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What Margo Channing Would Say About the Current Instability in Health Plan Business Activity—And Why CIOs Should Worry

June 23, 2015
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As we enter a period of unprecedented instability in health insurer business activity, many of the best-laid plans of healthcare IT leaders are at practical risk

The first few paragraphs of a June 21 article in The New York Times spoke volumes. It began thus: “The world of American health insurance may soon become even smaller, with the biggest companies seeking to become even bigger. A scramble has broken out within the industry as various providers jockey for position and make overtures to rivals. Anthem made the first public move, unveiling a $47 billion takeover bid for Cigna on Saturday, after months of negotiations had stalled. On Sunday, Cigna fired back, rejecting the bid as ‘inadequae and not in the best interest of Cigna’s shareholders.”

The article went on to say, “But others have been quietly maneuvering as well. UnitedHealth Group, the biggest American health insurer by revenue, recently made a preliminary approach to Aetna, a person briedf on the matted said. And a number of companies have indicated their interest in buying Humana, one of the smaller major insurers but one with a valuable Medicare franchise.”

The article went on to note a number of other possible combinations noting that “The Affordable Care Act has been driving the flurry of merger discussions.  Passage of the law in 2010 transformed the health insurance industry by expanding the government Medicaid program for low-income people in many states and giving insurers access to millions of additional customers through state marketplaces.”

So… got your scorecard out yet? You’ll need it in the coming months and next few years.

Indeed, if there’s a single thing that industry experts and observers can agree on, it’s this: we all need to expect that health insurance company consolidation will continue to proceed apace, with a combination of business opportunity, heightened market competition, and policy and reimbursement mandates and developments changing the landscape of healthcare operations as never before.

All of this is very logical, on a certain level. The question is, what does this mean for providers?

There are several levels to the answer to that question. First of all, at a high level, provider leaders need to anticipate continued movement, change, and even instability in the health insurer world. Second, the developments taking place on the insurer side will inevitably upset some of the partnerships, collaborations and alliances that recently have been forged and are currently being forged between individual health insurers and provider organizations, as the ongoing shifting of health insurer constellations keeps changing. If Health Plan A acquires Health Plan B, and Health Plan B and Health Plan C have been expending huge amounts of energy trying to compete with Health Plan A in the Cityopolis market by building partnerships with Multihospital System 1 and Multihospital System 2 in that market, then what?

Clearly, some of the carefully constructed health plan-integrated health system partnerships are going find themselves in the middle of suddenly destabilized local and regional healthcare markets.

At the healthcare IT executive level, all of this market movement could become severely destabilizing. What if you’re Multihospital System 1 in the Cityopolis local market? And what if you, the CIO of Multihospital System 1, have just spent the past 18 months burning the midnight oil in order to implement a population health management system with Health Plan B? And now all of a sudden, Health Plan A—until just now, Health Plan B’s biggest competitor—has acquired Health Plan B? Time to reach for the antacid, for starters.

At the 50,000-foot-up level, healthcare IT leaders and other senior provider leaders need to prepare themselves for years—perhaps considerably more even than a decade—of shifting business patterns on the part of health insurance companies. Healthcare IT leaders also need to prepare for maximal flexibility of strategy, tactics, and execution. Is this fair to CIOs, CMIOs, and other healthcare IT leaders? Of course it’s not. And yet, this is going to be the reality of the business of healthcare in at least the next decade.

The fact is that there are several levels of healthcare industry activity taking place at once, and on all of those levels, things are heating up, given the demand for improved care quality, cost-effectiveness, and efficiency—all articulated as a demand for greater value on the part of the purchasers and payers of healthcare for increased value coming from providers, as well as policy-level mandates coming from federal healthcare officials pressing down on the entire healthcare system, both on the provider side and on the private insurer side, in order to try to force more value from the overall system.

Will this all be frustrating to healthcare IT leaders? Yes—no question about it. And CIOs, CMIOs, and other healthcare IT leaders will absolutely have every right to feel deeply frustrated, and even angry, as the Lego blocks of the health insurer sector keep getting taken apart and put back together in different ways, at a frenzied pace, in the near future.

The fact is that we are facing a time of business instability in healthcare that is unprecedented. And whether we like it or not, healthcare IT leaders will inevitably get sucked into the maelstrom. As Bette Davis, playing Margo Channing, in the 1950 movie directed by Joseph L. Mankiewicz, “All About Eve,” so memorably said, “Fasten your seatbelts. It’s going to be a bumpy night!”