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CVS, Aetna see UnitedHealth and Amazon as growing threats

The Queen of the Amazons visits Alexander the Great

By CHAD TERHUNE

For Kaiser Health News 

 

As soon as news surfaced last week about the potential merger of CVS Health and Aetna, all eyes turned to the looming threat from Amazon.

The online retailer’s flirtation with the pharmacy business is a factor, no doubt. But many industry experts say CVS and Aetna have another huge competitor on their minds: UnitedHealth Group.

UnitedHealth is best known as the nation’s largest health insurer, with more than 45 million members in the U.S. But behind the scenes, it has extended its reach deep into America’s medicine cabinets, operating rooms and doctor offices.

Its Optum unit fills more than 100 million prescriptions per month as a pharmacy benefit manager, poaching big customers from rivals CVS and Express Scripts. UnitedHealth owns more than 400 surgery centers and urgent-care clinics and runs medical practices for about 22,000 physicians across the country.

“People have gotten carried away with Amazon,” said Ana Gupte, a health care analyst at Leerink Partners. “CVS and Aetna is an Optum wannabe. UnitedHealth is the winning business model, and Optum is showing the way.”

UnitedHealth’s expansion into dispensing prescription drugs and treating patients has put the company on track to reach $200 billion in annual revenue this year and profits for the first nine months of 2017 already topped $7 billion.

UnitedHeath is admired on Wall Street for its dependable results and diverse stable of businesses, which helps insulate it from rough patches in the insurance sector. However, the prospect of further industry consolidation alarms some consumer advocates and health policy experts. And they say UnitedHealth hasn’t always been a good role model.

In 2009, U.S. Senate investigators said the company built an industrywide database that deliberately understated what insurers should pay for out-of-network care, exposing consumers nationwide to hundreds of millions of dollars in extra charges.

More recently, patients have accused the company’s prescription drug business, OptumRx, of overcharging for routine medications in order to pocket a pharmacy “clawback” that boosts profits. The company has denied any wrongdoing in response to lawsuits over the drug pricing.

Employers, lawmakers and consumer groups accuse the three largest pharmacy middlemen — Express Scripts, CVS and UnitedHealth — of keeping drug prices high and pocketing too many of the discounts they negotiate with pharmaceutical companies.

Consumer advocates also are concerned about the prospect of companies mining a vast supply of consumer data to maximize profits rather than improve care.

“It is hard to find instances where these very large companies used their market power for the good of consumers, rather than for their shareholders,” said Lynn Quincy, a consumer advocate and director of the Healthcare Value Hub at the Altarum Institute, a nonprofit think tank. “The lack of transparency at these really large companies is appalling. That’s why we’re skeptical it will make things better.”

In a statement, UnitedHealth said it’s committed to “helping people live healthier lives” and its Optum unit is trying to make the entire health system work better.

In the past, company executives have said they’re fighting on behalf of employers and consumers against high costs, as well as poor outcomes and mind-boggling complexity. Before the merger news, executives at Aetna and CVS had already hinted at working together to tackle many of the same issues through the retailer’s vast network of stores.

Last week, The Wall Street Journal broke the news about the potential merger between CVS and Aetna, which could be worth more than $66 billion. CVS and Aetna say they won’t comment on market rumors or speculation.

In general, these companies are trying to address problems familiar to most Americans: poor coordination of care. Doctors rarely talk to each other. It’s incredibly hard to share medical records among providers or even with patients. Despite a lot of talk about linking pay to performance, a surprising amount of medical care is still reimbursed under the old-fashioned fee-for-service model that rewards quantity over quality.

For some experts, CVS and Aetna are well-positioned to fix many of those issues and that might make their deal more likely to pass muster with antitrust officials.

UnitedHealth, which has reached into everything from home health care to billing technology, has won praise for some of its efforts. One 2015 study published in Health Affairs found that the company’s use of house calls helped reduce costly hospital admissions for Medicare patients by 14 percent.

“One of the big failures of the U.S. health care system has been fragmentation, and these vertical mergers are trying to cure that problem,” said Thomas Greaney, a former federal antitrust lawyer and now a professor at the University of California’s Hastings College of the Law in San Francisco.

