Philip FitzGerald, Class of 2019; Kim Harvey Looney, Partner at Waller; Zachary D. Trotter, Associate at Waller

State certificate of need (“CON”) programs regulate the building and expansion of health care facilities and the acquisition of health care equipment. In our region, the states of Tennessee, Georgia, South Carolina, and North Carolina have bills working their way through the legislative process that would amend, limit or repeal CON laws.

Tennessee’s Legislature is currently considering a bill (SB 1291/HB 1085) to repeal the CON requirement for healthcare facilities and to terminate the Tennessee Health Services and Development Agency, the agency responsible for administering the CON program. The bill has passed on second consideration and both the House and Senate bills have been referred to their respective Government Operations Committees. A second bill (SB 0547/HB 0672) would eliminate the CON requirement for home care organizations or satellite emergency departments. That bill also passed on second consideration in the Senate and has been referred to the Senate Commerce and Labor Committee. In the House, this second bill has been assigned to the Facilities, Licensure & Regulations Subcommittee.

Georgia’s Legislature has introduced a bill (HB 198) which proposes to revise the CON program by the following:

• Increase the amount existing healthcare facilities can spend on expansion and equipment acquisition without requiring a CON.
• Eliminate the health strategies council, which advises Georgia’s Department of Community Health on the CON program.
• Allow destination cancer hospitals granted CONs prior to July 1, 2019, to convert to a hospital without obtaining any additional CON.
• Ease restrictions on CON exemptions for continuing care retirement communities.
• Add CON exemptions for private psychiatric hospitals, mental health or substance abuse facilities or programs, or mental health or substance abuse services.
• Add CON exemptions for freestanding ambulatory surgical centers.
• Add requirements for modifying or acquiring a CON that includes providing indigent care, and participating as a provider for Medicaid and PeachCare for Kids beneficiaries.
• Limit which providers may oppose a CON application to existing health care facilities of the same type proposed, or which offer substantially similar services located within a 35-mile radius of the proposed project.

This bill was favorably reported by the House Special Committee on Access to Quality Health Care on March 1.

In South Carolina, a bill (H 3823) proposes eliminating the CON program completely, which would leave licensure approval as the only requirement for building or modifying medical facilities or acquiring medical equipment. The bill was referred for review to the Committee on Ways and Means on January 31.

Although in previous years North Carolina has considered bills proposed to completely repeal its CON program, the only CON bill presented so far this year proposes to exempt ocular surgery from CON laws (H173).

It is too soon to tell whether any or all of these bills will be passed, however, their passage could have a substantial impact on the healthcare landscape throughout the Southeast. We will provide updates as these bills progress through the legislative process in each state.

Curtis Campbell, Class of 2019; Kim Harvey Looney, Partner at Waller

The United States Department of Health and Human Services (HHS) recently announced a new payment model for emergency ambulance services that will permit Medicare patients to be transported to healthcare facilities other than hospital emergency departments.

The Emergency Triage, Treat and Transport (ET3) model was announced on February 14 with the objective of allowing Medicare Fee-for-Service beneficiaries to receive the most appropriate level of care, while simultaneously reducing out-of-pocket costs. Under the model, HHS will allow ambulance suppliers and providers to transport Medicare beneficiaries to areas besides the emergency room, such as a doctor’s office or urgent-care facility, or use telemedicine, with the goal of reducing unnecessary trips to the hospital.

The ET3 model will run for five years and is expected to start in early 2020. This model was introduced to create a new set of incentives for emergency transport and care while ensuring patients get convenient and appropriate treatment in the correct setting. One concern with the existing model is that the payment system only pays ambulance providers when they take beneficiaries to the hospital emergency department, which HHS argues may lead to unnecessary emergency room visits or hospitalizations that may harm the patients.

The ET3 model will test two new payment models while still paying for emergency transport when a Medicare beneficiary is transported to a hospital emergency department or other destination covered under current regulations. The two new payment models are:

• payment for treatment in place with a qualified healthcare practitioner, either on-the-scene or connected using telehealth; and,
• payment for unscheduled, emergency transport of Medicare beneficiaries to alternative destinations, such as 24-hour care clinics.

