Mergers between hospitals and insurers expected to increase

"Health system reform, in combination with economic factors and trends in play, is expected to speed consolidation of health insurers and hospitals, leaving physicians to figure out how they should adapt," American Medical News reports. "The prospect for mergers and acquisitions throughout the industry is high thanks not only to health system reform, but also more access to financing to buy up other companies. In addition, a change in the 2011 capital gains tax means privately held companies will do better to sell this year, said Bill Baker, a Dallas-based health care transaction consultant. … Analysts expect to see the major health plans buy small regional health insurers rather than try blockbuster mergers of large companies" (Berry, 10/25).

Related: Hospitals, Inc., Costs and Clout - A Kaiser Health News Series

Modern Healthcare: "When creating a mixture of financial incentives to curb ever-rising healthcare costs, all insurers should follow the same basic recipe. The trick, however, is finding the right blend of ingredients to encourage hospitals and physicians to provide cost-effective, high-quality care, and thus, influence how much the U.S. spends on healthcare services. Consumer behavior also should be added into the mix. So say the participants in the most recent Commonwealth Fund/Modern Healthcare Opinion Leaders Survey. ... More than two-thirds, or 71%, of respondents said it is 'very important' or 'important' that 'all payers use the same basic method of payment for rewarding quality and efficiency'" (Wilson, 10/25).

The Indianapolis Star: Indiana's health care industry has remained strong during the economic downturn, "[y]et some hospitals and other health providers - faced with pressures from the economic downturn and uncertainty from federal health care reform - have been uncharacteristically cutting costs and jobs as well as cutting deals with one another. … The economic woes that first slammed the state's manufacturing towns trickled down to their hospitals" (Lee, 10/24).

Meanwhile, Modern Healthcare reports that the Department of Justice's lawsuit against Blue Cross Blue Shield of Michigan "may signal further scrutiny of health insurers' market clout and conduct at a time when the sector faces mounting political pressure and public anger over rising premiums, as well as tighter regulation of its business practices under the healthcare reform law enacted in March. … Specifically at issue in the lawsuit are contract terms known as 'most-favored-nation clauses,' which guarantee a business does not pay more than competitors." Such clauses are widely used and not inherently illegal, but they are already prohibited or restricted in "at least" 14 states (Evans and Blesch, 10/25).