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Becker’s Healthcare Podcast
Prior Authorization Transparency and the Debate Over Vertical Integration with Jakob Emerson
00:16:26
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- [00:00]
A
This is Scott Becker with the Becker Healthcare Podcast. Thrilled today to join by Jacob Emerson, who is a managing editor and leader at Becker's Healthcare, covers the payer area. We visit with Jacob regularly to talk about what are the big issues he's watching in the world of payers. And Jacob, let me tee you up and turn it to you. What are the big issues you're watching currently? What's top of mind in the payer industry? The payer arena.
- [00:27]
B
Yeah. Hey Scott, good to talk with you. So I thought the two stories we could talk about today, one is a bit more of, I think just an evolution on a topic that has always been pretty pertinent within the industry over the last decade or so, but now seems to be trickling out more into the wider public. And it's the topic of vertical integration. You know, every major insurer, at least the publicly traded ones and even the not public, publicly traded ones now have gone down this path, of course. And it's interesting where this topic has gone in terms of now proposed legislation to try to break up this kind of thing. We've got Mark Cuban being very outspoken about vertical integration. So some updates there and then a specific policy update on prior authorization, a big one going into effect literally just yesterday, March 31, under a rule that CMS finalized back in 2024. And so some big changes we expect to see start trickling out because of that new rule as well.
- [01:29]
A
And let's start there with prior authorization because that's been such a hot topic the last several years. What is the new rule and what does that mean?
- [01:37]
B
Yeah, so basically a few years ago, CMS finalized a rule that now requires payers to publicly post the data on how often they deny prior auth requests, how quickly they process them, and then how often those denials are overturned on appeal. And all those metrics have to be publicly posted on their website websites for everybody to view. And that was due, all of those metrics were due yesterday, March 31st. And this rule had a few different timelines in it. Some of it went into effect on January 1st of this year, some of it goes into effect January 1st of next year in 2027. But now for the, for the type of plans that CMS directly oversees. So that's Medicare Advantage, Medicaid and chip. And then the ACA plans all over the country, the private insures that, that administer those plans on behalf of the government now have to be publicly posting online. How, how basically difficult is it to get CARE approved through them through the prior authorization process? Which, you know, as you know, has been very opaque in the past. It's been a massive frustration issue for providers all over the country for years. And so in theory, you know, it is, it is a government regulation, so we'll see what ends up actually happening. But in theory, we'll get a lot more transparency around the scale of this problem, how quickly they approve for certain kinds of services, how well appeals work. And then health systems themselves should be able to start building in that data into their RCM processes so they can then figure out themselves, okay, this is going to be a service and this is going to be an insurer that is extremely difficult for us to work with. On the prior auth perspective, we can kind of build this more into our metrics and how we in our analytics and try to get, maybe even recoup millions of dollars in costs, which is something that our finance and RCM teams are working on actually as we speak is starting to reach out to health systems around the country and asking them, what are you going to do with, with this data now that it's trickling out?
- [03:44]
A
Fascinating. And take us through the other subject, the attack on vertical integration. Obviously we've seen over the last several years, obviously huge vertical integration, whether Aetna cvs, the combination of a payer and a big pharmacy chain, UnitedHealthcare and Optum and what they've done on the provider side elevance, which sometimes people talk about is Optum 2.0, trying to build up a practice and so forth group. Will that really change? And even though it gets some criticism, what does some of that mean? And obviously some of it's done for what were intended to be right reasons that you need to control your vertical integration to be able to provide care and manage the cost of it. And it goes in line with OB3 of, you know, which is a newer entrance of the field, which is trying to do unified billing, which is not really happening with some of these integrated systems, but at least get you closer to it. Kaiser is obviously the, the biggest example of a truly sort of vertically integrated hospital and insurance company. But what does all this discussion mean, if anything?
