Latest / Becker’s Healthcare Podcast / Prior Authorization Transparency and the Debate Over Vertical Integration with Jakob Emerson

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Prior Authorization Transparency and the Debate Over Vertical Integration with Jakob Emerson · Becker’s Healthcare Podcast

• 0:00
  This is Scott Becker with the Becker's Healthcare
• 0:03
  podcast.
• 0:04
  Thrilled today to jump by Jacob Emerson, who
• 0:07
  is a managing editor and leader at Becker's
• 0:09
  Healthcare, covers the payer area.
• 0:12
  We visit with Jacob regularly to talk about
• 0:15
  what are the big issues he's watching in
• 0:16
  the world of payers. And, Jacob, let me
• 0:19
  tee you up and turn it to you.
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  What are the big issues you're watching currently?
• 0:23
  What's top of mind in the payer industry,
• 0:25
  the payer arena?
• 0:27
  Yeah. Hey, Scott. Good to talk with you.
• 0:29
  So I thought the two stories we could
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  talk about today, one is a bit more
• 0:33
  of, I think, just an evolution
• 0:35
  on a topic that has always been pretty
• 0:39
  pertinent within the industry over the last
• 0:41
  decade or so, but now it seems to
• 0:44
  be trickling
• 0:45
  out more into the wider public, and it's
• 0:48
  the topic of vertical integration.
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  You know, every major insurer, at least the
• 0:52
  publicly traded ones, and and even the not
• 0:54
  publicly traded ones now have gone down this
• 0:56
  path, of course.
• 0:58
  And it's interesting where this topic has gone
• 1:01
  in terms of now proposed legislation to try
• 1:03
  to break up this kind of thing. We've
• 1:05
  got Mark Cuban being very outspoken about vertical
• 1:08
  integration.
• 1:09
  So some updates there, and then a specific
• 1:11
  policy update on prior authorization,
• 1:14
  a big one going into effect
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  literally just yesterday, March 31, under a rule
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  that CMS finalized back in 2024.
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  And so some big changes we expect to
• 1:25
  see start trickling out there because of that
• 1:27
  new rule as well.
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  And and and let's start deal with prior
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  authorizations. That's been such a hot topic the
• 1:32
  last several years. What is the new rule,
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  and and what does that mean?
• 1:37
  Yeah. So, basically,
• 1:38
  a few years ago,
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  CMS finalized
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  a rule that now requires payers to publicly
• 1:45
  post the data on how often they deny
• 1:48
  prior auth requests, how quickly they process them,
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  and then how often those denials are overturned
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  on appeal. And all those metrics
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  have to be publicly posted on their websites
• 1:59
  for everybody to view, and that was due
• 2:01
  all of those metrics were due yesterday, March
• 2:04
  31. And this rule had a few different
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  timelines in it. Some of it went into
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  effect on January 1. Some of it goes
• 2:10
  into effect January 1 in 2027.
• 2:13
  But now for the for the type of
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  plans that CMS directly oversees, so that's Medicare
• 2:19
  Advantage, Medicaid and CHIP, and then the ACA
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  plans
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  all over the country.
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  The private insurers that that administer those plans
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  on behalf of the government now have to
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  be publicly posting online
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  how how basically difficult is it to get
• 2:34
  care approved
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  through them through the prior authorization process, which,
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  you know, as you know, has been very
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  opaque in the past. It's been a massive,
• 2:43
  frustration issue for providers all over the country
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  for years.
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  And so
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  in theory, you know, it is it is
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  a government regulation, so we'll see what ends
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  up actually happening. But in theory,
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  we'll get a lot more transparency
• 2:57
  around
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  the scale of this problem,
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  how quickly, you know, they approve for certain
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  kinds of services,
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  how how well appeals work.
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  And then health systems themselves
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  should be able to start building in that
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  data into their RCM processes so they can
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  then figure out themselves, okay,
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  this is gonna be a service and this
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  is gonna be an insurer that is extremely
• 3:19
  difficult for us to work with on the
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  prior auth perspective.
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  We can kind of build this more into
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  our metrics and how we in our analytics
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  and try to get maybe even recoup
• 3:29
  millions of dollars in costs,
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  which is something that our our finance and
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  RCM teams are working on actually as we
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  speak is start starting to reach out to
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  health systems around the country and asking them,
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  what are you gonna do with with this
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  data now that it's trickling out?
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  Fascinating. And and take us through the other
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  subject, the attack on vertical integration. Obviously, we've
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  seen over the last several years. Obviously,
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  huge vertical integration,
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  whether Aetna CVS, the combination of a payer
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  and a big pharmacy chain,
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  UnitedHealthcare
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  and Optum and what they've done on the
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  provider side,
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  Elavance, which sometimes people talk about as Optum
• 4:05
  two point o, trying to build up a
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  practice and and and so forth group.