“You want to encourage efficiencies and integration that helps promote better care and lower costs. But you don’t want that to turn into a local monopoly,” he added.

Farzad Mostashari, a former official in the Obama administration who has studied health care competition, said it’s too soon to tell whether a CVS-Aetna deal would be good or bad for consumers. But Mostashari, who now heads Aledade, a tech start-up that works with doctors, said it warrants intense scrutiny of the more subtle ways it could put rivals at a disadvantage.

“These vertical mergers can create competitive challenges where you use your dominant market position to tip the ball to yourself in another area,” he said.

This story was produced by Kaiser Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation

KHN’s coverage of prescription drug development, costs and pricing is supported in part by theLaura and John Arnold Foundation.


Amazon threat one big reason for CVS, Aetna to merge

FierceHealthcare reports that  industry analysts say that multiple market forces combine to make drugstore behemoth CVS’s possible takeover of giant insurer Aetna (based in Hartford but moving to New York)  attractive  for both two companies. CVS is based in Woonsocket, R.I.

“One of the biggest ones is Amazon’s possible entrance into the prescription drug distribution business, which Leerink Partners analyst Ana Gupte says is a ‘massive threat’ to CVS, both in the pharmaceutical market and front-store sales,” Fierce reported.

The St. Louis Post Dispatch has reported that the online retail giant has already been approved by 12 states to become a wholesale pharmaceutical distributor there.

If the CVS-Aetna merger happens, CVS could respond to the Amazon-induced market pressure on its retail pharmacies by using more of its retail spaces to offer such healthcare services  as labs and dialysis, say analysts for Jeffries Group, the investment bankers.

Aetna, for its part,  has powerful reasons to want a merger with CVS.

For one, Fierce reports, “CVS’s capabilities, including its Minute Clinics and its Coram home infusion business, could help Aetna improve health outcomes and reduce costs. Aetna’s leaders have also long expressed a desire to move care closer to the consumer, and they’ve hinted at the possibility of working closer with CVS once the insurer’s long-term pharmacy benefits management  (PBM)contract with CVS expires in 2020.”

Gupte  also said that that Aetna has probably felt it should  enter the PBM business given the  announcement by another big insurer, Anthem that it would build its own  PBM partnership with CVS—and UnitedHealth’s success with its in-house PBM, OptumRx.

Aetna “likely sees solidifying a lasting relationship with its preferred partner CVS as a way to leave [Anthem] jilted at the altar,” she said.

Fierce reported that “Gupte pointed out that Anthem was likely not looking for a long-term relationship with CVS anyway, as its ultimate goal was to ‘go it alone’ with its IngenioRx PBM brand. Still, she predicted that Anthem might walk away from its pact with CVS if the company consummates a deal with Aetna.”


Nev. governor vetoes Medicaid-access-for-all bill

The Nevada State Legislative Building, in Carson City.

In Nevada, Republican Gov. Brian Sandoval  and Democratic legislators have often cooperated in innovative ways to address healthcare issues, whatever the fiercely partisan standoff in Washington, D.C.

But the governor wouldn’t go along when the Democratic-controlled legislature passed a bill to let anyone — regardless of income — sign up for Medicaid on the Affordable Care Act’s insurance marketplace — in a cousin of the universal-healthcare/Medicare-for-all proposals getting increasing attention as the red tape-bound and vastly expensive U.S. healthcare “system” looks worse and worse — including its lowly outcomes.

Mr. Sandoval vetoed the Medicaid-available-for-all bill on Friday night, hours before the deadline, saying that the legislation “could introduce more uncertainty to an already fragile health-care market and ultimately affect patient health care” and that it was being rushed “without factual foundation or adequate understanding of the possible consequences.”

But supporters of Medicaid access-for-all, including the bill’s sponsor, Assemblyman Mike Sprinkle, have argued that  it  cost less than a single-payer plan and that it was needed because “There is an absolute need for states to become more reliant on providing insurance options to its citizens.”

