The Care Continuum Wars
By Ken Congdon, editor in chief, Healthcare Technology Online
Lines are beginning to blur between health insurers and hospital systems, as both parties battle it out to control their own autonomous patient care networks.
A bitter contract negotiation in my own backyard has heightened my awareness of a new war being waged in healthcare — a war between health insurers and hospital systems to own and operate their own patient care continuums. As a native of Western Pennsylvania, the bitter contract negotiation I'm referring to, of course, is between UPMC and Highmark. Here's the backstory:
- In early 2011, reimbursement contract negotiations between Highmark and UPMC were on shaky ground, as the payer claimed the hospital system was demanding a 40% hike in payments — a move that would have translated into a $400 million increase in expenses for Highmark.
- In response, Highmark pursued the acquisition of West Penn Allegheny Health System in June 2011 — a struggling, five-hospital IDN, and direct competitor of UPMC. This move caused UPMC to halt its contract negotiations with Highmark altogether.
- In January 2012, the UPMC Health Plan introduced eight health insurance plans for individuals. This was the first time UPMC offered individual coverage as part of its plan, putting the health system in direct competition with Highmark.
- Earlier this month, Highmark announced its decision to drop an urgent care facility based in McMurray, PA from its network. Highmark made this move after the urgent care facility's owner, The Washington Hospital, formed a joint venture with UPMC in November 2011 to operate the center and open at least two others in Washington County. This dispute has widened the rift between UPMC and Highmark.
Contract negotiations between UPMC and Highmark remain at a standstill, and the implications for Western Pennsylvanians could be severe. Unless the two health care giants can come to a resolution, 4.8 million people in Southwest and Central PA may be forced to part ways with their preferred health providers beginning June 12, 2012. Highmark and Blue Cross Blue Shield customers will still have access to UPMC hospitals and physicians, but they would be responsible for paying out-of-network rates to continue seeking care at these facilities, making this option unaffordable for most residents. In essence, it will result in fewer healthcare choices for Western Pennsylvanians.
The Highmark-UPMC conflict is not the first time a health system and insurer have duked it out during contract negotiations. The highly publicized 2010 dispute between Continuum Health Partners in New York and UnitedHealthcare comes to mind. However, in most of these scenarios, months (sometimes years) of fighting eventually gives way to compromise and an amicable settlement. This outcome may not be in the cards for Highmark and UPMC. The key difference in this scenario is the fact that each party has responded to the conflict by making moves to compete with the core competency of the other. Both UPMC and Highmark are building their own patient care continuums that can function either cooperatively or independently.
Provider Acquisition As A Payer Growth Strategy
Looking beyond Western PA, one can find other examples of health insurers purchasing health providers — not in response to contract disputes, but as a fundamental growth strategy. For example, in November 2010, health insurer Humana purchased Concentra, a privately held operator of more than 300 medical centers and 240 worksite medical facilities in 42 states. Humana cited the acquisition as part of its overall strategy to keep medical costs below those of Medicare. The insurer's thought process is that with greater involvement in Concentra-run clinics, it can encourage its members to seek more preventative care services, and ultimately reduce hospital expenses.
UnitedHealth Group, Inc. also recently purchased Monarch Healthcare, an Irvine, California association that includes approximately 2,300 physicians in a range of specialties. United has said that the provider will not have an exclusive relationship with United and can continue to contract with an array of insurers. However, we'll soon see how committed United is to this stance. Monarch is currently in an arrangement with a United competitor, WellPoint, to create a cooperative ACO (accountable care organization). It will be interesting to see if United takes action to protect its own interests in this emerging relationship.
IT Investments, Not Provider Acquisitions, Drive Other Insurers
Not all health insurers are going down the provider acquisition path. Some have taken an alternate approach by acquiring technology vendors in an effort to provide the infrastructure necessary to deliver on the ACO promise for all of its providers. Over the past several years, Aetna, for example, has acquired the technology companies ActiveHealth (health analytics software), Medicity (HIE solutions), and iTriage (mobile health app). The payer says the goal of these acquisitions is to go beyond the EHR and leverage that data to drive the clinical decision support that will ultimately improve care, reduce costs, and reinvent the healthcare delivery system.
"Most of the EHRs and HIEs in use today still don't incorporate the clinical intervention tools necessary to prevent errors and keep people healthy," says Dr. Charles Kennedy, chief executive officer of accountable care solutions at Aetna. "We're aiming to bridge this gap with our technology investments. We bought Medicity because we needed to connect to all clinical data sources, so we could see the full history of a patient. We purchased ActiveHealth because it takes the data from Medicity, analyzes it, and turns it into clinical actions and interventions that optimize patient care and reduce costs. Finally, we acquired iTriage because it allows patients to make healthcare decisions and engage with their providers from anywhere via their mobile phones. When combined, these technologies provide an infrastructure for clinical reform and accountable care."
When asked if Aetna plans to acquire health providers as part of its long term accountable care strategy, Dr. Kennedy responded:
"I don't think you'll see Aetna acquire healthcare delivery systems. A similar payer/provider acquisition trend occurred in the 1990s and it didn't work out well. Forming a successful IDN is difficult enough to begin with. When you add the complexity of a health plan (which is a very different business), it becomes an excruciating and expensive ordeal. Our approach is to work with delivery systems in collaborative ways — they stay delivery systems and we remain the health plan. However, we're attempting to redefine what it means to be a health plan through our technology investments. We're no longer in existence just to pay a claim. We're working to support the care management needs and technology requirements of our providers as well."
While Aetna may not be among them, many insurers are investing in providers. It will be interesting to see if this trend continues and how it impacts the healthcare landscape and treatment of patients.