Two large mergers of healthcare insurers were criticized this week, as healthcare provider organizations and others questioned the effect that diminished competition would have on prices and services.
On Monday, Sen. Arlen Specter (R-Pa.), ranking member of the Senate Judiciary Committee, and Sen. Robert P. Casey (D-Pa.) conducted a full committee field hearing to take testimony on the merger of Highmark and Independence Blue Cross.
Separately, the American Hospital Association sent a letter on Tuesday to the Department of Justice seeking an investigation of the proposed acquisition of Sierra Health Services Inc. and UnitedHealth Group.
Specter called for the hearing to gather testimony on the proposed antitrust concerns. While both organizations have said the combination will bring $1 billion of economic benefits to the state, state Sen. Don White urged close scrutiny of the proposed combination.
"I strongly urge this committee to recommend to those federal agencies that they scrutinize this merger for its impact on competition in the health insurance market," he said. Because Pennsylvania does not have a state antitrust law, "Coordination between the state and federal review is essential," he added.
Highmark CEO Kenneth R. Melani, MD, and Independence CEO Joseph Frick both testified, highlighting the potential for business growth from a combined organization as well as operating efficiencies.
However, Melani admitted that the combined organization would experience a reduction in staffing and that as many as 1,000 jobs would be lost.
"Highmark and IBC contend that the merger should be approved based on the premise that it will result in savings," White testified. "There needs to be iron-clad assurances that those savings will occur not only in the short term but also the long term."
The ability of the organizations to achieve projected savings also was questioned by Lawton R. Burns, professor of health care systems and management and director of the Wharton Center for Health Management and Economics.
Burns noted that the Blues organizations still planned to operate separate headquarters and other cost-saving plans are vague. "Highmark and IBC should be explicit in outlining where the efficiencies and synergies are to come from," he said. "And even in the presence of such efforts and defined post-integration strategies, scale economies and merger efficiencies are difficult to achieve."
Burns said the merger would leave Pennsylvania "with a nearly statewide confederation of Blue Cross plans controlled by Highmark, with strong domination in each region," he said. If Highmark in the future combined with other plans in the central region of the commonwealth, "this would have the effect of reducing what little competition already exists between rival Blues plans."
Separately, the AHA letter to the U.S. Department of Justice said an investigation into the United Healthgroup-Sierra Health Services merger is warranted because of the "significant competitive concerns" that the merger would raise.
"It would bring additional consolidation to an already highly competitive industry and would increase the marketshare held by an already substantial payer," the AHA letter said.
State data suggests that both commercial and managed government plans could be hurt by the merger, and the merger will "eliminate a potential competitor in the marketplace, and that its competitive significance could be understated by a static market share," it said. "Competition among payers is especially important for consumers and providers, including hospitals, in a state in which managed care penetration is relatively low."