The ET3 model will reward participating ambulance suppliers or providers by providing the opportunity to earn up to a 5% payment adjustment in later years of the model if they meet certain quality measures. The quality measurement strategy aims to avoid adding additional burdens to participants, while also seeking to minimize new reporting requirements. The model will be phased in with multiple application periods in order to maximize participation throughout the country. HHS anticipates it will start accepting applications from Medicare-enrolled ambulance suppliers and providers in Summer 2019.

The proposed ET3 model illustrates the willingness of HHS to develop and evaluate new cost-containment strategies while ensuring that Medicare patients receive the appropriate levels of care in the right settings.

The HHS press release announcing the program can be found here.

Seth Carver, Class of 2020; Neil B. Krugman, Partner at Waller

In early 2018, Amazon announced a joint healthcare venture with Berkshire Hathaway and JPMorgan Chase to build an independent, nonprofit healthcare company targeted at improving care and reducing costs for its employees.

Since then, the joint venture has continued to form and develop, hiring surgeon and author Dr. Atul Gawande as its chief executive.  Outside of the joint venture, Amazon has also recently acquired PillPack, an online pharmacy, and now offers its own line of over-the-counter medical products, under the Basic Care brand.

These moves by Amazon, and a general lack of information about the joint venture’s ultimate goals, and, in particular, whether those plans include bringing healthcare services and products to the general public, make some segments of the health care industry nervous.

Recently the joint venture has encountered some headwinds in the form of a lawsuit filed against it by UnitedHealth. The latter company is seeking a temporary restraining order to block the joint venture from employing a former executive of UnitedHealth Optum, which is in the pharmacy benefit management business.

In her recent article in the New York Times, Reed Abelson described the suit as “a stark example of aggressive tactics that health companies have taken to protect their turf from technology powerhouses like Amazon and Apple,” and to pry open secrets about the joint venture’s ultimate plans.

The joint venture and Amazon’s moves in the health care space are especially pertinent to the Nashville healthcare industry with the recent announcement of Amazon’s “Operation Center of Excellence,” which will be located in Nashville Yards, just blocks away from Waller’s offices and the offices of such healthcare giants as HCA.  Regardless of the joint venture’s or Amazon’s ultimate plans, Nashville’s local healthcare community is bound to be impacted by the influx of approximately 5,000 new Amazon employees, with an average salary of $150,000.

Philip FitzGerald, Class of 2019; Colin H. Luke, Partner at Waller

Last month, the Department of Veterans Affairs (“VA”) proposed new access standards for community care as part of the implementation of the MISSION Act, which President Trump signed into law last June. One goal of the MISSION Act is to provide veterans with greater access to medical care by allowing them to use private care outside the VA system.

Although several confusing avenues currently exist for veterans to qualify for outside care, the new access standards would consolidate and simplify the process by basing eligibility on average drive times and appointment wait times. For primary care, mental health and non-institutional extended care services, the VA is proposing that veterans who must drive an average of 30 minutes for services, or who must wait longer than 20 days for an appointment, may seek care with an eligible community provider. For specialty care, the VA is proposing more stringent standards – a 60-minute drive time or a longer than 28-day wait to obtain an appointment. Veterans will also have access to urgent care that gives them the choice to receive certain services when and where they need it. The new access standards are set to go into effect in June.

According to the VA’s Fiscal Year 2019 Budget Submission, community care accounted for around $9.7 billion in 2018. Under the new access standards, the VA expects the number of veterans eligible for community care to almost triple. Of the $66 billion the VA spent on health care services in 2018, excluding community care, $38.5 billion went to ambulatory services, $14 billion went to inpatient care and $8 billion went to mental health care. The remainder went to prosthetics, dental care, and rehabilitation. With the expansion of access for veterans, a larger portion of these services will likely be supplied by community care providers.

Under the MISSION Act, the VA is required to establish networks to ensure veterans get access to community care from eligible providers. Eligible community care providers include providers who participate in Medicare, aging and disability resource centers, federally qualified health centers, and centers for independent living. Unlike prior community care programs which failed to make timely payments to providers (e.g., Veteran’s Choice Program (“VCP”)), the VA will be required to reimburse services under a prompt payment standard (i.e., within 45 calendar days upon receipt of a clean paper claim, or 30 calendar days upon receipt of a clean electronic claim).

