Providers in Illinois and Florida hope to derail one of the biggest managed-care mergers ever by raising antitrust concerns.
In June Minneapolis-based United HealthCare Corp. and Louisville, Ky.-based Humana announced they were merging in a $5.5 billion stock swap. The deal would create one of the nation's largest managed-care companies, with more than 10.4 million enrollees and $27 billion in annual revenues.
Last month, healthcare associations in Illinois and Florida asked Justice Department officials to investigate the anti-competitive effects of the proposed mega-merger, particularly on the growing Medicare managed-care market.
The union is subject to both federal and state approval and regulation and will be investigated on a market-by-market basis. If the investigation finds the combined company would control too much of any HMO market, it wouldn't halt the entire merger. But it would force the company to reorganize or divest in those markets.
As a result, legal experts predict Justice's investigation will be more of a speed bump than a derailment.
In Illinois, the merged company would become the largest HMO in the state, with more than 760,000 customers. It also would control 90% of the Medicare managed-care market and 60% to 70% of the Medicaid managed-care market, according to the Naperville-based Illinois Hospital and HealthSystems Association.
"We are concerned that the adverse effects of the merger will fall hardest on the most vulnerable populations in our healthcare system, Medicare beneficiaries and Medicaid recipients," IHHA attorney Richard Raskin said in a letter to Assistant U.S. Attorney General Joel Klein. "These patients, and the governmental programs which help pay for their care, will face significantly reduced options after the merger."
In Florida, the merged company would control about 30% of the state's 4.5 million managed-care enrollees, 51% of the Medicare managed-care market and 47% of the Medicaid market, according to the Florida Hospital Association.
Last month, both the Tallahassee-based Florida Medical Association and the Orlando-based FHA appealed to local and federal regulatory officials to investigate the merger.
"There are already problems with managed-care complaints being held accountable for their decisions affecting medical care. When a company has almost complete control, it will be even less likely to be responsive to the concerns of patients and physicians," says FMA President Glenn Bryan, M.D.
The associations hope investigators will determine that Medicare constitutes an independent market, and that the merged company's control of it is enough to be considered anti-competitive. United and Humana would have a combined 902,000 Medicare enrollees.
In 1997, the Federal Trade Commission investigated the merger of Santa Ana, Calif.-based PacifiCare Health Systems and Fountain Valley, Calif.-based FHP International. The merger created the nation's largest Medicare HMO at the time, with nearly 1 million enrollees. Then FTC investigators sought to determine if Medicare beneficiaries were limited in their healthcare choices and confined to receiving care from PacifiCare. Ultimately, investigators let the merger proceed. In fact, to date no managed-care merger has been stopped.
"When PacifiCare was looked at, that was the first time that a serious question was raised about whether there was an issue that could derail a transaction," says attorney Robert Bloch of the Washington firm Mayer, Brown & Platt. "It may be an issue in one particular market, but if that's the case, they could fix it in that particular market. The odds of (the merger) ultimately being derailed do not seem high to me."
Providers in both states are also concerned that the new company would prevent other HMOs from entering their respective markets, creating an anti-competitive market and forcing providers to accept contract and reimbursement terms.
"With no new HMOs coming into market for almost a year and taking almost a year to become one, the combined company can raise prices without new companies coming in to undercut them," says FHA general counsel William Bell.
United spokeswoman Sue Busch says investigations into mergers of this size are routine and the companies still hope to complete the transaction by the third or fourth quarter of this year.
She says United hopes to sit down with the associations and explain how the merger will be of benefit.
Regardless of what antitrust investigators determine, this mobilization is another example of providers asserting themselves, attorney Bloch says. "This is part of continuing efforts by providers to push back against some of the difficulties they see with practicing for managed-care plans," he says.