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  Will that really change? And even though it
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  gets some criticism,
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  what does some of that mean? And, obviously,
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  some of it's done for what were intended
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  to be right reasons
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  that you need to control your vertical integration
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  to be able to provide care and manage
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  the cost of it. And it goes in
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  line with o b three of, you know,
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  which is a newer entrance to the field,
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  which is trying to do unified billing, which
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  is not really happening with some of these
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  integrated systems, but at least get you closer
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  to it. Kaiser is obviously the
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  the biggest example of a truly sort of
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  vertically integrated
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  hospital and insurance company.
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  But Yep. What does all this discussion mean,
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  if anything?
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  Yeah. I mean, that's I mean, just to
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  your last point there, Scott, this is it's
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  such a nuanced conversation even just from the
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  perspective of a vertically integrated organization. Yes. It
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  is, I guess, by definition of what we're
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  talking about here is, you know, the insurance
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  company and the provider and maybe the PBM
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  all under one roof, but there's different kinds
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  of these companies. And, you know, you got,
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  like, a Cigna and Evernorth and Express Scripts,
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  and that's more pharmacy focused. You've had UnitedHealth
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  where it's basically everything.
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  But then you've got the Kaiser's where, you
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  know, it it's been proven that they they
• 5:18
  do achieve some of the highest quality
• 5:20
  health plans and hospital metrics in the country.
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  So the model has proven to work and
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  and for for decades in in Kaiser's case,
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  you know, going back to the news first
• 5:32
  half of the nineteen hundreds. But,
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  you know,
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  I think where a lot of this is,
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  now coming from is that, you know, we've
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  seen arguments that the ACA really spurred this
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  because or or the acceleration of this trend
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  because it capped how much these companies could
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  make on their actual insurance products.
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  And and, of course, you know, the cost
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  of care has just continued to rise in
• 5:52
  this country, and so I think it just
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  puts a bigger a bigger target on the
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  backs of these companies that have continued to
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  get bigger with, you know, may you maybe
• 6:00
  shouldn't be tying it together, but as as
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  costs have increased and these companies have gotten
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  bigger, well, that seems I think people or
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  or lawmakers are tying them together. Whether that's
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  fair or not, I don't know. It kinda
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  depends on what sector you're talking about. If
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  it's pharmacy or,
• 6:15
  physician costs or or whatever it is, but
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  the the the scrutiny is intensifying. We've seen
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  the congressional hearings just this year alone of
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  these companies, their CEOs being dragged to congress
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  to to answer for these high health care
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  costs.
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  Some would some would argue they have to
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  do this to survive. You know, we're we're
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  not a single payer country like other developed
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  nations. So,
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  this and and we've been up until this
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  point, and we still are such a disparate
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  system of all these companies
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  operating their own systems all over the place.
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  So you've got, you know, United's argument coming
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  in basically saying, well, we have to buy
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  up everything. We have to create our own
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  system. Otherwise, we're just gonna continue on with
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  this with this legacy, this even more disparate
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  system. We need to somehow get all the,
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  you know, the data and the pharmacy and
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  the providers under one roof.
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  I think,
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  what's interesting, though, is, you know, just in
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  terms of recent developments, Scott, we we've seen
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  Elizabeth Warren, the senator, and then senator Josh
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  Hawley, the republican
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  from Missouri.
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  They've they've cointroduced
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  a bill in the senate called the breakup
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  big medicine act. And, basically, this bill would
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  would ban companies from simultaneously owning a health
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  insurer and a pharmacy benefit manager alongside
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  a provider or a management services organization. So,
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  basically, you would not be allowed to exist
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  as a UnitedHealth slash Optum as as they
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  currently are. However, you know, I am not
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  naive to think, one, you know, it's a
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  dysfunctional congress. It's on the face of that,
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  it's not gonna go anywhere.
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  You also talk about the fact that just
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  United alone, it employs almost half a million
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  people. That's a lot of constituents.
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  They're not, you know, they're not gonna do
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  that. It's a major donor. They're not gonna
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  go after that. And then also, you know,
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  would this even be feasible? I don't I
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  don't really think so because
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  if if all those challenges were surpassed,
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  from the legal perspective, I can't even imagine
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  the lawsuits that would come out of legislation
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  like this and trying to get it enacted.
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  If you even think about when United tried
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  to purchase Change Healthcare, you know, the the
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  government tried to stop that from an antitrust
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  perspective, and the courts didn't agree.
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  So, you know, there's so many reasons why
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  this will not become law, and I'm very
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  confident in saying that. But what I just
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  think is interesting is that you have bipartisan
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  lawmakers who don't agree on anything ever publicly,
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  introducing this, going after this problem directly, and
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  now you've got Mark Cuban tweeting about it
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  all all the time on Twitter,
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  saying, you know, that he's in support of
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  it, calling on more lawmakers to support it.
