Cigna Group pulls plug on its planned merger with Humana Inc.

Photo illustration by Modern Healthcare

Kentucky Health News

The Cigna Group has pulled the plug on its planned merger with Louisville-based Humana Inc., which would have created a huge health-insurance company.

"The companies couldn’t come to agreement on price and other financial terms, according to people familiar with the matter," reports Lauren Thomas of The Wall Street Journal. "Cigna would have been acquiring Humana in a cash-and-stock transaction with a large stock component, the people said. Shareholders reacted coolly, with Cigna stock dropping nearly 10% since the talks surfaced as questions swirled about the wisdom of using the company’s stock as currency, among other concerns."

Thomas's sources told her that Cigna still believes in a merger with Humana, creating a company that would focus on improving access to care and lowering costs for consumers. Humana announced in February that it planned to concentrate on Medicare Advantage plans and sell its purely commercial lines of insurance, while expanding home-health and primary-care businesses, which it says support Advantage customers.

Humana has been the object of suitiors for years and "is in the midst of a succession handoff—often an opportune time for would-be acquirers to pounce," Thomas writes. "Humana said in October that Jim Rechtin—previously chief executive of Envision Healthcare—would take over as president and chief operating officer, effective Jan. 8. Rechtin was then to take over as CEO from Bruce Broussard in the back half of 2024."

Humana and Cigna, a larger insurance firm, are talking merger

Photo by Joe Bulewicz, Bloomberg News

Kentucky Health News

Louisville-based Humana Inc. is in merger talks with The Cigna Group that would create the nation's third-largest company selling health insurance.

The merger would "vault the combined company into the top tier of integrated health-care firms," The Wall Street Journal reports. "Cigna, which had revenue of about $181 billion last year, would be able to marry its huge pharmacy-benefit unit, which manages drug plans, and its strength in commercial insurance with Humana’s big position in the fast-growing Medicare segment, something Cigna has long sought."

Humana is the smaller company, with a market value of about $62 billion and revenues last year of about $140 billion. The merged market value would rank behind UnitedHealth Group and CVS Health among health insurers.

The Journal reports, "Humana could also help Cigna accelerate a strategy that is core to the managed-care business, a move toward paying doctors and hospitals in ways that aren’t tied to the volume of service provided. These 'value-based care' setups are increasingly central to Medicare plans, but have advanced far more slowly in commercial insurance." Humana's Medicare revenue of about $93 billion last year made it the number-two Medicare insurer, after UnitedHealth; Cigna's Medicare Advantage "falls well short of that scale."

Humana has been merger bait for years. In 2015, it explored merging with Cigna, but chose another suitor, Aetna, in a deal that a federal judge blocked on antitrust grounds, "leaving Aetna to be scooped up by CVS in 2018," the Journal notes. "Another deal that would have combined Cigna with Anthem, now known as Elevance Health, also died after an adverse antitrust ruling. The antitrust issues have made national insurers leery of large-scale combinations for years, and the Biden administration has signaled it would give scrutiny to health-industry consolidation."

This year, Humana has "made moves that could clear the deck for a possible combination, announcing in February that it would divest its commercial business and focus on its core Medicare Advantage line. Humana has said its home-health unit and expanding primary-care footprint support its Medicare patients," the Journal notes. "The company is in the midst of its own succession handoff. Humana said in October that Jim Rechtin—previously chief executive of Envision Healthcare—would take over as president and chief operating officer, effective Jan. 8. Rechtin was then to take over as CEO from Bruce Broussard in the back half of 2024."

Parent firm of KentuckyOne Health gets conditional approval from Catholic Church to merge with San Francisco's Dignity Health

The parent firm of most Catholic-owned hospitals in Kentucky, Catholic Health Initiatives, has received conditional approval from church officials to merge with Dignity Health, a not-for-profit chain based in San Francisco.

The deal "would create the nation's largest not-for-profit hospital company by revenue," Harris Meyer and Tara Bannow report for Modern Healthcare. CHI's Kentucky facilities, operating under the name KentuckyOne Health, include Louisville's Jewish Hospital and its affiliates; St. Joseph Hospital in Lexington, London, Martin, Mount Sterling and Nicholasville; Flaget Memorial Hospital in Bardstown, Our Lady of Peace in Louisville; and Sts. Mary and Elizabeth Hospital in Louisville.

