SAN FRANCISCO — Cellphone and cable companies are the bane of my existence. With so darn few of them, there is little motivation to innovate and price offerings competitively. Consumers like me are forced to swallow subpar service with no recourse.
It’s hard not to draw parallels between those communication companies and the wave of consolidation hitting the insurance industry. Just this Friday, Anthem announced it’s acquiring fellow giant Cigna in a $54 billion transaction to form a 53 million-member behemoth in the business. This comes on the tail of Aetna announcing its own intentions a few weeks ago to obtain Humana for $37 billion. If all these megadeals go through, we could soon go from the big five down to just three large players in the insurance market.
In a panel discussion Friday at the Health Forum–American Hospital Association Leadership Summit that was to have included Anthem CEO Joseph Swedish — he, naturally, was tied up — other players from the industry expressed unease about what this consolidation could spell for the industry.
Brian Marcotte, president and CEO of the National Business Group on Health, which represents large employers across the country, said his membership often plays those large players against each other to help spur innovation.
"I think large employers are concerned about this coming together and us going from four to three. … They’re wondering what they should do going forward, in terms of having that robust competition," Marcotte said.
He believes payer consolidation can benefit providers, as more large employers work directly with health systems to provide care to their workers. Such is the case for fellow panel member Jim Hinton, whose Presbyterian Healthcare Services in New Mexico, is working closely with Intel Corp. to provide next-generation care to its employees. Hinton said hospitals must respond to consolidation by offering value to make sure they have access to these members. "I think that really is going to be the heart of this next phase of consolidation and relationships with providers," he added.
Spurred by the Affordable Care Act and arrival of Swedish, who formerly served as CEO at Trinity Health Corp. system, Anthem has pushed for more conversations around value, according to Senior Vice President and West Region President Pam Kehaly, who took Swedish’s place on the panel.
"Those two things together really fostered a different and much more productive dialogue, rather than this constant tension around unit costs," Kehaly said. "Some of that does still occur, but the conversation is shifting more and more toward partnership, collaboration, and how we can work together in a very unique and different way. How can we align our financial reimbursement structures so that we’re both focused on getting to the same end state?"
In my Friday Summit blog, I dove into some of the key considerations for hospitals when determining whether to start a health plan. Saturday, Kim White, a consultant with Numerof and Associates, ran through factors for hospitals when, instead, eyeing a partnership with payers. Trust, aligned goals and agreed-upon outcomes are all critical elements, she said. Hospitals must figure out the rationale, future success measures and what the ideal end state looks like before inking such deals with insurers. Whatever the answers to those questions, hospitals should be seeking partners now and not waiting for one to show up neatly packaged at their doorstep.
"If you’re just waiting for someone else to make the move first, that’s not going to work going forward," she said.
What do you think the recent string of announced payer mergers mean for the provider side of the business? Share your thoughts in the comment section below.