Physicians get Senate's ear on plan mergers

A proposed Pennsylvania deal prompts the Senate Judiciary Committee to have organized medicine and others speak out on what health plan consolidation has wrought.

By Jonathan G. Bethely — Posted Oct. 2, 2006

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For years, physicians have complained that health plan mergers create an imbalance, as dominant plans can act with near impunity and tell comparatively smaller medical practices to like it or lump it when it comes to contract negotiations.

In September, for the first time, physicians got a public audience in Washington, D.C., to air their concerns about health plan market dominance, thanks to a powerful Pennsylvania senator who recently heard an earful about a possible merger in his home state.

The Senate Judiciary Committee's hearing, "Examining Competition in Group Health Care," isn't expected to put an immediate halt to any mergers under discussion. That includes a deal being talked about between two powerful nonprofit plans in Pennsylvania, home of the committee's chair, Republican Sen. Arlen Specter. Nor does it signal that the Justice Dept. might be re-examining past deals, as it has with hospitals, to see if they still pass antitrust muster.

But having on-the-record statements from physician representatives -- and insurer representatives -- is expected to guide the department the next time a merger crosses its desk. "The Dept. of Justice pays attention to hearings," said Specter spokeswoman Courtney Boone.

"We've been seeking hearings for quite some time," said AMA Board of Trustees Chair-elect Edward L. Langston, MD, RPh, who testified at the Sept. 6 proceedings.

"The concentration of insurance companies has been a major concern of ours," said Dr. Langston, a family physician from Lafayette, Ind.

Word of a possible merger between Pittsburgh-based Highmark Inc., a Blue Cross and Blue Shield affiliate, and Philadelphia-based Independence Blue Cross became a public concern earlier this year among employers, physicians and hospitals, especially after the plans announced they would jointly sell a Medicare prescription drug plan. Highmark operates mostly in western Pennsylvania, while Independence operates mostly in the eastern part of the state. A Highmark spokesman said the two companies continue to engage in discussions about how they might strengthen their business relationship.

Mark Piasio, MD, president of the Pennsylvania Medical Society, said his organization would oppose any merger between the plans until it learned more details.

"We'd like to see the Blues compete in each market instead of consolidating into one," said Dr. Piasio, an orthopedic surgeon in Dubois, Pa.

Boone said the hearing was scheduled after Specter went on a tour of the state and heard concerns from physicians and others about a possible Highmark-Independence merger, as well as tales of how dominant those plans already were in their existing markets. According to the AMA's "Competition in Health Insurance: A Comprehensive Study of U.S. Markets," as of 2004 (the latest information available), Independence, at 33%, had the biggest combined HMO-PPO market share of any Pennsylvania health plan. In Philadelphia, Independence had a 68% market share, making it the most highly concentrated health plan market in the state.

No accurate number was available for Highmark, because Pittsburgh, its biggest market, did not contribute information to the survey.

Insurers speak up

It wasn't just physicians who got their say at the Senate hearing. Stephanie Kanwit, special counsel for America's Health Insurance Plans, told the committee she disputes physicians' claims that a lack of competition exists in the marketplace. Kanwit said claims that health plans dictate prices are untrue because the "the average physician ... contracts with about 13 health plans ... and receives about only half of his or her practice revenues from health plan contracts."

"Doctors have a lot of choices, and patients have a lot of choices," Kanwit said in an interview with AMNews.

David Hyman, a professor of law and medicine at the University of Illinois, testified during the hearing that physicians' complaints about market power likely are not justified, at least on an antitrust level.

"Even if it could be shown that a health insurer actually has market power, the issue for antitrust purposes is whether the insurer has obtained or maintained that power through improper means," he said. "Absent such evidence, the sole fact that a market is concentrated is unlikely to attract the interest of an antitrust enforcer."

But antitrust attorney Richard Spohn, chair of the health care practice group at San Francisco-based law firm Lossman Guthner Knox and Elliott, said the hearing was reflective of the fact the Justice Dept. hasn't done all it can do to ensure antitrust laws are upheld. In more than 400 health plan mergers in the past 12 years, the Justice Dept. in only two cases has forced plans to sell at least some operations to satisfy antitrust concerns.

"The U.S. has developed a very respectable regulatory system, but when antitrust [violations] are not only tolerated but enabled, you've got the beginnings of physicians and patients being victimized," said Spohn, who did not testify at Specter's hearing.

Spohn said he doubted the Justice Dept. soon would reopen investigations into health plan mergers, even though it did re-investigate hospital mergers. Last year a federal judge ruled that the 2000 merger of Evanston Northwestern Healthcare Corp. and Highland Park Hospital in suburban Chicago should be broken apart. In that case, the Justice Dept. had evidence that consumers were paying more than they would have without the merger, which is the standard the department uses to determine whether a merger is approved.

Spohn said Specter's hearing is an encouraging first step for physicians who want to see more scrutiny given to health plan mergers.

"If there continues to be a series of hearings and perhaps hearings in the provinces where they can hear from doctors and patients about the effects of shrinking markets, then I think there will be some pressure on the DOJ," Spohn said.

"If Specter were to take this on, he could drive a vigorous opposition of market consolidation," he added.

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