April 18, 2025 • 17 mins
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Health Affairs' Jeff Byers welcomes Bob Herman of STAT News to the program to discuss the state of deals in the health care space, how vertical integration and consolidation have played a role in mergers & acquisitions as it relates to hospitals, and what might fly under the radar from even the most savvy of health policy wonks.
Health Affairs Insiders can join us April 23 for an exclusive virtual event exploring site-neutral payments with health economist and health services researcher Brady Post of Northeastern University and Health Affairs' Meg Winchester.
Also, we are hosting another Insider exclusive event on May 29 focusing on the FDA's first 100 days under the second Trump administration featuring moderator Rachel Sachs alongside panelists Richard Hughes IV and Arti Rai.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Jeff Byers (00:39):
Hello and welcome to Health Affairs This Week. I'm
your host, Jeff Beyers. We'rerecording on 04/16/2025. As a
heads up, we have two upcominginsider events I want you all to
be aware of. Next week on April23, we have a conversation with
Brady Post on-site neutralpayments.
And then on May 29, we haveanother insider event on the
(01:01):
FDA's first a hundred days underthe second Trump administration,
moderated by Rachel Sachs. Thepanel will include Richard
Hughes the fourth and Artie Rye.Today, I'm joined by Bob Herman
from Stat News to talk about them and a space in health care.
Bob is a health care businessreporter at Stat News, and his
work previously appeared inModern Healthcare and Axios, one
(01:25):
of the OG business reporters outthere. So, Bob, welcome to the
program.
Bob Herman (01:29):
Thanks for having me, Jeff. Glad to be here.
Jeff Byers (01:31):
I had you on because I'll I'll admit, I still got
that dog in me, but I'm nottracking this stuff as much as I
used to. So I thought it'd begreat if you could tell us about
the general state of deals inthe health care space. Is M and
A cooked?
Bob Herman (01:45):
Yeah. I mean, it it has changed a lot from, like,
the early days of the AffordableCare Act. You know, when when
president Obama signed the ACAinto law more than fifteen years
ago now, it really unlocked,like, every kind of player to
just start trying to buy or sellwhatever they wanted to. And you
just saw a flurry of dealseverywhere. And this is
(02:06):
especially the case withhospitals because the ACA
encouraged what many would callcoordination among the different
providers, and it just led tojust this huge boom in hospital
mergers.
But it's it's ebbed and flowed alot. You know, when COVID
happened, a lot of companieswere just suddenly had a ton of
cash and just started buyingeverything. So, like, that first
(02:27):
year of COVID, like 2021, therewas just so many deals
everywhere. And since then, it'sactually slowed down a little
bit. You know, president Bidengot elected in, you know, 2020,
took office, and there was a avery clear antitrust effort in
the in Biden administration.
You look at FTC when Lena Khanwas leading up, Jonathan Cantor
(02:47):
at DOJ. There was a there was avery clear presence there that
they wanted to clamp down onwhat they thought were
anticompetitive mergers inhealth care specifically. And so
there was just a there was a lotof pushback on some of those
deals, especially in thehospital space, you know, some
payers. Yeah. It's it's ebbedand flowed.
There's still a lot of moneyflowing around. Private equity
is everywhere, of course. But,yeah, it's it's it's ebbed and
(03:09):
flowed.
Jeff Byers (03:10):
You touched on a point that you've done a lot of
reporting on how much moneyhospitals made during the
pandemic or, like, how muchreserves they had. Can you dive
into that a little bit? BecauseI always thought that was
interesting and also kinda beatsagainst the hospital narratives
of that we're working on thinmargins. And, you know, not all
hospitals are the same, but canyou touch on that a little bit
(03:30):
as well?
Bob Herman (03:31):
During COVID, many hospitals were in a tough
position. Right? Because whenthe pandemic first started,
nobody pretty much everybodystopped going to the doctor, to
the hospital because it was justit was not safe to do so. So
there was a cash crunch there.But congress was like, wait.
This is a huge problem. Like,let's make sure hospitals have
money flowing on even thoughpeople aren't going to get care.
(03:52):
And so congress authorizedbillions and billions of dollars
to go into hospitals. And sohospitals did really, really
well those first couple years,just surpluses that were
gigantic. And there were someyears afterward where things
became a little bit tougher,costs got higher, and they were
relying a lot on, you know,travel staff, travel nurses, and
(04:14):
that was more expensive thanhaving permanent employees.
