N.Y. Medical Society Opposes HIP, WellPoint Mergers

October 6, 2005

The Medical Society of the State of New York has expressed serious concerns of the physician community regarding the recent announcement that HIP Health Plan of New York (HIP) and Group Health Incorporated plan to merge, as well as the announcement that WellPoint is purchasing WellChoice Inc., the parent company of Empire Blue Cross Blue Shield.

If this occurs, it would be the second and third major mergers within the managed care industry in the last two years, following the merger of United Healthcare and Oxford Health Plans in 2004.

“MSSNY is concerned that the merger of these large companies will reduce even further the already minimal ability that physicians have to negotiate critical patient care terms with health plans,” commented MSSNY President Robert A. Scher. “Moreover, the medical society believes that the merger of these companies would result in a situation that would make it even more difficult for physicians to advocate on behalf of patients with health plans.”

He said the group hopes that Attorney General Spitzer will strictly scrutinize these attempted mergers and acquisitions to determine whether they would violate antitrust laws, and, most importantly, whether there are reasonable grounds to believe these proposed mergers and acquisitions could negatively affect patient care.

Scher said doctors are now dealing with rising liability insurance and overhead costs and declining reimbursements from both public and private payors. But the efforts of insurance companies to intrude into the clinical decision-making authority of physicians through one-sided contractual terms is even more of a concern, he said, citing “all-products” clauses, coding rules that deviate from accepted national standards, unilateral ability to change fee schedules and subjective “medical necessity” definitions.

“Should the purchase be permitted to go forward, these problems would undoubtedly become worse because the new companies would exert even more control. As we have stated on many previous occasions, all regions of New York State are already dominated by one or a small number of managed care plans,” said Scher.

Quarterly enrollment data from the New York State Department of Health show that, as of June 2005, 62 percent of the state’s 4.5 million enrollees in managed care plans were enrolled in just five HMOs (HIP, Oxford, Empire HealthChoice, Excellus and MVP). According to published accounts, HIP has 2.6 million total enrollees and GHI has over 900,000. Empire has over 5 million enrollees, while WellPoint nationally has over 28 million enrollees.

“The size of the new entities would be enormous. Regionally, the figures are even more sobering, with each region of the state being dominated by one or only a few managed care companies,” said Scher.

According to the United States Department of Justice, a region with a market concentration in excess of 1000, as measured by the Herfindahl-Hirschman Index of competition, is considered “concentrated.” A market with an HHI excess of 1800 is considered “highly concentrated.” Every region of this state is, therefore, “highly concentrated,” according to this measure.

“When viewed on a county level, all counties in New York State are ‘concentrated’ or ‘highly concentrated.’ The merger of HIP with GHI and the purchase of WellChoice (Empire) by WellPoint will exacerbate an already bad situation which is grossly unfair to both physicians and patients,” maintained MSSNY’s Governmental Affairs Director Gerry Conway.

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