Providers who wish to provide services for veterans must contract with their region’s Community Care Network (“CCN”) administrator. The CCN is a set of contracts awarded to as many as four private sector contractors who are tasked with developing and administering six regional networks of high-performing licensed health care providers. To date, contracts for regions 1-3, which include the East, South, and Midwest, have been awarded to Optum Public Sector Solutions, Inc., a subsidiary of UnitedHealth. Following the deployment of the CCN, the selected contractor in each region will begin contracting with providers.

However, until the CCN is deployed nationwide, providers who meet certain eligibility requirements can partner with TriWest Healthcare Alliance’s community care network, the VCP administrator during the transition. Under the VCP, community providers must meet these eligibility requirements:

• Accept Medicare rates;
• Meet Medicare Conditions for Coverage and Conditions of Participation or other criteria established by the VA;
• Be in compliance with all applicable federal and state regulatory requirements;
• Have same or similar credentials as VA staff;
• Submit a copy of the medical records to the TPA for medical care and services provided to Veterans for inclusion in the VA record; and,
• Be eligible according to the U.S. Department of Health and Human Services Office of Inspector General Exclusion Program.

The Veteran’s Choice Program will statutorily sunset after June 6, 2019, so providers should be cognizant of potential changes in provider eligibility standards as the MISSION Act takes effect.

By Clay Brewer, Class of 2020; Caitlyn W. Page, Partner at Waller

An advisory opinion issued recently by the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) provides some insight into the growing relationship between access to technology and access to patient care.

The OIG issued Advisory Opinion No. 19-02 permitting a pharmaceutical manufacturer’s proposal to loan limited capability smartphones to certain financially needy patients in order to assist these patients and their care providers track medication adherence data. In issuing this advisory the OIG provided valuable insight into how it interprets the “promotes access to care” exception to the Beneficiary Inducement Civil Monetary Penalty Statute (the “Beneficiary Inducement CMP”).

According to the requestor, the patient population for an undisclosed drug experiences a high amount of medication nonadherence or partial adherence, which results in higher utilization of healthcare services and increased costs to the healthcare system. In response to this issue, the drug’s manufacturer created a device that detects a signal sent by the drug upon ingestion, which in turn transmits the ingestion time to an app developed by the manufacturer through Bluetooth. However, because some patients do not have a smartphone, they are unable to use the app. As a result, the manufacturer proposed issuing a limited capability smartphone along with the drug to patients who do not have a smartphone and who have a household income below a specified percentage of the federal poverty level. Aside from the preloaded app, all other features of the smartphone would be disabled except the patient would still be able to make domestic telephone calls. The smartphones would be issued by a specialty pharmacy under contract with the manufacturer and each patient would only be permitted to such use the phone for a maximum of two 12-week administrations while receiving the medication.

The OIG concluded that the Beneficiary Inducements CMP would be implicated by this proposal because patients would be receiving the ability to make domestic phone calls, which constitutes remuneration. Additionally, because the patient’s prescribing practitioner would complete the paperwork for the patient to obtain the smartphone, the patient would likely have the impression that he or she must continue receiving care from a particular provider in order to maintain use of the smartphone. The patient may also feel obligated to obtain the drug from the specialty pharmacy issuing the smartphones even if the drug is available at other pharmacies.  The OIG, however, found that the proposal would fall under the “promotes access to care” exception to the Beneficiary Inducements CMP for a number of reasons, most notably because the OIG concluded that there is unlikely to be any possibility of disrupting clinical decision making since the patient only receives a smartphone if he or she falls below a certain income and does not currently have a smartphone device to download the app.

The OIG also concluded the proposal poses a low risk of imposing additional costs upon federal healthcare programs because:

• there would be no incentive to issue a smartphone to an individual who already has one;
• there is no advertising of the proposal which would cause individuals to seek treatment for the purposes of receiving a smartphone; and,
• the smartphone’s limited capabilities and a maximum of two 12-week time periods would limit a patient’s effort to retain the smartphone.