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  Because he has But I guess, like, the
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  great the great question, I guess, is I
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  guess it's so easy to sort of look
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  at everything and say
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  nothing is working in terms of really cutting
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  cost.
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  I had a fastening podcast with somebody yesterday
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  who said, look. If you actually looked at
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  the rate of increase in cost, it's gone
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  down over the last thirty years per capita,
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  but none of that's really helpful when we
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  solve these crazy cost per family for insurance
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  and health care.
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  And and you certainly can look at the
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  big insurance companies and say, well, that's not
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  working. So the big vertical integration is not
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  working.
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  But is it really
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  but what is really
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  is that really the problem in and of
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  itself,
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  or is something else the problem? And and
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  I do sort of look at this and
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  say,
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  vertical integration can be good. It can be
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  bad.
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  It's an age old argument in terms of
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  capitalism,
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  whether vertical integration is good or bad.
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  But at at the same time, you sort
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  of looked at the next issue.
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  If you break up these insurance companies,
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  the fun of it is
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  is you've gone after somebody that the population
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  largely has grown to dislike.
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  But the more real question is,
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  what will it accomplish? What's really the intention
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  of it? I mean, what what really does
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  the and it's not that it's good or
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  bad. It's not that I I love the
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  fact. I'm I'm not a fan of the
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  fact that for the largest companies in America,
• 10:08
  our insurance companies,
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  I think there's a more base problem that
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  we've turned over so much of the government
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  at FISC, Medicare Advantage and Medicaid to the
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  big insurance companies,
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  then there is necessarily
• 10:19
  a vertical integration problem. And when people take
• 10:22
  shots at private equity and they say, oh
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  my god. Private equity owns
• 10:26
  or through their sponsored platforms,
• 10:28
  employs 8% of physicians in the country.
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  Well, United itself employs 9% or something like
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  that, eight or 9% itself, one company.
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  Is that fundamentally a problem or not? I
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  would argue that the fundamental problem is a
• 10:40
  supply problem.
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  The payment system is totally
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  fubar, to use the expression,
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  messed up beyond belief and completely
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  is vertical integration,
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  like private equity,
• 10:54
  a great
• 10:56
  scapegoat,
• 10:57
  but does it really solve the problem of
• 10:59
  getting cost lower in our country? And one
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  of the things, I guess, I think about
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  when I listen to,
• 11:06
  Josh Hawley and Elizabeth Warren
• 11:09
  rant on private equity or rant on vertical
• 11:11
  integration is
• 11:14
  other than pleasing their constituents,
• 11:17
  are they actually
• 11:18
  solving a problem and moving us towards lower
• 11:21
  health care cost? And that analysis, I have
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  no idea. I I just have no idea
• 11:26
  where this has any impact on it at
• 11:27
  all.
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  I think the truth is probably somewhere in
• 11:30
  the middle in terms of, you know, if
• 11:33
  if are these companies
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  ultimately what are causing the costs to go
• 11:37
  up or or how they're structured or not?
• 11:39
  You know,
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  I I do think there's a very real
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  argument when when when you have people dig
• 11:44
  into how these companies are structured,
• 11:46
  you know, that
• 11:47
  it is it is UnitedHealthcare
• 11:49
  that is often paying Optum,
• 11:52
  for for claims or that are submitted. And
• 11:54
  so there's a lot of this now examination
• 11:56
  of things called intercompany eliminations where the subsidiaries
• 12:00
  of these different companies are literally just paying
• 12:02
  each other, and there's some tricky accounting that
• 12:04
  goes on to make it look like money
• 12:06
  is being made. But it's all really just
• 12:07
  being swapped back and forth within the same
• 12:09
  company, and it looks really good for for
• 12:11
  the shareholders for these publicly traded companies.
• 12:14
  So I think there's that very real fact
• 12:16
  of that going on, but I also was
• 12:18
  talking to, you know, a pharmacy chief at
• 12:20
  a big health insurer just this morning, Scott,
• 12:22
  and he pointed out to just the very,
• 12:24
  I think, simple fact that you look at
• 12:26
  things like GLP ones,
• 12:28
  you know, the the types of medicine that
• 12:30
  we're consuming more and more, it's getting it
• 12:33
  is just on the face of it more
• 12:35
  expensive, and so these insurance companies have to
• 12:37
  cover more expensive health care. And they they
• 12:40
  can't I mean, there's people smarter than me
• 12:43
  that are gonna be listening to this and
• 12:44
  saying, I might be a little bit off
• 12:45
  basis here when it comes to, you know,
• 12:46
  how pharmacy finances work, but
• 12:49
  these insurers can't really do anything about the
• 12:51
  fact that Novo Nordisk charges
• 12:53
  much more money, much more for Ozempic in
• 12:56
  The United States than it does in Europe.