After the church's Congregation for the Doctrine of Faith deferred to local bishops, Denver Archbishop Samuel Aquila told CHI "that as long as his five moral conditions for the deal continue to be met, he had no moral objections to the merger going forward," as long as the merged chain had a recognizably Catholic name and other relatively minor conditions, Modern Healthcare reports.

"While the archbishops of Denver and San Francisco, where CHI and Dignity, respectively, are headquartered, previously had signed off on the so-called ministry alignment agreement, their approval was dependent on Vatican approval, which was uncertain," Meyer and Bannow report. "That left a cloud over the plan, initially announced in 2016, to create a combined system with 139 hospitals in 28 states with total annual revenue of nearly $30 billion."

The National Catholic Bioethics Center had given the merger "an unfavorable moral analysis . . . which added to the uncertainty about the Vatican's decision. CHI and Dignity then sought additional moral analyses from three other ethicists, who gave favorable opinions," the reporters write. "The merger still needs approval from state regulators in California, Arizona and Colorado, CHI's chief financial officer, Dean Swindle, said on an Oct. 11 call with investors."

California Attorney General Xavier Becerra is facing pressure "to ensure that the deal does not limit reproductive health services, care for LGBTQ patients, or services for low-income and under-served communities," Meyer and Barrow report. "Fifteen of Dignity's 39 hospitals are historically non-Catholic and provide services that are prohibited under Catholic doctrine, forcing the dealmakers to craft a merger model that worked around the directives." It would allow Dignity's non-Catholic hospitals to keep doing services the church considers immoral, such as tubal ligations after deliveries.

UPDATE, Nov. 23: Becerra approved the deal with conditions, including continuation of emergency services and women's health-care services at the California hospitals for 10 years. The merged firm will be CommonSpirit Health, Modern Healthcare reports.

Catholic chain that owns hospitals in Paducah and Irvine plans to merge with one that owns Our Lady of Bellefonte near Ashland

Lourdes Hospital (West Kentucky Star photo)

Cincinnati-based Mercy Health, which owns Lourdes Hospital in Paducah and Marcum and Wallace Memorial Hospital in Irvine, is merging with Maryland-based Bon Secours Health System, which owns Our Lady of Bellefonte Hospital in Greenup County, near Ashland.

The two Roman Catholic chains will "form a 43-hospital entity that serves seven states," and would be "the fifth-largest Catholic health system in the country," Alex Kacik reports for Modern Healthcare. Executives of the chains said that would "leverage economies of scale to deliver better, more affordable care," Kacik reports, based on a joint press release. "They expect to complete the merger by the end of the year."

Photo by Kevin Goldy, Ashland Daily Independent

Kacik adds, "The combined system would have $8 billion in net operating revenue and $293 million in operating income. More than 57,000 associates and 2,100 employed physicians and advance practice clinicians would work in more than 1,000 locations across the East Coast, Ohio and Kentucky, including more than 50 home health agencies, hospices, skilled-nursing and assisted-living facilities."

Mercy Health, the largest hospital chain in Ohio, operated a hospital in Owensboro until 1995, when it merged with Owensboro-Daviess County Hospital and was renamed Owensboro Mercy Health System. In 2003, the hospital and other facilities became Owensboro Medical Health System, which opened the new Owensboro Health hospital in 2013.

KentuckyOne Health parent firm's debt rating downgraded again; explores merger that would create largest not-for-profit chain

Flaget Memorial Hospital at Bardstown is part of the chain.

S&P Global Ratings has cut its debt rating for Catholic Health Initiatives, a nonprofit with KentuckyOne Health hospitals in Louisville, Lexington, Bardstown, Berea, Campbellsville, London, Martin, Mount Sterling, Nicholasville and Shelbyville.

S&P, former Standard & Poor's, dropped CHI's rating from A-minus to BBB-plus Thursday. That is just two spots above a junk-bond rating. However, the BBB-plus rating was upgraded from negative outlook to stable outlook, meaning no further downgrades were looming, Dave Barkholz reports for Modern Healthcare. Fitch Ratings also downgraded the company's debt rating in July from A-plus to BBB-plus, he notes.

