For the health insurance industry, 2015 was the year of mega mergers. Last July, Anthem announced its $54 billion offer for Cigna, while Aetna released details of its proposed $37 billion acquisition of Humana. Today, the four major payers insure at least 90 million Americans combined, according to the American Hospital Association.
While the deals were not finalized as of press time, if approved, the two new combined companies would join UnitedHealth as the only three major medical payers remaining in the United States, an issue regulators likely will scrutinize in the coming months.
The proposed deals also leave many unanswered questions for ambulatory surgery centers: Will provider networks and reimbursement rates remain the same in overlapping markets? Will fewer payers mean more volume for in-network centers? Will mass confusion ensue until well after the mergers are finalized?
It’s too early to say for sure. Recently closed deals, however, may provide ASCs with an indication of what’s to come: uncertainty and more financial pressures on patients. For example, Aetna completed its acquisition of Coventry Health in May 2013—a deal which added 3.8 million to Aetna’s then-18 million medical policies.
As many of us in the revenue cycle industry readily recall, that2013deal—which is tiny by comparison to the pending Anthem-Cigna and Aetna-Human deals—created countless complications for providers and patients alike, as the details were finalized and the combined Aetna-Coventry workforce was brought online.
These deals may also give the new mega payers considerable leverage in the market. The American Medical Association is warning that the Anthem-Cigna and Aetna-Humana deals may give payers too much negotiating power in certain markets, which may result in higher monthly premiums for patients. In its research, the AMA estimates that premiums increased almost 14 percent following the 2008 UnitedHealth and Sierra Health Services merger.
AMA research identified 85 metropolitan areas within the following 13 states that “would enhance market power” as a result of the Anthem-Cigna merger: California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, New York, Ohio and Virginia. The provider group conducted a similar analysis for the Aetna-Humana merger, predicting that such a deal would have a similar effect in 15 metropolitan areas within seven states: Florida, Georgia, Illinois, Kentucky, Ohio, Texas and Utah.
The AHA, too, has come out against the deals, telling federal regulators last fall that the acquisitions “have the very real potential to reduce competition substantially, increase the cost of premiums, and diminish the insurers’ willingness to be innovative partners with providers and consumers in transforming health care.”
As these deals unfold, ASCs can avoid disruptions to their revenue cycle and maximize their cash flow by focusing on the following three areas:
Contracts
The biggest issue ASCs are likely to face as these mergers unfold is determining the validity of individual reimbursement contracts when two insurance companies merge. For example, if an ASC has contracts with Anthem and Cigna, how would the terms of those individual agreements apply once the entities combine?
Past experiences suggest that the answers to these questions unfold slowly, and often through trial and error. While company representatives resolved claims issues and fielded other routine questions during the Aetna-Coventry merger, in our experience, contracts were put on hold while the deal was pending, and new agreements were unable to be negotiated until the deal was finalized—creating considerable uncertainty for outpatient facilities in the interim.
Insurance cards
As a result of the Aetna-Coventry merger, individuals in specific Coventry markets were migrated mid-year to the Aetna brand, while others remained with Coventry. These moves also did not happen all at once, and were not always well-publicized, which created confusion for ASC staff when individuals presented their insurance cards ahead of their procedures. Similar to the Aetna-Coventry merger, these new deals may create similar problems in the coming months, especially with so many potentially overlapping payer markets.
Rates
Until the merger dust settles, overlapping payer markets mean ASCs may face cash flow challenges if they have contracts with two merging payers that do not reimburse the same amount for procedures. In our experience, the newly merged payer is unlikely to honor the higher rate in all cases, which could erode the profitability of low margin cases—or even put them in the red. And if there is a discrepancy, whom do you email—the Anthem rep or the Cigna rep?
Or both?
Choosing the latter is likely to be the best approach for the foreseeable future. Aggressive, continual communication with representatives from all the relevant payers will mean your facility has the best information available at all times. ASCs should inventory all of their contracts, scour the fine print to identify issues that may arise, and reach out to payers immediately to determine how the mergers will be rolled out and what it means specifically for their ASC.
Unsatisfied with the answers you’re receiving? Ask to speak with a supervisor. Still uncertain? Ask to speak with the supervisor’s supervisor—and all the way up until you get the answer you need.
And prepare yourself: As with previous mergers, these issues are likely to take years to resolve completely.