New legislation from the political odd couple of Sens. Elizabeth Warren (D-Mass.) and Josh Hawley (R-Mo.) targets vertically integrated healthcare conglomerates that both own insurers, pharmacy benefit managers (PBMs), drug wholesalers, and medical providers, creating the possibility for a self-serving loop of business ties.

Called “The Break Up Big Medicine Act,” the proposal has no direct link to skilled nursing owners and operators, according to analysts, but could affect provider-owned Institutional Special Needs Plans (I-SNPs) depending on their ownership structure.

The senators, who often are at the opposite ends of the political spectrum, said “by controlling both the company that pays for healthcare services and also the entity that sets the prices for those healthcare services [e.g., a health insurance company and a doctor’s office], these healthcare conglomerates may be steering business to their own providers, evading laws intended to rein in corporate profiteering, or using physicians they employ to boost government payments to their insurance arms.”

In a nutshell, the pair said, “healthcare giants may have successfully manipulated the health care system to squash competition and enrich themselves, while forcing patients and taxpayers to pay more.”

What the Bill Says

The legislation will:

• Prohibit a parent company from owning a medical provider or management services organization and a PBM or an insurer;

• Prohibit a parent company of a prescription drug or medical device wholesaler from owning a medical provider or management services organization;

• Require that a company in violation of these provisions come into compliance within one year of the bill’s enactment;

• Create automatic penalties if a company fails to comply in a timely manner, including disgorgement of profits and forced sales of assets;

• Enable the Federal Trade Commission (FTC), Dept. of Health and Human Services, Department of Justice (DOJ), state attorneys general, and private parties to bring lawsuits against violators; and

• Allow the FTC and DOJ to review and block future actions that would recreate the conflicts of interest prevented by the bill.

What’s at Stake for I-SNPs?

Jay Gormley, chief investment officer, COO, Advisory, Zimmet Healthcare Services Group, said in reviewing the legislation for his weekly healthcare newsletter that rather than focusing on pricing rules, transparency requirements, or incremental reforms, the bill mandates structural separation, which effectively forces companies to choose between owning payors and owning providers.

“For the broader provider landscape, the implications would be significant if momentum builds,” he said. “The bill would fundamentally alter the business models of integrated MA platforms, PBMs, and wholesalers with downstream clinical assets.”

It also reflects a revival of structural separation thinking in antitrust policy (akin to historic limits in banking, telecom, and railroads) rather than relying solely on case-by-case enforcement.

“Importantly for post-acute providers, while SNFs fall within the bill’s definition of ‘provider,’ SNFs are not singled out as a policy target. At present, there do not appear to be very many [or any] SNFs that are vertically integrated under common ownership with national insurers, PBMs, or prescription drug/device wholesalers in a way that would trigger mandatory divestiture under the bill’s framework,” Gormley said.

But an area worth watching is provider-owned I-SNPs. “Because an I-SNP is legally a MA insurance product, common ownership between a provider [including a SNF] and an MA plan would appear to fall within the bill’s prohibition on insurer-provider integration,” he said.

Carve Out?

The legislation does not carve out exceptions for provider-sponsored plans. As drafted, a parent entity that owns both SNFs and an I-SNP insurance license could be required to divest one side of the business. “That said, many provider-aligned I-SNP arrangements are structured through joint ventures, minority stakes, or contractual care management relationships rather than direct ownership and control,” Gormley said.

While the primary political focus of the legislation is clearly on large national MA platforms, provider-owned I-SNP models are structurally, vertically integrated payor-provider arrangements and could face restructuring if the bill were enacted as written. However, since these arrangements are largely beneficial for enrollees, “there is hope that if this thing gets wings, the provider-owned plans can get a carve out,” Gormley said.

Questions or comments? Contact Patrick Connole at pconnole@parkplacelive.com.