"While management's current turnaround plan has created an expectation for stabilization and modest improvement over the next 18 months, it is our opinion that it will take several years on the current financial improvement trajectory for CHI to return to a higher rating," S&P credit analyst Martin Arrick said in the downgrade report.

CHI said in a statement that it has "considerable strengths," including $16 billion in annual revenue, 103 hospitals across 22 states and a solid balance sheet, with assets of $22.7 billion. "We expect a strengthening of our financial performance – and a strengthening of our credit profile," CHI said.

Barkholz reports, "The system's turnaround plan is now being shepherded by interim operating chief Anthony Jones, a Los Angeles-based management consultant who replaced longtime COO Michael Rowan, who resigned in December."

CHI's debt is relatively high for a system of its size, Barkholz notes. The company's annual debt service, interest paid on its bonds and borrowing, is about $460 million on total debt of $9 billion, according to Barkholz.

CHI, which is in affiliation talks with Dignity Health, told Barkholz that its turnaround plan is gaining traction as evidenced by improved earnings in its second quarter, which ended Dec. 31.

Its "alignment" discussions with Dignity continue, even as it works its turnaround plan, Barkholz reports. A merger between the two companies would create the nation's largest not-for-profit hospital chain, with 142 hospitals combined and an annual revenue of more than $26 billion.

Dignity's overall debt is lower: $5.25 billion, he writes. However, it, too, has maximum debt service to carry: $408 million annually. The two companies are expected to decide whether to merge sometime this year.

Humana says it will pull out of government health-insurance exchanges next year

Humana Inc. announced Feb. 14 that it would stop selling health insurance through the government marketplaces created by federal health reform. That made the Louisville-based company "the first major insurer to cast a no-confidence vote over selling individual plans on the public exchanges for 2018," The New York Times noted.

The company said its early analysis of Obamacare enrollment for this year showed “further signs of an unbalanced risk pool,” meaning too many "customers with expensive medical conditions continued to enroll as compared with healthy people," Reed Abelson explains for the Times.

The change will mean relatively little to Kentucky, since Humana was selling on the federal exchange in only nine counties (Bourbon, Bullitt, Clark, Fayette, Jefferson, Jessamine, Oldham, Scott and Woodford) and off the exchange in nine (Boone, Bullitt, Campbell, Gallatin, Grant, Jefferson, Kenton, Oldham and Pendleton).

"Humana is not a major player in the individual exchanges and is among the national insurers, like Aetna and UnitedHealth Group, that have struggled to make money in the market," Abelson notes. Humana and Aetna abandoned their planned merger after a federal judge ruled it would violate antitrust laws.

On the Obamacare exchanges, "The company has steadily scaled back its presence, selling policies for 2017 in just 11 states," Abelson notes. "The company’s main focus has been selling private insurance under Medicare," under the brand Medicare Advantage.

Judge blocks Humana-Aetna merger; appeal in doubt; Aetna's 'leverage' attempt jeopardized Obamacare exchanges

A federal judge blocked Aetna Inc.'s bid to buy Louisville-based Humana Inc. on grounds that it would reduce competition for consumers in Medicare Advantage markets, because it would ultimately affect the price of coverage. Medicare Advantage plans are privately run versions of Medicare for people who are over age 65 or disabled.

"In this case, the government alleged that the merger of Aetna and Humana would be likely to substantially lessen competition in markets for individual Medicare Advantage plans and health insurance sold on the public exchanges," Judge John Bates of the District of Columbia wrote in his 158-page ruling. "After a 13-day trial, and based on careful consideration of the law, evidence, and arguments, the court mostly agrees."

Tom Murphy of the Associated Press writes that Bates concluded "that federal regulation would probably be "insufficient to prevent the merged firm from raising prices or reducing benefits," and neither new competitors nor an Aetna plan to sell some of the combined company's business to another insurer, Molina Healthcare Inc., would be enough to ease competitive concerns."

Bates also concluded that Aetna had tried to "leverage" its continued participation in the Patient Protection and Affordable Care Act exchanges in exchange "for favorable treatment from DOJ regarding the proposed merger," Kevin McCoy reports for USA Today. Aetna's announcement that "it would drastically scale back" on exchange offerings not only hurt its case but "jeopardized the ACA exchanges," Shelby Livingston reports for Modern Healthcare.