But this idea that hospitals arewithering on the vine, that's
just it's it's kind offictional. It's never really
been the case. It's not to saythat some hospitals haven't
struggled. That's absolutelytrue. Especially rural
hospitals, small hospitals that,you know, treat more poor
elderly patients.
But overall hospitals haveespecially the big mega systems
(04:37):
where, you know, there's thisthing con there's, you know,
this consolidation over the pastdecade. They've been doing fine.
They're sitting on large cashreserves. Some of their
operating margins are thin. Someare operating a loss, but it
doesn't mean that they are dyingor at risk of going bankrupt.
Jeff Byers (04:50):
Kinda going back to the m and a space, you talked
about LenaCon and the FTC andthe DOJ under the Biden
administration. From what Irecall, they tried to scrutinize
some of the bigger deals. Isthere a sector or type of deal
that's happening that isn'tgetting a lot of attention?
Bob Herman (05:07):
It's a good question. Yeah. I mean, the
Biden administration did focuson a lot of bigger deals,
especially among the big techcompanies. But they went after a
lot of what I thought werepretty clear, you know,
anticompetitive health caredeals too. You think about there
was this big hospital deal inNorth not big, but it was local.
Novant Health tried to buy thishospital system around the
(05:29):
Charlotte area, and the Bidenadministration went after it. It
was, like, just like, the lowhanging fruit. Right? They
really didn't go after some of,like, the the cross market
mergers, whereas, like, thesebig hospital systems that were
not necessarily in the the sameareas, and they were just
merging because they didn'toverlap much. So the Biden
administration didn't go toomuch after those.
(05:49):
Now there are, I think, otherareas that are flying a bit
under the radar, and it's thisidea of vertical integration.
Right? Where it's instead ofhospitals buying hospitals or
insurers buying insurers, it'shospitals buying doctors or
insurers buying doctors.Something that's just not
totally their line of business,but they work with them a lot.
(06:09):
Maybe they're suppliers to eachother.
And those deals are still goingon pretty frequently. You know,
you think about UnitedHealthGroup, the largest health care
company in America. This hasbeen their strategy for, like,
the past decade. Right? Wherethey they realized that they
have kind of and this is acrossthe health insurance writ large
where we've kinda reached thiscritical mass where it's very,
(06:32):
very hard for insurers to buycompeting insurers because
there's just they're alreadyreally concentrated.
There those deals blew up backin 2016, I think, when Aetna and
Humana tried to merge and Anthemand Signature had merged, and
that was just wildly antanticompetitive, and the DOJ
shut those deals down. So tryingto do that again is gonna be
very difficult. So insurers havepivoted. They've they've run it
(06:52):
to get more into care delivery,and that has been United's MO
for a while. Now think about youknow, we reported earlier this
year, United continues itsbuying spree of outpatient
surgery centers, which is also abig focal point for hospital
systems as well.
You know, it's also continued tobuy more into physician groups
and anything that's liketangential to maybe a business
(07:13):
that like pharmacies, that'sanother one. So anything that
complements their business,anything where they could buy
from their self, right, whereit's if you're a
UnitedHealthcare insurancemember, it makes a ton of
financial sense for the companyto send you to a UnitedHealth
Group doctor or UnitedHealthGroup pharmacy. So vertical
integration has gotten way moreattention, but it still flies
(07:35):
under the radar because it'sjust it's happening so much. And
some of the deals are so smallthat maybe they don't, like,
catch the big nationalheadlines, but they make a a big
deal for the companies that arebuying them.
Jeff Byers (07:45):
Yeah. I can't remember the exact year. I think
it was 2018, but you can correctme if I'm wrong, when the CVS
Health Aetna deal went through,which was a big vertical
integration. And Absolutely.Your colleague, Zachary Tracer,
and myself back in 2017 bothwrote about Optum, who was owned
under UnitedHealthcare and justthe the wave of transformation
(08:07):
they have changed themselvesfrom a to a service company or,
like, the way that they theirportfolios changed even back
then from 2012 to 2017 was quitestark, and I'm sure that's
potentially still continue.