“It’s an innovative approach that might also be of interest to other states,” says Jessica Schubel, senior policy analyst with the Center on Budget and Policy Priorities, told Governing magazine. “but it clearly rests on the base of a strong Medicaid program and robust marketplace subsidies — both of which are in danger.”

The state is pushing hard to shore up its health-insurance offerings. For instance, Governing reports, it has told private insurers   that their “applications for state Medicaid contracts would get preferential treatment if they also sold plans on the marketplace  — and it’s already paying off.

“Nevada is the only state where Aetna is still going to offer coverage in 2018. This fall, Nevadans shopping on the exchanges will have five insurance options. In addition, premiums are expected to be lower than the national average.”

To hear the NPR report, please hit this link.
To read the Governing article, please hit this link.

Aetna bailing out of all ACA exchanges

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Aetna will complete its withdrawal from Affordable Care Act state insurance exchanges in 2018. The huge insurer, which overall is very profitable, said that continuing financial losses in the exchanges and uncertainty about the marketplaces’ future led it to decide to leave the last  two states  — Delaware and Nebraska — in which it has been on ACA exchanges. Just last week it said that it would stop offering ACA health plans in Virginia in 2018 and last month it  said it would leave Iowa.

Aetna Chief Executive Mark Bertolini has said that the ACA marketplaces were in a “death spiral,” which the nonpartisan Congressional Budget Office said isn’t true.

The exchanges have been undermined by the fierce opposition to the Affordable Care Act of the Trump administration and Republican politicians in Red States.

Insurers, for their part, complain that their ACA plans attract too few of the young and healthy customers needed to offset the expense of covering older people, who, of course, tend to have more serious  health problems than do younger people.

A major reason is that the financial penalties for people for not buying insurance are far too small.

For example, the penalty for not buying insurance for an adult is $625 per adult and $347.50 per child under 18. So a lot of younger healthy people decide to pay the fine, which is much cheaper than paying insurance premiums. And if they get sick or injured, they can go to a hospital ER, where all or some of the costs will be covered by the hospital, in the form of “charity care” and local, state and federal governments.

It’s all just another example of why  the U.S. healthcare system is near the bottom in medical outcomes and at the top in costs in the Developed World. It’s immensely complicated and contradictory, fee-driven and fueled by the desire of many, perhaps most, clinicians and hospital and insurance executives for maximum personal profit.

To read more, please hit this link.

 


Reaction to ruling against an Aetna-Humana merger

 

U.S. District Judge John Bates has backed the Justice Department and blocked  Aetna’s proposed $37 billion takeover of Humana over antitrust concerns. Judge Bates ruled  that Medicare Advantage and traditional Medicare should not be considered the same market. Therefore, the deal would violate antitrust laws as Aetna and Humana would have an “unlawful” Medicare Advantage market share in 364 counties across 21 states and that the deal would be anticompetitive in 17 counties across 3 states.

Here are five reactions collected by Becker’s Hospital Review to the ruling.

1. American Medical Association President Andrew Gurman, M.D., called the “court’s ruling … a notable legal precedent by recognizing Medicare Advantage as a separate and distinct market that does not compete with traditional Medicare. This was a view advocated by the AMA, as well as leading economists. AMA also applauds the decision for protecting competition on the public exchanges.”

2. Matthew Cantor, partner at Constantine Cannon, said he thought whether Medicare Advantage and original Medicare should be considered the same market was never “a real significant dispute.” However, in Becker’s words, “he found it interesting Judge Bates gave little weight to Aetna’s argument that its exit from ACA exchanges in the 17 complaint counties was a business decision.”

Mr. Cantor said while as a matter of law the ruling will be hard to reverse, the “most important part now is how the Trump administration is going to react to this. I would think they would be receptive and listen to what the merging parties have to say, particularly if it scores them political points on the repeal and replacement of the ACA.”

3. Randal Schultz, a partner at Lathrop & Gage and chairman of the firm’s healthcare strategic business planning practice group, said the judge’s ruling was logical and an easy decision. He said should Aetna successfully appeals the deal and if the deal does go through, he hopes that the court makes insurers  “disclose financial information about the actual cost of care. By putting requirements on merged groups to release actual healthcare costs … it opens up a black box [and] people will know what it actually costs to insure a population.” Doing so would push more employers toward self-insuring their workers, he said.

