Insurance Industry vs. Hospital Industry: Who Should Consumers Believe?

By Jill Zorn 

sumo

Like huge sumo wrestlers circling each other, the insurance industry and the hospital industry are each fighting to protect their plans to consolidate, while combating the merger efforts of their opponent.

Here’s what Anthem and CIGNA have to say on their recently created website, Betterhealthcaretogether.com, about the “benefits” of their proposed merger:

New treatments, technologies and clinical discoveries hold promise for patients facing health challenges once thought insurmountable.  These potential benefits may never be realized without a commitment to innovation, affordability and quality.

Our commitment to ensuring that members have access to affordable health coverage is the foundation of Anthem’s proposed acquisition of Cigna, and will remain one of our top priorities.

…By realizing the expected benefits of scale that will result from this acquisition, Anthem will operate more efficiently to reduce operational costs and, at the same time, enhance our ability to manage the cost drivers that negatively impact affordability for our members. The proposed combination will also allow us to expand…programs that have improved patient outcomes, generated meaningful cost savings, and empowered members to more actively engage in their own health and wellbeing.

In contrast, here’s what the American Hospital Association has to say about the Anthem – CIGNA merger as well as about the proposed Aetna – Humana merger:

This unprecedented consolidation should be of extreme concern for millions of health care consumers – as well as hospitals, doctors and others – who are working to improve quality and efficiency while making care more affordable to patients.

…. For consumers, these deals could make health care more expensive and less accessible… We are very concerned that both these deals could result in fewer choices for consumers – narrower networks of providers in what few choices remain – and higher premiums and out-of-pocket costs.

Meanwhile, in an article published this summer in The Hill entitled,Hospitals, insurers spar over healthcare mergers,” the trade group, America’s Health Insurance Plans (AHIP), had nothing positive to say about hospital consolidation.

Claiming that it is insurers who are working to keep coverage affordable through negotiating with providers and revising payment models, a spokesperson stated, “That drive to deliver better value for patients is being undercut by years of anticompetitive hospital consolidation that have forced patients to pay higher health care costs, increased premiums, and limited their health care choices.”

AHIP also expressed their negative opinion on hospital consolidation in a report published in June:

 While hospitals contend that consolidation can lead to operational efficiencies and improvements in quality of care, evidence suggests otherwise. A growing number of studies have suggested that provider consolidation may be motivated less by aiming to achieve operational efficiencies and more by the removal of competitive rivals and increasing market power.

But the American Hospital Association begs to differ.

An August blog post entitled, “Why Hospital Mergers are Different”, says, “Hospital realignment is essential to providing patients with high-quality, well-coordinated care, and it’s contributing to lower cost growth.”

Here in Connecticut, when discussing their announced affiliation with Lawrence + Memorial Hospital in New London, a Yale New Haven Hospital spokesperson touted that one of the primary benefits is to “drive down costs through economies of scale.”

Clearly each industry believes their cause is just.  Each claims that consolidation is good for consumers, it will lower costs and improve quality.

But that’s only their message when they are talking about themselves.  As soon as they are talking about the other industry, suddenly consolidation is merely about seeking to gain market power and will lead to higher prices and probably won’t improve quality, either.

Who should consumers believe?  Is consolidation the solution or the problem?

In the next blog, we’ll hear from experts on the subject of health industry consolidation.  Here’s a hint from one expert, Northwestern University Professor Leemore Dafny, “The consolidation in both of these industries has been shown to have an adverse impact on consumers.”

Watch:

Read Part 2

This entry was posted in Jill Zorn, Uncategorized and tagged , , . Bookmark the permalink.

4 Responses to Insurance Industry vs. Hospital Industry: Who Should Consumers Believe?

  1. Pingback: Connecticut Consumers Likely to be Squeezed by Insurer Mergers | Universal Health Care Foundation of Connecticut

  2. “Like huge sumo wrestlers circling each other, the insurance industry and the hospital industry are each fighting to protect their plans to consolidate, while combating the merger efforts of their opponent.”

    When we published this blog, we didn’t know that “sumo wrestler” is an actual legal term. In working on the next blog on this topic, Connecticut Consumers Likely to be Squeezed by Insurance Mergers, we ran across testimony given by Consumers Union at a Senate Judiciary subcommittee hearing in September regarding the proposed mergers of Aetna with Humana and Anthem with CIGNA. Here is how Consumers Union explains it:

    “One justification we’ve heard for approving these mergers is that giving these insurance companies more market power will offset the market power of hospitals and doctor groups. We are certainly aware of, and concerned about, increased concentration that has been taking place in provider markets – and how it can lead to less choice for consumers, and higher premiums and costs, and less value.”

    But the solution to too much provider market power is not to give health insurers their own market power and then hope they’ll take care of us. This has come to be referred to in antitrust circles as the “sumo wrestler theory” – that somehow adding market power at one level of the supply chain “stands up to” and offsets market power at another level.

    But the actual result is just more market power, with more of all the harmful effects that flow from it. The two sumo wrestlers typically end up deciding to shake hands – that is, they find an accommodation that benefits them both – and they go after everybody else. And the everybody else, those who don’t have market power – and that includes consumers with a ring-side seat, as well as smaller hospitals, local clinics, and medical practices – get tossed around, sat on, sometimes mercilessly crushed.

  3. Pingback: Health Care Topics to Watch for in 2016… | Universal Health Care Foundation of Connecticut

  4. Pingback: Playing Monopoly with Our Money  | Universal Health Care Foundation of Connecticut

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s