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Mar 03, 1999
CONTACT: Jamie Court - 310-392-0522 x327
California Regulators Called Upon To Stop Aetna-Prudential Merger
Testimony of Jamie Court and Doug HellerConsumers For Quality Care called upon the California Department Of Corporations to halt its approval of the Aetna-Prudential merger at hearings in Los Angeles today. (Testimony available upon request)
The heath care watchdog group claimed that merger would result in an HMO industry leviathan that will cover one out of ten Americans and will downsize patient care to unreasonable levels, unduly leverage physicians, undermine competition and cause the potential for unfair business practices.
If the buyout is allowed, Aetna will triple its presence in California, further consolidating the health care market in the state. A four company oligopoly -- Aetna, Inc., Kaiser, Pacificare and Health Systems International -- will control healthcare for over 12.5 million Californians in HMOs if the pending buyout is allowed.
"This buyout is certain to limit the healthcare options for patients and employers, erode the bargaining position of doctors and hospitals, and threaten the quality of care patients receive," said Jamie Court, director of Consumers For Quality Care. "Allowing this buyout to proceed is to hand over a key ingredient for market dominance to a corporation which has routinely compromised patient care and disregarded doctors' concerns in the pursuit of profit. A bad actor like Aetna should not be given a license to have more leverage over patients and their doctors."
The group pointed to recent evidence of Aetna's poor conduct to bolster its case against allowing the company to grow:
Testimony of Jamie Court and Doug Heller:
Regarding Proposed Aquisition of Prudential Health Care Plan of California, Inc. by Aetna Inc.
Thank you for inviting Consumers for Quality Care to testify today. Consumers for Quality Care is a non-profit consumer watchdog group created in 1994 to protect and to promote the public interest in higher quality health care.
Consumers for Quality Care urges you to deny the proposed acquisition of Prudential Health Care Plan of California, Inc. by Aetna Inc.
If this buyout is allowed, Aetna will triple its presence in California, further consolidating the health care market in the state. A four company oligopoly -- Aetna, Inc., Kaiser, Pacificare and Health Systems International-- will control healthcare for over 12.5 million Californians in HMOs if the pending buyout is allowed.
The proposal is a dangerous move in the direction of a private healthcare monopoly. This buyout is certain to limit the healthcare options for patients and employers, erode the bargaining position of doctors and hospitals, and threaten the maintenance of a free market.
The newly forged company would have over 22 million enrollees (more than 18 million in "managed care" plans) and contracts with approximately 400,000 doctors -- two-thirds of the physicians in the country. Additionally, Aetna will become the nation's second largest dental insurer with 15 million enrollees.
This buyout should be disallowed because Aetna will crowd out competition simply by its new bulk, not by operating effectively. The fact that Aetna has grown so quickly based on a track record of poor quality care (see below) suggests the free market has already been compromised.
This merger will undermine competition in the managed care marketplace and sentence consumers to fewer choices, fewer services and the potential for greater price fixing and unfair business practices.
Impact on consumer choice and patient care
The concentration of healthcare into the hands of very few HMO corporations will spell disaster for the goal of competitively priced and quality healthcare. If a patient or employer cannot shop around, there will be no competitive pressure on HMOs to offer affordable premiums. With such a powerful market position, Aetna will decrease the level of coverage offered for a basic premium and make optional certain benefits that would be part of a basic premium in a more competitive market. Patients would be subject to higher premiums and lower levels of care as a result.
Aetna has already foisted upon doctors capitation rates that appear to be inadequate to patient care needs. That is why 600 physicians in San Mateo recently defected from Aetna on January 1st. Thousands of doctors across the country have, in fact, defected from Aetna because reimbursements do not allow them to provide quality care. At least 575 doctors and health care providers in Long Beach, California left Aetna recently and 400 doctors defected from Aetna in North Texas, while similar walkouts or threats to leave have occurred in Ohio and Georgia. If this merger is approved, physicians will have few other places to go when they object to Aetna's conditions and cut-rate reimbursements. This will be a serious blow to patient care.
If this merger is approved without guarantees about Aetna's conduct and authorization practices, the new company would be in a position to downsize the level of care even further. Aetna was already ranked worst by California doctors in a survey conducted by the Pacific Business Group on Health Negotiating Alliance. This poor report card is bolstered by evidence from other regions.
Impact on doctors
The buyout of Prudential would severely weaken the position of doctors when they negotiate contracts with Aetna and other HMOs. With so few companies managing so many patients, doctors would not be able to effectively leverage Aetna into sufficiently compensating them. Doctors will lose much needed bargaining power when seeking a fair and patient-oriented contract and when pressing Aetna to provide medically necessary treatments. The combined Aetna-Prudential would be in a powerful position to grind its capitated rates so low that physicians could not possibly adequately care for their patients.
Most recently, Aetna has been forcing doctors to accept "all-or-nothing" contracts -- where doctors must either accept all of Aetna's plans or will not be able to work under any of them. This shows a market dominance which could lead to doctors being forced to accept onerous contracts that are harmful to their patients simply to survive. Aetna has shown a willingness to do foist such contracts on doctors and the state of California should not give the company a greater way to do this.
Aetna is already overextended from previous mergers
Aetna has yet to recover internally from both its 1996 merger with US Healthcare and the 1998 merger with New York Life. Aetna cannot absorb another 6 million members nationwide, nearly one million of them in California alone, without degrading the quality of care provided to those patients. Two years after the US Healthcare merger, Aetna Inc. continues to have problems bringing US Healthcare patients and doctors into their system. This has led to under-served patients and frustrated doctors. Moreover, Aetna is not likely to have even integrated the New York Life database with their main database until well into the year 2000. In its haste to dominate the HMO industry, Aetna has allowed patient services to erode. Aetna has neither the structural nor technological capacity to buy Prudential without curtailing care for patients. Aetna cannot serve new members before they have begun to effectively operate their system as it stands today.
Aetna: Defiant corporate citizen
Allowing this buyout to proceed is to hand over a key ingredient for market dominance to a corporation which has routinely compromised patient care and disregarded doctors' concerns in the pursuit of profit. The combined Prudential-Aetna entity would be in a position to further compromise medical decisions with administrative and fiscal concerns, a violation of the Knox Keene Act. In addition, Aetna has recently exhibited a genuine disregard for civil authority which suggests that it cannot be trusted with greater market leverage.
Aetna has been challenged for various abuses of the public's trust and numerous transgressions of the law. Each of these instances demonstrates both the antitrust and public health risks associated with stifling the competitive market by allowing this buyout to proceed.
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