Industry leaders have demonstrated a hungry anticipation and excitement for recently announced insurer-provider arrangements. However, these proposed mergers face numerous challenges in their potential path toward healthcare disruption.
In a Dec. 14 op-ed for Harvard Business Review, David Blumenthal, MD, president of the Commonwealth Fund and the previous national coordinator for health IT for the Obama administration, comments on the industry fervor surrounding insurer-provider mergers and whether such transactions will really improve the quality of healthcare for patients.
Here are six thoughts Dr. Blumenthal wrote on the insurer-provider relationship.
1. The U.S. healthcare system is "begging for disruption" because care, for most Americans, "is not only expensive, but is also fragmented, inconvenient and physically inaccessible, especially to the sickest and frailest among us," Dr. Blumenthal wrote.
2. However, it is unclear if provider-insurer mergers are the way to go. The success of such mergers "depends above all on the results," wrote Dr. Blumenthal. Those types of mergers must produce a higher-quality product for consumers at a much more affordable price.
3. With regard to the insurance-provider model, the act of combining an insurance function with a delivery system is not a revolutionary concept in the healthcare industry, according to Dr. Blumenthal. He notes several examples, including Danville, Pa.-based Geisinger Health System and Oakland, Calif.-based Kaiser Health Plans, in which "high-performing, nonprofit healthcare organizations" branch out into the insurance marketplace.
"The reason this formula works is that when care-delivery systems also act as insurers, they assume financial responsibility for the care they provide. This tends to focus doctors, nurses, and other health professionals on the value of what they do — finding the most cost-effective approach to managing their patients' problems," Dr. Blumenthal wrote. "The result can be a culture of economy and quality that is very hard to replicate in the prevailing fee-for-service environment, where health professionals get rewarded for the volume rather than the value of services."
4. However, CVS, the care provider in the $69 billion CVS-Aetna acquisition deal, provides a limited set of health services, which includes drugs, drug purchasing and select, routine primary care services at CVS "Minute Clinics." According to Dr. Blumenthal, to have the disruption-factor equivalent of Geisinger or Kaiser, CVS-Aetna "would have to acquire — or develop — seamless relationships with legions of primary care and specialty physicians and hospitals. ... Turn [CVS] stores into medical clinics, with exam rooms, diagnostic laboratories, and x-ray suites. ... And [CVS] would have to install and link electronic health records with other providers in its communities."
Even if CVS manages to overcome those obstacles, the combined organization would still have the difficult task of managing physicians and other healthcare professionals nationwide, he noted.
5. The more likely outcome of the CVS-Aetna deal, Dr. Blumenthal wrote, is the merged organization would be able to offer a suite of preventative and population health services for high-cost, chronically ill patients in a much more convenient fashion. By doing so, the combined organization will "reduce patients' use of more expensive emergency, hospital, and specialty services, thereby reducing Aetna's bills and making its product more competitive. Aetna would incent its clients to use CVS services by exempting these from the normal deductibles and copays that most insurers charge, thus incidentally, increasing CVS's business more generally. This strategy could attract customers to both CVS and Aetna, add health care value, and even drive up profits," he wrote.
6. While the proposed UnitedHealth-DaVita acquisition more closely mirrors the traditional Kaiser or Geisinger insurer-provider relationship, UnitedHealth and DaVita face the similar challenge of creating a national system capable of disrupting the provision of care.
"Health care is a very local affair, and the organizations providing it tend to be creatures of their localities and histories. It can take generations for a provider-insurer partnership to develop a culture of trust, collaboration, and value orientation that has made existing examples of these combinations so uniquely effective. If the new [UnitedHealth-DaVita] entity seeks to grow, it will find that recruiting and training physicians who can leave the fee-for-service mentality behind is a challenge, as is finding leadership that can gain and keep health professionals' trust," Dr. Blumenthal wrote.
To read Dr. Blumenthal's full op-ed, click here.