Some industry experts are positing that now that subsidies are guaranteed for states that use Healthcare.gov, any one of the Big-Five insurance deals that were potentially put on ice until the landscape was clearer may proceed. Leerink Partners analyst Ana Gupte told Reuters that the Supreme Court's ruling on King v. Burwell could remove the uncertainty that may have been keeping these deals from reaching fruition—deals like a reported acquisition of Humana by Aetna, or an Aetna purchase by United.
Speculation of these mergers has led to speculation about how the provider market will respond. Erik Gordon, a business professor at the University of Michigan, told Modern Healthcare that consolidation in the payer space could prompt consolidation among providers to counter the increased bargaining power of insurers. "If providers merge, then insurers have to merge, and if insurers merge, then providers have to merge," Gordon said. "It's a cyclical arms race, until antitrust steps in and says that's enough."
"We expect the Department of Justice's antitrust division to scrutinize every deal," said the American Hospital Association's general counsel Melinda Hatton in an email to Healthcare Dive. "We believe that consolidation of large commercial insurers is the root of higher prices for consumers. We would expect the antitrust division to ensure that none of these new consolidations would add to that problem."
In the meantime, providers are left playing a delicate game of "wait and see" until details emerge. Healthcare Dive spoke to a couple of provider executives to find out how a potential merger might impact different organizations—and what providers are doing to prepare.
Bill Leaver, CEO, UnityPoint Health
I don't know that we are really preparing for anything. We don't know what exact combinations are going to happen, it will take some time for that all to shake out—who, if anybody, gets merged with whom. For those Big Five insurers, Iowa is down the list in terms of potential markets. A couple of them do have a presence in the state, but it's not a huge presence. I don't that we are sitting here strategizing what are we going to do in response to [a potential consolidation].
I think in Illinois it could create more aggressive posture in some of the markets we are in. In Iowa, we have a big Blue Cross plan that is pretty dominant in the market. There's a potential that post-merger, one of [the other] big insurers might say "we have more ability to compete in Iowa." I'm not privy to what they are thinking, but it could create some competition for Blue Cross.
If a merger happens, the FTC is going to ask for comment and we would evaluate whether we should weigh in. I'm not sure it's even appropriate for us to try to do that without all the facts.
On whether a large merger would drive costs up or down
I think there is more likelihood that providers have less sway at the negotiating table than the fact that prices are going to come down. If the logic is that we have a bigger pool to spread the risk of all these insured patients, particularly the expanded Medicaid population, then perhaps the argument [that a merger would lower costs] has some logic to it. But it still has to become reality and I'm not sure that I would bet on that.
The fewer payers we have to deal with, the less complexity—but I heard at one point that we were billing 1,000 to 1,200 different insurers anyway. Taking the Top Five and making them the Top Three, I don't know that that changes that complexity. You still have a ton of the one-offs.
Robert Fortini, VP of Clinical Operations, Bon Secours Medical Group
Conceptually, there's a pro and a con to [insurance] mergers. The pro side is that right now, my world is negotiating eight different contracts—Aetna, Cigna, United, Humana, Coventry. Every contract has different definitions, numerators, denominators. It makes day-to-day workflow and operations very difficult. Having a single entity with a single set of quality, utilization and financial measures simplifies the equation.
The con side is that more and more these days, we get into circumstances where there is a network restriction. We recently went through a real wrestling match with Anthem. They had a narrow network product and Bon Secours was excluded from the network.
On administrative efficiencies
I have 170 distinct physician practices across Virginia and I have an army of case managers spread across these locations. We get from Cigna, for example, a daily discharge report, a frequent flier utilization report, a 30-day readmission report and a gaps-in-care report. Anthem sends me the same four reports, but they calculate things a little differently. Then Humana sends me a report. Then United sends me a report. And Aetna sends me a report.
My RN case managers have to go into five different databases and look at four different reports in each one of the databases to understand who their at-risk populations are. Right there I have a lot of wasted effort and redundancy. Dealing with a single payer takes that all away—it gives me a single report on a population of at-risk patients and all of that downtime that I spend sorting data can now be focused on delivering patient care. That doubles the amount of care I can deliver.
We've seen some of this with Aetna's purchase of Coventry, which made things a little easier for us. The alignment of measures and expectations has been simplified.
In addition, Humana and United managed care products are both managed by Optum Health and that has simplified things. The annual assessment forms are a single form and they're identical. It makes our lives a lot easier.
I'm worried about the monopoly control and the leverage that will give our payers around pricing and reimbursement, but on the other hand, it makes day-to-day operations a lot simpler just dealing with one player.
David Bittner, Senior Vice President of Finance and CFO, Saint Francis Care
We're anticipating [possible insurer consolidation], but I don't think we're actively quantifying what the impact might be on an annual basis. This kind of consolidation is hard to anticipate and quantify what that impact would actually be. We have really good relationships with each of our payers, so there's not any particular payer that's so burdensome that it would be an issue if they consolidated with another one.
I do think if [cosolidation] continues, it would reduce our ability to compete from a negotiation perspective. If you go from eight [managed-care payers in a single market] to three, then the ability to negotiate becomes much less and you take whatever the national rate may be.
On the national trend towards consolidation
There's some general concepts that we have in mind with consolidations of the managed care companies. I think the most obvious that you see state to state is: You have some managed-care payers that have a vast majority of the market—70% or 80% of the market, almost a monopoly—those hospitals basically take whatever rate they give them. There's no negotiation, no real contemplation that they can actually terminate an agreement with a player that's that large in the market. They are basically forced to accept not only rates but language terms that are unfavorable to the hospital.
Connecticut is fairly competitive. There's seven major national players from the managed-care perspective. As that gets consolidated, there's a lack of ability to compete for those patients from a covered lives perspective, so you see the larger payers in the country starting to implement policies and procedures that aren't necessarily attached to contracts.
On whether consolidations would create administrative efficiencies for providers
It wouldn't be that significant. There would be some, but for example, with the [potential] Anthem-Cigna consolidation, we wouldn't necessarily have a big lay-off. If we used to have eight [managed-care payers] and now we have six, we still have to manage those six. We still have that department.