More health care provider-payor integration on the horizon?

Hospitals mergers with other hospitals, hospital acquisition of physician practices – are provider-payor mergers next on the M&A horizon? Insurer Highmark is acquiring West Penn Allegheny Health System in Pittsburgh, pending final regulatory approval. At the May annual meeting sponsored by Becker’s Hospital Review, former West Penn executive Bob Edmonson discussed these key trends that suggest provider-payor integration may gain more traction in the future:

• Payors are beholden to medical loss ratio limits
• Physicians are the core of accountable care organizations [ACOs]
• Insurers have key ACO competencies
• Providers are assuming greater population risk
• ACO start-up capital is high at a time when hospital revenues are flat or declining

Source: Dunn L. Payor-provider integration: anatomy of the Highmark-West Penn Deal. Becker’s Hospital Review, May 17, 2012. http://www.beckershospitalreview.com/hospital-transactions-and-valuation/payor-provider-integration-anatomy-of-the-highmark-west-penn-deal.html

UPDATE: West Penn Allegheny calls off Highmark merger. Becker’s Hospital Review, Sept. 28, 2012. http://www.beckershospitalreview.com/hospital-transactions-and-valuation/west-penn-allegheny-health-calls-off-highmark-merger.html

UPDATE: Herman B. Highmark-West Penn merger receives Pennsylvania approval. Becker’s Hospital Review, Apr. 29, 2013.   http://www.beckershospitalreview.com/hospital-transactions-and-valuation/highmark-west-penn-merger-receives-pennsylvania-approval.html

Related resources:

Gamble M. The quiet takeover: insurers buying physicians and hospitals. Becker’s Hospital Review, July 11, 2011. http://www.beckershospitalreview.com/hospital-management-administration/the-quiet-takeover-insurers-buying-physicians-and-hospitals.html

Payer-provider M&A roundup: the biggest deals of 2011. FierceHealthPayer, Nov. 7, 2011. http://www.fiercehealthpayer.com/special-reports/payer-provider-ma-roundup-biggest-deals-2011

Kurtz R. Highmark-West Penn merger sets precedent for payer-provider deals. FierceHealthPayer, May 2, 2012. http://www.fiercehealthpayer.com/story/highmark-west-penn-merger-sets-precedent-payer-provider-deals/2012-05-02

Braun CJ and Short F. Going vertical: the hospital-health insurer merger. Background article for American Bar Association and American Health Lawyers Association, Antitrust in Healthcare Conference, May 3-4, 2012. http://www.mintz.com/publications/3255/Going_Vertical_The_Hospital_Health_Insurance_Merger

Crosby J. 2 giants – HealthPartners, Park Nicollet – plan to merge. StarTribune, Aug. 30, 2012. http://www.startribune.com/business/168058306.html

Posted by the AHA Resource Center, (312) 422-2050, rc@aha.org