Could the Aetna-Humana Merger Announcement Be a Game-Changer? | Mark Hagland | Healthcare Blogs Skip to content Skip to navigation

Could the Aetna-Humana Merger Announcement Be a Game-Changer?

July 3, 2015
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What might the Aetna-Humana merger mean for current population health efforts among health plans and providers—and for the carefully laid strategic healthcare IT plans being designed to facilitate those efforts?

As happens when a very major development occurs on the eve of a holiday weekend, public reactions were scattered on Friday regarding the announcement that the Hartford-based Aetna would be acquiring the Louisville-based Humana for $37 billion in stock and cash. After all, most Americans are busy preparing for the holiday weekend, or already enjoying it.

But the news of the merger could not be bigger for the U.S. healthcare industry. The combined company, as The New York Times’ report noted, would have an estimated operating revenue of $115 billion this year, and serve more than 33 million members. That’s huge.

As the Times’ report further noted, “The proposed merger occurs as the nation’s largest for-profit health insurers seek ways to reduce costs and capitalize on growing opportunities in the government and individual markets. The companies say they will be able to operate more efficiently and negotiate more effectively with large health systems, which have also been consolidating.”

Of course, mergers can play out in any number of ways. For example, the U.S. airline industry—already consolidated down to a handful of mega-carriers—is now being investigated by the Justice Department over allegations of pricing collusion. And that development has taken place just a year and a half after the DoJ in November 2013 cleared the way for the merger of American Airlines and US Airways. Among other things, the feds are looking into whether airline executives are secretly signaling collusion to each other through speeches at industry conferences. What’s more, this new investigation is being initiated against the backdrop of mounting consumer dissatisfaction over rising airfares, overbooking of flights, plummeting service quality (partly because of intentional overcrowding on the airlines’ part), the narrowing of scheduling options for passengers living in mid-sized cities, and even growing air safety concerns. Clearly, consolidation can result in complex daisy chains of consequences, many of them unintended.

Healthcare is of course a very different industry from the passenger airline industry. That having been said, ongoing M&A consolidation in healthcare at times feels quite double-edged-sword-ish, too.  Just as airline consolidation has brought some benefits (including better-coordinated scheduling of flights within now-larger airlines), along with the above-mentioned downsides, so, too, healthcare consolidation is resulting in all sorts of developments.

For one thing there is this ongoing “arms buildup” phenomenon, with health insurers and providers each getting bigger and bigger in order to assert greater market power against one another. It seems that every day there is a major hospital-organization merger or acquisition, and many local and regional healthcare markets are already now strongly dominated by just a handful of players. Even megalopolises like New York City, Los Angeles, Chicago, San Francisco, and Boston, are now dominated by just a few major hospital-based integrated health systems, while there are dozens and dozens of mid-sized markets dominated by just a single integrated delivery system.

In the case of the big managed care insurance companies, there are definitely two sides to the coin. One longstanding problem for healthcare consumers with health insurance paid for by their employers is the all-too-regular lurch on the part of those employers from one health plan to another, often just before it’s time for their employees to engage in their annual benefits election process. I have long noted that the pie-in-the-sky goal of having health plan members grow in loyalty to their health plans in order that those plan members become more engaged in health plan-based care management programs, is regularly sabotaged by the lurching switches of carriers on the part of their employers. Could the Aetna-Humana merger—and, let’s face it, the subsequent mergers coming down the pike—do anything to change that dynamic?

The potential for improved population health management is definitely there; on the other hand, look at how complicated it is becoming already for the senior executives of hospital-based integrated health systems and large medical groups to intelligently partner up with specific health plans in their local markets. The “arms race” has been discombobulating on all sides. Just yesterday, Memorial Hospital joined up with Happy Health Plan, thinking that that partnership would position both organizations well against their down-the-street rivals, Community Health System and Acme Health Plan, only to find out that the map today is now shifting yet again.