In the News
What happened in healthcare recently—and what we think about it.
- DOJ sues to stop UHG-Amedisys deal. On Tuesday, the Department of Justice (DOJ) and four state attorneys general filed a civil antitrust lawsuit to block the $3.3 billion acquisition of home health provider Amedisys by UnitedHealth Group (UHG). After UHG’s Optum and Amedisys announced their intent to combine in June 2023, the DOJ launched an antitrust investigation into UHG, which added further scrutiny to this deal already under review. The suit, filed in the District Court of Maryland, alleges that the acquisition would eliminate competition in the home health and hospice services markets, thereby harming patients, payers, and workers. The DOJ’s antitrust concerns stem from UHG’s $5.4 billion purchase of LHC Group, an Amedisys competitor, earlier in 2023. To reduce overlap between their markets, UHG has proposed divesting some facilities to VitalCaring Group, but the DOJ claims this action would be insufficient.
- The Gist: The decision to file this long-rumored suit was reportedly delayed until after the presidential election, which means the incoming Trump administration will have the choice to drop its involvement in the case. The Democratic state attorneys general could continue pursuing the case without the DOJ, but the federal agency’s decision will serve as a litmus test for the new administration’s antitrust stance. After four years of vigorous enforcement by Biden’s DOJ and Federal Trade Commission, a Republican executive branch is expected to provide a reset on antitrust policy. However, factions within the Republican party, including Vice President-elect JD Vance and Attorney General-nominee Matt Gaetz, have expressed support for some of the Biden administration’s antitrust policies, although they’ve been more focused on big tech than healthcare.
- Cigna confirms it’s not pursuing Humana deal. On Monday, The Cigna Group released a statement communicating that “the company is not pursuing a combination with Humana,” putting an end to “recent and persistent speculation.” Rumors of deal talks between the two insurers surfaced in late 2023, only for the deal to be called off weeks later, and then reportedly revived in October of this year. Had a deal been reached, the combined entity would have had an annual revenue of about $300 billion, almost on par with UHG and CVS. Sharing its updated strategy publicly in advance of investor and analyst meetings, Cigna affirmed its full-year outlook and its commitment to stock buybacks, which have totaled $6 billion in 2024 so far. Cigna claims to still be interested in M&A but would only pursue deals that are “strategically aligned, financially attractive, and have a high probability to close.”
- The Gist: During a turbulent time for all major payers, Cigna and Humana have pursued divergent paths, with Humana announcing its gradual exit of the commercial market in Feb. 2023, and Cigna divesting its Medicare business in Jan. 2024. Since then, Humana’s Medicare business has fared poorly, and investor reactions—Cigna’s stocks rose and Humana’s fell, in response to the news—suggest a lack of belief in the business case for their combination. More broadly, the pursuit of scale for scale’s sake appears to be falling out of favor in healthcare. Instead, payers and providers alike are prioritizing more strategic transactions, such as those to gain access to new tools, technologies, and capital investments, or to undertake organization-wide reconfigurations.
- Johnson & Johnson sues HRSA for halting 340B rebate program. On Tuesday, Johnson & Johnson (J&J) filed a lawsuit against the Health Resources and Services Administration (HRSA) and its parent agency, the Department of Health and Human Services (HHS), seeking to reinstate the drugmaker’s planned 340B rebate program. In August, J&J informed disproportionate share hospitals (DSHs) that it intended to stop providing upfront 340B discounts for two of its top-selling drugs, Stelara and Xarelto, and instead offer rebates for the drugs at a later date. After HRSA threatened significant sanctions, J&J announced it was abandoning the rebate program in late September. The drugmaker has now responded with this suit, filed in the District Court for the District of Colombia, which claims that it is HRSA, not J&J, that is misinterpreting federal law, and that the rebate program should be allowed to proceed.
