For Health IT Leaders, a Highly Unsettled Business and Policy Landscape Demands Maximal Agility

Jan. 24, 2017
Monday’s federal court ruling blocking the Aetna-Humana merger served as a warning to IT leaders in patient care organizations that the U.S. healthcare system is headed into an unprecedentedly unsettled period for the foreseeable future, one requiring maximal agility in planning and execution

What does the major ruling in the Aetna-Humana case on Monday mean for healthcare IT leaders? In a word, uncertainty—uncertainty in business contracting that could affect planning around risk contracting and population health initiatives trickier than ever before.

Let’s look at the circumstances of the federal court ruling on Monday, when a federal judge blocked the a proposed mega-merger, between the Hartford-based Aetna and the Louisville-based Humana, two of the powerhouse health insurers in the U.S. As Managing Editor Rajiv Leventhal noted in his news story posted shortly after the news broke, the merger agreement, in which Aetna proposed to buy Humana for $37 billion, has been ruled anticompetitive by US District Judge John Bates. A report in Bloomberg Markets on Monday morning reported, in referencing the health insurers’ assertions that their merger would not be anticompetitive, that “Bates sided with the government, writing that data showed there are seniors who prefer Medicare Advantage and would be unlikely to switch to original Medicare if prices for Medicare Advantage plans rose."

The Bloomberg Markets story continued, "The head-to-head competition between Aetna and Humana benefits these seniors with broader networks and lower costs, Bates said. The companies’ proposal to restore competition by selling assets to Molina [a separate health insurer, based in Southern California] was insufficient, the judge said. And it quoted Judge Bates as writing that “The companies’ rebuttal arguments are unpersuasive: Federal regulation would likely be insufficient to prevent the merged firm from raising prices or reducing benefits, and neither entry by new competitors nor the proposed divestiture to Molina would suffice to replace competition eliminated by the merger.”

The Washington Post’s article on the ruling noted that “Bates wrote in his opinion that the proposed merger would have decreased competition substantially in the Medicare Advantage market in 364 counties. Aetna and Humana had argued that Medicare Advantage plans also competed against traditional Medicare options, but the judge sided with the Justice Department that the private Medicare plans were a separate market. The companies also proposed that divesting some of that business to a smaller insurer, Molina Healthcare, could have addressed those concerns, but the judge did not agree.”

The Post’s story, by The merger was also deemed to lessen competition in the exchanges set up by the ACA in three Florida counties. Aetna withdrew from the majority of the exchanges that it had participated in this year, citing financial losses. The judge, however, wrote that Aetna withdrew from 17 counties highlighted in the case "specifically to evade judicial scrutiny of the merger."

What’s more, as the Bloomberg story noted, “Reuters last week reported that another healthcare tie-up, the Anthem-Cigna megamerger, would be blocked by a federal judge. Former Attorney General Loretta Lynch argued in July when the suit was brought that both the Anthem-Cigna merger and the Aetna-Humana merger would hurt consumer choice and increase prices.” Reuters had quoted former Attorney General Lynch as saying that "not only would the bank accounts of the American people suffer, but the American people themselves." Of course, with a change in administration, it is possible that the overall landscape around how federal authorities might treat antitrust issues in the healthcare world, and in particular in the health insurance world, could shift quickly.

The Reuters article reported on Jan. 19 that “A federal judge is expected to block a proposed deal between health insurer Anthem Inc (ANTM.N) and Cigna Corp (CI.N) as soon as Thursday, the New York Post reported, citing sources. Anthem, which operates Blue Cross Blue Shield health insurance plans in 14 U.S. states, is trying to buy smaller rival Cigna. The government sued seven months ago to stop the deal, saying it was anti-competitive. Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia has not yet issued an opinion on the case,” the Reuters story noted. “The trial began late last year, and Cigna said it ended on Jan. 4.”

Looking at the bigger picture—and seeing business instability

Whatever the ultimate outcomes of the Aetna-Humana and Anthem-Cigna cases, one thing is clear: CIOs, CMIOs and other healthcare IT leaders will need to think carefully and as strategically as possible about how they lay the foundations for and facilitate all the data gathering and data exchange that will support the accountable care organization development, population health initiatives, bundled-payment contracting, and all other risk-based contracting that they are currently engaged in or might become engaged in, with any of these major health insurers, or with any health insurers—not to mention with fellow patient care organizations.

That is not to say that laying the broad, general foundations for the kinds of data gathering, data analysis, and data sharing to support broad population health efforts should not continue; they absolutely should. Indeed, despite the partisan political rancor right now over the Affordable Care Act in Congress, there is simply no question that the core concepts around value-based purchasing in healthcare will evolve forward over time. The burning platform for value-based purchasing? The absolute fiscal cliff that the United States healthcare system is headed toward, as total U.S. healthcare expenditures go from around $3.3 trillion now, to $5.631 trillion by 2025, according to the Medicare program’s actuaries’ revised estimates last July.

So our entire healthcare system is in a bit of a strange period of flux right now. On the one hand, the broadest outlines around our healthcare system’s trajectory are as clear as anything in our system can be: healthcare already costs too much in the U.S., in the context of affordability relative to what our nation can sustain (and we aren’t alone in that, either, as every advanced industrialized nation is struggling with rising healthcare costs these days—we just have a cost profile that is on a different level from those of all of the nations we might consider peers); and our cost trajectory is becoming more challenging, not less. As a result, the purchasers and payers of healthcare are demanding that the providers of healthcare uncover and pursue new strategies to shift healthcare’s value paradigm, even as the landscape of our healthcare system enters as unsettled a period of time, at the policy and business levels, as it has ever experienced.

What does all this mean for healthcare IT leaders? The word “flexibility” comes to mind here. And it is flexibility on multiple levels—on the strategic planning level, on the level of execution, and on the level of day-to-day adaptability to ever-changing policy and operational environmental factors. So your health system had established a robust ACO with Big Health Plan A last year? And then Big Health Plan A announced a merger with Big Health Plan B? And now the Big Health Plan A-Big Health Plan B merger is off? But in the meantime, your competitor down the road, Health System B, which had made an announcement to partner with nearby Health System C, to develop a broad risk contract with Health Plan B, has changed its plans, and is now working with Health System D on an ACO contract with Big Health Plan D? Yes, really—that is the kind of scenario that could happen—and probably will, to someone.

Under such circumstances, the approach for many healthcare IT leaders will have to be to achieve a combination of speed, agility, foundational computing strength, and flexibility, to help their organizations move deftly across this landscape, potentially changing plans as payers and providers in their landscapes make sometimes-abrupt changes, and as policymakers in Washington, D.C. and the state capitals at times shift the ground from under them.

So in the end, we’re really talking about a certain type of split-screen contingency planning here, one that lays the foundations for value-based purchasing, accountable care, and population health management, while providing for maximal flexibility around the particulars of the various business arrangements that will be possible.

In that, yes, healthcare IT leaders will have to be more savvy and more planful than ever. But there really is no way around the need to be ready for any eventuality, in this operating landscape that keeps shifting-all the time.

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