Calling the merger a “significant blow” to hospitals’ attempts to move toward a payment system that rewards good outcomes, instead of fee-for-service reimbursement, the American Hospital Association on Thursday filed an amicus brief urging the U.S. Court of Appeals for the District of Columbia Circuit to uphold a lower court decision blocking Anthem Inc.’s proposed $54 billion acquisition of Cigna Corp.
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The AHA is a national organization that represents about 5,000 hospitals and other providers and 43,000 individual members.
The U.S. Justice Department sued last July to block Anthem’s deal. In early February, U.S. District Judge Amy Berman Jackson blocked the merger, saying it would harm competition in the health insurance market nationally. Anthem appealed the ruling on the merger, which would have created the largest insurer nationwide. In January, a different federal judge blocked Aetna Inc.’s proposed $37 billion merger with Humana, Inc.
For their part, Anthem and Cigna, like other insurers, have claimed that concentrated hospital markets have negatively affected health care costs. About two years ago, America’s Health Insurance Plans commissioned a report by an economics consultant who concluded that high market concentration among hospitals could increase premiums by about 8 percent for a 24-year-old living in a region with three or fewer carrier competitors.
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The AHA’s 20-page brief primarily focused on the proposed merger’s potential to stifle innovation aimed at lowering health care costs. It argued that because Anthem has been less willing than Cigna “to develop new payment methodologies that go beyond the old fee-for-service system,” Anthem’s acquiring Cigna would cause the latter’s focus on innovation to be lost, to the detriment of health care consumers. According to trial evidence, Cigna “is known for being more dynamic, value-centric, and customer-focused,” the brief states.
“While Anthem remains resistant to value-based reimbursement, especially in markets where it has substantial share, hospitals and healthcare providers are embracing the new world of value-based care,” according to the brief, which was submitted by Davis Wright Tremaine lawyers Douglas Ross and David Maas, as well as the AHA’s general counsel Melinda Hatton.
“Permitting an acquisition that will reduce the market for national insurers from four to three will lessen the incentive of all players in the market to innovate—to the detriment of patients,” the brief states.
The AHA went on to state that antitrust laws are intended to promote innovation, and that innovation has become an important focus of courts’ merger analyses. Citing the “uneasy relationship between the two companies,” the organization argued that Anthem would be even less likely to innovate than it is today, should the acquisition go through. In a lawsuit filed in Delaware shortly after the judge’s ruling, Cigna alleges that Anthem breached the merger agreement and took actions that impaired Cigna’s ability to innovate and compete. Anthem countersued, arguing that Cigna sabotaged the acquisition.
“While the now-bitter rivals’ cross-claims have not been adjudicated, the very fact they were made underscores the improbability, should the acquisition occur, that anything will remain of the Cigna way of doing business,” the AHA wrote. Two other health care organizations—the American Medical Association and the Medical Society of the District of Columbia—have filed an intent to submit a joint amicus brief likewise supporting affirmance of the lower court’s ruling.
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