In our last post, we explored how you need a Big Data app just to keep track of who’s buying whom – Anthem buying Cigna, United buying Aetna, or Aetna buying Humana. Many speculate that independent Blues will soon follow, whether it’s consolidating under Anthem or HCSC or some other umbrella. One thing is clear: the landscape for national health plans is changing very rapidly.
This consolidation has huge implications for health systems, physician groups, specialty providers, and post acute providers across the country. Let’s briefly examine a few of the possibilities, and start to think through the implications for payor/provider contract negotiations, new and innovative risk models, and payment rates for those health plans not involved in the consolidation.
We have already discussed the Anthem acquisition of Cigna. Now we turn our attention to Aetna buying Humana, and United buying Aetna. Of course, either probably precludes the other, so we will discuss both but keep in mind it’s almost certainly either/or.
Scenario 1: Aetna buys Humana
Interesting. Since Humana announced it was exploring a sale – most industry watchers assumed Aetna was the most likely winner in the Humana Sweepstakes. Under CEO Mark Bertolini’s leadership, Aetna has been doing some interesting and innovative things, and Aetna lacks a strong Medicare Advantage platform. Nothing solves that problem like Humana.
The implications for health systems and other provider organizations seem less complex than an Anthem/Cigna combination, or some of the other possibilities out there. This is about scale, and combining negotiations for commercial and Medicare Advantage under a single banner. Aetna could use the new Humana Medicare Advantage business to push for lower commercial rates under a consolidated contracting approach, and certainly Aetna would move up a notch or two in terms of importance to health systems and provider organizations. There are few markets where Aetna is the dominant plan, but moving from 4 to 3, or 3 to 2 could result in different rates with providers.
Scenario 2: United buys Aetna
Lots of rumors on this one, but little that’s concrete. Personally, we don’t see it. This is about scale, too, if it’s going to happen. Yet we don’t see anything that Aetna gives United that United doesn’t already have, except more. Maybe this is about United killing a potential Aetna/Humana combination, since that would provide a more direct and comprehensive competitor.
No matter what, provider organizations have to pay attention to this one because United is involved. The dismal performance by United in the National Payor Survey and Trust Index for the last nine years – and especially the last two years – means that more business for United is more business that’s tough for providers to deal with and administer.
Further, Aetna has performed pretty well in the Payor Survey and Trust Index, and it’s hard to see how consolidation by United helps Aetna with the very healthcare providers who care for its members. Needless to say, the sheer scale is the biggest threat to providers – where United is No. 1 or No. 2 in the market, this will only strengthen its position. Where United is No. 3 or No. 4, the United/Aetna combination could vault United into a much stronger negotiating position. Furthermore, where United’s rates are lower than Aetna’s, providers could see that Aetna business running through United’s rates with the resulting erosion in payment yield. Not dissimilar from what providers saw Aetna do with the Aetna/Coventry deal, and not a happy scenario.
A recent Health Leaders story nailed the issue.
“Competition among insurers has encouraged cost cutting innovations such as narrow networks, new arrangements with physicians, and incentive payments for population management… but that encouragement may turn into something else when the companies merge.
‘If, as a hospital, you look up and all you see is gigantic UnitedHealth and gigantic Anthem, and no one else who might compete for your business, it’s going to be blunt force applied to hospitals rather than trying to offer something attractive,’ says Robert Fuller (attorney with Nelson Hardiman in Los Angeles).”
Does this sound promising for your health system?
Leading health systems and provider organizations must approach their strategies differently, and engage their boards, physician leadership, and local employers in a very different way. It all starts with C-suite buy-in and a clear, disciplined strategic approach. If you’re rethinking your health plan contracting strategy – short term or long term – we can help.
