AMA Urges DOJ to Block Health Plan Mega-mergers

In other recent business developments, Henry Ford Health has signed a letter of intent to acquire Allegiance Health, Tenet Health is exiting the North Carolina market, and the FTC is delaying a hospital deal in West Virginia.

The American Medical Association is asking the federal government to block two proposed mega-mergers involving four major health insurance companies, deals that the physicians' association say would drastically reduce competition and increase healthcare costs for consumers.

AMA President James L. Madara, MD, said in a letter to Assistant Attorney General William Baer, with the Department of Justice's antitrust division, that the proposed acquisitions of Humana by Aetna and of Cigna by Anthem would create "significant concerns with respect to the impact on consumers in terms of health care access, quality, and affordability."

"The proposed mergers are occurring in markets where there has already been a near total collapse of competition," Madara said. "Under the U.S. Department of Justice/Federal Trade Commission merger guidelines, the proposed mergers are presumed to enhance market power in a vast number of commercial and Medicare Advantage markets. Because of persisting high barriers to entry in health insurance markets, the lost competition through these proposed mergers would likely be permanent and the acquired health insurer market power would be durable."

Aetna and Anthem issued statements challenging the AMA's assertions.

"We believe the combination of Aetna and Humana will improve the healthcare system and offer consumers more choices and greater access to higher quality, more affordable care," Aetna said. "Our proposed transaction is primarily about the Medicare marketplace, where there is robust competition and choice. We are confident that our transaction will receive a fair, thorough, and fact-based review from the Department of Justice and the states."

Anthem said the letter "merely reiterates the comments the AMA has made previously and does not reflect the actual facts regarding Anthem's acquisition of Cigna."

"Together, Anthem and Cigna, which have limited overlap in a highly competitive industry, will be in a better position to improve consumer choice and quality," Anthem said. "Additionally, we will deliver for consumers by operating more efficiently to reduce our own costs, while enhancing our ability to manage the cost drivers that negatively impact affordability for consumers.

Anthem argued that a combined Anthem/Cigna would accelerate the transition from volume- to value-based payments, and that the bigger company would have more leverage to negotiate lower rates from physicians and hospitals, which would be passed on to consumers.

"Consolidation among hospitals and physician groups is a real and growing concern for consumer affordability," Anthem said. "A recent analysis found that physician prices for groups acquired by hospital systems jumped by 14%, on average. A separate study showed that large, self-insured employers paid lower prices for care in markets where insurers had a better negotiating position."

Henry Ford Health to Acquire Allegiance Health
Jackson, MI-based Allegiance Health will be acquired by the Henry Ford Health System, a five-hospital system based in Detroit. The two health systems signed a letter of intent this month and if all regulatory hurdles are cleared the acquisition should be completed in early 2016.

"Joining with Allegiance Health is an important strategic step for Henry Ford as we broaden our expertise and reach beyond southeast Michigan," Henry Ford president Wright Lassiter, III, said in prepared remarks. "We appreciate how important Allegiance is to the Jackson community, and how dedicated its staff and physicians are to the health of their neighbors. We look forward to working with them to expand and enhance the services they provide to Jackson County and the entire south central region."

Allegiance Health includes a 480-bed community-owned health system in Jackson, with a strong emphasis on community partnerships.

Allegiance Health President and CEO Georgia Fojtasek said that joining Henry Ford will allow for greater access to new technologies and enable clinicians from both systems to develop new approaches to patient care. It will also enable Allegiance Health to expand its services and build clinical capacity, as well as improve facilities and technology.

Under the deal, Allegiance Health leaders and community leaders will continue to represent local interests on the board of trustees and governance committees. Allegiance will adopt Henry Ford's Epic electronic medical records system.

FTC Delays WV Hospital Acquisition
The Federal Trade Commission says it will block Cabell Huntington (WVA) Hospital's proposed acquisition of St. Mary's Medical Center.