Craig Garthwaite, a health economist at Northwestern University, told Livingston that Aetna's move reduced competition and choice for consumers and gave an “impression to people that the marketplaces are failing” and “that's totally inaccurate.”

Aetna's shares fell about 3 percent to $119.20 and Humana's stock finished more than 2 percent higher at $205.02 on Jan. 23, the day of the ruling.

"We're reviewing the opinion now and giving serious consideration to an appeal after putting forward a compelling case," Aetna spokesman T.J. Crawford said in a statement.

However, several analysts told the investing website Seeking Alpha that any appeal is unlikely to succeed.

The Department of Justice praised the ruling as a win for consumers.

"Today’s decision is a victory for American consumers — especially seniors and working families and individuals,” Deputy Assistant Attorney General Brent Snyder, the head of the department’s Antitrust Division, said in a statement. "Millions of consumers have benefited from competition between Aetna and Humana, and will continue to benefit, because of today’s decision to block this merger."

Aetna, the nation's third-largest health insurer, announced its plan in 2015 to buy Humana for $34 billion and become one of the top providers of Medicare Advantage, Murphy notes. The Justice Department sued to block the deal and won. Click here to read the decision.

The Justice Department has also filed suit to block a proposed merger between Anthem Inc. and Cigna Corp., but this case is still pending, Murphy notes.

If approved, the two deals would consolidate the nation's five largest insurers into three, a list that includes UnitedHealth Group Inc., currently the largest. Murphy notes that the insurers argued that these mergers would help them negotiate better prices with drug companies, hospitals and doctor groups, as well as allow them to spread out the cost of technology investments.

American Medical Association says Humana takeover by Aetna would reduce health-insurance competition in Kentucky

Humana Inc.'s proposed takeover by Aetna Inc. would hurt health-insurance competition in 57 metropolitan areas in 15 states, especially Kentucky and Georgia, says an analysis by the American Medical Association. It cites Louisville-based Humana's large share of the Kentucky market and said the threat is mainly to policyholders in preferred provider organizations (PPOs).

"The AMA, no friend of the insurance industry to begin with, is stepping up the already mounting pressure on Aetna as it attempts to buy Humana, and [on] Anthem, which is trying to take over Cigna," Bruce Japsen reports for Forbes magazine. "The U.S. Justice Department in July sued to block both deals, saying they would hurt competition and raise prices for consumers. . . . The insurers deny the AMA’s contention and are challenging the government’s lawsuits."

Across the various forms of insurance, the AMA analysis saw a threat to overall competition in the Louisville, Lexington and Elizabethtown markets. It saw a threat to the HMO market in the Clarksville, Tenn., market, which includes the Hopkinsville area. It saw lesser threats in the Evansville, Ind., and Huntington, W.Va., markets, which include parts of Kentucky.

Another rural Ky. hospital will become part of a new group to stay afloat; Glasgow's hospital is buying Columbia's bankrupt one

ColumbiaMagazine.com  

Another rural Kentucky hospital is merging with a larger hospital system in order to keep its doors open.

T.J. Regional Health, the parent company of T.J. Samson Community Hospital in Glasgow, just announced its plan to buy Westlake Regional Hospital in Columbia and its clinics, according to a news release.

“Westlake has been an important part of the healthcare infrastructure of Columbia and Adair County for 35 years," T.J. Regional Health President and CEO Bud Wethington said in the release. "We see great opportunities to collaborate with the physicians and employees to grow the health care services and continue its efforts to advance the health status across the region.”

Westlake is owned and operated by Adair County Public Hospital Corp. and the Adair County Hospital District, both of which are in bankruptcy.

The Glasgow hospital has recently cut and adjusted salaries and offered early retirement to reduce costs, and was surprised when The Medical Center at Bowling Green bought Caverna Memorial Hospital in Horse Cave, which referred many patients to Glasgow. Now the Glasgow hospital looks to rebuild its network by buying the one in Columbia.

(Base map from Google maps)

Metcalfe County, between Glasgow and Columbia, has no hospital. The Columbia hospital is close to the tax-supported Russell County Hospital in Russell Springs, a critical-access hospital that was managed by Baptist Health Lexington until about a year and a half ago.