Regarding the looming decision of Indianapolis-based Anthem’s proposed $54 billion acquisition of  Cigna, Mr. Schultz added, “I’ll be shocked if the other case doesn’t come down the same way.”

4. Aetna spokesperson T.J. Crawford said  “We’re reviewing the opinion now and giving serious consideration to an appeal after putting forward a compelling case.”

5. Aetna Chairman and CEO Mark Bertolini and Humana CEO Bruce Broussard said jointly:  “After putting forward a compelling case that addressed each of the Department of Justice concerns, we are disappointed with the court’s decision and will carefully consider all available options. We continue to believe a combined company will create access to higher-quality and more affordable care, and deliver a better overall experience for those we serve.”

To read more, please hit this link.


Insurers may soon lose ACA excuse for their soaring premiums

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Ana Mulero, writing in Healthcare Dive, notes that “2016 was a terrible year for insurance costs. Double-digit ACA premium increases were common. Insurance and provider monopolies and near-monopolies look likely to support future increases. But as we go into 2017, it’s reasonable to ask: How long will consumers put up with this?”

After all, “{T}his comes as some payers, including the five largest ones in the U.S., have remained highly profitable. Aetna, Anthem, Cigna, Humana, and Unitedhealth, four of which have multibillion-dollar plans to merge, have collectively profited more than $65.5 billion post-ACA, Public Citizen reported in October.”

Meanwhile salaries for insurance execs continue to surge. Consider, she writes:

”{S}alaries for C-suite executives were raised by 57% last year at Health Care Service Corp. (HCSC), which operates Blue Cross and Blue Shield plans in Illinois, Montana, New Mexico, Oklahoma, and Texas, according to a recent analysis by Modern Healthcare. The top ten company executives saw their combined earnings increase from a total of $36.1 million in 2014 to $56.7 million in 2015.”

And,  “Hospitals and health systems may actually be the ones that have felt the squeeze the most, and they have acted in ways that are {also} pushing up costs.

“Health systems are consolidating at a rapid pace, and many of them say they have done so to have more leverage with insurance companies. This activity has in turn led to monopolies and duopolies on the provider side as well, which results in not only increased prices to consumers, but also a decrease in quality care as competition is significantly reduced.”

“Hospital prices in monopoly markets are more than 15% higher” than in non-monopoly markets,  says Deborah Feinstein, the Federal Trade Commission’s director of the Bureau of Competition.

“Requiring more transparency around payers’ operating costs and salaries of their C-suite execs could help address these issues. But with Republicans promising a repeal, the ACA may not be available as cover for high costs much longer.

“Thus, insurance companies looking for whom, or what, to blame for the increases may face an uncomfortable reality soon: For every finger they point, three fingers might point back at them.” And, we might add, at some monopolistic hospital systems, too.

To read her whole article, please hit this link.


Hysteria over Aetna’s partial ACA evacuation needs to be cooled

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Jon Kingsdale argues in Health Affairs that news coverage of Aetna’s plan to exit from 11 of the 15 states where it now offers insurance on Affordable Care Act insurance exchanges, and similar actions by some other big insurers, such as Humana and United Healthcare, has contained much hyperbole and that in fact the exits are no big deal.

He writes:

Critics of the ACA are citing these departures as evidence of the law’s fatally flawed design. Even supporters worry about how to staunch the outflow. And the news reverberated in presidential politics, on both sides. What’s really going on here? Are these big insurers bailing because Obamacare is just too risky? Will more such desertions cripple the marketplaces?”

He answers himself: “Not all health insurance companies are the same, nor do they necessarily serve the same customer segments. In fact, most medical insurance companies, unlike Aetna and United, are regional non-profits, such as the state (or smaller) Blue Cross Blue Shield plans, Kaiser Permanente and HIP. These ‘regional’ plans and Medicaid managed care organizations (MCOs) are generally better positioned to compete on the new marketplaces than ‘national’ insurers.”

