Overly Aggressive Acquisition Strategies Can Damage a Health Plan's Relationships with Providers and Customers, Health Plan Week Reports
Atlantic Information Services, Inc. (AIS) - January 25, 2008 - Washington, DC

According to AIS's Health Plan Week, UnitedHealth Group’s Dec. 4 admission that its customer service and provider relationships have been hurt by its aggressive growth strategy highlights the significant integration problems mergers and acquisitions can cause for health plans, even years after deals have been completed. CIGNA Corp., another insurer with a large purchase in the works, says it will not combine customer service or claims-payment systems in the deal, partly to avoid such snafus.

United officials in December pledged to revamp business strategies, forge better relationships with providers, improve administration systems and resolve member problems more quickly — in an effort to resolve problems caused by recent acquisitions, including damaged provider relationships, frustrated members and harm to its reputation.

Many of the problems cited by company leaders were related to the integration of PacifiCare Health Systems, which the company acquired in late 2005. "We pursued too much change too fast, and the results were too disruptive," Executive Vice President David Wichmann said at a Dec. 4 investor meeting in New York City. "After listening to the market, we decided we needed to slow down the pace of change if we ever expected to speed up the pace of true accomplishment."

While some industry observers say United's new strategy was prompted by fines levied against it by state insurance regulators, they acknowledge that, if successful, other insurers might be prompted to pay closer attention to post-acquisition integration processes.

"I give United credit for being forthright and for taking responsibility on the issues," says Henry Loubet, senior vice president in the Oakland, Calif., office of Keenan & Associates, an insurance brokerage company and third-party administrator (TPA). Between 1996 and 1999, Loubet was the CEO of United's West Coast operations. "There is a lot of complexity around the integration of information technology (IT) systems. I can't say that I have seen any [health plan] get it totally right. I think that's why some health plans have shied away from large-scale acquisitions."

Integration problems are far from unique among health insurers and often are driven by complex consultant-designed insurance products, myriad provider-discount arrangements and insurance regulations that vary from state to state. Some health plans rely on antiquated administration systems that are "held together with bailing wire and Band-Aids. Paying fines is sometimes cheaper than trying to solve problems," says one industry observer who asked not to be identified.

United's post-acquisition integration challenges are "a fundamental issue" for the health insurance industry, adds Chip Tooke, former CEO of Lumenos, a consumer-directed health care vendor acquired by WellPoint, Inc. in mid-2005. Insurers, he explains, tend to view employers, rather than enrollees, as their customers. "When you walk into Nordstrom's [department store], you know immediately that you are the customer." But health plans have a tough time seeing the member as a customer because it's the employer that is purchasing the coverage.

To read the full article, which was originally published in the December 17, 2007, issue of AIS's Health Plan Week, visit http://www.AISHealth.com/PR2008_0125_hbd.html.

About AIS

Atlantic Information Services, Inc., (AIS) is a publishing and information company that develops highly targeted news, data and strategic information for managers of health plans, hospitals, medical group practices, pharmaceutical companies and other health care organizations. AIS products include print and electronic newsletters, looseleafs, books, strategic reports, databases, audioconferences and management seminars. For more information, visit www.AISHealth.com

Contact:

Steve Davis Managing Editor AIS’s Health Plan Week Atlantic Information Services 202-775-9008, ext. 3047 sdavis@aishealth.com

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