Given the uncertainty over the Affordable Care Act and the potentially limited appeal of the core insurance business, insurers are looking to follow the strategy pursued by UnitedHealth Group. The big insurer, which acquired a chain of outpatient surgery centers earlier this year, has a wide array of profitable health care businesses like its own pharmacy benefit manager and various consulting arms through its Optum unit.
While the companies promote these partnerships to employers and consumers as one-stop shopping, they could also put customers at a disadvantage by limiting their choices and increasing medical costs.
Under these arrangements, people may not be able to see doctors outside the organization’s own medical group. In addition, patients may worry that their doctor will decide not to order an expensive test to exact savings for the business partners — the insurer and the health organization. An in-house pharmacy benefit manager could direct customers to certain drugs because its manufacturer offers hefty rebates even if the medicine is more expensive or does not work as well as a competitor’s.
And the combined clout of the companies could push consumers’ expenses higher.
Employers that purchase coverage on behalf of their workers may also have difficulty determining how much they are paying for a given medicine or a particular service, said Edward A. Kaplan, a senior vice president at Segal Consulting. There’s already a lack of transparency when it comes to drug prices, and employers may have even less information if the insurer and the pharmacy benefit manager are the same entity. “It’s going to be harder for us to get behind the curtain,” Mr. Kaplan said.
Companies are actively looking for partners that will provide an entree into new businesses or a new supply of customers. CVS Health, which started as a drugstore chain, operates a large pharmacy benefit manager as well as walk-in clinics in its drugstores. By combining with Aetna, which covers about 22 million people, CVS would be able to direct members to its own mail-order and pharmacy business and to its walk-in clinics, located in its drugstores, for much of their care.
“It’s a sign of the continued integration in health care,” said Tom Robinson, a partner for Oliver Wyman, a consultant that estimated there have been about 200 partnerships created between insurers and large health groups in the last five years. By sharing in the profits or losses of these ventures, the parties say they work more closely to make sure a patient gets the right medicine or has access to a doctor at a nearby clinic instead of resorting to an emergency room.
The savings can be tangible. Anthem, which recently announced that it plans to start its own pharmacy benefit manager, estimated it could save $4 billion a year, the bulk of which it said would result in lower drug costs for customers.
These partnerships can also represent a dramatic departure from the status quo. In many situations, an insurer and a hospital group would barely talk to each other outside a meeting every year or so to haggle over how much to pay for a knee replacement or an overnight hospital stay. The discussions rarely include how to better manage the care of a patient whose asthma goes untreated or has back pain that would be better treated with physical therapy.
The contract negotiations between insurers and hospital systems tend to be “a zero-sum game,” said Brigitte Nettesheim, a senior executive with Aetna. Once the contract is signed, and a conflict arises over the cost or choice of a treatment, the patient is the one often caught in the middle.
Aetna started offering joint plans with Inova, a large organization in Northern Virginia, in 2013. The partnership now covers more than 193,000 people. Patients see a doctor who belongs to a special network of primary-care physicians and specialists, most of whom are not employed by Inova but work together closely with the system to coordinate care for patients.
Inova was able to finance the creation of this network through the joint venture, and it is now experimenting with new ways of paying the network’s doctors so they bear more responsibility for the overall effectiveness of the care they deliver. If they save money by caring for the patient more efficiently, they share in the savings.
Patients in these joint ventures are also assigned a nurse who helps them navigate the system. When a cardiologist prescribed a new cholesterol medicine that required a $200 co-payment, the nurse was able to call the doctor to find a less expensive alternative, saving the patient nearly $2,300 a year, Ms. Nettesheim said. “It’s about these open lines of communication,” she said.
When Banner Health, a large group based in Phoenix, partnered with Aetna to offer a joint health plan, it decided to add 35 retail clinics where people could get care after-hours or closer to their homes rather than show up in the system’s emergency rooms. The clinics “are lower-cost options for our members and more convenient,” said Chuck Lehn, the president of the Banner Health Network.
It’s too soon to tell whether these new combinations will succeed in delivering on the promises made when they join forces. “They just tied the knot,” Mr. Robinson of Oliver Wyman said. “Now they have to build the relationship.”