As if the healthcare system wasn’t confusing enough, construction signs are now popping for consolidations.
As if navigating the twists and turns of the U.S. healthcare system highway wasn’t confusing enough, construction signs are now popping up all over the place in the form of consolidations. Why is this happening? What does this mean for consumers? And, how will this change the way consumers receive care?
The United State’s annual medical spend has risen to over $3.4 trillion and is only projected to grow. This spend accounts for roughly 18 percent of the U.S. GDP. Some want a piece of the incredibly large pie, while others are focused on reducing its size. Then, there are those who have accepted the need for a smaller pie but want the biggest piece possible. It’s in this third group where we’re seeing many of the industry consolidations. From Aetna and CVS to Cigna and Express Scripts and, most recently, Walmart and Humana, these big-name players are intent on controlling the largest portion of the multi-trillion dollar industry they can.
If these consolidations are successful, the way insurers and healthcare providers interact will change because of one word: data. Data is king, and many believe it is the key to reducing healthcare costs in this country.
Aetna is one of the largest health insurers. Its plan to merge with CVS, the largest national retail pharmacy chain that also happens to own the largest pharmacy benefit manager, Caremark, will give the consolidated healthcare giant access to an incredible amount of member, patient and provider data. The same is true for Cigna and Express Scripts, although to a slightly lesser extent. While this consolidated entity would not, at this time, have brick-and-mortar pharmacies, together, they will reap the benefits of combining member, patient and provider data. However, the proposed Walmart and Humana merger could prove the most impressive in terms of data consolidation, followed by Aetna and CVS. Not only will the newly combined company know whether their members and patients fill their prescriptions, they’ll know what those same members and patients purchased while waiting for their prescriptions. Did the depressed, hypertensive diabetic buy ice cream, red meat and cigarettes? They will now have those answers.
So why is this important? According to the Centers for Disease Control and Prevention (CDC), over 86 percent of the healthcare spend is due to those suffering from chronic disease. More importantly, however, is over 50 percent of these costs are attributable to patient behavior. As a result, having access to both medical and behavioral data allows the depressed, hypertensive diabetic purchasing ice cream, red meat and cigarettes to become an opportunity for outreach and case management.
These companies will attempt to capitalize on the data available to them to help manage the cost of care. Perhaps it will be in the form of a letter or phone call to the member. Perhaps it will come in the form of a highly personalized clinical program where the member receives access to nicotine replacement therapy, a gym membership and nutritionist services.
These organizations alone cannot and will not be able to force patients and members into participating in programs designed to improve health and reduce the cost of care.
Okay, so now what? Let’s assume for an instant all of this data conglomeration works to drive down the cost of care to a more reasonable $2.5 trillion. Will consumers benefit from the savings? This is yet to be determined. In reviewing the proposed consolidations, the federal antitrust enforcers will attempt to discern the impact on the consumers. Undoubtedly, these entities will argue the proposed mergers will reduce costs by increasing efficiencies and allowing them to positively affect the medical spend trend. Critics, however, predict individual consumers will never see the savings projected by these organizations. Who’s right? That’s a question that can only be answered with time.
This article is educational in nature and is not intended as legal advice. Always consult your legal counsel with specific legal matters.
Christian Puff
About the Author:
Christian Puff is an attorney with Hall, Render, Killian, Heath & Lyman, P.C., the largest healthcare-focused law firm in the country. Please visit the Hall Render Blog at http://blogs.hallrender.com/ for more information on topics related to healthcare law.
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