Bob Herman (08:21):
Yeah. And and in the same vein, you think about all
the PBM mergers too. Right?Like, because Cigna bought
Express Scripts. That was themajor one.
And then even before that, youknow, United had bought
Catamaran, which was folded intoOptumRx. And then CBS was
already a big PBM as the resultof PBM mergers from, like, you
know, the late, you know,February to twenty tens. So PBMs
(08:43):
is another space that's allrelated to that. As you'll see,
insurers are no longer justinsurers. It's it's it's way
more complicated than that.
Jeff Byers (08:51):
Yeah. So there was a moment this year where the FTC,
I believe, please correct me ifI'm wrong, kinda reaffirmed some
Biden era proposals on theantitrust level. And so my
question to you is based onthat, unless that has changed or
unless there's been anystatement, which very well could
have changed, you know, thismorning or to the time we
(09:13):
published on Friday, looking atthat vertical integration, is
there any implications for that,of that reaffirmation of those
proposals versus what you'reseeing?
Bob Herman (09:22):
Yeah. So the the Department of Justice and the
Federal Trade Commission haveboth made it clear that they
want revamped merger guidelines.They've wanted to take a closer
look. And, honestly, like, whenLina Khan was at FTC in
particular, she kinda gotsupport from both sides of the
aisle on this. Republicans andDemocrats are both like, it
makes a lot of sense that morescrutiny should be placed on
(09:42):
some of these deals, especiallythe vertical deals.
I think vertical deals havestill not really been challenged
all that much. You think about,like, currently, UnitedHealth is
trying to buy Amedisys, thislarge home health and hospice
chain. But DOJ is suing not ongrounds that it's because of the
of its vertical nature. It'sbecause United already owns a
(10:03):
large home health and hospicecompany called LHC Group, which
it bought a few years ago. And,therefore, having that and
Amedisys would create too muchmarket power for United.
So that's not quite a verticalmerger challenge, but there is
this idea of wanting tochallenge more mergers along
that line. I spoke with JonathanKanter a few months ago, the
outgoing DOJ antitrust headunder Biden, and he was very
(10:27):
concerned about this idea ofhealth care companies becoming
platforms. That means it wasbasically a a you know, vertical
integration was becoming a majormajor problem in his eyes, where
by becoming verticallyintegrated, there is the idea
that maybe things do become moreefficient. Maybe care does get
coordinated a little bit better.But you also there's there's so
(10:47):
many financial incentives toprefer your own company.
And that is just it could bevery anticompetitive. It could
lock out competitors. But, also,are you directing people toward
the best options for their care?So, yeah, I mean, I think
there's still lot to be youknow, we don't really know how,
you know, this new Trumpadministration antitrust
(11:08):
apparatus is gonna go intoeffect. We have Andrew Ferguson
at FTC leading it now and GailSlater at DOJ.
And they, I mean, they havestill been pretty pretty
vigilant in making sure thatthere's merger enforcement. It's
not like there's been this,like, totally, like, hands off,
let corporate America run wildidea. But, you know, I don't
(11:28):
it's still early days and Idon't know what that means. But
overall, I I still think dealvolume is still down a little
bit because, you know, duringthe Biden administration,
everyone was just like, we'reholding off because there's a
chance that we could getchallenged here. And I don't
know that it's just fullyresumed.
I know a lot of, like, theconsulting firms and, you know,
law firms that want deals tohappen because it's a it's a
(11:49):
little self serving for them.But, you know, they want these
deals to happen because a lot ofcompanies, especially private
equity companies, are sitting oncompanies that they wanna unload
now. So I think there's a lot ofchances for for deals to come
back up, and whether there'sstrict federal enforcement of
some of these is still an openquestion.
Jeff Byers (12:06):
I am interested. So you and I are talking about
vertical consolidation. We'retalk we've talked about mergers
and acquisitions and horizontalconsolidation for a while. Do
you get the sense that maybe notthe general public, but the
generally informed public or,like, people interested in
health care, is this somethingthat's on their radar, or is
this a really wonky topic forthe most part?
Bob Herman (12:28):
I think, you know, there's that meme, why not both?
Right?
