Both companies are primarily motivated by the search for data, Friend says.
"Care is being pushed outside the walls of the hospital, and traditional care models are being challenged, putting pressure on providers to cut costs and improve outcomes," he says. "This is especially true in Massachusetts—a state with higher-than-normal healthcare costs driven by hospital spending and enrollment changes. One key ingredient to lowering costs and improving outcomes is access to population health data."
Friend notes that the Partners-Harvard Pilgrim merger is the latest in a spate of deals signifying that the entire healthcare system is converging, and by next year, the traditional pharmacy benefit manager model could be extinct.
"If the Partners-Harvard Pilgrim merger comes to fruition, the combined entity has the potential to provide better care outcomes at lower costs. It could also use its combined population health data to develop new services and better serve its consumers through more personalized care," he says.
A new reality
Health insurance third-party payers, such as Harvard Pilgrim, and healthcare providers, such as Partners, are facing a new reality regarding the business side of healthcare, says C. Timothy Gary, JD, healthcare attorney with Dickinson Wright and CEO of Crux Strategies, a compliance and consulting firm.
"There is a great deal of what economists refer to as transactional costs in the current system," he says. "As both providers and payers look to reduce costs, returning to an integrated staff model is one option that many will consider, as that approach presents the opportunity to reduce those transactional costs."
Staff model HMOs were not at all unusual in the 1980s and 90s, Gary notes. Humana Health, for example, was a staff model payer before it sold off hospital holdings. The healthcare industry tends to recycle old models with new features, Gary says.
The proposed merger is part of a trend and Gary expects to see more in the future.
Gregory A. Freeman is a contributing writer for HealthLeaders.