- [04:49]
B
Yeah, I mean that's, I mean, just to your last point there, Scott, this is, it's such a nuanced conversation, even just from the perspective of a vertically integrated organization. Yes, it is, I guess by definition of what we're talking about here is, you know, the insurance company and the provider and maybe the PBM alone under one roof. But there's different kinds of these companies and you Know, you got like a Cigna and Evernorth and Express scripts and that's more pharmacy focused. You've had UnitedHealth where it's basically everything. But then you've got the Kaisers where, you know, it's been proven that they, they do achieve some of the high quality health plans and hospital metrics in the country. So the model has proven to work for decades in Kaiser's case, going back to the first half of the 1900s. But I think where a lot of this is now coming from is that we've seen arguments that the ACA really spurred this or the acceleration of this trend because it capped how much these companies could make on their actual insurance products. And, and of course, you know, the cost of care has just continued to rise in this country. And so I think it just puts a bigger, a bigger target on the backs of these companies that have continued to get bigger with, you know, maybe you maybe shouldn't be tying it together. But as, as costs have increased and these companies have gotten bigger. Well that seems, I think people or lawmakers are tying them together. Whether that's fair or not, I don't know. It kind of depends on what sector you're talking about, if it's pharmacy or physician costs or, or whatever it is. But the, the, the scrutiny is intensifying. We've seen the congressional hearings just this year alone of These companies, their CEOs being dragged to Congress to, to answer for these high health care costs. Some would all, some would argue they have to do this to survive. You know, we're, we're not a single payer country like other developed nations. So this, and, and we've been up until this point and we still are such a disparate system of all these companies operating their own systems all over the place. So you've got, you know, United's argument coming in basically saying well, we have to buy up everything, we have to create our own system, otherwise we're just going to continue on with this, with this legacy, even more disparate system. We need to somehow get all the, you know, the data and the pharmacy and the providers under one roof. I think what's interesting though is, you know, just in terms of recent developments, Scott, we've seen Elizabeth Warren, the Senator and then Senator Josh Hawley, the Republican from Missouri. They've, they've co introduced a bill in the Senate called the Breakup Big Medicine Act. And basically this bill would, would ban companies from simultaneously owning a health insurer and a pharmacy benefit manager alongside a provider or a Management services organization. So basically you would not be allowed to exist as a United Health slash Optum as, as they currently are. However, you know, I am not naive to think one, you know, it's a dysfunctional Congress. It's on the face of that, it's not going to go anywhere. You also talk about the fact that just United alone, it employs almost half a million people. That's a lot of constituents. They're not, you know, they're not going to do that. It's a major donor. They're not going to go after that. And then also, you know, would this even be feasible? I don't, I don't really think so. Because if, if all those challenges were surpassed from the legal perspective, I can't even imagine the lawsuits that would come out of legislation like this and trying to get it enacted. If you even think about when United tried to purchase Change Healthcare, you know, the government tried to stop that from an antitrust perspective and the courts didn't agree. So, you know, there's so many reasons why this will not become law and I'm very confident in saying that. But what I just think is interesting is that you have bipartisan lawmakers who don't agree on anything ever publicly introducing this, going after this problem directly, directly. And now you've got Mark Cuban tweeting about it all the time on Twitter saying, you know, that he's in support of it, calling on more lawmakers to support it.
- [08:45]
A
But I guess the great, the great question I guess is, I guess it's so easy to sort of look at everything and say nothing is working in terms of really cutting cost. I had a fascinating podcast with somebody yesterday who said, look, if you actually looked at the rate of increase in costs, it's gone down over the last 30 years per capita. But none of that's really helpful when we saw these crazy costs per family for insurance and health care. And you certainly can look at the big insurance companies and say, well, that's not working. So the big vertical integration is not working. But is it really? But what is really, is that really the problem in and of itself or is something else the problem? And I do sort of look at this and say vertical integration can be good, it can be bad. It's an age old argument in terms of capitalism, whether vertical iteration is good or bad. But at the same time, you sort of looked at the next issue if you break up these insurance companies. The fun of it is, is you've gone after somebody that the population largely has grown to dislike. But the More real question is what will it accomplish? What's really the intention of it? I mean, what, what really does that? It's not that it's good or bad. It's not that I, I love the fact, I'm, I'm not a fan of the fact that for the largest companies in America are insurance companies, I think there's a more base problem that we've turned over so much of the government, fisc, Medicare Advantage and Medicaid to the big insurance companies than there is necessarily a vertical integration problem. And when people take shots at private equity and they say, oh my God, private equity owns or through their sponsored platforms, employs 8% of physicians in the country, well, United itself employs 9% or something like that, 8 or 9% itself, one company, is that fundamentally the problem or not? I would argue that the fundamental problem is a supply problem. The payment system is totally fubar, to use the expression, messed up beyond belief and completely. Is vertical integration, like private equity, a great scapegoat, but does it really solve the problem of getting cost lower in our country? And one of the things I guess I think about when I listen to Josh Hawley and Elizabeth Warren rant on private equity or rant on vertical integration is other than pleasing their constituents, are they actually solving a problem and moving us towards lower healthcare costs? And that analysis, I have no idea. I just have no idea where this has any impact on it at all.