The proposed acquisition is contingent upon multiple factors, including reaching certain agreements with creditors, confirmation of a Chapter 9 bankruptcy plan by a federal bankruptcy judge and of approvals from state and federal regulators. 

More consolidations are expected. Fleming County Hospital in Flemingsburg recently merged with a larger hospital system to stay afloat. Rural hospitals in Nicholas and Fulton counties have closed in the last year.

Non-profit hospitals in Flemingsburg and Horse Cave become part of larger groups in order to stay open

Two more rural Kentucky hospitals, Caverna Memorial Hospital in Horse Cave and Fleming County Hospital in Flemingsburg, are merging with larger hospital groups in an effort to make ends meet.

“Significant regulatory changes brought about by the Affordable Care Act and payment reform at the federal and state level make it increasingly difficult for small rural hospitals to remain independent,” Caverna CEO Alan Alexander said in a news release.

In a merger expected to be complete by year's end, not-for-profit Caverna will join not-for-profit Commonwealth Health Corp., the parent company of The Medical Center at Bowling Green and will change its name to The Medical Center at Caverna, Alyssa Harvey reports for the Bowling Green Daily News.

Commonwealth will then operate five acute-care hospitals in Southern Kentucky, including The Medical Center at Franklin, The Medical Center at Scottsville and the Commonwealth Regional Specialty Hospital in Bowling Green.

Caverna, a 25-bed, critical-access hospital, was named one of 15 rural hospitals in "poor financial health" by State Auditor Adam Edelen in a report last year.

The report said rural hospitals struggle with high administrative costs associated with Medicaid managed care, higher-than-average penalties from Medicare for readmitting patients within 30 days, managed-care policies related to emergency room visits that often didn't cover the cost of care, and ongoing complaints of slow, low or denied payments from the managed-care organizations.

MCOs in Kentucky signed new contracts with the state this year that addressed many of these issues, but these new contracts only went into effect July 1.

Edelen's report said that to survive, some hospitals would have to change their business models, and merging with larger hospitals could be an option.

Rural hospitals in Nicholas and Fulton counties have closed in the last year.

"I see it as a trend. The industry is going through some very rapid and massive changes," Alan Palmer, director of marketing at TriStar Greenview Regional Hospital, told Harvey for a separate article. "A lot of pressures are being put on smaller or rural facilities. It's a matter of survival and these smaller communities believe they deserve to have a health care facility in their communities."

Palmer noted that HCA, Greenview's parent company, has a spinoff company called LifePoint Health that owns rural hospitals.

LifePoint announced earlier this month that it had acquired Fleming County Hospital, which had been listed in "fair financial health" in Edelen's report.

Fleming County Judge-Executive Larry Foxworthy, who sits on the hospital board as a non-voting member, told Christy Hoots of The Ledger Independent in Maysville that the facility had struggled since it was built in 2008.

"Reserves are down," Foxworthy said. "Unless something is done, the hospital may go bankrupt. We don't want to see that happen. We need to make sure the hospital stays open and has a presence in Fleming County."

LifePoint owns nine other Kentucky hospitals: Bluegrass Community Hospital in Versailles; Bourbon Community Hospital in Paris; Clark Regional Medical Center in Winchester; Georgetown Community Hospital in Georgetown; Jackson Purchase Medical Center in Mayfield; Lake Cumberland Regional Hospital in Somerset; Logan Memorial Hospital in Russellville; Meadowview Regional Medical Center in Maysville; and Spring View Hospital in Lebanon.

The Daily News reported that T.J. Samson Community Hospital in Glasgow, a nonprofit that has chosen to not merge with a larger hospital, has cut between 39 and 49 employees and made salary adjustments in all departments in 2014. It also offered about 45 employees early retirement, of which about 24 people, including then-CEO Bill Kindred, accepted.

Politicians, economists and journalists debate the reasons for, and the impact of, proposed sale of Humana to Aetna

By Al Cross
Kentucky Health News

The purchase of Louisville-based Humana Inc. by fellow health-insurance giant Aetna Inc. for $37 billion still needs approval from federal anti-trust officials, partly because of the possibility that the merger will reduce competition and increase premiums.

Some other public officials, the elected kind, wasted no time weighing in on the sale. And, since it deals with health insurance, it may come as no surprise that their statements followed partisan lines, reflecting their views of the Patient Protection and Affordable Care Act.

