Health insurance mergers aim to reduce costs, improve outcomes

When payers negotiate with hospitals on reimbursement contracts and procedure costs, they aim for the lowest reimbursements possible to reduce their costs. Hospitals, on the other hand, want the insurance company to raise its reimbursements so the hospital can increase its revenue.

In this ongoing negotiation, bigger hospitals have more leverage and get a larger reward. However, with some healthcare organizations facing financial turmoil, insurance companies realize merging with or acquiring a healthcare organization can redefine the relationship between the two.

This wave of health insurance mergers and acquisitions has raised some eyebrows in recent years. But payers' interest in healthcare organizations can be justified for several reasons. Payers, as businesses, are looking to diversify their portfolios at a time when healthcare policy is uncertain.

Another reason for the shift is the need to focus on improving outcomes for patients. What better way to get that process going than to take ownership and set the priorities for healthcare organizations? However, other factors also contribute to the increase in health insurance mergers.

Better patient outcomes improve the payer's bottom line. Payers see the acquisition of a healthcare organization as a prime opportunity to focus on patient outcomes to avoid future health complications and the associated costs. Primary care physician groups are the typical target for payers that want to assist patients early in their care journey.

Adoption of new processes around physician's orders. Payers are constantly paying for multiple lab tests. Duplicate testing often stems from the fact that some healthcare organizations prefer to perform their tests in-house.

Other times, the healthcare organization is unable to access previous test results and must repeat them. Payers recognize that test duplication is costly and see an opportunity to reduce duplications by encouraging healthcare organizations to adopt new processes and procedures around testing.

Streamlining the billing and processes. Insurance claims processing is a complex and costly part of the healthcare organization and payer's business. The claims lifecycle requires coders, billers, integration software, clearinghouses and other components. Insurance companies are finding an opportunity to reduce some of that burden by integrating with hospital billing systems directly and streamlining some of the claims and billing processes.

Prescriptions can be costly to payers. We are all familiar with pharmaceutical reps meeting with physicians to discuss the effectiveness of their drugs and why physicians should prescribe them. The cost to the patient or payer is seldom discussed, and payers know some of the drugs on the market are more costly than others. To address that, payers see an opportunity to educate physicians on some of the medication options in order to encourage a more balanced approach around medication costs.

Access to data for deeper patient analytics. Another factor in health insurance mergers is clinical data access. Payers generally have limited visibility into their members' health records, as they can only base it, in most cases, on their insurance claim data. When a payer controls a majority share or owns a health group, it has greater access to the data. This allows the payer to apply advanced analytics to patient data and helps the payer identify new ways to reduce their costs and improve care.

While the motivation for health insurance mergers and acquisitions will differ from one to another, the overall theme is to improve patient outcomes and reduce healthcare costs. However, in a field like healthcare, where business strategies should not influence decision-making, physicians will likely find themselves pushing back if there are any concerns about patient care.