Cigna-Humana Merger Called Off, Providers See Surge in Audits

December 13, 2023 - Major payers Cigna and Humana have dissolved their merger plans, according to the Wall Street Journal.

Rumors emerged that the two payers were in talks about a merger in late November 2023, but those plans were dead by mid-December. In the wake, Cigna announced it will dispose of its Medicare Advantage business. Together, these payers cover approximately 35.1 million lives. Humana held 18 percent of the Medicare Advantage marketplace in 2022, while Cigna had 10 percent of the national market, according to the American Medical Association (AMA), making them a formidable pairing.

Remote patient monitoring data shows strong results in the first two years of implementation. Healthcare leaders deployed these tools primarily for patient populations with chronic diseases. Meanwhile, providers saw a surge in external audits from payers. The surge comes as payers experience more pressure to explain where their payments from CMS are going.

Finally, CVS Health has introduced a new portal that intends to bring together patient information and vendor solutions into one place. It also may encourage patients to stay within the CVS Health system, since some of its capabilities are only available to Aetna members or individuals who use CVS Health's Oak Street Health or CVS MinuteClinics.

Kyle Murphy: Hello and welcome back to Healthcare Strategies | Headlines. This week's episode:

• No Christmas Wedding for Cigna Humana
• Payers to Docs: "Show Your Work"
• RPM Generating ROI for Provider Organizations
• The Race to Make the Portal to End All Portals

...That sounds so ominous, Kelsey.

Kelsey Waddill: I know it does.

Kyle Murphy: Well. Yeah.

Kelsey Waddill: Dramatic.

Kyle Murphy: I wish there were magical portals that could send us anywhere, like when it's December and dark as...

Kelsey Waddill: To the Bahamas.

Kyle Murphy: Yeah, to the Bahamas. Anyplace warm. So you have new glasses on today, Kelsey?

Kelsey Waddill: I do.

Kyle Murphy: This is a big deal. You can see clearly now?

Kelsey Waddill: I can see clearly now.

Kyle Murphy: It's exciting.

Kelsey Waddill: Yep.

Kyle Murphy: How'd you make the decision?

Kelsey Waddill: Oh man. After too long, the lady was probably really ticked at me because I was just looking at all these options and then I'd put them away and then I'd bring them back out. But it happened and I finally settled on a pair. Do you have contacts?

Kyle Murphy: No.

Kelsey Waddill: No? Wow.

Kyle Murphy: I've been blessed.

Kelsey Waddill: You have perfect vision?

Kyle Murphy: Yeah, I've been blessed by genetics. Nothing to do with my own life. I would claim that it's diet and lifestyle but... All right, you ready? Let's get into it.

Kelsey Waddill: All right.

Kyle Murphy: All right. So no Christmas wedding for Cigna, Humana. Cigna is calling quits to its pursuit of Humana after failing to agree on a price in other financial terms, the Wall Street Journal reports. The Journal is actually the one that broke the story end of November. Shareholders apparently were not in favor of the proposed merger, which would've taken the form of a cash-in-stock transaction with an emphasis on the stock component. Dilute those shares or whatnot.

Cigna's stock dropped 10 points following news of the merger. Yeah, that's not good. No bueno. Now the company has signaled a plan to spend $10 billion on stock buybacks--didn't see it coming--and Cigna remains committed to offloading its Medicare Advantage business, which has been a challenging growth area for the payer, and where the Humana merger was likely to prove fruitful. So...

"As we look harder at the broader landscape and the strategic opportunities before us, we remain financially disciplined with a clear focus on executing against our strategy", Cigna CEO, David Cordani, said in the statement. "Executing against our strategy", looks like they're going... They don't know which way they want to go.

So Kelsey, honestly, I read this, the story of the merger and I was like, obviously it's going to go forward because if it's ridiculous and it involves billion-dollar companies in healthcare, it usually goes forward because that's the way it works. What was your reaction to the failure for this to come together?

Kelsey Waddill: I would say I wasn't surprised by the failure because we have a history of that with the Anthem and Cigna, Humana and Aetna 2015 attempts. I was just shocked, I think, by how fast they decided it wasn't going to work out. It was within a couple weeks of the rumors circulating.

Kyle Murphy: Yes.

Kelsey Waddill: So I wonder if that just shows how much the shareholders have influence over these kinds of decisions.

Kyle Murphy: Or whether they weren't considered at all.

Kelsey Waddill: Yeah, that's also a good point.

