In the wake of Anthem's proposed acquisition of Cigna and Aetna's proposed acquisition of Humana, providers are lining up to be heard. Take the American Medical Association (AMA), for example, which is urging federal and state regulators to "take a hard look at [the] proposed health insurer mergers" and enforce the antitrust laws that "prohibit harmful mergers" and "anticompetitive conduct by insurers." And not to be left out, the American Hospital Association recently wrote the assistant attorney general in charge of the U.S. Department of Justice Antitrust Division (the Division) offering its own detailed analysis of these deals suggesting that they "are, and should be, at risk," because each presents a "substantial risk" to competition in the commercial health insurance market – competition that is "essential for access, affordability and innovation in the health care sector." (The Division's Litigation Section I is reviewing both deals at the same time.)

What exactly is at stake for providers?

If you attended the American Health Lawyers Association annual meeting this summer, then you heard directly from Peter Mucchetti, chief of the Division's Litigation Section I, that among the concerns the Division has in mergers like the proposed Anthem/Cigna and Aetna/Humana deals is monopsony buying power – the ability to lower reimbursements that results in fewer, or lower quality services for patients. When it comes to payor mergers, this concern is not new.

Take, for example, Aetna's acquisition of Prudential's HMO business in 1999. The Division's investigation of that transaction led it to conclude, among other things, that Aetna's acquisition of Prudential would "consolidate its purchasing power over physicians' services in Houston and Dallas, enabling the merged entity to unduly reduce the rates paid for those services." According to the Division, the result of Aetna's new found "ability to unduly depress physician reimbursement rates in Houston and Dallas," would "likely lead[] to a reduction in quantity or degradation in the quality of physicians' services."

How you may ask? With the acquisition of Prudential, Aetna would have gained "control over both a large share of revenue of a substantial number of physicians in Houston and Dallas and a large share of all potential patients in those areas" and, "[i]n light of the limited ability of physicians to encourage patient switching, a significantly large number of physicians in Houston and Dallas would be unable to reject Aetna's demands for more adverse contract terms if Aetna were allowed to acquire Prudential."

That's why the Division required Aetna, and Aetna agreed, to divest enrollees in the Houston and Dallas areas. (At the time, the AMA came out strongly against the proposed transaction urging the then-assistant attorney general in charge of the Division "to review this transaction and to challenge its anticompetitive aspects," and later called the Texas divestitures "a big win, but [] a first step.")

How will the Division review the proposed Anthem/Cigna and Aetna/Humana deals? And what will the impact (if any) be on the analysis given that both are being reviewed at the same time?

The Division will look at the competitive implications of these deals product line by product line within each geographic area. As the above makes clear, the competitive implications for the purchase of provider services will also be considered in each geographic area. And since these deals are being reviewed at the same time, there might be one less competitor available to help remedy a particular transaction through divestiture by picking up enrollees. No wonder the parties don't anticipate closing these deals until well into next year.

*"Lawyers, Guns and Money" by Warren Zevon

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