“By contrast, national firms such as Aetna, United and CIGNA are far better positioned to serve national employers and other large, self-insured groups than to compete for individual households.”

“The vast majority of purchasers on the ACA marketplace are low-to-moderate income households, who are searching for low-priced health plans. As extremely ‘price-sensitive’ buyers, most seem willing to trade access to a broader network in return for lower premiums. Regional health plans and Medicaid MCOs are generally more successful than national ones in negotiating the lowest payment rates with local doctors and hospitals. As a result, the Blue Cross Blue Shield and other regional plans generally—not always—enjoy a cost and premium advantage over national plans and tend to dominate their marketplaces.”

“In fact, United and Aetna, despite their deep penetration of the large-group insurance market, together serve only 15 percent of marketplace enrollees, and their retrenchment will impact only about 10 percent.

“They are leaving many marketplaces, but staying in those where they think they can compete. This is clearly not the same as rejecting ACA marketplaces wholesale because of some fundamental flaw in the law. Presumably, they are being selective about their participation as they see how price-disciplined the marketplaces are and where they enjoy a competitive advantage.”

To read Mr. Kingsdale’s Health Affairs article, please hit this link.

 

 


Some things to know about Aetna’s ACA threats

 

Herewith Becker’s  Hospital  Review looks at “things to know” about Aetna’s plan to withdraw from most Affordable Care Act  state insurance marketplaces:

1. The insurer warned the U. S. Department of Justice on July 5 that it would immediately act to reduce its 2017 ACA exchange footprint if the DOJ sued to stop  its acquisition of Humana.

2. Aetna CEO Mark Bertolini said if its transaction with Humana is blocked, it is “very likely”  that Aetna would exit the ACA exchanges entirely. However, if the deal closes, Mr. Bertolini said, Aetna would look into how it can support “more public exchange coverage over the next few years.”

3. On July 21, the DOJ sued to block the $37 billion Aetna-Humana deal over antitrust concerns. The DOJ is also fighting a merger between Anthem and Cigna.

4. On Aug. 15, in Becker’s words: “Aetna said it will pull out of 11 of its 15 state ACA exchanges next year, citing $430 million in losses on its individual plans since January 2014.”

5. Kevin Counihan, director of the ACA marketplaces, told Politico  that Aetna’s departure placed a greater urgency on HHS’s insurer recruitment. He asserted that losing big insurers like Aetna does not mean the exchanges are broken, but rather it is “the nature of the industry.”

6. Aetna had revenue of $15.95 billion in the second quarter of 2016, up 5 percent from the year-earlier period. The insurer recorded net income of $790.8 million, up from the year-earlier  $731.8 million.

To read the Becker’s article, please hit this link.


Feds detail case against huge insurance mergers

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U.S. Atty. Gen. Loretta Lynch has discussed in detail why the Feds are rejecting the huge insurance company mergers sought by Anthem and Aetna. Anthem wants to buy Cigna; Aetna wants to buy Humana.

“If allowed to proceed, these mergers would fundamentally reshape the health insurance industry They would leave much of the multitrillion-dollar health industry in the hands of three mammoth insurance companies, restricting competition in key markets,”  she said.

The government says the transactions would “substantially lessen competition in numerous markets around the country,” leading to  “higher prices and reduced benefits” for consumers.

Justice Department officials also worry that the deals would kill most competition in the Affordable Care Act’s insurance marketplaces.

For the full article, please hit this link.


Texas Health, Aetna to create insurer

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Aetna and Texas Health Resources, a big nonprofit hospital system serving the Dallas-Forth Worth area, will create a jointly owned heath-insurance company for North Texas to address, among other things, population-health issues.

It will be the first such venture in the region between a major insurer and a major health system and include fully integrated care teams and administrative services to reduce redundancies and streamline the patient experience.

This is Aetna’s second joint venture with a nonprofit health system. The first was its pact with Inova Health System in Northern Virginia, signed in 2014.

The new health plan will combine Aetna’s “coverage expertise, case- management capabilities and analytical insights with Texas Health’s provider network and population-health management tools,’’ HealthcareDive reported.


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