Kyle Murphy: When there's a blowback like that--a lot of us will say whatever we want to say about shareholders making business decisions, but for a publicly traded company, there are ramifications to your decision-making. Maybe sometimes you ought to read the room before you make a move, but hey, who knows? I'm not an expert, I just play one on TV.

Kelsey Waddill: So speaking of payers.... Payers to docs: "show your work."

External payer audits have quadrupled in 2023, according to an MDaudit annual benchmark report. And for context, for those who don't know, an external payer audit occurs when payers, whether governmental or commercial, initiate an examination of a provider's finances or processes. This is often instigated by providers offering, according to the payers, insufficient evidence for a medical necessity or overuse of a certain code.

So not only were payers quicker to ask for an audit this year, but their additional documentation requests [ADRs], which payers send to providers when they want more evidence to support a claim, got much longer. Sometimes over a hundred pages. Risk-based audits spiked by 50 percent and hierarchical conditions coding [HCC] audits jumped 170 percent due to the increased regulatory pressure on Medicare Advantage plans to account for high reimbursement. Audits for diagnosis-related group [DRG] codes and classification codes, as well as pre-bill audits, saw major increases.

And as a result of all this, at the end of it all over a quarter of providers failed their audits. So there's a lot of pressure on providers right now to sort of show their work on why they are recommending certain treatments or coding a visit in a certain way. And according to the report, this is all happening in tandem with the workforce shortage. So providers have fewer people managing a bigger load of audits.

Kyle, while it's only responsible for some of these increases, I do want to talk a second about the impact of higher scrutiny of Medicare Advantage plans because it did impact these numbers. Aside from the volume of external payer audits that are increasing, what have been the ripple effects of this move to really pay more attention to Medicare Advantage plans' processes?

Kyle Murphy: I'll tell you that I actually did work on something recently talking about these RADV audits--the risk adjustment data validation programs--and this is where they look at HCCs, DRGs and the fact of the matter is there are financial consequences now for not showing your work in the Medicare Advantage program. There's a certain grace period with a rule that went into effect where certain program years weren't going to be affected. But, I believe, 2018 and onward, those years for Medicare Advantage were going to be scrutinized very, very closely in these audits.

And the reason being, there's a lot of money on the table. I think there's something like nine DRGs or HCCs that the federal government is looking at. You're talking about stroke, cancer, major depression. You've got to show your work in order for the government not to determine that you need to repay money because they sample a part of your Medicare Advantage population and if they find a certain percentage of things not being coded accurately or not having justification, they multiply that by your entire Medicare Advantage population and then they do the math. That's called extrapolation. And other than a math term, it's a very dangerous one in the payer space.

So it makes a lot of sense. There's a lot of business now, a lot of money being spent on the Medicare Advantage, Part C kind of program. It only makes sense that the audit trail and the audit work is significant. And this stuff takes time, by the way. So if it takes time, means it takes resources, which means we're all going to pay for it.

Kelsey Waddill: Yeah, the report was commenting, those a hundred page or more additional documentation reports....

Kyle Murphy: That's why we use fax machines. Fax machines are able to share information.

Kelsey Waddill: Oooh.

Kyle Murphy: Yeah. That's healthcare for you.

Kelsey Waddill: That's the new age of healthcare that we're in is still relying on fax....

Kyle Murphy: It's the old age, but still it's better than the mail. All right. RPM generating ROI for provider organizations. A survey by MD Revolution and Sage Growth Partners finds that nearly three quarters (73 percent) of health systems, physician practices and federally qualified health centers [FQHCs] participating in the survey report a positive return on investment--otherwise known as ROI--from remote patient monitoring programs despite many of the programs being less than two years old. People in healthcare love a quick turnaround. A quick ROI is better than any other ROI that you could possibly get. And usually we're talking years this was less than two. That's months.

All right. RPM programs are primarily used for managing chronic diseases such as hypertension, diabetes, heart conditions, and others. These programs have shown notable impacts on patient care and satisfaction. Of the 141 responses, a vast, vast majority (94 percent) saw improved patient outcomes due to RPM, while 63 percent have seen ROI through enhanced care plan compliance and medication adherence. Chronic care management programs also showed positive ROI mainly through additional revenue with approximately 29 percent increase in reimbursement post-implementation. Looking ahead, most execs plan to increase or maintain their budgets for RPM and chronic care management programs in 2024.

Kelsey--RPM, chronic disease management like peanut butter and jelly, are they not?

Kelsey Waddill: If you consider peanut butter and jelly a good combination, then yes.

