I think this seemed from our standpoint, when we’ve done reporting, just seems like an unprecedentedly sort of bad time for insurers to be in front of a jury. But we haven’t seen a lot of proactive conduct by the insurers to divest or do something to avoid litigation. So maybe you could talk about just the general environment. Do you expect jury trials? And does that ultimately lead UNH to try to address some of these problems proactively? Or are they just going to ride it out and just hope that they can keep doing what they’re doing?
HAYDEN ROOKE-LEY: I’ve seen some responses around prior authorization and the CEO murder and some statements about maybe limiting those practices. My general sense is this is business as usual. The price of doing business is litigation. United is, again, one of the nation’s largest companies. It’s a $400 billion-dollar revenue company. It’s got the best lawyers in the world. It’s got armies of lawyers. It’s always litigating. This is part of what it means, I think, to be a massive company like this, one that in a lot of ways is just a government contractor. It’s just getting hundreds of billions a year from the government. It’s a successful strategy for them to play these games.
As reporting has shown, as we’ve long known in the data, again, because this is all public money. When they play these games, it results in tens of billions of dollars in excess payments. Until you see some sort of successful litigation that really stops any of this conduct, I wouldn’t expect really any of it to stop. And again, this gets back to the role of litigation in the larger sort of governance of our healthcare system. I think there’s an interesting question as to how far the DOJ and enforcement agencies can get us. Certainly, they can raise the profile of these issues and potentially prevail in some of these claims, maybe chill some of this conduct. But I’ll get back to an initial point I made here, which is that, and other folks have observed this, at least in the Biden administration. You had a real divide between how the FTC and the DOJ saw these issues and how Congress and CMS and the White House saw these issues. And at the end of the day, we’re talking about a healthcare system that’s 70 percent taxpayer financed and a set of companies that are, as I said, just government contractors running on public money.
If we really want to get at the core of these problems, we’re going to have to, I think, think a lot more deliberately and intentionally about how we’re structuring these markets and how we’re structuring the flow of money from the government to these insurance companies.
TEDDY DOWNEY: Last question for you here. So, you know, you mentioned government contractors. One thing that the Trump administration is doing is just willy-nilly kind of cutting contracts and cutting staff and Congress is now putting a lot of health care cuts on the table. We’ve pointed out that there is a lot of reporting and OIG work suggesting that there’s not just problematic payments, but actual fraud in Medicare Advantage.
Do you think that this is a little bit different this time around than what we’ve seen historically with the Republican Party? Yeah, they’re reflexively pro-MA, but ostensibly they’re going to need to come up with a lot of money related to fraud. And I mean, some of the most well-documented big numbers on fraud are coming out of MA. Doesn’t that make it a little bit of low-hanging fruit? Or is it just, you know, we’ll see, you know, we’ll see. It just seems a little different this time, but curious to get your you on that?
HAYDEN ROOKE-LEY: Yeah, I’m not holding my breath. Obviously there’s a range of different folks staffing these administrations that come with different ideological perspectives. What we’ve seen out of the way to fix this MA problem is in Congress, particularly because you want to, if we’re talking about just the fraud and the overpayments, you want to use those payments to strengthen the traditional Medicare program. The problem with the Republicans right now is not just their sympathies to privatize Medicare. But they, of course, want to use the savings for tax cuts. And then you’re in a situation where you’re just cutting Medicare.
The way some Democrats have proposed doing this, and I wish a lot more, is, of course, to just put the programs on equal footing at the least and take the overpayments that we’re giving to MA and use them to strengthen the traditional Medicare benefit, which we’ve just allowed to wither on the vine. It doesn’t provide nearly the affordability that it should as the insurance coverage for elderly Americans. So, I don’t have a lot of faith in the bills I’ve seen, I believe, coming out of the House. All the healthcare cuts, they just want to cut Medicaid. So again, just classic Republican politics, welfare politics.
When it comes to the administration and when it comes to DOGE, the issue here that the problem in MA and our health care system writ large is it’s a story of private sector bureaucratic bloat. When you compare our country to other countries, we don’t use the health care system. This is the point I’ve made a lot of my work. We don’t use the health care system more than others do. The difference in our health care system is that we have exorbitant prices for private sector administrative costs. So, the approach of DOGE, which is, of course, to prosecute this culture war against the government bureaucrat, doesn’t actually align with the problem that we have here.
There are some changes that could be made in terms of approach for folks at CMS. But firing a bunch of CMS workers, in terms of CMS as an insurance company, again, we’ve long known actually runs incredibly efficient. The bloat and the waste and the overpayment, it’s all in the private sector. It’s all in the checks that we just cut to these insurance companies to administer the Medicare benefit. So, I don’t see that aligning with the DOGE approach, which of course is just firing federal workers. We’ve already de facto done that in the government by outsourcing our programs to these insurance companies. And I just don’t see folks in the administration interested in villainizing the businessmen at these insurance companies. Those are the folks that they want in power in our country and running our healthcare system, rationalizing our system. That’s what they wanted and they’ve already sort of have that. So to some degree, the healthcare system has already been DOGEd. So I don’t see the administration really doing much on, and so far as these DOGE initiatives, to address Medicare Advantage.
TEDDY DOWNEY: Yeah, it’s funny because sometimes I look at what’s happening at these other agencies and the contractors are getting thrown out with the federal staff. At USAID and NIH, but those are politically charged places, obviously in many respects. I guess they don’t have as much political support on the right as maybe the Medicare Advantage companies provide. But it will be interesting to see.
Please, if you haven’t read Hayden’s work, please check it out. I think a lot of it has really been helpful in predicting a lot of things. The reporting that’s come out has really, I think, made you look a bit like a genius, Hayden, just sort of proving all of your findings and the work you’ve done on incentives and adding more meat on the bone there. And can’t thank you enough for taking the time out to do this today.
HAYDEN ROOKE-LEY: Appreciate it. Thanks for having me.
TEDDY DOWNEY: All right. And thanks to everyone for joining the call today. This concludes the call.