Lastly, the OIG determined that the federal Anti-Kickback Statute could be implicated by this proposal if the requisite intent were present; however, it would not pursue administrative sanctions against the manufacturer because the proposed program contained a number of safeguards, including the fact that the loaner smartphone would be available only on a temporary basis, would only be used by individuals who otherwise would not be able to use the medication, and there would be no advertising of the smartphone so individual patients would not go to a certain provider seeking the medication for the purposes of receiving a smartphone.

While the OIG expressly stated that this opinion is narrowed to the specific facts that the Requestor presented and should not be relied upon for other possible initiatives, this advisory opinion provides useful guidance regarding the OIG’s view on the intersection of technology and the Anti-Kickback Statute and Beneficiary Inducements CMP.

By Philip FitzGerald, Class of 2019; Colin H. Luke, Partner at Waller

In late 2018, federal District Court Judge Reed O’Connor held that the Patient Protection and Affordable Care Act (the “ACA”) was invalid. The lawsuit was filed by a coalition of Republican attorneys general and governors, and was based upon the Tax Cuts and Jobs Act of 2017, which reduced the tax penalty for failing to obtain an ACA-compliant plan (i.e. the “individual mandate”) to $0.

The individual mandate had previously been held constitutional by the Supreme Court based upon Congress’ taxing power. The plaintiffs’ argument in this case was that the individual mandate was no longer constitutional since the tax no longer existed. Furthermore, they argued that the mandate was an essential, inseverable piece of the ACA, and therefore, the entirety of the ACA was invalid.

Judge O’Connor agreed with the plaintiffs’ arguments, holding that the individual mandate was unconstitutional, and, since the mandate was an inseverable part of the ACA, also held the entire act to be invalid. In other words, not only was the individual mandate unconstitutional, but the hundreds of other provisions in the ACA, such as the 10 essential health benefits, Medicaid expansion and the prohibition on discrimination for pre-existing conditions, were also no longer enforceable.

The healthcare industry had a mixed response to this ruling. The American Medical Association warned that the decision could destabilize health insurance coverage. However, Seema Verma, the CMS Administrator, stated that 2019 ACA plans would not be affected by the ruling. She also stated that CMS has a plan to protect patients with pre-existing conditions if the ACA is struck down, but was not forthcoming with the details of the plan.

In early January 2019, Judge O’Connor’s ruling was appealed to the U.S. Court of Appeals for the Fifth Circuit by a coalition of Democratic state attorneys general. It should be noted that Judge O’Connor allowed the ACA to stand while his decision is under appeal “because many everyday Americans would otherwise face great uncertainty.” Therefore, for now, the ACA remains in full force and effect.

The federal appeals process can take anywhere from a few months to more than a year in order to obtain a decision. If the case is appealed all the way to the Supreme Court, the process could take even longer.

To make matters worse, the Fifth Circuit stayed its review of this case during the federal government shutdown, and only resumed consideration of this appeal on January 29. Many legal experts are confident that Judge O’Connor’s ruling will be reversed by the Fifth Circuit. However, the Fifth Circuit could uphold the decision, could overturn only part of the decision, or could rule to sever the individual mandate from the ACA, leaving all other portions of the ACA intact. We will continue to monitor this case as we await the decision of the Fifth Circuit and, regardless of the Fifth Circuit’s decision, we expect that the case will ultimately be appealed to the Supreme Court.

By Matthew Byron, Class of 2019

The Affordable Care Act (ACA) does not currently mandate that insurers cover contraceptives under their respective plans. However, in 2011, the Departments of Health and Human Services, Treasury, and Labor (the Departments) issued regulations requiring non-grandfathered group health plans and health insurers to cover all FDA-approved contraceptives. Under those regulations, a few entities–mainly churches and other religious organizations–were exempt from being required to cover contraceptives, so the exemptions under these regulations were very narrow.

