FTC Approves UHG-DaVita Merger Settlement in Nevada
The embattled merger demonstrates that experts continue to question the potential consequences of payer mergers and acquisitions.
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- The Federal Trade Commission (FTC) announced that it approves of the limitations set on the $4.3 billion UnitedHealth Group (UHG)-DaVita merger in Nevada.
“The proposed acquisition would likely have reduced competition in the markets for managed care provider organization services sold to Medicare Advantage insurers, and Medicare Advantage plans sold to individual Medicare Advantage members,” the FTC explained in a press release. “The proposed acquisition also would have positioned UnitedHealth Group to raise the costs of its managed care provider organization services to rival Medicare Advantage insurers, or even withhold such services from these rivals, the complaint alleged.”
The settlement, proposed in June 2019, stated that the merger would particularly affect competition in Clark and Nye counties in Nevada.
The complaint asserted that the merger would diminish competition among Medicare Advantage (MA) managed care provider organizations (MCPOs), which would affect MA plan premiums. Furthermore, the complaint pointed out that UnitedHealth Group would have had the power to force rival MCPOs in the region to drive up prices and even deny service to competitors.
The FTC allowed for a public commenting period before approving the settlement on August 22, 2019.
As a result, within the next 40 days UHG and DaVita will divest themselves of Healthcare Partners Nevada Assets, which Intermountain will acquire.
UHG and DaVita will provide transition and hiring assistance such as forwarding HealthCare Partners Nevada Business emails and, for up to a year following divestiture, allowing Intermountain to interview information technology employees who worked in relation to HealthCare partners Nevada Business.
The FTC also barred UHG from acquiring any Las Vegas healthcare providers for ten years following the order date.
This concludes an embattled agreement that was met with opposition from FTC commissioners Rebecca Kelly Slaughter and Rohit Chopra as well as the Attorney General of Colorado Phil Weiser.
While the FTC commissioners agreed on the injuries to Nevada, they were split regarding the status of Colorado.
It was Weiser, formerly a senior antitrust official in the Department of Justice, who challenged the merger in Colorado. The attorney general believed that the merger would diminish competition in the Colorado Springs area. He pursued the antitrust litigation without the support of the federal government or any other states, a move that is unprecedented.
“I recognize that this case marks an important step in state antitrust enforcement,” Weiser stated in a press release when he filed the antitrust lawsuit. “As the People’s Lawyer, I am committed to protecting all Coloradans from anticompetitive consolidation and practices and will do so whether or not the federal government acts to protect Coloradans.”
The lawsuit in Colorado also ended with a divestiture. DaVita agreed to turn over its MCPO, DMG, to Intermountain Healthcare.
Marked by two settlements in separate states, this challenging merger embodies the concerns associated with healthcare industry mergers. With the CVS-Aetna merger awaiting the court’s final verdict and the Wellcare-Centene and Tufts-Harvard Pilgrim mergers underway, experts express concerns about the long-term effects of payer consolidations.
Amid the negative reports circulating around healthcare industry mergers, a recent study revealed a more positive consequence of this trend in the payer industry.
In August 2019, researchers from Johns Hopkins University and the University of Southern California conducted a study on the effects that payer consolidations and hospital consolidations have on the patient experience.
The researchers found that health payer consolidations may have a positive effect on patient experience, whereas hospital consolidations have had a negative impact.
The study employed secondary data from 2008 through 2015, gathered from Hospital Compare's patient survey results, the American Hospital Association (AHA) Annual Survey’s data, and HealthLeaders-InterStudy’s results on the payer industry. The study used hospital/year-level regressions to predict patient experience.
The researchers found that by moving from twentieth percentile payer consolidation to eightieth percentile payer consolidation and from eightieth percentile hospital consolidation to twentieth percentile hospital consolidation, the quality of a patient’s experience rose.
As payer consolidation grew and hospital consolidation decreased in the model, patients that highly or definitely would recommend the hospital increased slightly.
The study suggests that concerns related to quality of care associated with hospital mergers may not apply to payer mergers such as UHG and DaVita’s.
However, this data does not assuage experts’ warnings that payer consolidations, like hospitals’, have a cost, such as higher premiums and lower innovation. As the mergers are approved and mature, the long-term consequences will become clear.
