“The insurance companies [Cigna and Kaiser Permanente] provided Ginger with access to millions of potential users. After its financial investments in Ginger, Cigna began offering no-cost access to Ginger’s behavioral health services in order to improve customers’ overall health and well-being, according to leadership from both organizations. Yes, it is possible that those customers will benefit from the platform. But given that Ginger’s valuation grew in multiples around the same time—at least in part because of the massive influx of customers from Cigna and Kaiser—it’s reasonable to suggest that the insurance company was double dipping. By sending its customers to Ginger, Cigna was also boosting the platform’s user numbers and maximizing its return on investment. It certainly bears the appearance of a conflict of interest, with the potential to influence the quality of care for patients. Seeing this play out, we began to ask ourselves: Is it ethical for health insurance companies to be investing in health care startups—and if it’s going to keep happening, what guardrails should be put in place?
[..] much of the growth in venture funding—reaching $621 billion in 2021—has been fueled by nontraditional actors, like universities diversifying their endowment portfolios. (Full disclosure: One of us, Vishal Khetpal, advises as a venture scout for a firm called Necessary Ventures.) In health care, these nontraditional actors have included health insurance companies like Cigna and large hospital systems like the Mayo Clinic.
[..] here’s a hypothetical scenario. Let’s suppose you’re a patient and your doctor recognizes an abnormal rhythm when listening to your heart. You both discuss exploring this issue further with heart monitoring. Your insurance company, however, only covers one type of heart monitor, and it happens to be made by a company that the insurance company’s venture arm has invested a lot of money in. Maybe it’s not the best heart monitor for you—and, too bad, it’s your only option. But even if the heart monitor works perfectly fine, this setup creates the perception of self-enrichment on the part of the insurance company. This is a practice that has been considered unethical, and even illegal, in medicine. Physicians, for example, are heavily regulated in their financial interests by Stark Law, two pieces of legislation passed in the early 1990s. Stark Law effectively bans doctors from referring Medicaid and Medicare patients to services in which they have a financial conflict of interest. For example, an orthopedic surgeon can’t refer a Medicare patient they just performed an operation on to a physical therapy company that she herself owns. The Stark Law has exceptions—it is perfectly legitimate, for example, for a doctor to own public stocks in a drug company that makes medications they prescribe to patients—but by and large, the law is designed to stamp out kickbacks. Hospitals, though not their venture capital funds necessarily, are similarly covered through the anti-kickback statute. No similar laws or regulations, however, currently exist for health insurance companies.
[..] what if a venture-backed product was harmful or did not meet the standard of care? What if insurance companies, say, required their members to use an A.I.-powered symptom checker they’ve invested in as a screening tool before going to an emergency department? American health care is already afflicted by a power imbalance that favors health insurance companies and health systems over patients. Most patients have very limited options for buying affordable health insurance or are assigned plans by their employer, while most plans control care and costs through levers like tiered drug formularies and prior authorizations. Large hospital systems, meanwhile, increasingly exist as local monopolies. Venture investments may further exacerbate that imbalance, and patients have few means to advocate for themselves in these situations. Hospitals could compel physicians and patients to use vendors where they themselves have a financial conflict of interest, while health insurance companies could use venture-backed products to gatekeep care. When insurers and health systems corporations like Cigna and Providence St. Joseph Health choose to wear multiple hats—operating as payers, providers, and now investors—their motivations become murky.
We don’t think that health insurance companies and hospitals should be excluded from venture investing. To startups, both offer resources that often can’t be matched by traditional venture capital firms, which lack real-world experience in delivering health services. Hospitals and health insurance companies, with their expertise, can help startups like Ginger focus their service lines toward core patient needs, anticipate industry trends, and realize their potential. But unlike traditional firms, which operate solely in their own financial interests, these entities also have responsibilities to their patients.
Legislators can look to how conflicts of interests are handled for physicians, who treat patients but may have other income streams as well. The Sunshine Act mandates that data from drug and medical device makers track all compensation over $10 that it offers to physicians, which is then published in a public database by the federal government. Legislation like the Stark Law and the anti-kickback statute should be applied to health insurance companies, while more specific regulations around corporate venture investing, enforced by organizations like the Federal Trade Commission, are needed for both health systems and health insurers. Similar to what is mandated by the Sunshine Act for doctors, a central database, searchable by the public, that details their investment activity should be created. And finally, patients should be made aware of the potential conflicts of interest lurking behind products offered to them or applied to their care in the exam room. When offered a service venture-backed by a hospital or a health insurance company they’re using, patients should also be offered a competitive alternative without a financial conflict of interest.
As health care innovation continues to rapidly evolve, health insurers and health systems are poised to help companies like Ginger reach their potential through venture investing. However, guardrails and transparency laws are urgently needed to ensure that patients receive high-quality care, not high-profit care.”
Full article, V Khetpal and NR Shah, Slate, 2022.3.2