Since the 2011 regulations were enacted, several religious organizations sued the Department of Health and Human Services to challenge paying for or providing contraceptives due to certain religious and moral objections over contraceptives. In an effort to protect the individuals and entities with sincere religious and moral objections to providing or covering contraceptives, while still keeping the contraceptive mandate intact, on November 7, 2018, the Departments announced two final rules, available at the Federal Register, that provide certain protections for American individuals and entities that have a legitimate religious or moral objection to health insurance that covers certain contraceptive methods. While these rules do not go into effect until January 14, 2019, the rules provide for two major exemptions from the contraceptive mandate requirement.

Exemptions for Religious Beliefs

The first of the two final rules establish an exemption from the contraceptive mandate for entities and organizations that have “sincerely held religious beliefs” opposed to coverage of some or all contraceptive or sterilization methods…” An otherwise exempt entity can still choose in its plan to provide for the coverage of contraceptives, but of course, this would be a voluntary choice for that entity instead of a requirement. In addition, if an otherwise exempt entity chooses to object to one particular type of contraceptive, but chooses to allow for coverage of another type of contraceptive, the entity may do so. This exemption applies not only to religious organizations, but it can be applicable to non-profit organizations, institutions of higher learning, and certain individuals, so long as those entities have a sincerely held religious objection.

Exemptions for Moral Convictions

The second of the two final rule provides an exemption from the contraceptive mandate requirement for individuals and entities that have non-religious moral convictions opposing services covered by the mandate. These exemptions can apply to nonprofit organizations and to closely held businesses, as well as to institutions of education, health insurance issuers serving exempt entities, and individuals. Like the religious beliefs exemption, otherwise exempt individuals and entities with a moral conviction may choose to voluntarily cover contraceptives to beneficiaries in their plan. One notable exception to this exemption is that this final rule does not exempt publicly-traded businesses or governmental entities. While it can be hard to establish what a valid moral conviction looks like, the Departments clarified that, under case law, a moral conviction is one (1) that a person “deeply and sincerely holds”; (2) “that are purely ethical or moral in source and content; (3) “but that nevertheless impose…a duty”; (4) and that “certainly occupy…a place parallel to that filled by…God’ in traditionally religious persons,” such that one could say the “beliefs function as a religion.”

In sum, since these two final rules are not currently in effect, it is unclear as to how many individuals and entities will try to claim the exemption, and how many beneficiaries the exemption would otherwise affect. The Departments estimate that, at most, 200 employers with religious or moral objections would be affected by these final rules, and between 6,400 and 127,000 women’s coverage would potentially be affected. Although these rules do not replace or supersede any existing contraceptive mandate requirements, they do add protection, and possibly an additional avenue for providers of health insurance with legitimate religious or moral objections to be exempt from covering contraceptive services. While at first glance it appears, based on the Departments’ numbers, that the final rules will only have a relatively small impact on contraceptive coverage, only time will tell when these rules take effect mid-January.

By Curtis Campbell, Class of 2019; Andrew F. Solinger, Attorney at Waller

The Centers for Medicare & Medicaid Services (CMS) has issued a proposed rule that would overhaul the Medicare Shared Savings Program, which was established by the Affordable Care Act (ACA). Currently, the vast majority of Medicare’s Accountable Care Organizations (ACOs) operate under the Medicare Shared Savings Program. The redesigned program is called “Pathways to Success” and was developed based on a comprehensive analysis of the performance of ACOs to date.

What is an “ACO”?

ACOs are groups of health care providers that agree to take responsibility for the total cost and quality of care for their patients. Under the Medicare Shared Savings Program, the ACOs get to keep a portion of the savings they achieve. CMS provides ACOs with Shared Savings Waivers to allow the savings to be applied in virtually any manner to further innovation.  Presently, there are 561 Shared Savings Program ACOs that serve over 10.5 million Medicare fee-for-service beneficiaries.

Results of the Medicare Shared Savings Program

Since the Medicare Shared Savings Program was established by the ACA, and launched in 2012, it has been faced with a mix bag of success:

• Shared Savings Programs have shown increases in net spending for CMS and taxpayers because 82 percent of all ACOs in the program are not taking on risk for increases in cost.
• ACOs that are not at risk for cost increases end up increasing Medicare spending in the aggregate.
• ACOs participating in the two-sided, risk-sharing model in which eligible ACOs share in a larger portion of any savings, but are also required to take on losses if spending exceeds certain benchmarks, have proven successful in accounting for significant savings to the Medicare Program.

