Could mega health plan mergers drive down healthcare costs?

There's been concern that the recent mega-mergers proposed by health plans could wind up driving up costs in the provider realm. But that trend could actually lead to counterintuitive results, according to CFO magazine. Instead, the article posited, the mergers could lower costs in the long run.

The deals being announced have been formidable. They include Anthem trying to acquire Cigna, and UnitedHealth trying to buy out Aetna--deals that would move tens of millions of lives into a single entity.

"Scale is becoming increasingly important when you look at the technology investments needed to do more sophisticated data analysis to figure out how to help people be healthier," Jim Winkler, chief innovation officer at Aon Hewitt Health, told CFO. "That requires capital. But scale will also give health plans better negotiating leverage. Providers obviously won't love that, but it will help the healthcare marketplace move faster toward payment for value."

Winkler and others suggested the consolidation trend involving hospitals and medical groups could do more to push up prices than what has been going on in the payer realm. "A hospital that buys stand-alone physician practices is essentially turning itself into an outpatient facility but charging more for that," Winkler said.

Such concerns have prompted industry observers to sort out mergers by their consequences, such as whether they benefit the surrounding community, or discourage competition.

"We're heading into an era of huge players in the healthcare industry, on both the insurers' side and on the healthcare providers' side," Mike Thompson, a New York-based principal and healthcare practice leader at PwC, told the trade journal Business Insurance.

To learn more:
- read the CFO article 
- check out the Business Insurance article