Wall Street Journal graphic

Even before the deal was announced, Senate Majority Leader Mitch McConnell, R-Ky., said Thursday, "You’ve seen the rumors about Humana being gobbled up by someone who’s even bigger. This kind of government takeover of the private health-insurance market – think of it this way: what Obamacare has basically done is taken the private health insurance market and turned it almost into a regulated utility."

In a press release Friday, McConnell said, "This morning’s announcement, as I predicted during the debate five years ago, is the inevitable result of Obamacare’s push toward consolidation as doctors, hospitals, and insurers merge in response to an ever-growing government."

U.S. Rep. John Yarmuth, D-Louisville, said consolidation in the health-care industry has been going on for decades, "and it is appropriate for the Department of Justice to scrutinize the pending merger to ensure it does not reduce competition, and therefore, consumers' options."

Louisville Mayor Greg Fischer, a Democrat who ran in the primary for McConnell's seat in 2008, said he was "a little surprised by the political nature" of the senator's statement. Fischer and Democratic Gov. Steve Beshear were generally upbeat about the merger. "I am cautiously optimistic that this merger will be a net positive for Louisville and the commonwealth," Beshear said.

Humana has 12,500 employees and 1,500 contractors in the Louisville area. Fischer said, "I think it's very fair to speculate that it will lead to more jobs," and Bruce Broussard, president and CEO of Humana, said, "I think Louisville will be a net beneficiary as a result of this transaction."

However, University of Louisville finance professor David Dubofsky "said it may not turn out so well for the Louisville and Humana employees after all," The Courier-Journal reports, quoting him: "When two companies in the same industry merge, and the acquirer is paying a premium, you have to generate cost savings," partly by reducing employment among workers with similar jobs.

There is a connection between the merger of health-care providers, such as the creation of Kentucky One Health by several hospital groups, and the merger of insurance companies. "Many experts have said that the provider consolidation can drive higher rates—and that more-powerful insurers might have a better chance of countering them and striking pacts for new forms of payment that incentivize efficiency," Anna Wilde Matthews and Christopher Weaver write for The Wall Street Journal.

But they also note, "Research suggests that having fewer insurers leads to higher premiums, said Leemore S. Dafny, a former Federal Trade Commission official who is a professor at Northwestern University’s Kellogg School of Management.

Aetna with Humana would dominate the Medicare Advantage market in some states, with 90 percent of it in Kansas, notes Drew Altman, president of the Kaiser Family Foundation. "Of course, regulators could insist that companies take steps to maintain more competitive markets."

The Journal reports that it analyzed a Medicare database and found, "An Aetna-Humana tie-up would increase by about 180 the number of U.S. counties where at least 75 percent of customers for Medicare Advantage plans are in the hands of a single insurer." Most of those counties are in the South and Midwest. Using another federal database, it found that "In eight states, an Aetna-Humana merger would remove a competitor from the exchanges where individuals can buy coverage under the Affordable Care Act."

The prospect that jobs might be lost in Louisville doesn't mean that the ACA has put financial pressure on Aetna or Humana, Dan Diamond writes for Forbes magazine: "There’s limited evidence that the biggest players are struggling. While the ACA capped insurers’ ability to take profits, industry analysts have been fairly bullish on the sector. . . . And as I wrote earlier this week, the ACA appears to have only helped major insurers, by driving millions of new customers into the market. Aetna and Humana have seen their stock valuations triple in the past five years, since the ACA was signed into law, and the other three major insurers also have seen huge gains."

Diamond also isn't buying the argument, advanced by Aetna officials, that the combined company will be more efficient than the separate ones. "Aetna and Humana already are giant, scaled entities," he notes. "And economists aren’t buying the claim that insurer consolidation will lead to lower costs." As Judy Woodruff noted on "PBS Newshour" Friday, the deal would give the combined company more leverage to negotiate payments to health-care providers.

Health insurers' shares of total Medicare Advantage business
(Kaiser Family Foundation chart)

Diamond says the best case for Aetna's purchase is that it gets the company deeply into the Medicare Advantage business, without having to expend "a great deal of work and time," as Michael Bernstein, a partner at Baird Capital partner who focuses on health care, told Bloomberg News last month. Aetna has only 7 percent of that business, Humana 19 percent -- and about 65 percent of its revenues came from Medicare Advantage plans in 2014, Altman notes. The combined company is expected to get 56 percent of its revenue from government programs.

