There’s been a lot of mergers and acquisitions in the work comp arena, and certainly more to come.
But the activity in our little corner is minor indeed compared to what’s happening in the “real world” – group health, Medicaid, and Medicare. Make no mistake, these transactions will affect work comp.
You’ve probably heard of some of the activity among payers;
- Anthem is buying Cigna for $54 billion
- Aetna is paying $37 billion for Humana
When these deals are completed, there will be three giant health insurers; United, Anthem, and Aetna. All will have major operations in the Health Exchanges, Medicaid, Medicare, and employer-sponsored health insurance. Anthem, which owns many Blues plans, will have more local dominance in specific markets while Aetna and UHG are bigger players in the employer marketplace.
What you may not be tracking is the provider consolidation – which is equally frantic. Just a few examples from the last few months:
- New Jersey – Barnabas Health and Robert Wood Johnson Health System are merging – consolidating 9,000 physicians and 11 hospitals
- New Jersey – Meridian and Hackensack are also combining; 6,000 docs and 11 hospitals
- Pennsylvania – Lancaster General and the UPenn system and their 6 hospitals are joining forces – LG dominates the Lancaster area and this adds further reach to UPenn
- KY TN VA and NC – two health systems with operations in the four state border region are merging
- Tenet bought a controlling interest in the nation’s largest ambulatory surgical provider; the new entity will have 244 outpatient surgical centers and 20 short-stay surgical facilities which will be linked with its 20 imaging centers.
- Connecticut – Yale-New Haven Health System and Lawrence-Memorial Hospital’s 5 hospitals are joining forces
The ongoing seesaw of market power is playing out nationally and locally – but the local scene is much more relevant for workers comp payers. Local health systems negotiate with these big payers, with both sides coming to the table from positions of strength. If Aetna wants coverage in southeastern PA, UPenn-Lancaster must be in their network. For UHC to compete for employer and/or exchange business in New Jersey, they’ve got to have access to facilities and docs controlled by the two entities listed above.
The bruising battle over access, rates, and exclusivity is what’s driving the move to narrow networks. Health plans have to deliver more patients to specific health systems or those systems will not negotiate on price.
The best way to ensure increased patient volume is to make a deal exclusive – and we will see more and more narrowing of networks as competition heats up among the big three health insurers.
What does this mean for workers comp?
Work comp is incidental to Medicaid/Medicare/group/Exchange business. Health systems are going to get squeezed in these deals. Health plan execs will look to several reimbursement sources to make up margins; out-of-network care being most important but workers comp will be considered quite attractive as well. Comp is quite profitable, particularly as it drives orthopedic and ancillary revenue, services which have traditionally high margins for hospitals.
The other consideration is the care that is delivered via a health system or facility is billed under a hospital fee schedule. And, there can be a facility charge in addition to the physician fee.
The net is work comp will be seen as a great source of very profitable patients.
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