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Humana deal will benefit payers at expense of providers

Larger insurers likely to create more narrow networks, shut out poor-performing providers

The health insurance industry consolidation that a Humana sale would bring stands to benefit payers while challenging hospitals and providers, according to Healthcare Dive.

Humana has entered a quiet period amid rumors that Aetna, Anthem or Cigna may make a deal for the Louisville-based insurer, which has struggled to attract customers on the Affordable Care Act exchanges but offers a booming Medicare Advantage business, FierceHealthPayer previously reported.

The consolidation that would result will be "great for the profitability of the insurers that are left standing," William Bithoney, M.D., of BDO's Healthcare Advisory practice told Healthcare Dive. That's because insurers gravitate toward narrow networks as they grow larger and gain negotiating clout, he said. Provided that patients can still see their preferred doctors, the rumored industry consolidation would also benefit consumers, he added.

This puts pressure on providers to improve their performance, Bithoney told Healthcare Dive, as those facilities that fall out of the top 25 percent on quality metrics risk being excluded from the narrow networks.

Meanwhile, the specific phrasing of Humana's quiet period announcement reflects the large scale of the deal that may be at hand, the Louisville Business Journal reported.

The Humana statement does not use the words "merger" or "acquisition" but, rather, "industry consolidation." The size of the players will dictate what type of deal might occur, the article said.

Aetna had total revenue of $58 billion in 2014, compared to $34 billion for Cigna. If either were to strike a deal with Humana, which had $48 billion in revenue last year, it would essentially be a merger, the article said.

On the other hand, with nearly $74 billion in revenue in 2014 and with interest rates low, Anthem may be ready to make an acquisition.

For more:
- read the Healthcare Dive article
- here's the Louisville Business Journal article

Related Articles:
Humana enters quiet period until July 29, refueling acquisition rumors
How a Humana acquisition would reshape the market
Humana still attractive acquisition target, but priced too high
Anthem may be ready to make an acquisition
Booming Medicare business could make Humana an acquisition target