Mental Health Threatened by Aetna/Prudential Merger

Psychiatric TimesPsychiatric Times Vol 16 No 7
Volume 16
Issue 7

Proposed in December 1998, the merger has turned Aetna into a managed care powerhouse providing coverage for about one in 11 Americans and having contracts with some 400,000 physicians, more than half the national total. This concentration of economic power, opponents charge, will substitute profit-driven "minimally acceptable clinical guidelines" for treatment plans determined by physicians operating in their patients' best interests. Mental Health Threatened by Aetna/Prudential Merger

Eight months after lawyer Robert Payton, a magna cum laude graduate of Boston University, first submitted his claim for inpatient drug rehabilitation to Aetna U.S. Healthcare, it authorized his request. Unfortunately, Payton had died three weeks earlier of an accidental overdose at the age of 42. His family claims Payton is the victim of a company whose bottom-line approach to medical care deprived him of the mental health and substance abuse treatment covered by his plan.

Now that a $1 billion merger between Aetna and Prudential HealthCare was approved in June by the antitrust division of the U.S. Department of Justice (DOJ), physician groups say this scenario will be repeated over and over again. Proposed in December 1998, the merger has turned Aetna into a managed care powerhouse providing coverage for about one in 11 Americans and having contracts with some 400,000 physicians, more than half the national total.

This concentration of economic power, opponents charge, will substitute profit-driven "minimally acceptable clinical guidelines" for treatment plans determined by physicians operating in their patients' best interests. At the same time professional autonomy is whittled away, critics also claim that physicians' negotiating power will further erode as fewer health care competitors gain tighter control over the marketplace. The acquisition will make Aetna the nation's largest health benefits provider, bringing its total membership to about 22 million individuals, 18.4 million of whom belong to one of Aetna's managed care plans.

But in a surprise move, the DOJ took more time to review the nearly 1 million documents turned over by Aetna before signing off on the antitrust aspects of the deal. Although physician groups were disappointed by the DOJ approval, they found some comfort in the requirement that Aetna divest some Prudential health plan units in the most heavily impacted markets. Meanwhile, regulators in some states are also still looking at the proposed transaction. The fact that they are doing this raises the possibility that Aetna may have to meet additional demands before completing the acquisition.

A week after Aetna and Prudential revealed their plans, the American Medical Association's executive vice president, E. Ratcliffe Anderson Jr., M.D., fired off a letter to the DOJ urging it to carefully review the transaction and to "challenge its anticompetitive aspects." Anderson wrote, "The market power that would be created or exacerbated by this merger would limit the choices of patients and employers, reduce competition and further erode the ability of physicians to make medical decisions based on science and the medical needs of their patients, not share price," Anderson wrote.

Calling the threat posed by a giant health care benefits company "not theoretical," Anderson also said that "Aetna has used its current market position to impose unreasonable contract provisions on physicians that define medically necessary services as 'the least costly of alternative supplies or levels of service.'" He added that "any increase in Aetna's market power would further diminish the ability of patients to receive the quality of care they seek from physicians devoted solely to their best interests."

In February, the Washington, D.C.-based American Association of Private Practice Psychiatrists (AAPPP) weighed in, focusing the DOJ on the unique issues faced by individuals suffering from mental illnesses and the psychiatrists who treat them.

In a letter to the DOJ, Kenneth C. Anderson, an antitrust and health care lawyer in Washington, D.C., said that HMOs will continue cost-cutting in order to satisfy shareholders. He further charged that Aetna would use data collected from its enormous pool of patients to develop a "price" for each treatment based on "minimally acceptable guidelines" that have little to do with a patient's interests but everything to do with the amount of profit Aetna must generate for Wall Street. Anderson represents the AAPPP.

