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It seems that merger mania has takenhold of the health care industry. With talks between Cigna andExpress Scripts and CVS Health and Aetna Inc., among others,consolidation has gotten the attention of many stakeholders. Whilethese companies justify their unions by highlighting theefficiencies they will gain and the improvements that employers,other health care purchasers and their covered populations willexperience, purchasers should remain skeptical.

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Related: How broker consolidation and industry alliances arechanging the industry

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Mergers and acquisitions in health carehave occurred for decades. Provider organizations have been mergingwith or acquiring others for years, and so have health plans. Whatfeels new lately is consolidation among health care entities withdifferent types of businesses. Unfortunately, the evidence aboutthe impact of past consolidation on purchasers is mixed and shouldraise questions for purchasers about more recent unions.

Providerconsolidation

It would take having one's head in thesand not to know that health care costs have been on the rise. Infact, in 2016, health care spending amounted to $3.3 trillion, representing17.9 percent of GDP. Driving this growth is an increasein prices, largely due to the market power providers have been ableto amass through consolidation, enabling them to demand higherprices from health insurers.

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From 1998 to 2015, 1,412 mergers amonghospitals occurred. During the same period, hospitalsbought independent physician practices. Several studies have found a correlation between higherphysician concentration or hospital-physician integration andhigher commercial health insurance prices. Furthermore, researchershave discovered a negative association betweenhigher prices and patient experiences with care — the higher theprices, the worse the experience.

Health planconsolidation

To maintain negotiating power withprovider conglomerates, health insurers also began to merge.In 2001, more than eight health insurance companies had sizablemarket share across the U.S. but by 2013, only about four did. In2015, two massive mergers between health insurance plans wereproposed — a union between Aetna and Humana and between Anthem andCigna — though the Department of Justice blocked the mergers on the grounds thatthey would violate antitrust laws and lead to higher health carecosts for Americans.

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While the mergers may have given theresulting health plans more market power, many health care expertsexpressed concern that any savings they would accrue by gainingnegotiating power would transfer into C-suite salaries oradministrative expenses and wouldn't be passed ontoemployer-customers.

Recent mergers andacquisitions

While consolidation among providers andplans continues, health care companies in different lines ofbusiness have also begun to propose partnerships. CVS's proposeddeal with Aetna has received the most attention. Both companiessuggest that their partnership will lead to greater convenience foremployers and their covered populations and that it will lowerhealth care prices due to greater leverage in negotiations withdrug manufacturers.

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Based on previous experience, should weaccept their rationale or think critically about whether this isultimately favorable for purchasers?

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If the deal goes through,experts believe patients could end up paying more, notless. A company with such leverage will make it challenging for neworganizations offering insurance coverage to enter the market andcompete. Furthermore, many employers and other health carepurchasers have enjoyed the flexibility of offering medicalbenefits and pharmaceutical benefits to their members throughseparate companies. By keeping them separate, they have been ableto shop around, gaining leverage as competitors know prospectivecustomers have multiple choices. Without the option to offer thesebenefits separately, purchasers will have to look for whichsingular health plan offers the best combination of medical andpharmacy benefit management. This might leave them compromising onone to ensure the other meets their needs.

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Experts project that these mergers will lead tomore like them, likely further reducing competition in themarketplace. As more retail pharmacies, PBMs, and insurers combine, these conglomeratescould make it pricier for employers to shop for and offer medicaland pharmacy benefits separately, for example by charging higherfees to accept data from an independent pharmacy benefitmanager.

Impact toemployers

There will also likely be other typesof consolidation leading to similar issues for purchasers. Forexample, while purchasers can procure telehealth servicesseparately today, allowing them to take advantage of how telehealthmay reduce utilization of high-priced health care services such asthe emergency room, hospitals and health systems are likely toacquire these vendors' business to create further “stickiness” withtheir own patients.

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If the past is at all telling, furtherconsolidation in the health care industry may portend seriousissues regarding health care costs and the quality of health carein the future. While these new relationships may not violate anyantitrust laws, they may better serve the interests of thecompanies amassing market power than those who must pay for and usehealth care services.

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Suzanne F. Delbanco is theexecutive director of Catalyst for Payment Reform, an independent,non-profit corporation working to catalyze employers, publicpurchasers, and others to implement strategies that produce highervalue health care and improve the functioning of the health caremarketplace.

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