Hospitals are ideally positioned to withstand consolidation in the health insurance industry, according to a report from Fitch Ratings.
Recently, the payer sector has seen a wave of mergers & acquisitions (M&A) activity, and the consolidations may have long-term implications for the hospital sector.
Hospitals probably won't feel immediate price pressure as a result of the mergers because providers have built a market presence that will shore up their negotiating power, Fitch said in the report announcement. But the merger trend could have a negative impact on competition by smaller insurers in some markets in the long term, the firm noted. It could also hasten providers' shift toward a value-based payment model if insurers bet on those models.
If finalized, the proposed merger between Aetna and Humana will create the second-largest national for-profit health insurer in the country. It could also provide a major boost to the accountable care model, as Aetna has emphasized a broad accountable-care strategy post-Affordable Care Act (ACA), according to Healthcare Finance News. Aetna maintains about 15 accountable care organizations with health systems, according to the article. Many of these collaborations, such as the insurer's arrangement with Memorial Hermann in the Houston, Texas area, also help health systems launch their own plans for employees or the market at large.
The wave of mergers also comes in the wake of the Supreme Court's ruling in favor of ACA subsidies in the King v. Burwell case, which had a positive impact in stocks in both the hospital and insurance sectors. Hospital leaders have also taken action to address challenges in the operating environment, which Fitch credits with encouraging health payer consolidation.