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Leemore Dafny

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How Aetna, CVS might prosper from merger

Harvard Business School Prof. Leemore Dafny writes in NEJM Catalyst about how the Aetna-CVS merger might pan out. Among her observations:

“With a focus on total costs of care in Aetna’s corporate DNA, {the merged entity}  will aspire to reduce total spending for care (while increasing its own revenues) by redirecting patients to lower-cost sites for certain services, such as infusions or imaging (in which NewCo may have ownership stakes); using its physical convenience and non-visit care technologies to maintain contact with patients requiring closer monitoring, thereby potentially averting ED visits and admissions; and considering combined medical and pharmacy spending.

“Aetna can directly support these objectives by encouraging members to use Minute Clinics, other {merged entity} affiliated providers, CVS pharmacies, and Caremark services — perhaps through favorable cost sharing or more seamless scheduling, billing, and care or product delivery. To the extent that CVS’s physical and digital efforts can lower total costs of care, {the merged entity} can benefit directly from anyone insured by Aetna, and indirectly by sharing in savings with members of self-insured plans. Notably, Aetna is building market share in Medicare Advantage plans, and arguably Medicare Advantage enrollees are the members most likely to appreciate and benefit from frequent, high-touch interactions with CVS pharmacists and nurse practitioners.”

To read her essay, please hit this link.


AHA meeting denounces insurer-merger plans


It’s no surprise that hospitals don’t like health-insurer  mergers, as the American Hospital Association annual meeting on May 2 made clear.

They particularly don’t like  the two  biggest pending health insurer mergers — Aetna-Humana and Anthem-Cigna.

“The unprecedented level of consolidation that these deals threaten could make health insurance more expensive and less accessible to consumers,” moderator and AHA board member Thomas Miller said. “We are also very concerned that these deals could hinder the momentum that hospitals have established to move the nation’s healthcare system forward.”

The hospitals, of course, fear that the bargaining power of these behemoth insurers could slash their operating margins.

FierceHealthPayer reports that “Northwestern University Prof. Leemore Dafny has argued that, because while there is no definitive academic research proving that past insurer mergers have created cost efficiencies or improved quality and innovation, there is evidence that provider reimbursement decreases and that insurance premiums go up.”

“The data is also clear, she said, that the health-insurance sector is already composed of “highly concentrated markets that have grown more concentrated over time.”

At the same, federal and state  regulators have been eying skeptically various big hospital- system mergers as threatening higher prices in their markets.

Podcast: Analyzing consolidation’s effects

Hear this podcast:

“As more and more health insurers and providers merge, it’s important to look at the potential impact on the cost and quality of health care.

“In the latest episode of New Directions in Health Care, The Commonwealth Fund’s podcast, Sandy Hausman talks with the fund’s Eric Schneider, M.D., and Northwestern University’s Leemore Dafny about the need for federal regulators to consider how consolidation and loss of competition can drive up prices, even as it opens up opportunities for more-coordinated care. They also discuss the need for greater price and cost transparency to ensure consumers are protected.”

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