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The Illusion of Getting ‘Bigger’

Sometimes Size MattersAmerican culture is all about the belief that “bigger is better.” Heck, just stop by the local convenience store and you will find patrons walking away from the cash register with a ‘Big Gulp’ beverage. (No wonder obese Americans now outnumber overweight Americans.)

We seem obsessed with having the biggest ‘something’ – whether it is a city, town square, tallest building, largest (and most expensive) house or maybe a huge bicycle fortress crossing the state during late July. No doubt, it can be enticing to claim something enormous.

In both the hospital and health insurance industries, the fixation on growth is being taken to a whole new level. Nowadays, growth does not necessarily occur organically, such as through offering newly-innovative products and services that provide added value to customers. As customarily assumed, growth is intended to drive down costs, increase negotiating leverage and ultimately boost profits.

Controlled, organic growth seems to be much too slow for investors and today’s conventional wisdom of doing business. Enter acquisitions and mergers of competitors.

Insurance companies are making headlines with eye-popping takeover bids. For example, UnitedHealth Group, the nation’s largest health carrier, with expected revenue this year of $143 billion, has made a move to acquire Aetna, the nation’s third largest health carrier. The second largest carrier, Anthem, Inc., is pursuing Cigna Corp. They just made a takeover offer of $47.5 billion – which was subsequently rejected as being too cheap. If this isn’t enough, Aetna is reportedly interested in buying Humana, the fourth-largest carrier in the country. Big is better, right? After all, lobbying does matter a great deal in healthcare.

The impact on various markets across the country will most certainly affect local competition, and because of this, such takeovers will face rigorous antitrust scrutiny by the U.S. Justice Department for anti-competitive reasons. The reality is that healthcare markets are local, so unless a larger carrier gains a larger percentage of insureds in a given market, certain markets will not be impacted.

Hospitals have also made a myriad of moves in the recent past through mergers and acquisitions. Physician practices are gobbled up in Pac-Man fashion. Hospitals are concerned that larger insurance oligopolies will gain more clout by keeping provider payments lower – yet increase prices of insurance products to purchasers – employers and individuals. It appears the new arms race is not so much about nuclear bombs, but rather, healthcare purchasing clout. The hunger to grow escalates when the other side expands – a never-ending treadmill of activity.

So what does this mean for healthcare customers like you and me? Through sleight-of-hand, carriers and providers provide the illusion that patients are the focus in this post-ACA environment. But unfortunately, due primarily to the complexities inherent in healthcare, the public continues to buy into this perpetual illusion that care will somehow get better and become less expensive because our best interests are the center of this activity. The illusion continues.

Let’s be honest, it’s about the bottom line – healthcare is in the money business.

Third parties develop websites on price information coming from aged-claims data that usually are at least two years removed from the unknown prices now being used. Patient engagement is critical within healthcare, yet, according to research conducted by Nielsen/Harris Interactive Strategic Health Perspectives, patients with chronic conditions who have significant out-of-pocket exposure are increasingly feeling disillusioned by our healthcare ‘system.’

As mentioned in previous blogs, gaining the ‘public trust’ is the fundamental business in which the health provider community should be operating. But customers who feel hopeless about their healthcare most likely will not have the trust to use transparency tools to make optimal healthcare decisions – even when more relevant tools eventually become available.

Growth by acquisition and mergers will not gain public trust. If consumerism has a chance to work in healthcare, we must allow it to work by agreeing that, when seeking non-emergency care, consumers are entitled to receive accurate cost information about their out-of-pocket exposure. This information can be provided through the collaboration of providers and carriers. If they are unwilling or unable, other third parties can fill this role. Without a doubt, the healthcare and health insurance worlds are in a full state of disruption – complacency is NOT an option for those who wish to survive.

Further, consumers must have access to quality metrics about the provider care they seek. Gaining a consensus on quality metrics will be no easy task, but it is the right course to take when rewarding those providers who perform the care we assumed we were receiving in the past.

Mergers and acquisitions may be great for owners, stockholders, corporate executives and the M&A consultants who promote such activities. But it only prolongs the REAL work that is needed for healthcare to become safe and affordable to all.

Bigger is not better. Smarter is better.

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