New York Times
December 17, 1998ECONOMIC SCENE
In Health Care Business, Size Can Matter
By MICHAEL M. WEINSTEIN
etna Inc.'s proposed purchase of the health care business of Prudential Insurance Co. of America has touched off concern among doctors and consumers, but Aetna's size and market power could ultimately benefit patients.
The acquisition would create the nation's largest health insurer, serving one in every 10 Americans and writing contracts with about half of the nation's physicians. Doctors fear the behemoth will harden Aetna's already aggressive assault on tests and procedures it deems excessive, and some consumer advocates worry that an enlarged Aetna will bully patients. Rival insurance companies recoil at the prospect of competing against a company with the market power to negotiate steep discounts with hospitals.
But the critics overlook a powerful reason in favor of the takeover. If insurance companies spent most of the last decade belligerently cutting costs, they will probably spend the next decade evaluating the quality of patient care. Here, large plans will have a decisive advantage. Tight oversight of patient care requires hugely expensive computer systems that only large insurance companies can afford.
Aetna is creating such systems. So too is New York state's largest insurer, Empire Blue Cross and Blue Shield. In a rapidly evolving business, size becomes the patient's friend.
Richard Huber, president of Aetna, said as much when he announced the deal for Prudential Health Care. He predicted that "the wave of company-led cost-cutting is nearly complete. The next big push will be quality." The large size of Huber's company does not guarantee success. But without large size, it might well fail.
Aetna's new heft will give it only 10 percent of the national market and up to 30 percent of some regional markets. Those are not formidable numbers. Besides, there are ample remedies if the antitrust authorities find local pockets of excessive concentration.
Size will also help insurance firms create computerized data systems that track diagnoses, treatments and prescriptions. The idea is to flag errant care before it does harm. The huge development costs for these computer systems can only be absorbed if the insurer can spread the expense over many patients.
Aetna has been developing clinical information systems for almost a decade. Every time one of its 16 million customers files a claim for a procedure, test or drug, the transaction enters Aetna's computer files. Aetna distributes reports to each of its physicians once or twice a year, telling them how their treatment of several prominent medical problems compares with that of their peers.
The physicians learn, for example, how many of their diabetes patients, compared with diabetics nationwide, received an annual eye exam. Aetna reports how many of the doctors' patients filled their drug prescriptions and how many of their asthma patients suffered attacks severe enough to send them to a hospital emergency room. The company contends that doctors are responding to its reports by slowly bringing their treatment practices in line with recommendations by the major medical societies.
Empire has created a sophisticated oversight system that so far covers about 100,000 enrollees, including employees of Merrill Lynch & Co. and Circuit City Stores Inc. The important feature of Empire's system, says its president, Michael Stocker, is instant feedback.
Each day, Empire runs data on each of the 100,000 enrollees through its computer to search for "triggers" -- events, like admission to a hospital or prescription for a new drug -- that justify subjecting the patient's medical record to careful scrutiny. Empire says it pulls about 60 files a day for close examination. It then turns the files over to a company that examines the patient's labs tests, prescriptions and medical procedures for evidence of mistaken diagnoses or inappropriate treatment. The records are referred to academic specialists for independent review.
If the review turns up a problem, Empire's doctors call the patient's physicians to suggest corrections. Empire says it makes one or two such calls a day. Jamie Court, a prominent consumer advocate in California, supports the use of computer systems "when their purpose is to root out errors rather than to deny care for the purpose of cutting costs."
Empire points to cases where errant care was corrected before it did harm. In the case of a patient admitted to a hospital for knee surgery, it was found that he had been taking an unnecessarily dangerous drug to combat colitis. Another patient was found to be taking a blood thinner she did not need but not taking anticholesterol drugs she did need. And, her records indicated, she had not been properly examined for peptic ulcer disease.
A third patient was found to be taking duplicate drugs both to lower her cholesterol and to lower her blood pressure. Empire's system provides daily checks, rather than the quarterly and annual reports of many other clinical-data systems.
Health maintenance organizations argue that, by putting a single physician -- called a gatekeeper -- in charge of a patient's care, they eliminate inconsistent therapies. Otherwise patients are prone to visit multiple doctors who know little, if anything, about one another. The intriguing feature of clinical-data systems is that they harness computers to perform some of the error checking that gatekeepers perform. There remains the important task of persuading patients and physicians to adopt wise counsel, a difficult problem that may turn out to be managed care's true advantage.