"Diagnosing and treating mental illness is often enormously complex and difficult and thus particularly unsuited for standardization," Anderson wrote. "Incursions by managed health care entities in the treatment of mental illness has already produced great harm to patients and, ominously, is now beginning to discourage providers from entering the profession. Aetna's brave new world could dramatically worsen an already bad situation."

One new physician who abandoned her plans to become a psychiatrist to avoid the undermining scrutiny of managed mental health care organizations is the daughter of Lawrence C. Sack, M.D., a psychiatrist in Washington, D.C. Sack is the current president of the AAPPP. He said that his daughter chose radiology instead of psychiatry after it became apparent to her that managed care would not allow her to deliver adequate care to her patients.

For Sack, tying up the Aetna/Prudential transaction was a quixotic quest to put an end to managed care's destructive impact on health care. "We saw an opportunity to work with the AMA and to do something that would set the track for an end to the monopolistic growth of large corporations whose job it is to destroy care, destroy doctors and destroy medicine," he said. One of their main goals is to "bring to a halt the damage done by mental health carveout companies [that operate] without being legally accountable to anyone."

Another goal is to bring some rationality to the antitrust laws, which permit managed care companies to combine and merge into more economically powerful entities, but prohibit physicians from organizing into bargaining units. "We believe that the main monopoly damaging people, damaging health and damaging the economy is the managed care industry, pure and simple," said Sack. "They're not accountable, and the antitrust laws are used to squelch the physicians when they try to get redress and an equal playing field."

Sack pointed to a late-May ruling by the National Labor Relations Board that denied more than 600 New Jersey physicians who contracted with AmeriHealth HMO Inc. the right to appoint a collective bargaining unit, finding that their independent contractor status prevented union representation (AmeriHealth Inc./AmeriHealth HMO, Employer, and United Food and Commercial Workers Union, Local 56, AFL-CIO, Petitioner, Case 4-RC-19260). This setback means that without legislation at either the federal or state level, physician efforts to gain bargaining power could suffer as negotiations over reimbursement and working conditions become more difficult as HMOs gain market dominance.

A bill currently wending its way through the House of Representatives-the Quality Health-Care Coalition Act of 1999 (H.R. 1304)-sponsored by Tom Campbell, a California Republican, holds out some hope for physicians. It would permit health care professionals to negotiate collectively with health care plans by treating them as employees rather than employers, independent contractors, managers or supervisors. In effect, the bill would limit the application of antitrust laws to groups of physicians who organize to bargain with large HMOs.

Meanwhile, regulators in various states such as Texas, New Jersey and Georgia must all pass on the Aetna/Prudential merger. In an interview with Psychiatric Times, Donald P. "Rocky" Wilcox, the general counsel of the Texas Medical Association, said that the state's Department of Insurance will likely make its decision soon, now that the DOJ has made its determination.

Cities such as Houston and Dallas/Fort Worth could be heavily dominated by Aetna if the merger and divestitures succeed, still making the anticompetitive impact a key issue.

Wilcox also said that the Texas Medical Association has argued that the merger request should be disapproved until allegations brought by the state's attorney general against Aetna are resolved. The company has been accused of various insurance code and consumer protection law violations.

As Psychiatric Times went to press, the Texas legislature was on the verge of passing a bill (S.B. 1468) that would allow the state's physicians to bargain collectively through the aegis of the attorney general's office. Wilcox said that he expects the bill to end up on the governor's desk shortly and to become law before this session of the legislature adjourns.

The American Association of Private Practice Psychiatrists took the lead in advancing the interests of the mentally ill during consideration of the merger, Sack said, because the APA's diverse membership makes it awkward for the group to take a position. He conceded that stopping the transaction was unlikely, but now that Aetna is required to divest Prudential health plans in some heavily impacted markets as a condition of approval, he would consider that a victory.

"We were not sure we were going to win this one, but we certainly were going to make the public aware of the issues and educate government regulators about [them]," said Sack. "A lot of these people make important decisions, and they don't have a clue as to what the managed care companies are doing."

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