Jeff Byers (12:31):
I think it it could
Bob Herman (12:33):
be both. Yeah. Right. Yes. Vertical integration
is is wonky because it's justit's you know, when you think
about mergers, I think mostpeople just think about, like,
competitor a buying competitorb, and that's the deal.
When this is you look at, like,down the chain, who could they
be buying instead of theircompetitor. But I it's very
(12:53):
clear that verticalconsolidation has caught the
attention of antitrustenforcers. We saw that with
Jonathan Cantor and Lena Khan.And you still see it now, I
think, with with Trumpadministration antitrust
officials. And it and it's alsocaught the attention of
lawmakers too.
And I wanna give another goodgood example of this, one that
definitely has flown under theradar, but it's picking up now.
(13:14):
And that is you have these largewholesalers, these medical
supply and drug wholesalers. Youthink of Cardinal Health,
McKesson, and Syncora, whichused to be called
AmerisourceBergen. They, like,they just run most of the
sourcing of drugs and medicalproducts as distributors, and
they are getting into caredelivery. All of the the big
(13:37):
three have all bought or boughtmajor majority stakes in certain
physician groups, oncologygroups, eye doctor groups,
certain specialties where theyrely on these physician
administered drugs, maybe theirinjection is, you know, IV
administered.
But as a wholesaler, you canmake a whole lot of money by
suddenly owning that physiciangroup, supplying them with those
(13:59):
very profitable medicines, andretaining more of that profit
then as the parent company. Sothat's another area that is,
again, this idea of verticalintegration in a different way,
completely different way. Butthat has attracted the attention
of lawmakers too. ElizabethWarren has sent letters on this
concerned that it could beanticompetitive. Vertical
integration has been the way forhospitals, for insurers, for
(14:23):
other groups to diversifybecause they might have felt
tapped out elsewhere.
And now I think people arestarting to realize that maybe
this has some anticompetitiveeffects of its own.
Jeff Byers (14:33):
Well, Bob Herman, thanks again for joining us
today on Health Fairs This Week.Is there anything that you wanna
tell our listeners that you gotgoing on at STAT News or any
specific coverage that you wannapoint them to?
Bob Herman (14:45):
Yeah. I mean I mean, I'm biased, but STAT has really
just been doing a lot of greatmy colleagues are just they're
they're really the best at whatthey do. And, you know, with the
Trump administration coming inand they're kind of being chaos
across the federal government interms of people being laid off,
certain agencies just completelybeing eliminated, It's the way
(15:06):
that I've been trying to stayinformed as well. So, yeah,
anything on the federalgovernment is is just, like,
firmly in our radar right now.There's just so much change
going on there.
Yeah. And, of course, you know,that cost money. That's why, you
know, we have a stat plus, whichis our subscription. And I know
we all kinda have subscriptionfatigue to some point, but I do
(15:26):
feel like it's it's a prettygood value because we do put out
what I hope is very diligent,trustworthy health care news.
And for anyone who wants, youknow, free stuff, you know, we
have free newsletters as well.
I have one HealthCare Inc. Youcan sign up at you know, find
the sign up page atstatnews.com, and that's a great
way to just stay informed, youknow, through a lighter touch
(15:46):
too.
Jeff Byers (15:47):
Yeah. Are you making those memes at the end of it?
Bob Herman (15:50):
I am. Yeah. Do you find
Jeff Byers (15:52):
the reporting harder or the memes making harder?
Bob Herman (15:54):
Oh, man. The memes honestly are harder. It was one
of those things when I startedthe newsletter. I'm like, oh,
this is gonna be so much fun,you know, having a meme at the
end of every issue, and it'sbecome increasingly harder. I
don't know.
I I completely did not thinkabout, you know, doing this over
time, but it's still fun. It'sit's still fun. Just a
challenge.
Jeff Byers (16:14):
I I look at it, and I am impressed because you're
trying just from a joke formatperspective, trying to get so
much specific information inthere. Thanks for being honest.
That is a challenge. Oh,
Bob Herman (16:25):
it's it's not easy. Yeah. Some people have it, and,
you know, kudos to them.Hopefully, I'm trying. You know,
it's just you know, there's somuch news that is like, it's
it's, you know, it's a lot.
So any way that you can, like,bring a sense of humor to it,
hopefully, will help maybepeople understand, but also
bring, you know, a little bit ofa laugh.
