Medco Is Top Bidder for Aetna PBM, Reuters Reports

August 31, 2009

Two things stood out for me in the Reuters report last week that Medco Health Solutions had emerged as the lead bidder to acquire Aetna’s pharmacy benefit management operation.

The first is that the Aetna PBM appears to be attracting little interest from potential buyers, according to Reuters.  The second is that the auction might end if Aetna fails to get the right price.  Neither is a big suprise.

After WellPoint sold its PBM for a hefty $4.7 billion, several industry observers (myself included) figured others would follow. 

The problem is that the WellPoint PBM operation was unique.  Unlike most health plan-owned PBMs — which largely serve their own capitive medical members — the WellPoint operation was pretty successful at winning outside business.  It also had the size and scale to wield considerable purchasing power; albeit, not at the level of standalone PBMs.

In contrast, PBM operations owned by other managed care   companies — e.g., Aetna and Cigna — don’t have near the scale or roster of outside clients.  Consequently, it’s unlikely they would yield the type of buyout multiple WellPoint’s PBM attracted.

That’s why I wrote last month that analysts’ projections probably overstated the value of the Aetna PBM — putting it at anywhere from $1.6 billion to $2.4 billion.   We shall see.


Kennedy’s Death a Turning Point for Healthcare Reform

August 27, 2009

The death of Sen. Kennedy (D-MA) will be a turning point for healthcare reform.  The only question is which way things will turn.  Jim Cramer of believes without Kennedy, Democrats simply don’t have the votes to get reform done.  He writes:

We have to acknowledge that his death does change the debate…The Dems only have 59 votes in the Senate — and the Senate is all that matters — and there will be no new senator emerging from Massachusetts because of the commonwealth’s law.

In contrast, Gregory Valliere of Soleil Securities Corp. expects “a renewed resolve” among Democrats to pass reform — even if it means using the 50-vote reconciliation process.   He writes:

Democrats know the window for reform will close by winter…We think they’ll get partisan and pass a measure as a tribute to Kennedy that will satisfy most of the liberals in the House with a quasi-public option, perhaps some type of national health cooperative. The right wing will howl, but the Democrats have the votes.

I lean more toward Valliere’s view.  Democrats — the President included — were already growing weary of Republican stall tactics on reform.  Now the Dems have a rallying cry.

Betsy McCaughey on Healthcare Death Panels

August 26, 2009

There’s nothing like a reasonable argument against the dangers of healthcare reform.  And that’s what Betsy McCaughey delivers in this video interview — nothing like a reasonable argument against the dangers of healthcare reform.  From the Daily Show with Jon Stewart.

Stewart: “You have been accused — fairly or unfairly — of being the catalyst for this idea of death panels.  Now I know you never called it ‘death panels.’  Apparently, that’s the translation of what you had said in Alaska.”

The WellPoint Bounce

August 26, 2009

Given that I’ve been quick to point out every time WellPoint management takes heat from Wall Street (see posts here and here and here), it’s only fair that I also note when things are going well.  Shares in WellPoint are up 30% this year.  

Granted, the managed care sector overall has soared as investors realize that healthcare reform isn’t going to put the industry out of business. WellPoint’s decision to sell its PBM also helped boost shares (or as the suits say “build value”).

Even Lee Cooperman of Omega Advisors — an investor in WellPoint — told me in a phone interview he’s happy with the run-up.  (He’s still not happy with the company’s capital deployment, but that’s another story).

RIP Ted Kennedy

August 26, 2009

The man had a lot of faults.  But I agreed with him on issues of politics far more than I disagreed.  Peace out.

VHA, EMRs and Rising Costs

August 26, 2009

The Veteran’s Health Administration has been praised for its ability to deliver high-quality healthcare while controlling costs in part through the use of electronic medical records.

The Congressional Budget Office has released an analysis titled Quality Initiatives Undertaken by the Veteran’s Health Administration, which offers some interesting thoughts on the topic.  (Note: VistA is VHA’s healthcare information technology system, which includes an EMR).

Some proponents of the veterans’ health system have suggested that VistA has helped the Veterans Health Administration hold down cost growth when compared with other federal health programs, such as Medicare. But such comparisons are difficult to make. The substantial changes in VHA’s structure and in eligibility for care make it particularly difficult to interpret such metrics as cost per enrollee when enrollment was rising dramatically from 1999 through 2002….(CBO) adjusted enrollment data to account for changes in the mix of enrollees and found that VHA’s spending per enrollee was relatively flat from 1999 through 2002, but since that date it has risen about as rapidly as spending per enrollee in the Medicare program. It is likely that rapid increases in annual appropriations for VHA, efforts to reduce waiting lists within the system, and expansion of mental health and other specialized services have contributed to the recent growth in spending per enrollee. 

VHA Spending
Here are some other interesting bits of information from the study. 

Did you know?…Of the 8 million VHA enrollees, 31% also have private health insurance (79% have some type of non-VHA coverage, e.g., private, Medicare, Medicaid, Medigap or Tricare).

Did you know?…VistA source code is available free from VHA.  Healthcare organizations must pay any adaptation, installation and training costs, which can be considerable.  But the software is proven.  Just ask Midland Hospital (Midland, TX).

Did you know?…Along with VistA, other factors in VHA’s dramatic improvement in quality included implementation of an external peer review program, performance incentives, and “the reorganization of VHA from a centralized system to a set of regional networks funded on a capitated basis—that is, based on the number and type of patients each network serves, rather than on the number of medical procedures performed or on historical budgets.”

Did you know?…VHA’s integrated delivery system includes 150 medical centers, 900+ outpatient clinics, and facilities for counseling and long-term care. In 2008, VHA treated 5.1 million or 22% of the nation’s veterans, at a cost topping $40 billion.

Healthcare Costs Still on the Rise

August 25, 2009

Writing about rising costs in healthcare is easy.  You just take the same article you wrote last year, tweak a number here and there, and you’re done.

For example, last year around this time I wrote:

survey from Aon Consulting found that employers can expect healthcare claims costs to rise 10.6% over the next 12 months before benefit buydowns.  Aon surveyed more than 70 leading health plans representing 100 million lives.  The survey found HMO costs are expected to rise 10.6%, POS plans 10.5%, PPOs 10.7% and consumer-directed plans 10.5%.

This year:

survey from Aon Consulting found that employers can expect healthcare claims costs to rise 10.5% over the next 12 months before benefit buydowns.  Aon surveyed more than 60 leading health plans representing 100 million lives.  The survey found HMO costs are expected to rise 10.4%, POS plans 10.4%, PPOs 10.7% and consumer-directed plans 10.5%.

And you thought rising healthcare costs were a problem.

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