• 12:58
  And so and but they have to cover
• 13:00
  it regardless or figure out a way to
• 13:01
  get that get these medications that work to
• 13:04
  their members. So I think that's an issue
• 13:06
  that we just we have to pay more
• 13:08
  for a lot of these services
• 13:09
  more and more every year.
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  But but the other thing that I think
• 13:13
  is just interesting about all of this is
• 13:15
  that more and more the public now is
• 13:18
  starting to know just the term vertical integration.
• 13:22
  When when you have Mark Cuban kind of
• 13:23
  being almost, I think, like, an in between
• 13:25
  between
• 13:26
  the world that you and I talk about
• 13:28
  and talk to people within this very, in
• 13:31
  some ways, closed off to the public in
• 13:33
  terms of how things work within health care
• 13:34
  administratively and financially,
• 13:36
  and then what the wider public knows of
• 13:38
  health care. Mark Cuban's almost, I think, a
• 13:40
  a bridge in between, and he's fill he's
• 13:42
  he's creating a public conversation more and more
• 13:45
  where people understand
• 13:47
  the behemoth that United and CVS
• 13:50
  and Cigna and Elevent slash Anthem have become.
• 13:54
  And I think that that is then trickling
• 13:55
  down into what you're seeing lawmakers do. Whether,
• 13:58
  you know, these proposed bills will actually do
• 14:00
  anything,
• 14:01
  well, they're not gonna go anywhere. And whether
• 14:03
  they would help, I don't know. But I
• 14:05
  think there's the fact that it that we
• 14:06
  are that they're screaming about vertical integration in
• 14:09
  the halls of Congress tells us a lot
• 14:11
  about what the public is now starting to
• 14:14
  understand more and more. Right. And and and
• 14:17
  I do think that to your last point
• 14:19
  about screaming about vertical integration,
• 14:21
  it it reminds me of screaming about private
• 14:24
  equity.
• 14:25
  It's fun to do. There's it's an easy
• 14:27
  bogeyman. It's an easy scapegoat,
• 14:30
  but does it really
• 14:32
  get us to any solution? Like, if anybody
• 14:34
  studied,
• 14:35
  if we got rid of some of this
• 14:36
  vertical integration
• 14:38
  you know, I know they've looked at market
• 14:39
  concentration where two health systems have really owned
• 14:42
  a market, then they have the ability to
• 14:44
  raise the prices, and there's been a ton
• 14:46
  of studies of that. You know, my biggest
• 14:48
  sense of the vertical integration and the cost
• 14:50
  of the insurers is the massive amount of
• 14:52
  federal money that's turned over to the insurers
• 14:54
  is the real problem, not the vertical integration.
• 14:57
  But it's easy for the lawmakers to scheme
• 14:59
  up vertical integration because that's much easier than
• 15:02
  taking a look at their own policies. So
• 15:04
  it it just what I cluster. And, anyway,
• 15:06
  Jacob, I know we've gotta wrap up. Go
• 15:08
  ahead. You wanna say something? Go ahead. Well,
• 15:09
  I just I do think there is just
• 15:11
  also
• 15:12
  at the end of the day, these are
• 15:14
  publicly traded companies, the ones we're talking about.
• 15:16
  They will continue the the profit line has
• 15:18
  to go up, or at least that is
• 15:19
  the goal for the investors.
• 15:21
  They have to make money in new places
• 15:23
  or in larger margins somewhere and somehow.
• 15:27
  And so
• 15:28
  does that come from better care?
• 15:30
  I don't know. But, you know, the money
• 15:32
  has to keep getting made. So that's a
• 15:35
  100%. Leave it at the percent. And that's
• 15:36
  and that that's true of whether you're a
• 15:38
  physician practice, a health system, an unprofitable system.
• 15:41
  Everybody's got enough margin to be able to
• 15:43
  do what they do, and it it it
• 15:45
  ties into everything.
• 15:46
  And I I just I I do think
• 15:48
  I you know, somebody said this the other
• 15:49
  day. There ought to be a more thoughtful
• 15:50
  study some of the stuff, and it does
• 15:52
  seem like the you know, when Josh,
• 15:54
  Polly, and Elizabeth Warren get together,
• 15:57
  I think you've got two fire brands. One
• 15:59
  from the right, one from the left. And,
• 16:01
  generally,
• 16:03
  they're good at being fire brands. I don't
• 16:05
  know if they're good at actually getting anything
• 16:06
  done that's really important or effective.
• 16:08
  But, anyways I I'll agree with you there.
• 16:11
  Jacob, I wanna thank you for joining us.
• 16:13
  Excuse me for the background noise. It just
• 16:15
  is fantastic to visit with you. And and
• 16:17
  Grace, our producer, thank you so much for
• 16:19
  helping us stay tuned. Thank you very, very
• 16:21
  much.
• 16:22
  Thank you, Scott.