Jeff Byers (16:44):
Fantastic. We'll put the link to stat and to the
newsletters and the show notesso listeners can check that out
if they haven't already checkedit out. Bob Herman, thanks again
for joining us today on HealthFairs This Week. And if you, the
listener, enjoyed this episode,please send it to the dealmaker
in your life. Thanks, and we'llsee you next week.
Hello and welcome to Health Affairs This Week. I'm
your host, Jeff Beyers. We'rerecording on 04/16/2025. As a
heads up, we have two upcominginsider events I want you all to
be aware of. Next week on April23, we have a conversation with
Brady Post on-site neutralpayments.
And then on May 29, we haveanother insider event on the
(01:01):
FDA's first a hundred days underthe second Trump administration,
moderated by Rachel Sachs. Thepanel will include Richard
Hughes the fourth and Artie Rye.Today, I'm joined by Bob Herman
from Stat News to talk about them and a space in health care.
Bob is a health care businessreporter at Stat News, and his
work previously appeared inModern Healthcare and Axios, one
(01:25):
of the OG business reporters outthere. So, Bob, welcome to the
program.
Bob Herman (01:29):
Thanks for having me, Jeff. Glad to be here.
Jeff Byers (01:31):
I had you on because I'll I'll admit, I still got
that dog in me, but I'm nottracking this stuff as much as I
used to. So I thought it'd begreat if you could tell us about
the general state of deals inthe health care space. Is M and
A cooked?
Bob Herman (01:45):
Yeah. I mean, it it has changed a lot from, like,
the early days of the AffordableCare Act. You know, when when
president Obama signed the ACAinto law more than fifteen years
ago now, it really unlocked,like, every kind of player to
just start trying to buy or sellwhatever they wanted to. And you
just saw a flurry of dealseverywhere. And this is
(02:06):
especially the case withhospitals because the ACA
encouraged what many would callcoordination among the different
providers, and it just led tojust this huge boom in hospital
mergers.
But it's it's ebbed and flowed alot. You know, when COVID
happened, a lot of companieswere just suddenly had a ton of
cash and just started buyingeverything. So, like, that first
(02:27):
year of COVID, like 2021, therewas just so many deals
everywhere. And since then, it'sactually slowed down a little
bit. You know, president Bidengot elected in, you know, 2020,
took office, and there was a avery clear antitrust effort in
the in Biden administration.
You look at FTC when Lena Khanwas leading up, Jonathan Cantor
(02:47):
at DOJ. There was a there was avery clear presence there that
they wanted to clamp down onwhat they thought were
anticompetitive mergers inhealth care specifically. And so
there was just a there was a lotof pushback on some of those
deals, especially in thehospital space, you know, some
payers. Yeah. It's it's ebbedand flowed.
There's still a lot of moneyflowing around. Private equity
is everywhere, of course. But,yeah, it's it's it's ebbed and
(03:09):
flowed.
Jeff Byers (03:10):
You touched on a point that you've done a lot of
reporting on how much moneyhospitals made during the
pandemic or, like, how muchreserves they had. Can you dive
into that a little bit? BecauseI always thought that was
interesting and also kinda beatsagainst the hospital narratives
of that we're working on thinmargins. And, you know, not all
hospitals are the same, but canyou touch on that a little bit
(03:30):
as well?
Bob Herman (03:31):
During COVID, many hospitals were in a tough
position. Right? Because whenthe pandemic first started,
nobody pretty much everybodystopped going to the doctor, to
the hospital because it was justit was not safe to do so. So
there was a cash crunch there.But congress was like, wait.
This is a huge problem. Like,let's make sure hospitals have
money flowing on even thoughpeople aren't going to get care.
(03:52):
And so congress authorizedbillions and billions of dollars
to go into hospitals. And sohospitals did really, really
well those first couple years,just surpluses that were
gigantic. And there were someyears afterward where things
became a little bit tougher,costs got higher, and they were
relying a lot on, you know,travel staff, travel nurses, and
(04:14):
that was more expensive thanhaving permanent employees.
But this idea that hospitals arewithering on the vine, that's
just it's it's kind offictional. It's never really
been the case. It's not to saythat some hospitals haven't
struggled. That's absolutelytrue. Especially rural
hospitals, small hospitals that,you know, treat more poor
elderly patients.
