Harvard Law School Health Law Policy Director Glenn Cohen

Payors

Cigna and Humana Eye Blockbuster Merger

The headline of the week – and possibly the year – goes to the Wall Street Journal’s scoop on the upcoming mega-merger between Cigna and Humana, which could create a new payor powerhouse before the end of next month.

Although “sources close to the matter” didn’t disclose the structure or terms, the combined company would be worth some $140 billion, making it the third largest player in the sector behind only UnitedHealth and Elevance.

Cigna hauled in upwards of $180 billion in revenue last year, mostly from its strong position in the commercial coverage market. The acquisition of Express Scripts in 2018 also made Cigna one of the biggest names in pharmacy benefits, and its Evernorth health services arm has been adding more fuel to the fire.

• The glaring white space in that portfolio happens to be one of the biggest growth engines for insurers, the Medicare segment.

• While Cigna’s been trying to build momentum in Medicare Advantage since picking up HealthSpring in 2011, just this month it announced that it’s “evaluating options” to offload its underperforming MA unit.

Humana is the second largest Medicare insurer, and last reported that its MA enrollment stands at about 5.9M members – 3x more than Cigna. 

• On top of that, Humana’s CenterWell home-health business and growing network of primary care clinics give it a big leg up in managed-care and VBC, two areas that would complement Cigna’s Evernorth operations.

• Despite those strengths, last year’s revenue was about half of Cigna’s at ~$93B, and Humana recently announced that it would be shedding its commercial business to focus on its core MA line.

It’s worth noting that this isn’t the first time Cigna and Humana have considered merging, but previous attempts circa 2015 either fell apart or were blocked on antitrust grounds. This time around, with Cigna exiting Medicare at the same time that Humana bails on commercial, the pair seem to be building a decent case that a merger wouldn’t decrease competition.

The Takeaway

Joining forces would vault Cigna and Humana into the top tier of integrated healthcare firms, not to mention give the M&A market a much needed jolt with 2023’s biggest transaction across all industries. We’ll apparently have all the details in the next few weeks, followed by what’s sure to be a lively antitrust case.

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The Wire

• Ardent Ransomware Attack: The latest high-profile ransomware attack hit 30-hospital system Ardent Health Services just before Thanksgiving, forcing ambulances to be diverted and elective procedures to be rescheduled. To say that Ardent has had a nightmare week would be an understatement, as it doesn’t appear to be submitting to the attackers’ demands and is still actively working to get Epic back online at all of its facilities across six states.

• Telehealth Use Remains Elevated: Telehealth continues to be utilized about 30x more than prior to the pandemic, according to the latest data from Epic Research. In 2019, telehealth made up ~0.2% of overall visits. That figure had jumped to 31.2% of visits by the second quarter of 2020, and has since stabilized at its current share of 5.8%. The breakdown of telehealth’s staying power by specialty paints a familiar picture, with mental health leading the pack by a wide margin at 37% virtual visits.

• Season Acquires Wellory: Food-as-medicine leader Season is massively expanding its provider roster through the acquisition of Wellory, one of the largest networks of registered dietitians in the country. Wellory’s network is composed of hundreds of RDs across over 25 clinical specialties, positioning Season to provide diet-based clinical programs to more patients with conditions such as diabetes, CKD, obesity, and high-risk pregnancy. Gaining national contracts with Aetna and Cigna is also a nice cherry on top.

• Troubling Trends in CVD Mortality: An article in the American Journal of Preventive Medicine outlined troubling cardiovascular disease mortality trends in recent years. Despite an 8.9% decline in age-adjusted CVD mortality rates from 2010 to 2019, the last three years saw a 9.3% increase, dragging the US back to levels last seen in 2010. From 2020 to 2022, 229k excess CVD deaths occurred, 9% more deaths than expected based on trends from the previous decade.

• Memorial Hermann + Laudio: Memorial Hermann Health System is implementing Laudio’s administrative workflow platform and joining the company’s recent $13M Series B raise as a strategic investor. Unlike staffing solutions aimed at adding more people, Laudio helps retain the talent healthcare organizations already have by automating repetitive work (e.g. employee rounding, new hire check-ins, quality audits) and nudging managers toward next best actions

• Waning Trust in Science: A Pew Research survey of 8,842 American adults found that 27% have little to no confidence in scientists to act in the public’s best interests, a wild spike compared to the 12% who said the same in 2020. Some other disheartening stats from the survey include the fact that only 57% of Americans believe science has had a mostly positive effect on society, down 16% from pre-COVID responses. Despite the waning confidence, trust in scientists still outranks business leaders and elected officials. 

• Mayo Clinic Partners With Ayble: Digital GI platform Ayble Health is partnering with Mayo Clinic to offer patients a hybrid care model that matches them with virtual and in-person services depending on their needs. Given that gastrointestinal symptoms fluctuate frequently, Ayble will complement Mayo’s clinicians by pairing patients with board-certified digestive health coaches to guide them through personalized nutrition plans, behavioral therapy, and wellness tools.

• Bloomberg Puts Amazon in the Hot Seat: Bloomberg didn’t pull any punches in its recent (hit)piece on Amazon’s foray into healthcare. The article outlines how Amazon invested billions over the last decade attempting to re-invent US healthcare, then eventually “capitulated” by taking a more traditional approach. Although we’d rather cheer for shots-on-goal in the healthcare innovation game, it’s hard not to read this one without feeling like there’s been some over-promising and under-delivering.

• Black Patients See Delayed Alzheimer’s Diagnosis: Black patients are diagnosed with Alzheimer’s disease nearly five years later than white and Hispanic patients, even though they are at higher risk of the disease. In a study presented at RSNA 2023, researchers looked at patients who had CT or MRI scans for cognitive impairment, finding that Black patients who were later diagnosed with Alzheimer’s had an average age of 73, compared to 68 for whites and 67 for Hispanics. Black patients also had lower rates of MRI for cognitive impairment (51% vs. 60% for whites and 67% for Hispanics).

• Layer Seed Round: Clinical note startup Layer Health closed a $4M seed round to push the development of its Distill platform that uses AI to perform tasks that require chart review. Layer assesses unstructured clinical notes using AI and LLMs to let providers and researchers easily execute workflows related to areas such as quality measurement, rev cycle management, real-world evidence curation, and clinical trial recruitment. 

• Solving the Rural Cardiologist Shortage: University of Iowa researchers might have figured out how to solve America’s rural cardiologist shortage: pay them to drive to rural clinics. Noting that Iowa has just 200 practicing cardiologists who mostly work in urban areas, the study found that it would cost the state $430k a year in order to maintain 2019’s level of care as more cardiologists retire. Although that might seem like a lot, “it really isn’t, compared to hiring just one cardiologist.”

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