The Executive Suite: Healthcare Integrations, consolidations, and mergers: steps toward a better future?

Tuesday, February 18, 2020

Healthcare Integrations, consolidations, and mergers: steps toward a better future?

It’s safe to say broadly that everyone wants healthcare in the United States to “be better.” Generally, this translates to improved affordability and outcomes for patients. For provider practices, these efforts often come with trade-offs, including significant increases in paperwork for prior authorizations or managing reams of “helpful” analyses of your practice. In this brief article, we look at the continued integration of insurers, pharmacy benefit managers (PBMs), providers, and health systems—representing what appears to be the next phase of making the system better—and its potential implications for practices.

Prime Therapeutics, a PBM owned by 18 Blue Cross Blue Shield (BCBS) plans, and Cigna-owned Express Scripts (ESI) recently announced a collaboration that will give them outsized leverage in negotiating drug prices with manufacturers and pharmacy networks. The move would greatly increase these entities’ influence over drug prescribing. Provider practices will be facing a PBM that manages prescriptions for 103 million members or almost half of all US prescriptions.

Could this collaboration reduce the variability of formularies and prior authorization criteria attached to members managed by ESI and Prime benefits? Perhaps over time it will. For now, the agreement allows ESI and Prime to manage their own formulary development processes. Further, Prime’s individual Blues plans have some flexibility in creating their own formularies. Whatever the variations in drug contracting and formularies, ESI will manage the actual negotiations with manufacturers for pharmacy benefit drugs for all participants in the collaboration except in certain defined instances, such as value-based drug contracts. Over time, it is possible that the Blues plans and ESI’s national standard formularies will move toward one another, especially in the areas of inflammatory diseases, oncology, diabetes, and other high-volume, high-cost or/and heavily rebated therapy areas.

On the medical benefit side, each partner will manage separately those drugs that are administered by a healthcare provider. Therefore, in the near term, the chance of broader alignment/streamlining is scant. As the Cigna/ESI vertical integration matures, the partners will become more facile in managing across benefits and negotiating the nuances of medical benefit contracts. While certain payers could see this as a value-add, regional payers such as the Blues, may shy away from being seen as an extension of the Cigna organization.

The trend of joining forces is not exclusive to PBM giants. Insurers and provider groups are also collaborating or are spinning off new companies. In the Pacific Northwest, Premera Blue Cross and MultiCare, a not-for-profit multispecialty care organization, developed Peak Care based on the exclusive provider organization model. Initially offered in 2018, Peak Care has expanded its footprint for 2020. Meanwhile, in the Midwest, BCBS of Minnesota acquired a 49% stake in North Memorial Health, a Minneapolis-based health system. The shared organization launched in January 2020, marketed under the North Memorial name. The goals of these two examples are similar:

Provide greater access to care and a better patient experience
Take the patient out of discussions involving prior authorizations between their provider and insurer
Hopefully reduce or mitigate overall costs of care

As with other so-called narrow provider network insurance products, unaligned practices may see patients forced to move if their coverage changes to one of these closed networks. Gaining access to the closed network could be a major undertaking for unaligned providers and provider groups.

While these examples of vertical integration may seem innovative or groundbreaking, they are variations on the health maintenance organization (HMO) models already in the market. A high-profile example of the HMO is Kaiser Permanente (KP). At its base, KP is a large, multispecialty group practice (Kaiser) deeply integrated with an insurer (Permanente). Potentially, these newly minted alliances could work toward developing “command and control” infrastructures similar to KP with an eye toward achieving their goals through alignment of networked provider groups, pharmacies, allied services, and the payer.

The approaches to “better healthcare” are certainly not limited to these examples—and even if these early ventures are met with success, we may not necessarily see an expanded effort in the purchase of practices and IDNs by national payers. What may be more likely is regional payers opting to follow the Peak Care or North Memorial models in the future. The only certainty is that these and other alliances will continue to impact providers in new and unexpected ways in a fast-changing healthcare landscape.