MHA Today | May 20, 2016

May 20, 2016
MHA Today: News for Healthcare Leaders

MHA Today is provided as a service to members of the Missouri Hospital Association. Additional information is available online at MHAnet. Connect with us on LinkedIn.


Herb Kuhn, MHA President & CEO

Real or practically-exclusive buyer-based market power is known as monopsony. Where monopsony exists, the buyer essentially can control the marketplace. If this type of concentration of market power were to occur in Missouri’s commercial health insurance marketplace, it could materially harm hospitals and the patients they serve.

In a marathon session on Monday, state insurance regulators and representatives of the insurance company Aetna sparred about the influence the proposed Aetna–Humana merger would have on Missouri’s insurance marketplace. Most of it was a legal proceeding, using courtroom rules of evidence and procedure. This was followed by public testimony. The fundamental question at the hearing was whether Aetna’s purchase of Humana will allow the combined entity to gain sufficient market share to jeopardize the stability of the marketplace. We believe it would.

MHA submitted a letter to the hearing officer outlining concerns about market concentration. Eight other provider and consumer organizations — including Freeman Health System and Truman Medical Centers Inc. — submitted written testimony as well. Aetna came well prepared.

Although the Missouri hearing likely will have little direct effect on the Department of Justice merger review, insurers must be authorized to sell their product in Missouri. As a result, Aetna’s ability to sell policies in Missouri under a merged Aetna-Humana could be at stake.

Missouri’s insurance statutes require the Missouri Department of Insurance, Financial Institutions and Professional Registration to review mergers to analyze whether they would have a substantial influence on competition. In the analysis, DIFP must consider both the market concentration and the relative shares of the market held by the merging entities. The threshold for a highly-concentrated market is when the four largest insurers share at least 75 percent of the market.

Missouri’s commercial insurance marketplace meets the highly-concentrated standard. In Missouri, the top four insurers hold a market share in excess of 80 percent in 107 out of 114 counties, the City of St. Louis and in 24 of 28 metropolitan statistical areas.

In the Medicare Advantage marketplace, the concentration is more profound. The four largest insurers hold 100 percent of the market share in all but 16 counties, where the top four hold at least 92 percent.

Concentration in MA matters. In the last five years, more than 100,000 new enrollees have entered the MA market — a trend that is expected to increase as Baby Boomers generate a “silver tsunami” in health care demand. In MA, a merger would reduce plan choice and provider access, and affect premium rates and coverage options for hundreds of thousands of Missourians.

Hospitals need insurers, and insurers need hospitals. However, tipping the market power toward insurers could have a significant negative effect — the proposed merger would place hospitals at an extreme competitive disadvantage when negotiating contracts. Lower reimbursement while the uncompensated care load continues to increase jeopardizes hospitals and the entire delivery system.

The imbalance hurts consumers too. Consumers are unlikely to see savings. What they can expect is smaller provider networks, reduced patient choice and increased out-of-pocket costs. These consequences would have a disproportionately large impact on those that can least afford it — Missouri’s MA enrollees.

The state should send a strong signal to federal regulators that Missouri’s health care system, and Missourians in the commercial and MA sectors of the marketplace, can ill afford additional concentration in the health insurance marketplace.

Economists may call this type of concentration a monopsony. Whatever you call it, it’s unhealthy.

Send me a note to let me know what you’re thinking.

Herb Kuhn, MHA President & CEO

Herb B. Kuhn
MHA President and CEO

state and federal health policy developments

U.S. Senators Support Flexibility In Outpatient Regulations

Staff Contact: Daniel Landon

A bipartisan group of 51 U.S. Senators has written the Centers for Medicare & Medicaid Services “to underscore the importance of including flexibilities to enable hospitals to continue to serve patients in these settings, as well as provide predictability for the hospital field.” The letter urges flexibility in implementing a November 2015 law limiting Medicare payment for services delivered in new off-site locations of hospital outpatient departments. Sen. Roy Blunt is a signatory.

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Consider This ...

May is Mental Health Month. Nearly 40 percent of the total cost of caring for mental health disorders is spent on institutionalized populations, including patients in nursing homes, psychiatric hospitals and prisons.

Source: Health Affairs