But overall hospitals haveespecially the big mega systems
(04:37):
where, you know, there's thisthing con there's, you know,
this consolidation over the pastdecade. They've been doing fine.
They're sitting on large cashreserves. Some of their
operating margins are thin. Someare operating a loss, but it
doesn't mean that they are dyingor at risk of going bankrupt.
Jeff Byers (04:50):
Kinda going back to the m and a space, you talked
about LenaCon and the FTC andthe DOJ under the Biden
administration. From what Irecall, they tried to scrutinize
some of the bigger deals. Isthere a sector or type of deal
that's happening that isn'tgetting a lot of attention?
Bob Herman (05:07):
It's a good question. Yeah. I mean, the
Biden administration did focuson a lot of bigger deals,
especially among the big techcompanies. But they went after a
lot of what I thought werepretty clear, you know,
anticompetitive health caredeals too. You think about there
was this big hospital deal inNorth not big, but it was local.
Novant Health tried to buy thishospital system around the
(05:29):
Charlotte area, and the Bidenadministration went after it. It
was, like, just like, the lowhanging fruit. Right? They
really didn't go after some of,like, the the cross market
mergers, whereas, like, thesebig hospital systems that were
not necessarily in the the sameareas, and they were just
merging because they didn'toverlap much. So the Biden
administration didn't go toomuch after those.
(05:49):
Now there are, I think, otherareas that are flying a bit
under the radar, and it's thisidea of vertical integration.
Right? Where it's instead ofhospitals buying hospitals or
insurers buying insurers, it'shospitals buying doctors or
insurers buying doctors.Something that's just not
totally their line of business,but they work with them a lot.
(06:09):
Maybe they're suppliers to eachother.
And those deals are still goingon pretty frequently. You know,
you think about UnitedHealthGroup, the largest health care
company in America. This hasbeen their strategy for, like,
the past decade. Right? Wherethey they realized that they
have kind of and this is acrossthe health insurance writ large
where we've kinda reached thiscritical mass where it's very,
(06:32):
very hard for insurers to buycompeting insurers because
there's just they're alreadyreally concentrated.
There those deals blew up backin 2016, I think, when Aetna and
Humana tried to merge and Anthemand Signature had merged, and
that was just wildly antanticompetitive, and the DOJ
shut those deals down. So tryingto do that again is gonna be
very difficult. So insurers havepivoted. They've they've run it
(06:52):
to get more into care delivery,and that has been United's MO
for a while. Now think about youknow, we reported earlier this
year, United continues itsbuying spree of outpatient
surgery centers, which is also abig focal point for hospital
systems as well.
You know, it's also continued tobuy more into physician groups
and anything that's liketangential to maybe a business
(07:13):
that like pharmacies, that'sanother one. So anything that
complements their business,anything where they could buy
from their self, right, whereit's if you're a
UnitedHealthcare insurancemember, it makes a ton of
financial sense for the companyto send you to a UnitedHealth
Group doctor or UnitedHealthGroup pharmacy. So vertical
integration has gotten way moreattention, but it still flies
(07:35):
under the radar because it'sjust it's happening so much. And
some of the deals are so smallthat maybe they don't, like,
catch the big nationalheadlines, but they make a a big
deal for the companies that arebuying them.
Jeff Byers (07:45):
Yeah. I can't remember the exact year. I think
it was 2018, but you can correctme if I'm wrong, when the CVS
Health Aetna deal went through,which was a big vertical
integration. And Absolutely.Your colleague, Zachary Tracer,
and myself back in 2017 bothwrote about Optum, who was owned
under UnitedHealthcare and justthe the wave of transformation
(08:07):
they have changed themselvesfrom a to a service company or,
like, the way that they theirportfolios changed even back
then from 2012 to 2017 was quitestark, and I'm sure that's
potentially still continue.
Bob Herman (08:21):
Yeah. And and in the same vein, you think about all
the PBM mergers too. Right?Like, because Cigna bought
Express Scripts. That was themajor one.
And then even before that, youknow, United had bought
Catamaran, which was folded intoOptumRx. And then CBS was
already a big PBM as the resultof PBM mergers from, like, you
know, the late, you know,February to twenty tens. So PBMs
(08:43):
is another space that's allrelated to that. As you'll see,
insurers are no longer justinsurers. It's it's it's way
more complicated than that.