Diamond says economists see one more possible reason for the merger: "Amid health care’s merger mania, insurers are feeling psychological pressure to make deals of their own." And that does take us back to Obamacare. But the impact on Kentucky has yet to be seen, and so do the reasons.

Aetna is close to a deal to buy Humana, Bloomberg reports

Getty Images, via CNBC

Health insurer Aetna "is said to be closing in on a deal to buy" Louisville-based Humana Inc., Julie Hyman reports for Bloomberg News, "and a deal could come "as soon as this weekend."

Humana is also expecting an offer from Cigna Inc., but Humana's board of directors "prefers the Aetna offer," Hyman reports, citing unnamed people familiar with the negotiations. The deal has been discussed for weeks, but Aetna didn't make a formal proposal until this week.

The last major obstacle to a deal may have been the Supreme Court's ruling today that people in all states are entitled to tax subsidies for health insurance under the Patient Protection and Affordable Care Act, Hyman suggests, noting higher stock prices for health-insurance companies.

"Shares of Humana rallied more than 8 percent after trading was briefly halted for volatility," Reem Nasr of CNBC reports.

Humana is an attractive buy because "a great deal of its business — 73 percent of its premiums revenue — comes from contracts with the federal government," David Mann reports for Louisville Business First. "That means Humana is flush with Medicare business, which is a fast-growing category in the industry as many baby boomers are reaching the eligibility age. Its competitors, including Aetna, don't have nearly as much of this business."

"Consolidation among the country's top insurers follows a massive consolidation among providers in pharmacy, hospital and patient care, which has increased the leverage against insurers like Humana and Aetna," Grace Schneider reports for The Courier-Journal.

Merger mania: Aetna bids for Humana; Cigna may want it too; Anthem has bid for Cigna; UnitedHealth makes a play for Aetna

Aetna Inc. has made a bid to buy Louisville-based Humana Inc.,"one of a number of recent moves by big health insurers to find merger partners," Dana Mattioli and Liz Hoffman report for The Wall Street Journal.

The proposal was made in "the last few days," the Journal reports. "It isn’t clear how much Aetna indicated it would pay. Humana has a market value of $30 billion. The company hired Goldman Sachs Group Inc. to help it field takeover interest, people familiar with the matter have said."

Meanwhile, Aetna has been approached by another big insurer, UnitedHealth Group. "It isn’t clear what, if any, Aetna’s response was," the Journal reports. "News of the Aetna proposal comes the same day Anthem Inc., another of the five big managed-care companies, said it boosted its takeover offer for Cigna Corp.,"offering $47.5 billion. "Anthem went public with the bid after the two sides failed to reach agreement, and is seeking to put pressure on Cigna through Cigna shareholders."

"Cigna itself is eyeing Humana, people familiar with the matter have said. The five big managed-care companies are jockeying for deals that will enable them to get more efficient and better respond to changes in the health care landscape in the U.S.," the Journal reports.

"Humana, which has an estimated 12,000 employees and roughly 2,000 contractors in Louisville and the immediate region, has been seen as an attractive target in the health-insurance industry because of its well-run business running Medicare Advantage programs," Grace Schneider reports for The Courier-Journal. The company is valued at $30 billion.

"The company's membership rolls have surged to more than 3 million in the last year," Schneider writes. "That growth comes when health care reform has forced providers — hospitals, doctors, pharmacies, among them — to consolidate to increase their leverage and clout in an increasingly competitive health care segment. For the same reason, health insurers are now looking to consolidate."

Judge rules University of Louisville's hospital is public and subject to Open Records Act; it may appeal

The University of Louisville's hospital is a public entity, a Jefferson Circuit Court judge has ruled in a lawsuit filed to get access to the university's deals with other health providers.

Judge Martin McDonald ruled yesterday in favor of The Courier-Journal, WHAS-TV and the American Civil Liberties Union, noting that the university makes or approves all appointments to University Hospital's board of directors. The university had argued that the board, and thus the hospital, was not a public agency under the state Open Records Act.