- The Gist: With battles over contract pharmacy restrictions still ongoing, the legal war surrounding the 340B program sees the opening of a new front. J&J’s latest argument is that rebates are a permissible way to honor 340B discounts under the statute. The American Hospital Association and nearly 200 Members of Congress disagree and have taken HRSA’s side. However, the legal weight behind the agency’s interpretation of the statute may be undermined by the Supreme Court’s recent overturning of the Chevron doctrine. Underlying these legal disputes are concerns from hospitals that drugmakers would use these rebates to delay and deny discounts. J&J, in turn, claims that 340B hospitals lack transparency and are undermining the integrity of the program.
Plus—what we’ve been reading.
- The chain model in care delivery. Published recently in the Harvard Business Review, this piece details the successful use of the chain model in fertility clinics. In a 2012 New Yorker article, Atul Gawande proposed that “health care could benefit from the operational efficiency and management practices” utilized by chain restaurants such as the Cheesecake Factory. There is controversy regarding this model’s use in healthcare given the potential for conflict between the pursuit of profits and the provision of quality care. However, the research indicates that in vitro fertilization (IVF) clinics acquired by a chain saw a 27% increase in IVF cycles and a 14% increase in live births. The author argues that the conditions that enabled improved volumes and care quality are not unique to IVF clinics and could be replicated in other facets of care delivery.
- The Gist: While the chain model in healthcare has suffered some recent setbacks, this article offers strong evidence that effective chain management can improve care delivery given the right conditions and incentives. Fertility clinics thrived under the chain model because their services are easily shoppable on quality and price, and the competitive IVF market allows for more patient choice. Although these conditions are not equally present in other aspects of healthcare, the success of the chain model with IVF clinics still offers valuable lessons to healthcare leaders: standardize care where possible, focus on the patient experience, and align corporate and patient interests, so that quality improvements can translate into profitability gains.
Graphic of the Week
A key insight illustrated in infographic form.
Epic increases lead in the EHR market
This week’s graphic illustrates how Epic has continued to expand its lead in the electronic health record (EHR) market over its rival Oracle Health, which acquired Cerner in 2022. From 2016 to 2023, Epic increased its acute care hospital market share from 26% to 39%; meanwhile, Oracle’s share held flat at about 25% until decreasing to 23% in 2023. Additionally, Epic controls 52% of the acute hospital care market by bed count, more than double that of Oracle. Thus far, Oracle and other, smaller competitors have been unable to curb Epic’s rise, as Epic was the only EHR vendor to increase its hospital-bed market share last year. In 2023, Epic brought under its platform 45 new acute care organizations and 153 hospitals, while Oracle lost 24 organizations and 71 hospitals on net. Oracle continues to grow outside the US and with smaller, standalone hospitals, but its current product is proving unpopular with large health systems. In a bid to potentially reverse this trend, Oracle announced plans to launch a new AI-forward EHR in 2025. With Epic also integrating AI into its EHR software, it will be interesting to see which company leverages this burgeoning technology more effectively to fuel future growth.
This Week at Kaufman Hall
What our experts are saying about key issues in healthcare.
A period of relative stability following the pandemic and its inflationary aftermath has many health system leaders rethinking their organization’s strategy. Without a corporate strategy function, however, effectively designing and executing new strategic initiatives is an immensely challenging task.
In a new blog, Amanda Steele and Max Timm identify the key characteristics of a high-performing strategy function. They also discuss the paramount importance of establishing clarity around strategy functions and activities and interconnectivity between other corporate services and processes.
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Major retailers including Walmart, Walgreens, and Amazon have waded into healthcare delivery with high hopes and mixed results. Coming up on Monday, host J. Carlisle Larsen speaks with Kaufman Hall's Scott Christensen about what we've seen in the retail healthcare space and what hospitals can learn from these endeavors.
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Thanks for reading! We’ll see you next Friday with a new edition. In the meantime, check out our Gist Weekly archive if you’d like to peruse past editions. We also have all of our recent “Graphics of the Week” available here.
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The Gist Weekly team at Kaufman Hall