- [11:29]
B
I think the truth is probably somewhere in the middle in terms of are these companies ultimately what are causing the cost to go up or how they're structured or not? You know, I do think there is a very real argument when you have people dig into how these companies are structured, you know, that it is UnitedHealthcare that is often paying Optum for claims or that are submitted. And so there's a lot of this now examination of things called intercompany eliminations, where the subsidiaries of these different companies are literally just paying each other. And there's some tricky accounting that goes on to make it look like money is being, being made, but it's all really just being swapped back and forth within the same company. And it looks really good for the shareholders for these publicly traded companies. So I think there's that very real fact of that going on. But I also was talking to a pharmacy chief at a big health insurer just this morning, Scott, and he pointed out to just the very, I think, simple fact that you look at things like GLP1s, the types of medicine that we're consuming more and More it's getting, it is just on the face of it, more expensive. And so these insurance companies have to cover more expensive health care. And they, they can't. I mean, there's people smarter than me that are going to be listening to this and saying, I might be a little bit off basis here when it comes to, you know, how pharmacy finances work, but these insurers can't really do anything about the fact that Novo Nordisk charges much more money, much more for Ozembic in the United States than it does in Europe. And so, and, but they have to cover it regardless or figure out a way to get that, get these medications that work to their members. So I think that's an issue that we just, we have to pay more for a lot of these services more and more every year. But, but the other thing that I think is just interesting about all of this is that more and more the public now is starting to know just the term vertical integration. When you have Mark Cuban kind of being almost, I think, like an in between, between the world that you and I talk about and talk to people within this very, in some ways, closed off to the public in terms of how things work within healthcare, administratively and financially, and then what the wider public knows of healthcare. Mark Cuban's almost, I think, a bridge in between, and he's creating a public conversation more and more where people understand the behemoth that United and CVS and Cigna and Elevance Anthem have become. And I think that that is then trickling down into what you're seeing lawmakers do, right. Whether these proposed bills will actually do anything. Well, they're not going to go anywhere. And whether they would help, I don't know. But I think the fact that they're screaming about vertical integration in the halls of Congress tells us a lot about what the public is now starting to understand more and more. Right.
- [14:17]
A
And I do think that to your last point there about screaming about vertical integration, it reminds me of screaming about private equity. It's fun to do. There's. It's an easy bogeyman. It's an easy scapegoat. But does it really get us to any solution? Like, has anybody studied if you got rid of some of this vertical integration? You know, I know they've looked at market concentration where two health systems really own a market, then they have the ability to raise the prices. And there's been a ton of studies that, you know, my biggest sense of the vertical integration and the cost of the insurers is the massive amount of Federal money that's turned over to the insurance is the real problem, not the vertical integration. But it's easy for the lawmakers to scheme about vertical integration because that's much easier than taking a look at their own policies. So it's just what it costs are in any event, Jacob, I know we've got to wrap up. Go ahead. You want to say something? Go ahead.
- [15:10]
B
Well, I just, I do think there it just also at the end of the day, these are publicly traded companies, the ones we're talking about, they will continue the profit line has to go up or at least that is the goal for the investors. They have to make money in new places or in larger margins somewhere. And somehow and so does that come from better care? I don't know. But you know, the money has to keep getting made.
- [15:34]
A
So that's 100%. 100%. And that's, that's true of whether you're a physician practice, a health system, a non profit health system. Everybody's got enough margin to be able to do what they do and it ties into everything. And I just, I do think, you know, somebody said this the other day there ought to be a more thoughtful study of some of the stuff. And it does seem like the, you know, when Josh Hawley and Elizabeth Warren get together, I think you've got two fire brands, one from the right, one from the left. And generally they're good at being fire brands. I don't know if they're good at actually getting anything done that's really important or effective.
- [16:09]
B
But anyways, I'll agree with you there.
- [16:11]
A
Jacob, I want to thank you for joining us. Excuse me for the background noise. It just is fantastic to visit with you. And Grace, our producer, thank you so much for helping us today too. Thank you very much.
- [16:22]
B
Thank you, Scott.