Warren Calls out Insurers, Private Equity, and Big Pharma for Anti-Competitive Tactics and Raising Health Care Costs, Calls for Government Crack Down on Corporate Greed in Health Care
“As you move forward with your inquiry, I urge you to continue to … take appropriate enforcement actions against vertically integrated insurers, private equity firms, and pharmaceutical companies that are driving health care consolidation – a trend that has enriched corporate actors at the expense of patients’ health and financial security.”
Washington, D.C. – U.S. Senator Elizabeth Warren wrote to the Department of Justice (DOJ), the Department of Health and Human Services (HHS), and the Federal Trade Commission (FTC), calling out high health care costs due to vertically-integrated insurers, private equity companies, and pharmaceutical companies that are driving health care consolidation. The letter responds to the three agencies’ March 2024 cross-government inquiry into the impacts of corporate greed in health care, and highlights examples of abusive and anticompetitive behavior by companies in the health care industry.
Vertical Integration: Today, the U.S. health care system – 70 percent of which is funded with taxpayer dollars – is dominated by giant corporate actors that control every link in the health care payment and delivery chain. The largest insurers in the country also own their own pharmacies, pharmacy benefit managers (PBMs), physician groups, and more. These arrangements allow giant health care companies to operate on both sides of health care transactions, as the providers of health care services and the entities responsible for paying, or reimbursing, for those services – a gross conflict of interest. Using this structure, giant corporations can shift profits from the insurance arm of the business to various subsidiaries as a way to avoid federal requirements that cap insurers’ profits and administrative expenses, while raising prices and disadvantaging competitors.
Serial Roll-ups: Private equity companies and insurers have driven consolidation in health care by aggressively purchasing provider groups across the country, often engaging in a series of small transactions to fly under the radar of antitrust scrutiny. Individually, the transactions may not reach the threshold that requires reporting to antitrust agencies. Yet, taken together, these serial roll-ups can significantly increase a company’s market share. The letter urges the agencies to consider this widespread trend in health care acquisition and review the state of market dominance in order to prevent harm to competition and patients.
Capitation-Based Financing: These rapidly consolidating companies have abused the federal government’s payment policy to boost their corporate profits. Under “capitation-based financing,” insurers and providers receive monthly lump sum payments upfront. If they can keep costs under that amount, they can keep the difference. Insurers and private equity companies exploit the system by acquiring companies that are eligible for, or can influence the size of, these payments. Once in control, corporate actors manipulate patients’ medical records and billing practices to secure higher government payments, aggressively deny care to pad profits, and exert control over providers’ business and clinical decisions.
Patent Listing Abuse: In another example of monopolized health care, pharmaceutical companies often employ anticompetitive tactics to extend their patents, to protect themselves from generic competition, and keep prices artificially high. For instance, pharmaceutical companies have received warnings from the FTC for improperly listing patents in the Orange Book in order to hold off competition from generics, increasing drug and health care costs for patients and driving up insurance premiums.
These tactics, together with other practices used to stifle competition, have a devastating effect on American consumers. In 2019, U.S. patients and payers spent an additional $40.07 billion on pharmaceutical products “as a result of antitrust violations by the pharmaceutical industry.”
Senator Warren is calling on the three agencies to focus on enforcing merger guidelines, closely analyze ownership data to determine whether insurers are engaging in profit-shifting schemes, crack down overpayments to private insurers in Medicare Advantage, remove sham patent listings to fight patent abuse, enforce Corporate Practice of Medicine laws to allow independent physicians to remain viable, and undo mergers that harm competition.
Senator Warren has led the fight against private equity in health care, consistently underscoring the harmful impacts on costs, employment conditions, quality of care, and patient and physician safety:
- On May 1, 2024, at a hearing of the U.S. Senate Committee on Finance, Senator Warren questioned Andrew Witty, Chief Executive Officer for UnitedHealth Group, about how the conglomerate leverages its market power to raise prices, increase payments it receives from Medicare Advantage through tactics like upcoding, and evade federal regulations that restrict insurance company profits.
- On April 3, 2024, Senator Warren delivered remarks at a Senate hearing in Boston titled, “When Health Care Becomes Wealth Care: How Corporate Greed Puts Patient Care and Health Workers at Risk,” which centered on Steward Health Care’s Massachusetts hospitals.
- On March 8, 2024, Senators Warren and Markey sent a letter to Dr. de la Torre, blasting him for years of financial mismanagement, private equity schemes, and executive profiteering that have led to Steward Health Care’s financial crisis.
- On January 29, 2024, Senator Warren released a statement about Steward’s financial situation and allegations of patient neglect at Steward facilities.
- On January 23, 2024, Senator Warren led the Massachusetts congressional delegation in a letter to the CEO of Steward Health Care pressing the company to brief them on Steward’s financial position, the status of their Massachusetts facilities, and their plans to ensure the communities they serve are not abandoned.
- On November 27, 2023, Senators Warren and Richard Blumenthal (D-Conn.) sent a letter to U.S. Anesthesia Partners and its private equity (PE) parent company Welsh, Carson, Anderson & Stowe raising concerns that PE’s involvement in health care markets has exacerbated problems like surprise medical billing, inadequate training, and lack of oversight and due process.
- On November 16, 2023, Senators Warren, Bernie Sanders (I-Vt.), and Richard Blumenthal released a new report: Residents at Risk: Quality of Care Problems in Understaffed Nursing Homes and the Need for a New Federal Nursing Home Staffing Standard, revealing that, across a broad range of health outcomes, nursing homes with higher staffing levels that meet the requirements in the Centers for Medicare and Medicaid Services’ (CMS) proposed rule provide higher quality care than homes with lower staffing levels.
- In May 2023, Senator Warren called out corporate owners of nursing homes, including private equity firms and Real Estate Investment Trusts (REITs), for their failures to protect patient safety and use of complex legal arrangements to avoid regulatory scrutiny.
- In May 2022, Senator Warren and lawmakers sent a letter to private equity giant KKR regarding the grossly substandard care and unsafe living conditions in group homes it owned for people with intellectual and developmental disabilities.
- In February 2022, testifying before the Senate Budget Committee, Senator Warren called out private equity firms’ predatory practices of buying up distressed companies; stripping workers of benefits, fair pay, and safe working conditions, and reaping billions in profits. She noted that research shows that private equity ownership of nursing homes led to a 10% jump in short-term mortality rates.
- In October 2021, Senator Warren and lawmakers reintroduced the Stop Wall Street Looting Act, a comprehensive bill to fundamentally reform the private equity industry and level the playing field by forcing private investment firms to take responsibility for the outcomes of companies they take over, empowering workers, and protecting investors.
- In October 2021, chairing a hearing of the Senate Banking, Housing, and Urban Affairs Subcommittee on Economic Policy, Senator Warren spoke about the need to protect companies and communities from destructive private equity practices as the industry’s growth continues to explode.
- In August 2021, Senator Warren and lawmakers launched an investigation into private equity ownership of for-profit hospice companies and subsequent reductions in the quality of care.
- In November 2019, Senators Warren and Sherrod Brown (D-Ohio), and Representative Mark Pocan (D-Wisc.) wrote to four private equity firms that invested in companies providing nursing home care and other long-term care services, citing reports that show private equity investment has played a role in the declining quality of care in nursing homes and requesting information about each firms' management of this sector.
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