The merger between Cigna and Anthem was blocked by a federal judge in order to maintain competition between health insurance companies and ensure that cost to consumers were not fully controlled by three main payers. Anthem and Cigna are two major health insurance payers, their merger would have limited competition and increased costs. Competition among insurance companies help reduce the cost of premiums, increase quality of care, and the ability to offer better benefits (Campbell, 2017).
The merger between Cigna and Express Scripts differ from the Cigna-Anthem merger in that the acquisition with Express Scripts gives Cigna the ability have a PBM partner that can offer self-insured employer groups price transparency and help incorporate value-based pricing. In addition, Cigna will be able to demand better purchasing, pricing, and rebates (Sagonowsky, 2018).
The proposed Walmart-Humana merger benefited patients by further stimulating the competition in drug pricing. Walmart currently has a co-branded Medicare drug plan with Humana that steers patients to Walmart stores. The partnership offers a prescription drug plan that can save up to 20 percent in drug costs for customer (Mathias, 2018).
The Cigna-Anthem Merger differed from the Cigna-Express Scripts and Walmart-Humana merger in that the Cigna-Anthem merger was going to lead to increased cost and limit competition in the marketplace, ultimately having a negative impact on consumers, payers, and patients. The Cigna and Walmart mergers had a more positive impact on competition in the marketplace, improving pricing transparency, and reducing healthcare costs.
In the climate of mergers, the DOJ has the responsibility to maintain competition within the healthcare industry and prevent monopolies or companies who command a significant percentage of the market share that can control prices and reduce fair competition. The proposed Cigna-Anthem merger would have been a horizontal merger of two companies who combined would provide insurance for half of the large companies with at least 5,000 employees (Cooper, 2017). This differs from the merger between Cigna and Express Scripts since this is a vertical merger between an insurance provider and pharmacy benefits manager. Despite the difference in integration, the top three PBMs command 80% of the market share for prescription claims with CVS/Caremark commanding 33%, followed by Cigna/Express Scripts at 26% (The Top Pharmacy Benefit Managers of 2021, 2022). Both the horizontal and vertical mergers presented above adversely impact competition through consolidation which provides these companies a commanding percent of the market share. The Cigna/Express Scripts merger was able to demonstrate how they would achieve cost savings through this merger, where the Judge did not believe that the Cigna-Anthem would effectively reduce costs. Additionally, Cigna would not be able to increase costs within their own competitive marketplace as a result of a vertical merger.
The proposed Walmart/Humana merger is again a vertical merger seeking to acquire an insurer to accompany the healthcare services they already provide: in-store walk-in clinics and laboratories through a partnership with Quest Diagnostics. This is a strategic move on Walmart’s part because Humana is the largest provider of Medicare Advantage Plans. This acquisition would give Walmart leverage to negotiate lower drug prices and provide convenient and cost-effective healthcare services to the growing senior population (Sawaka, et. al, n.d.). Walmart is a retail store, so similarly to the vertical integration of Cigna and Express Scripts, merging with an insurance company is not going to directly impact retail competition with other competitors. Question: Should vertically integrated mergers be blocked when considering how it impacts marketshare? Even if these companies provide different products or services, the merged entity still limits competition and market viability for smaller companies within either market.
The past few decades have demonstrated a major trend of consolidation in the healthcare industry. Consolidation refers to how hospital systems are organized through mergers and system acquisitions. Hospital consolidation has both positive and negative impacts. On the upside, the formation of hospital systems holds the promise of care that is of better quality, better coordinated, and better tailored to local needs (Cuellar & Gertler, 2005). It is believed that the consolidation trend is in response to managed care or to make themselves indispensable to managed care provider networks. A Deloitte publication (n.d.) suggests that significant regulatory changes, technological innovations, and market dynamics are the causes of the “great consolidation”.
Consolidation will most likely continue to trend. Although the rate of hospital system acquisition may be slowing, the local presence of hospital systems is growing, according to Cuellar & Gertler, 2003). There are so many options when considering consolidation. Thinking back to week six and remembering that consolidation can be vertical where health systems acquire medical groups or horizontal which allows for hospitals to acquire other hospitals.
The Affordable Care Act encouraged consolidation believing that greater consolidation would streamline services and drive down costs but they were wrong (Kandrach, 2018). Mandates were pushed that made competition more difficult for physician groups, insurers, and hospitals. Across the industry, the evidence points toward increased costs, decreased services, and reduced quality of care for patients as a result (Kandrach, 2018).
Consolidation is not a bad thing to consider; we must look at how it affects the customers. Consolidation is most likely to continue to happen. At an increasing rate, the healthcare industry consolidates how hospitals get closer to achieving their sustainable goals. Typically emphasizing cost and better-coordinated care is an advantage of mergers and acquisitions dominating the market with resolution (Hemphill, 2017).
Today’s community hospitals and health system is striving for the long-term concerning their administrators. The benefits of the healthcare sector are a once-in-a-lifetime chance to make choices, but it may not benefit each firm. The ultimate objective of integrating the care delivery system can play out in the upcoming years as providers enhance the quality and efficiency of care by cutting costs.
To improve and save money, unification will allow providers to do this. Integrating a rehabilitation center into a healthcare system can provide necessary care while the patients are still in the hospital. This will help the patient to recover quicker if physical therapy is needed after their hospital visit (Gaynor, M., 1999). An integrated pharmacy partner and the insurance around the medication or medical equipment could complete an image of everything, facilitating payment.
Consolidation is not always good for patients. Reducing competition in healthcare system networking could result in fewer treatment options in some areas. Saving costs to the patient in the hospital rarely passes. Consolidation may increase hospital service prices if the system develops a regional monopoly (Vogt & Town, 2006). When doctors are concentrated in one system, the hospital would likely request supplemental payment for services.
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