Payer merger bubble pops: What it means for physicians

April 10, 2017

Merger mania has ended

 

Merger mania has ended.

In January, the proposed $37 billion merger between Aetna and Humana was blocked by a judge. Weeks later, another federal judge  ruled against the proposed $54 billion merger between Anthem and Cigna, the second- and third-largest commercial health insurers in the country.

All four payers have said that the deals have been called off as a result of the court decisions.

The mergers would have reshaped the healthcare industry. Physicians and other healthcare experts have argued that they would have harmed insurance markets by increasing costs, narrowing networks and giving  payers too much bargaining power over healthcare providers. 

The Anthem-Cigna merger would have created the largest health insurance company in the country. The U.S. Department of Justice brought the case against the merger, arguing that it would violate antitrust laws by creating a company so large that it would squelch competition from smaller companies in the health insurance market.

Anthem had claimed that the cost savings achieved by the merger would actually reduce premium prices for consumers, because it would allow the merged company to cut its own operating costs. This, Anthem said, would result in a new ability to offer lower-priced options to customers.

The judge’s order said that the merger had the potential to drive up costs to consumers, and to reduce choice for patients by creating a more restricted list of in-network healthcare providers.

This would have potentially dire consequences for primary care physicians who chose to accept other insurance offered by the national and state healthcare exchanges.

 

Physicians against mergers

The Physicians Advocacy Institute (PAI) applauded the judge’s decision. The institute advocates for fair and transparent payment policies to doctors from insurance companies and others.

“Big health insurers are zero for two when it comes to mergers, with federal courts delivering a resounding message that supports a competitive healthcare marketplace,” Robert W. Seligson, PAI president, said in a prepared statement. 

“This merger would have resulted in higher prices and diminished innovation, which is bad news for patients already coping with narrow provider networks and increased out-of-pocket costs,” the statement added. “Competition helps keep premiums in check and allows more choice in which physicians patients choose to see for their medical care. This decision is a clear win for patients.”  

With the merger off the table, competition for customers will continue between the two insurers. This means that primary care physicians will retain the power to negotiate on behalf of their patients, notes Randal Schultz, JD, a partner in the law firm of Lathrop & Gage LLP in Kansas City, Missouri, and chair of the firm’s Healthcare Strategic Business Planning Practice group.

“By eliminating that potential market power, you have more room to have primary care doctors have some kind of voice in the marketplace,” Schultz says. The blocked merger signals that it’s time for doctors to think seriously about new delivery models that will reduce costs in the system as a whole, he notes.

“We want to keep that corridor open for physicians, between historical costs and current costs,” he says.

 

 

An opportunity created

The health insurance system today is what drives costs for employers, who in turn provide a choice of insurance providers to employees, Schultz says. 

When a primary care doctor finds ways to reduce healthcare costs-by treating a patient outside of the hospital, reducing the length of hospital stays, or foregoing  unnecessary tests, for example-the patient and the employer both save money.

“That money should go right to the primary care doctor,” says Schultz. “The employer is thrilled because the cost doesn’t go up, and the primary care doctor is incentivized to keep the cost down,” he adds. “If the doctors really understand the nature of the business, there are a lot of ways to deliver healthcare services that create a better financial model for the doctors.”

Preventing the Anthem/Cigna merger makes it possible for primary care doctors to think more creatively about working with insurance companies, says Schultz.

“Because no merger occurs, it creates the opportunity for more insurance companies in each market,” he explains. “If I’m a primary care doctor, I want to find every way I can to be involved in the care of the patient, to get between the employer and the patient. The primary care doctors are in the driver’s seat.”

With many consumers today paying high out-of-pocket costs because of rising  deductibles, he notes, the health insurance companies that win will do so by reducing  costs while increasing access to care. For example, it costs less to send a patient home with a nurse than to keep that patient in the hospital several days longer to recuperate after surgery.

“If I were your doctor and I told you that your mother could go home a day early from the hospital and have a nurse go with her, wouldn’t that be better?” Schultz says. “She’s scared sitting in the hospital, and she’s in danger of infection. And it’s cheaper to have a nurse go home with her. That would save on cost and be better for the patient. Isn’t that what we want? It’s intuitive, it’s practical and it helps everybody.”