Ever since news broke this summer that Aetna planned to merge with Humana and Anthem would acquire Cigna, concern has swirled about how the insurance industry's consolidation will alter the healthcare landscape.
Provider groups have pulled few punches in their criticism of the pending deals, with the American Hospital Association detailing its concerns in letters to federal regulators and the American Medical Association issuing a report that highlights how both mergers would diminish competition.
The top executives of the merging companies, meanwhile, have defended the deals' merits. Cigna CEO David Cordani said this week that his company's combination with Anthem will not decrease consumer choice, and Aetna CEO Mark Bertolini has said the deal with Humana will make both companies stronger in the retail marketplace.
But long before announcing its plan to acquire Humana, Aetna had been toiling to shift its entire business from a fee-for-service reimbursement model to a value-based one, Bertolini has said.
But how will Aetna's ACO strategies mesh with Humana, which through its booming Medicare Advantage business has also been a major player in value-based payment models? To find out, FierceHealthPayer spoke to Charles Kennedy, M.D., (right), chief population health officer for Aetna's provider solutions business, Healthagen.
Editor's Note: This interview has been edited for length and clarity.
Q: How do you think the merger with Humana will help Aetna accomplish its goals in accountable care?
A: Actually I think the merger is going to be very, very positive for our ACO strategies and ambitions.
If you think about what Aetna's doing, we have been pursuing a mission of building a healthier world--and when we say that, people think that's kind of coming from a philanthropic place, and partially it is, but it's also coming from a sound economic place.
If you look at healthcare costs, roughly 80 cents on the dollar, depending on the population, can be traced to chronic disease. So if we're going to look at how to create an affordable, efficient and effective healthcare system, you really have to start from the perspective of health in order to get a handle on chronic disease.
So when we look at Humana, they complement that perspective that Aetna has very, very well, and we think this transaction is going to enable us to accelerate our efforts in that space.
The second thing that I would relate is that, in the American healthcare system, consumers have really struggled to get good value for their dollar. And we believe this transaction is going to help the consumer get better value for their healthcare dollar. That's really the primary goal of the transaction--to help us offer consumers more choice, more products in more geographies, and at the heart of that is accountable care.
Q: Can you describe some of the specific initiatives Humana has undertaken that Aetna would like to learn from, in terms of engaging with members, work in the Medicare space, etc.?
A: To be in the Medicare Advantage business, you have to be focused on value, because you have to offer the Medicare Advantage customer better value than fee-for-service Medicare. So Humana is really a value-based company to its core, and if you look at what they've done with ACOs, they've got a little over half of their Medicare Advantage members in ACOs, and those members have had roughly 19 percent lower costs of healthcare than their very same types of members who are not in those types of relationships.
And so that kind of performance is very exciting to us as a foundation, because we can take their capabilities in Medicare Advantage, their track record, and then by combining it with our commerical experience and our commercial performance--we've had similar successes--we think we're going to end up with in essence a health services division between the two companies that will offer consumers and providers better solutions in making accountable care services available.
In order to make accountable care work, you really need to have a certain way of doing business, but you also need the tools, the care management program, the experience with the financial incentive base to make a change from traditional volume-based care to value-based care.
Humana has done that very successfully in the Medicare space. We've done that very successfully in the commercial space, and the combination of the two will facilitate the move to value-based healthcare. We think that's going to offer the American consumer better value for their healthcare dollar.
Q: A lot of provider groups seem to be coming out against the merger--do you think that's going to affect how you work with providers in furthering accountable care?
A: If you look at the old volume-based way of doing healthcare, I can certainly appreciate those organizations' concerns. But if you look at the track record that Aetna and Humana have created, around moving to value-based care, you end up with a very different perspective.
Because in order to increase consumer value--what do you have to do? You have to collaborate with physicians. The old model, where we sit across the negotiating table and have a confrontational negotiation over rates, that's not what this model is.
And I think a lot of the regulators, some of the large provider organizations, when they look at this merger, they're looking at it from the lens of the past rather than the value-based healthcare system of the future, which both ourselves as well as the federal government, quite frankly, are trying to create for the country.
And so our challenge is making sure these organizations understand our strategy, understand how it actually creates a win-win for the providers, and communicating that so they fully understand the business model, the dynamics, and how this is actually going to bring benefit to their members as well as to the American consumer.
Q: Do you see any other merger-related challenges, in terms of combining cultures, getting everyone on the same page?
A: Certainly every merger has its own unique challenges. When you look at the track record of which mergers have been successful, one of the most important determinants of success is the alignment of cultures. And if you look at, for instance, what's happening between providers and hospitals that are frequently integrating in our marketplace today, one of the challenges they've had is that the cultures frequently don't match between provider groups.
In our case, the reason we're so excited about the Humana merger is that our leadership on both sides looked very closely at the cultures of both organizations, and I think because both of us have made the commitment to value-based healthcare so strongly, we actually found that there's very good cultural alignment. And that's going to make the work of getting the merger done I think much easier to achieve.
The other thing that I would point to is that we acquired Coventry a couple of years ago, so we have a senior management team that has already gone through a fairly significant acquisition. We have a lot of expertise now in place that we can bring to bear in the merger. So I think we're going to do just fine when it comes to the merger dynamics.
Q: Anything else you'd like to add?
A: When I say we see this merger as being valuable both to the provider as well as the consumer, sometimes people say, well how can that be, because they're thinking of it as sort of a zero-sum game. And this is where the move to value-based healthcare is so absolutely important.
If you think about the healthcare that offers zero value, it's waste. If you think about the healthcare that actually harms people, that's actually negative-value healthcare.
The power of the value-based strategy that we're pursuing and accelerating with Humana is that it creates the appropriate sets of measures to drive out the type of care that doesn't benefit anyone or actually harms people. Through shared savings types of arrangements, we can actually create financial gains for the providers, at the same time that we're offering better value for the consumer.
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