"The combination would create a dominant firm with a near monopoly over general acute care inpatient hospital services and outpatient surgical services in the adjacent counties of Cabell, Wayne, and Lincoln, West Virginia and Lawrence County, Ohio likely leading to higher prices and lower quality of care than would be the case without the acquisition," the FTC said in an administrative complaint.

The FTC will also seek a temporary restraining order on the merger pending an administrative hearing. On the local level, the merger has received the approval of the West Virginia Attorney General's office but is still awaiting approval from the West Virginia Health Care Authority and the Catholic Church.

"If this proposed acquisition goes forward, it would eliminate important competition that has yielded tremendous benefits for Huntington-area residents," Steve Weissman, deputy director of the FTC's Bureau of Competition, said in prepared remarks. "The merged hospitals would have a market share of more than 75%, and local employers and residents are likely to face higher prices and reduced quality and service at the combined hospital."

The complaint alleges that the two hospitals are each other's closest competitor for health plans and patients, and that the acquisition would substantially lessen competition between the hospitals for patients and for inclusion in health plan networks. The complaint also alleges that, at times, the parties have attempted to limit their intense head-to-head competition through collusive conduct, such as restrictive marketing agreements.

CHH and SMMC issued a joint statement of disagreement with the FTC's findings.

"It is our opinion that the FTC's action announced today misreads the highly competitive landscape in our Tri-State region and overlooks the enormous community benefits that would result from the combination of CHH and SMMC," Kevin N. Fowler, president/CEO of CHH said in prepared remarks. "Despite the FTC's decision, we remain committed to this acquisition as we believe it assures quality medical care for the residents of our region."

West Virginia Attorney General Patrick Morrisey signed off on the deal in July.

Tenet Healthcare Leaves NC
Tenet Healthcare Corporation will sell its two hospitals and other operations in North Carolina to Duke LifePoint Healthcare.

Financial terms were not disclosed for the sale, which is expected to be finalized by mid-2016. The sale includes the 137-bed Central Carolina Hospital in Sanford, NC, and the 355-bed Frye Regional Medical Center in Hickory, NC, and 19 physician practices.

"Tenet has long enjoyed serving the Sanford and Hickory communities through our network of trusted hospitals and caregivers," Tenet Vice Chairman Keith Pitts said in prepared remarks. "As we evaluated strategic alternatives to ensure the long-term success of these operations, we chose Duke LifePoint because of their growing statewide network, impressive leadership teams and focus on quality and value."

William J. Fulkerson Jr., MD, executive vice president of Brentwood, TN-based Duke University Health System, says the acquisition means that Duke LifePoint will expand to nine hospitals in North Carolina and14 hospitals nationwide.

"Tenet and Duke LifePoint share a commitment to high-quality, patient-centered care, and we look forward to a seamless integration as we bring these facilities into our network," he said.

As part of the deal, Duke LifePoint will maintain all services provided at both hospitals, and offer jobs to all employees of the hospitals.

Navicent, Mercer U. Create 'Disruptive' Center
Macon, GA-based Navicent Health is partnering to with Mercer University to create a Center for Disruption & Innovation to promote innovation and collaboration among healthcare leaders in the drive toward evidence-based research and value-driven processes.

"We call it disruptive because to have a new space we have to disrupt the current space," says Ninfa M. Saunders, president and CEO of Navicent Health. "If you are trying to change something, you have to mess it up first. Unfortunately, you can't just do that in the middle of everything else going on in healthcare because there are patients there and we must continue to innovate without completely messing up everything."

Saunders says the center will focus on optimization healthcare delivery and reducing practice variation, "disruptive innovation" to generate new approaches to processes, and develop and commercialize new products in conjunction with Mercer's schools of biomedical engineering and business.

"We are developing a laboratory where we can look at what is going on in the current space and what are the different models that we could try," Saunders says. "Today in healthcare we don't have a research and development office. We think of something, we implement it, we test it, and hope it works, and we continue to tweak. This will allow us to do some of the concept development in a lab."