New Company Combinations in Health Care

Some of the recent health care merger announcements have attracted the usual blithering commentary about revolutionizing the health system, etc, etc.  A report from PriceWaterhouseCooper’s Health Research Institute epitomizes the trend.   (PWC Report)   The report notes such pending high-profile deals as CVS’ purchase of Aetna (itself on the rebound from a rejected merger with Humana) and Cigna’s merger with Express Scripts (Cigna also a jilted partner to Anthem) and suggests we are seeing new companies that will remake health care in wonderful ways.  (Not mentioned was the recent Walmart buying Humana rumor, which Humana undoubtedly ginned up to try to get someone to want to buy the company.)  They also discuss the Amazon, JP Morgan and BerkshireHathaway combination to fix health care from an employer purchaser perspective.  That didn’t last long, as JP Morgan realized its health care investment banking clients might not be thrilled.  The report says we are seeing four new “archetypes” represented by these deals–vertical integrators, employer activists, technology invaders and health-oriented retailers.  Supposedly, abilities to better integrate and use data across the health spectrum and to better serve consumers in the driving force for these archetypes.

The more accurate way to look at these trends is as the desperate moves of companies who feel they aren’t competing well and can’t do so independently in the future, and as the usual cash-out attempts of executives who are out of good ideas for operating their companies more successfully.  Cigna and Aetna had recent failed attempts to merge.  Express Scripts hasn’t competed well against the CVS Caremark division or the OptumRx division of UnitedHealth.  Who knows what CVS is thinking, probably some executive stab at glory, one that is destined to end badly.  Some of these mergers may go through, and some may end up in future spin0ffs even if they do go through.  None of them will provide the touted benefits to shareholders, consumers or the health system.  Distractions and misguided strategy will rule.  Better to keep our health system companies smaller, more nimble and forced to compete and better for them to focus on maximizing the health and care of individual patients.