Pathways to Success

The proposed rule, Pathways to Success, would redesign the participation options available under the program to transition more to two-sided models. The projected proposal is estimated to lead to savings to Medicare of $2.2 billion over ten years.

Pathways to Success is designed to advance five goals:

• (1) Accountability and (2) Competition: Currently, ACOs have up to six years without taking on risk for increases in cost. These ACOs receive a shared savings payment from CMS when they keep their costs down, but do not have to pay back taxpayers when costs are high. Under the proposed rule, ACOs can only remain in the program without taking risk for two years, instead of six.
• (3) Beneficiary Engagement: CMS proposes to require that beneficiaries receive a notification at their first primary care visit of a performance year informing them that they are in an ACO and what it means for their care. To bolster beneficiary engagement, CMS proposes to allow certain ACOs to provide incentive payments to patients for taking steps to achieve good health.
•  (4) Quality: CMS proposes allowing physicians in risk-sharing ACOs to receive payment for telehealth services provided to patients regardless of the patient’s location. This would expand the use of telehealth even in situations in which the beneficiary’s home is the originating site. In addition, the proposed rule promotes interoperability and patient control of their medical data by proposing a new requirement around ACOs adopting the 2015 edition of the Certified Electronic Health Records (EHR) technology.
• (5) Integrity: CMS’s proposed rule would change the benchmark calculations to better account for regional adjustments by accurately reflecting the spending levels and growth rates in each ACO’s local market. The proposed ruled will also strengthen the monitoring of financial performance and permitting termination of ACOs with multiple years of poor financial performance.

In sum, Pathways to Success is aimed at mitigating losses, increasing program integrity, and promoting regulatory flexibility for ACOs. As CMS Administrator Seema Verma stated, “ACOs can be an important component of a system that increases the quality of care while decreasing costs.” With the proposed rule change, the program will hopefully achieve its original intent of decreasing net spending for CMS and taxpayers.

By Tayler Chambless, Class of 2020; Elizabeth N. Pitman, Counsel at Waller

2017 was the first year for participation in the Merit-based Incentive Payment System (MIPS), a Quality Payment Program (QPP) implemented by CMS, to award or penalize participating clinicians with regard to future Medicare reimbursements based upon reporting under four categories:

1. Quality
2. Improvement Activities
3. Promoting Interoperability (2017 Advancing Care Information; previously Meaningful Use)
4. Cost

In July, CMS released 2017 Performance Feedback Reports detailing clinicians’ MIPS final scores, performance category details, and 2019 MIPS Medicare payment adjustments. According to CMS, approximately 621,700 providers received negative adjustments.  At the same time as release of reports, CMS conducted a “targeted review” and discovered major calculation errors in the following areas:

• Advancing Care Information and Extreme and Uncontrollable Circumstances Hardship Exceptions
• Awarding Improvement Activity credit for successful participation in Improvement Activities Burden Reduction Study
• All-Cause Readmission measure

On September 25^th, CMS announced that clinicians have 20 days to request a targeted review of their  MIPS report.  Lack of transparency by CMS has buoyed critic positions that MIPS is too complicated.  CMS, however, states that it has “reviewed the concerns, identified a few errors in the scoring logic, and implemented solutions. The targeted review process worked exactly as intended, as the incoming requests quickly alerted us to these issues and allowed us to take immediate action.”

Clinicians are encouraged to review Performance Feedback Reports and request a Targeted Review by Oct. 15, 2018, at 8 p.m. EDT.

What is a targeted review, and how do I submit a request?

Clinicians must request a Targeted Review through the formal online process established by CMS. The Performance Feedback Report may be found at the QPP Portal.

No targeted review is available for:

1. Methodology used to determine the amount of the MIPS payment adjustment factor and the amount of the additional MIPS payment adjustment factor and the determination of such amounts;
2. Establishment of performance standards and performance period;
3. Identification of measures and activities specified for a MIPS performance category and information made public or posted on the Physician Compare CMS website; and
4. Methodology used to calculate performance scores and calculation of such scores (weighting measures and activities)

CMS will generally require additional supporting documents that the clinician must provide within 30 days. All targeted review decisions are final and without further review.