Jeff Byers (08:51):
Yeah. So there was a moment this year where the FTC,
I believe, please correct me ifI'm wrong, kinda reaffirmed some
Biden era proposals on theantitrust level. And so my
question to you is based onthat, unless that has changed or
unless there's been anystatement, which very well could
have changed, you know, thismorning or to the time we
(09:13):
published on Friday, looking atthat vertical integration, is
there any implications for that,of that reaffirmation of those
proposals versus what you'reseeing?
Bob Herman (09:22):
Yeah. So the the Department of Justice and the
Federal Trade Commission haveboth made it clear that they
want revamped merger guidelines.They've wanted to take a closer
look. And, honestly, like, whenLina Khan was at FTC in
particular, she kinda gotsupport from both sides of the
aisle on this. Republicans andDemocrats are both like, it
makes a lot of sense that morescrutiny should be placed on
(09:42):
some of these deals, especiallythe vertical deals.
I think vertical deals havestill not really been challenged
all that much. You think about,like, currently, UnitedHealth is
trying to buy Amedisys, thislarge home health and hospice
chain. But DOJ is suing not ongrounds that it's because of the
of its vertical nature. It'sbecause United already owns a
(10:03):
large home health and hospicecompany called LHC Group, which
it bought a few years ago. And,therefore, having that and
Amedisys would create too muchmarket power for United.
So that's not quite a verticalmerger challenge, but there is
this idea of wanting tochallenge more mergers along
that line. I spoke with JonathanKanter a few months ago, the
outgoing DOJ antitrust headunder Biden, and he was very
(10:27):
concerned about this idea ofhealth care companies becoming
platforms. That means it wasbasically a a you know, vertical
integration was becoming a majormajor problem in his eyes, where
by becoming verticallyintegrated, there is the idea
that maybe things do become moreefficient. Maybe care does get
coordinated a little bit better.But you also there's there's so
(10:47):
many financial incentives toprefer your own company.
And that is just it could bevery anticompetitive. It could
lock out competitors. But, also,are you directing people toward
the best options for their care?So, yeah, I mean, I think
there's still lot to be youknow, we don't really know how,
you know, this new Trumpadministration antitrust
(11:08):
apparatus is gonna go intoeffect. We have Andrew Ferguson
at FTC leading it now and GailSlater at DOJ.
And they, I mean, they havestill been pretty pretty
vigilant in making sure thatthere's merger enforcement. It's
not like there's been this,like, totally, like, hands off,
let corporate America run wildidea. But, you know, I don't
(11:28):
it's still early days and Idon't know what that means. But
overall, I I still think dealvolume is still down a little
bit because, you know, duringthe Biden administration,
everyone was just like, we'reholding off because there's a
chance that we could getchallenged here. And I don't
know that it's just fullyresumed.
I know a lot of, like, theconsulting firms and, you know,
law firms that want deals tohappen because it's a it's a
(11:49):
little self serving for them.But, you know, they want these
deals to happen because a lot ofcompanies, especially private
equity companies, are sitting oncompanies that they wanna unload
now. So I think there's a lot ofchances for for deals to come
back up, and whether there'sstrict federal enforcement of
some of these is still an openquestion.
Jeff Byers (12:06):
I am interested. So you and I are talking about
vertical consolidation. We'retalk we've talked about mergers
and acquisitions and horizontalconsolidation for a while. Do
you get the sense that maybe notthe general public, but the
generally informed public or,like, people interested in
health care, is this somethingthat's on their radar, or is
this a really wonky topic forthe most part?
Bob Herman (12:28):
I think, you know, there's that meme, why not both?
Right?
Jeff Byers (12:31):
I think it it could
Bob Herman (12:33):
be both. Yeah. Right. Yes. Vertical integration
is is wonky because it's justit's you know, when you think
about mergers, I think mostpeople just think about, like,
competitor a buying competitorb, and that's the deal.
When this is you look at, like,down the chain, who could they
be buying instead of theircompetitor. But I it's very
(12:53):
clear that verticalconsolidation has caught the
attention of antitrustenforcers. We saw that with
Jonathan Cantor and Lena Khan.And you still see it now, I
think, with with Trumpadministration antitrust
officials. And it and it's alsocaught the attention of
lawmakers too.
