Top Stories in Business & Health for May 22, 2017

Steward Health Care merger will create largest private for-profit hospital operator in US

On Friday, Boston-based Steward Health Care announced a definitive agreement to merge with Franklin, Tenn.-based IASIS Healthcare LLC. If the proposed transaction is successful, the combined entity will have 36 hospitals in 10 states, approximately 38,000 employees, a network of 5,600 physicians and projected revenue of nearly $8 billion in 2018. Steward just completed the $304 million acquisition of eight Community Health Systems (CHS) hospitals in Ohio, Florida and Pennsylvania. While the health system did not divulge the purchase price for IASIS, a person familiar with the situation placed it at $1.9 million, The Wall Street Journal reported. IASIS operates 17 acute care hospitals and a behavioral health hospital in Arizona, Arkansas, Colorado, Louisiana, Texas and Utah, and employs approximately 13,400 employees, including more than 1,800 physicians. The deal is expected to close in the third quarter, pending state and federal regulatory approval. According to Steward CEO Dr. Ralph de la Torre, IASIS hospitals will then operate under the Steward name.

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UnitedHealth plans to close its Harken Health subsidiary

Citing heavy losses, UnitedHealth Group has decided to phase out its Harken Health subsidiary, including 11 primary care clinics in the Chicago and Atlanta markets. Launched in 2015, Harken Health provides members with insurance coverage featuring unlimited primary care at the clinics with no coinsurance or copays other than for prescription drugs, along with round-the-clock access to physicians by phone. The clinics also offeres free yoga, tai chi and nutrition classes, mental and behavioral health counseling, and sessions with personal health coaches. The intent was to give members ample access to services that might help prevent more expensive health issues. Last year Harken transitioned from selling plans on the individual health exchanges to the group insurance market. According to Modern Healthcare, the subsidiary had approximately 26,000 members in Illinois at the end of 2016, when it pulled out of the exchanges. Coverage will continue through the end of the year for individual members and until employer contracts expire for members in small group plans. 

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CHS mulls sale of its Lutheran Health Network

A group of about 300 physicians might purchase the Lutheran Health Network, based in Fort Wayne, Ind., from Community Health Systems, the News-Sentinel reported last Monday. The network consists of eight hospitals, RediMed clinics and other facilities. According to the News-Sentinel, CHS announced a week earlier that it would invest $500 million in upgrading facilities in the Lutheran network, which has annual revenue of approximately $1.5 billion and generates an estimated profit of $300 million. The report said CHS declined to comment on a possible sale and what effect it would have on the planned investment. The physicians’ bid to buy the network would be backed by a private equity firm and possibly other investors. A subsequent report by the News-Sentinel on Friday stated that the medical staff at Lutheran Hospital supports a sale of the network because the relationship with CHS “is not reconcilable.”

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Amazon contemplates expansion into prescription drug business

There’s very little that can’t be bought through Amazon, and it appears that the online retailer is getting more serious about adding prescription drugs to its offerings. Amazon has reportedly been mulling over the possibility for at least a few years, and it’s unclear whether the company is considering a relatively moderate foray into the mail-order drug business or has an eye on a larger piece of the pharmaceutical pie, but it looks as though Amazon could be preparing to jump in with both feet. According to numerous reports last week, the company is ramping up by hiring people like Mark Lyons, a former Premera Blue Cross executive who was brought on board a couple of months ago to create an internal pharmacy benefit manager (PBM) for Amazon employees. If all goes well, that model could eventually be scaled out to compete with the likes of Express Scripts and CVS. While Amazon faces substantial regulatory hurdles before it can become a contender in this retail sector, as well as the challenge of breaking into a market where relationships between payers, PBMs and drug companies are already firmly ensconced, the e-commerce goliath has demonstrated repeatedly its knack for overcoming barriers and using innovation to carve out a place at the top. 

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CMS takes steps to change HealthCare.gov enrollment, provides checklist for state ACA waivers, issues final rule to delay bundled payment models

While the Senate contemplates what to do about the American Health Care Act passed by the House earlier this month, the Centers for Medicare and Medicaid Services (CMS) took steps last week that could further undermine the Affordable Care Act (ACA). On Monday, CMS proposed changes for businesses that participate in the Federally Facilitated Small Business Health Options Program (FF-SHOP). Currently, HealthCare.gov serves businesses that obtain SHOP coverage for their employees in 33 states. Under the proposal, these businesses would still use HealthCare.gov to determine their eligibility but would then have to purchase coverage through an insurance agent or broker, or directly from an insurer. CMS said low participation in the SHOP program was a driving factor behind the proposed change, but as one advocacy group pointed out, the additional step necessary to obtain coverage could further reduce participation. Similarly, on Wednesday CMS announced a “streamlined direct enrollment process” for consumers that will allow individuals to bypass HealthCare.gov and purchase ACA-approved coverage through a direct-enrollment insurance agent or broker. 

Separately, CMS released a checklist on Tuesday for states to use when applying for Section 1332 waivers. States could use the waivers to establish high-risk insurance pools or request funding for state-operated reinsurance programs. CMS Administrator Seema Verma said the waivers would “help lower premiums, stabilize the health insurance exchange and meet the unique needs of each state.” The proposed AHCA relies heavily on high-risk pools to address the cost of care for patients with pre-existing conditions. Additionally, CMS finalized a rule on delaying implementation of the mandatory cardiac care bundled payment models, along with the expansion of the Comprehensive Care for Joint Replacement (CJR) Model and the effective date for the Cardiac Rehabilitation Incentive Payment Model. The agency had issued an interim rule in March delaying the start of the cardiac programs and the CJR expansion from July 1 to Oct. 1. The final rule further delays them to Jan. 1, 2018.