Clinicians should be prepared to submit supporting documents:

• Supporting extracts from the electronic health record (EHR)
• Performance data provided to third-parties
• Performance data submitted to CMS
• QPP Service Center ticket numbers
• Signed contracts or agreements between clinician/group and third-party intermediaries
• Alternative Payment Model participation agreements
• Partial qualified participant (QP) election forms
• Other requested documents.

CMS is in the process of reviewing over 15,000 comments on a proposed rule that was issued in July to outline changes for year three of the MIPS Quality Payment Program and update the Medicare physician fee schedule. The final rule will be issued later this fall.

 

By Curtis Campbell, Class of 2019; Kim Looney, Partner at Waller

The Cigna-Express Scripts and the CVS Health-Aetna mergers are among the most significant healthcare mergers of the past decade and are anticipated to transform the U.S. healthcare business. Both of these vertical deals have successfully shown how they can provide consumer benefits in order to pass federal antitrust scrutiny.

Cigna-Express Scripts

The Department of Justice decided not to challenge Cigna’s $67 billion acquisition of Express Scripts because the deal would “unlikely result in harm to competition or consumers.” Regulators spent six months on the investigation, reviewed more than 2 million documents, and interviewed more than 100 people before reaching their conclusion. However, while the federal antitrust division will not seek to block the merger, the deal is still subject to state regulations and various departments of insurance. The deal is expected to close at the end of the year.

Because the DOJ is not challenging the merger, Cigna is closer to putting its medical benefit services and Express Scripts expertise in pharmacy benefit management under one roof. This will potentially help rein in spending on costly specialty drugs. However, there is some concern that consumers could end up at the “mercy of a handful of giants” as choices of medical care and pharmacy become a thing of the past. However, backers of the merger thought that it will create efficiencies in the market. Cigna CEO David Cordani stated that “we are another step closer to completing our merger and delivering greater affordability, choice and predictability to our customers and clients as a combined company.

Given the lack of overlap between Cigna’s business versus Express Scripts, analysts stated that it is not surprising that the merger went through. Cigna had to overcome last-minute opposition from some investors, but they backed down after major shareholder advisory firms came out in support of the deal. Cigna executives said they expect the deal to result in earnings per share to increase from $18 to $20-21 by 2021 with a long-term annual growth of 6 to 8 percent.

CVS Health-Aetna

Shortly after approving the Cigna-Express Scripts merger, the DOJ also conditionally approved the $69 billion merger between CVS Health and Aetna. The conditional approval was based on Aetna’s decision to sell off its private Medicare drug plans. This addressed the government’s concerns that the combined companies would control too much of the healthcare market.

CVS Health had revenues of about $185 billion last year and provided prescription plans to roughly 94 million customers. Aetna had about $60 billion in revenue last year and currently covers 22 million people in its prescription health plans. With this merger, the two companies hope to better coordinate care for consumers as the mergers aim to help tighten cost controls. The merger focuses on Aetna’s addition of a retail component and the use of CVS’s 10,000 pharmacies and 1,100 retail clinics to deliver care, enabling a variety of new services to be brought into its retail stores, potentially transforming the corner pharmacy chain to a healthcare hub with thousands of locations.   This change could enable CVS stores to serve as a location where someone could get care for ailments ranging from a sore throat to diabetes. A person could also potentially go to a CVS store to get blood tests to monitor chronic conditions.

These two mega-mergers continue the growing trend of healthcare companies vertically integrating to improve quality and lower healthcare costs. With more consumers going to outpatient facilities instead of hospitals, this merger could help claim more of a market share in the healthcare industry by utilizing the CVS stores to attract more consumers. The merger also could help by decreasing deductibles and lowering out-of-pocket spending, which are two primary concerns for consumers when deciding to seek medical care.

These mergers could also put pressure on rival companies to come up with their own deals.  Critics worry that these mergers mean that consumers could end up with fewer options and higher expenses because consumers could have less control over their medical care and prescription drugs. Only time will tell how these mergers actually affect consumers going forward.