And I wanna give another goodgood example of this, one that
definitely has flown under theradar, but it's picking up now.
(13:14):
And that is you have these largewholesalers, these medical
supply and drug wholesalers. Youthink of Cardinal Health,
McKesson, and Syncora, whichused to be called
AmerisourceBergen. They, like,they just run most of the
sourcing of drugs and medicalproducts as distributors, and
they are getting into caredelivery. All of the the big
(13:37):
three have all bought or boughtmajor majority stakes in certain
physician groups, oncologygroups, eye doctor groups,
certain specialties where theyrely on these physician
administered drugs, maybe theirinjection is, you know, IV
administered.
But as a wholesaler, you canmake a whole lot of money by
suddenly owning that physiciangroup, supplying them with those
(13:59):
very profitable medicines, andretaining more of that profit
then as the parent company. Sothat's another area that is,
again, this idea of verticalintegration in a different way,
completely different way. Butthat has attracted the attention
of lawmakers too. ElizabethWarren has sent letters on this
concerned that it could beanticompetitive. Vertical
integration has been the way forhospitals, for insurers, for
(14:23):
other groups to diversifybecause they might have felt
tapped out elsewhere.
And now I think people arestarting to realize that maybe
this has some anticompetitiveeffects of its own.
Jeff Byers (14:33):
Well, Bob Herman, thanks again for joining us
today on Health Fairs This Week.Is there anything that you wanna
tell our listeners that you gotgoing on at STAT News or any
specific coverage that you wannapoint them to?
Bob Herman (14:45):
Yeah. I mean I mean, I'm biased, but STAT has really
just been doing a lot of greatmy colleagues are just they're
they're really the best at whatthey do. And, you know, with the
Trump administration coming inand they're kind of being chaos
across the federal government interms of people being laid off,
certain agencies just completelybeing eliminated, It's the way
(15:06):
that I've been trying to stayinformed as well. So, yeah,
anything on the federalgovernment is is just, like,
firmly in our radar right now.There's just so much change
going on there.
Yeah. And, of course, you know,that cost money. That's why, you
know, we have a stat plus, whichis our subscription. And I know
we all kinda have subscriptionfatigue to some point, but I do
(15:26):
feel like it's it's a prettygood value because we do put out
what I hope is very diligent,trustworthy health care news.
And for anyone who wants, youknow, free stuff, you know, we
have free newsletters as well.
I have one HealthCare Inc. Youcan sign up at you know, find
the sign up page atstatnews.com, and that's a great
way to just stay informed, youknow, through a lighter touch
(15:46):
too.
Jeff Byers (15:47):
Yeah. Are you making those memes at the end of it?
Bob Herman (15:50):
I am. Yeah. Do you find
Jeff Byers (15:52):
the reporting harder or the memes making harder?
Bob Herman (15:54):
Oh, man. The memes honestly are harder. It was one
of those things when I startedthe newsletter. I'm like, oh,
this is gonna be so much fun,you know, having a meme at the
end of every issue, and it'sbecome increasingly harder. I
don't know.
I I completely did not thinkabout, you know, doing this over
time, but it's still fun. It'sit's still fun. Just a
challenge.
Jeff Byers (16:14):
I I look at it, and I am impressed because you're
trying just from a joke formatperspective, trying to get so
much specific information inthere. Thanks for being honest.
That is a challenge. Oh,
Bob Herman (16:25):
it's it's not easy. Yeah. Some people have it, and,
you know, kudos to them.Hopefully, I'm trying. You know,
it's just you know, there's somuch news that is like, it's
it's, you know, it's a lot.
So any way that you can, like,bring a sense of humor to it,
hopefully, will help maybepeople understand, but also
bring, you know, a little bit ofa laugh.
Jeff Byers (16:44):
Fantastic. We'll put the link to stat and to the
newsletters and the show notesso listeners can check that out
if they haven't already checkedit out. Bob Herman, thanks again
for joining us today on HealthFairs This Week. And if you, the
listener, enjoyed this episode,please send it to the dealmaker
in your life. Thanks, and we'llsee you next week.
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