Kyle Murphy: An excellent combination.

Kelsey Waddill: An excellent combination. Yeah. I think it is interesting as you highlighted that it's only two years or less of information, so I am wondering what we're going to see in the long term. Hopefully, it's a continuation of this theme and it makes sense that it would work when you're on a daily basis trying to track a disease that will follow you for the rest of your life, it's good to have something that can actually do that tracking on a daily basis for you without you having to really think about it that much. So one would imagine that it would have some really good impacts on health.

Kyle Murphy: We also know that billable codes and stuff like that have been created more recently for RPM. So the reimbursement is there as well. So I wonder what happens when the commercial market imitates more what the federal public market does, and that's becomes much more widespread because seems like prevention is less costly.

Kelsey Waddill: I've heard that as...

Kyle Murphy: Rumors?

Kelsey Waddill: I've heard that idea.

Kyle Murphy: It's radical.

Kelsey Waddill: Radical, yeah.

Kyle Murphy: Well, in other news on tech-related subjects, the race to make the portal to end all portals--admittedly a pretty dramatic title for what I'm about to describe. CVS Health has introduced a tool that it says will supercharge...

Kyle Murphy: That's super, super.

Kelsey Waddill: ...patients' health. The goal is to have everything in one place. So prescription info, CVS Minute Clinic and Oak Street Health appointment scheduling, chronic disease management tips...

Kyle Murphy: Oh, that's another mention today.

Kelsey Waddill: Yeah.

...and access to dependents' health info through proxy accounts for parents. Users with Aetna or CVS Caremark membership can view their deductible information in the app too. It will also connect with other vendors such as telemental health or postpartum virtual care providers, and of course it will leverage generative AI.

Kyle Murphy: No way.

Kelsey Waddill: Unless it wants to be rendered dead on arrival.

They're using AI in this case to operate their chatbot through which users can find new doctors or ask health questions. So this importantly is not your classic patient portal, but it does share some qualities with that approach to health management, just for reference.

So, Kyle, the other day I was talking to an actuary who consults with employers on health benefits and he was commenting about how health plans and employers have all of these point solutions all over the place and are having trouble connecting them all and putting them in one place for employees and users to access. So--I'd be curious if you think that this might be true, but--I'm wondering if we're seeing kind of CVS Health kicking off something where a lot of retail health might move in to be the space that combines all of these solutions. Just seems like, I don't know, a trajectory that's possible. What do you think?

Kyle Murphy: I think in our march to single-payer, this is how it starts. It starts because, remember, we had the Walmart conversation, I think we had Best Buy conversations. This one for me is CVS is creating the digital ecosystem that if you're in any of its programs, one of them, you're probably going to experience a certain modern experience that might encourage you to stay within that CVS system.

So I don't know. To me this is problematic because if the push in healthcare is to have a primary care provider, so far as I understand it, CVS does not provide that. Oak Street is its attempt, but that's not everything. So CVS can obviously do it all because it is one of those companies that spans it all. But I still think that this creates a lot of fragmentation. So I wonder if, unless they can make every patient sticky and part of everything that it provides--whether it just means it's another portal, it's another thing that you need to look at if you want to follow your healthcare, and it's probably another thing you need to share with your doctor if you actually do anything meaningful over there. As far as I know, my doctor knows nothing about what I've done at CVS, even though those are two Epic systems. But if no one addresses a problem, somebody else in the industry will. And CVS has clearly made the investments in everything. But I'm old enough to remember CVS as being mostly a candy and drug store that sold cigarettes. So, as I said, I think this is a real, real turnaround and a CVS, a Walgreens, they're closer to people, to most ordinary individuals than the healthcare system is.

Kelsey Waddill: Exactly.

Kyle Murphy: So definitely are convenient. The question is, will it actually lead to any improvement?

Kelsey Waddill: Yeah. I don't know. Maybe in two years.

Kyle Murphy: Well, if it's RPM in two years or less, we'll see the ROI.

Kelsey Waddill: Maybe not the portal to end all portals, but a portal, another one.

Kyle Murphy: A new gateway somewhere else.

Kelsey Waddill: Yeah. Well.

Kyle Murphy: You want to sign it off?

Kelsey Waddill: On that note...

Kyle Murphy: This has been Healthcare Strategies | Headlines edition. Thank you, Kelsey. Good to see you.

Kelsey Waddill: Good to see you, too.

Kyle Murphy: All right. Find us on Spotify or wherever else you consume your audio podcasts.