“My guess is that regulators would not like this,” said David E. Williams, president of the Boston consulting firm Health Business Group. “There’s no compelling logic for a merger here. There would be a lot of resistance to it.”
Williams said he doesn’t see a good business reason for a merger since Partners and Harvard Pilgrim, one of the largest health insurers in Massachusetts, could choose to work together more closely while remaining independent.
I’m pretty sure the idea of a merger won’t get very far. Stay tuned.
Friday’s news was full of stories about merger discussions between Partners HealthCare and Harvard Pilgrim Health Care. No one denied the reports, so we can assume there’s some truth to the rumors. But why would these organizations contemplate a merger and how likely is it to happen?
From Partners’ perspective:
After growing for decades by taking over other providers, Partners has run out of options for major acquisitions. The state blocked Partners’ attempt to buy South Shore Hospital, for example. Meanwhile, Partners’ biggest rival, Beth Israel is becoming more formidable as it combines with Lahey. In some ways a Partners/Harvard Pilgrim merger would be analogous to the proposed Aetna/CVS combination, which was pursued only after Aetna’s planned purchase of Humana was rejected on antitrust grounds.
After buying Neighborhood Health, Partners is comfortable with the idea of owning an insurer. But they want one that’s bigger and focused on the commercial market rather than Medicaid.
The shift to value based care means providers need more of the capabilities typically found within health plans. This becomes a buy v. build decision.
From Harvard Pilgrim’s perspective:
Even though it’s not the number one player in the market, it too may be too big to get away with acquiring a significant competitor, e.g., Tufts Health Plan.
The Partners account itself actually has about 100,000 members. Shifting that business away from Blue Cross could be significant even on its own. (Although it kind of reminds me of the Cheech and Chong sketch where Chong proclaims himself a “good customer” –of himself).
Possibly, Harvard Pilgrim could gain an exclusive relationship with Partners, where the only way to get care at Partners is by purchasing a Harvard Pilgrim plan. That doesn’t seem likely, but who knows?
It’s not unusual for health plans and providers to consider tying up. Remember, Harvard Pilgrim’s predecessor, Harvard Community Health Care was a staff model HMO with its own physicians and care facilities. More recently, you see combined payers and providers (“payviders”) emerging in the Medicare Advantage space. There is a certain appeal to combining health insurance and delivery in one entity–Kaiser is Exhibit A– but ultimately it’s not such a superior model.
I don’t think a merger of Harvard Pilgrim and Partners has a compelling rationale and I don’t see it happening. More likely is some kind of limited alliance or joint venture.
The average consumer might not know it, but health plans are often mired in complexity and inefficiency as they struggle to configure and deploy new offerings. A surprising number of plans rely on spreadsheet-based systems to manage their plan benefit packages — a surefire formula for driving up labor costs and making errors. Some have spent tens of millions of dollars trying and failing to automate theses processes.
In this podcast interview, Simplify Healthcare CEO Mohammed Vaid shared his perspective on this problem and its solution.
(0:14) What are some of the main inefficiencies you see with health plans?
(3:44) Are these problems widely recognized within the plans?
(5:08) Have they become more of an issue recently?
(7:12) What approaches have been taken to address these problems?
(10:12) What are the more promising ways to address these issues, perhaps starting with benefits?
(12:12) To what extent have such enlightened solutions been implmented? Are there success stories out there?
(14:10) Tell me about Simplify Healthcare and how your company gets involved. What’s the experience like for a customer?
Tufts Health Plan CEO Tom Croswell is a veteran of the health plan world. I sat down with him recently to discuss value based care, collaboration, diversity and how Tufts tries to set itself apart in a crowded market. Tufts is best known for serving Massachusetts but is also expanding into neighboring states. It has a joint venture in New Hampshire and just announced its entry into Connecticut in partnership with Hartford HealthCare.
(0:08) What’s the outlook for value based care? Have the attacks on Obamacare taken a toll?
(1:15) Tufts got started in a value based way. Say more about that history.
(3:55) You talked about partnering. Who are the partners? How do you work with them?
(5:29) Do health plans need to take an adversarial role with providers? Does your collaborative approach actually work?
(7:42) Does collaboration just work in Eastern Massachusetts? Or can it work more universally, including your new market of Connecticut?
(8:59) Let me ask you about a couple of other buzzwords: diversity and inclusion. What do those words mean to you?
(11:02) Are there particular things you do at Tufts on diversity and inclusion related to your own workforce?
(12:36) Can you measure the impact of your policies and activities?
(13:54) Are you optimistic or pessimistic about 2018?
(15:00) How do you think about differentiating Tufts Health Plan from all the other strong players out there?
Now that Amazon and its partners JP Morgan Chase and Berkshire Hathaway have decided to tackle healthcare for their employees, everyone is tossing out ideas for what they might do to solve the system’s myriad problems. I count myself among those lobbing in suggestions, with my emphasis on making the system more patient-oriented.
Two letter writers in the Wall Street Journal have interesting ideas about what the partnership should do, but ultimately they are misguided.
Fred Hyde, MD, JD, MBA thinks the team should take advantage of association health plan (AHP) rules to beat up providers over pricing, pointing the finger at “monopoly pricing by larger health systems” and prescribing reference pricing or a Dutch auction for the procurement of hospital care. He points to ERISA as a great liberator for larger companies and thinks AHPs could be the answer for smaller businesses.
Well, all three partners already can take advantage of ERISA and that hasn’t really helped them. There’s also no particular reason to think providers are going to give the companies lower prices just for the heck of it.
Robert E. Mittelstaedt Jr., Emeritus Dean from Arizona State University, thinks full price transparency is going to be the answer, “forcing patients to make economic decisions” and pushing government to allow providers to compete on price. In my experience providers don’t want to compete on price and sick patients and their families are not well positioned to shop for most healthcare, especially the expensive and emergency stuff like cancer treatment and trauma care.
The writer says the partnership is “no different” than the history of Kaiser Permanente. In that case why not have all employees join Kaiser? After all there is already Kaiser Permanente Washington, based near Amazon’s headquarters, the former Group Health Cooperative. These plans are no panacea.
I’ve heard people quip that the best thing this group of companies could do for their employees is advocate for a single payer system in the US. I think they can do better than that, but it’s actually a better idea than a lot of what’s being discussed.