The hospital said it might appeal the ruling. McDonald gave it 30 days to give him the records being sought, along with arguments about why they should be exempt" under exceptions to the law, reports The C-J's Andrew Wolfson. "He gave the news organizations at the ACLU 20 days to respond to any claimed exemptions." The hospital has said revealing contracts would put it at a competitive disadvantage.

The suit began after the university refused to let the plaintiffs see records related to its proposed merger with Jewish Hospital & St. Mary's HealthCare and Lexington-based St. Joseph Health Care System. Gov. Steve Beshear vetoed the merger on grounds that a public hospital should not be bound by a religious organization's health-care policies. This month the hospital announced a new deal with KentuckyOne Health, which includes the faith-based entities, but said reproductive services would not be affected despite a policy of "respect" for Catholic health directives. (Read more)

U of L doctors wary of KentuckyOne's promise of autonomy

Doctors at Louisville's University Hospital are expressing concerns that the partnership with KentuckyOne Health and the Catholic health rules that come with that merger might affect patient care. Assurances that their concerns are unfounded have been coming from KentuckyOne's majority owner, Denver-based Catholic Health Initiatives. Anxiety over doctors' medical freedom to treat patients as they feel is necessary is being fueled as staff and physicians are being asked to "respect" Catholic health directives, The Courier-Journal reports.

Sheila Reynertson, advocacy coordinator for the New York-based MergerWatch Project, who tracks secular-religious hospital mergers, told The C-J's Laura Ungar that such language puts doctors in "a difficult position." For instance, she explains, "cancer doctors may wonder about prescribing birth control to prevent pregnancy, she said. Catholic directives include a ban on sterilization, abortions, and euthanasia and say Catholic health institutions can't "promote or condone contraceptive practices." Gary Mans, spokesman for the U of L Health Sciences Center, said he doesn't believe doctors and staff will feel constrained by the directives. (Read more)

University of Louisville delays choosing hospital partner

To allow time for more "discussions and negotiations," the University of Louisville has put off deciding on University Hospital's new health-care partner until the end of June.

It is not known how many entities are interested in partnering with the indigent-care hospital, nor have any entities been identified. The deadline for applications, which was last month, has not been extended. "The university has said it needs a partner with deep pockets that can inject cash required to expand the hospital and attract new patients," reports Andrew Wolfson for The Courier-Journal.

Kerri Richardson, chief spokeswoman for Gov. Steve Beshear, said he is hopeful the hospital will find "a suitable path forward to preserve its public mission and continue to successfully serve citizens in the region."

Last year, Beshear rejected a proposed merger between University Hospital, Jewish Hospital & St. Mary's HealthCare and Saint Joseph Health System, which is owned by Catholic Health Initiatives. Because Saint Joseph would have had majority control in the initial deal, the other facilities would have had to adhere to Catholic health directives, which affect procedures like elective abortions, sterilizations, artificial insemination and euthanasia. Those limitations raised concerns and that the move would have been a loss of control of a public asset, meaning University Hospital.

After Beshear's decision, Jewish & St. Mary's and St. Joseph merged, forming KentuckyOne. (Read more)

Expect more hospital mergers across the country, some with unlikely partners, Moody's Investors Service report predicts

Reflecting several hospital mergers that have already taken place in Kentucky, a new report from Moody's Investors Service predicts hospitals will continue to band together across the country as they respond to changes in health care.

"The difficult business environment and the changes expected in how hospitals will be paid for delivering care are driving many smaller, stand-alone hospital groups into the arms of larger and better-financed organizations," reports Reed Abelson for The New York Times.

Hospitals have long looked for partners to become larger in order to have more negotiating power to ask for higher payments from insurers. But now they are looking at ways to become more efficient too as they expect lower reimbursements from Medicare because of federal health-care reform. That means more consolidation, Moody's says.

While there are traditional mergers in play, there are also more atypical alliances forming. One of the nation's largest nonprofit hospital groups, North Shore-LIJ Health System, will join with Hackensack University Health Network in New Jersey, for example. There are instances of for-profit hospital groups joining with private equity firms. Health insurance companies could even become buyers, and hospitals and doctors could join forces "so they can be more of a one-stop shop," Abelson reports.

As a result, patients will ultimately have fewer hospitals from which to choose, but some small, stand-alone hospitals, especially in rural areas, will still exist. "We're not going to predict the small independent hospitals will all shutter and close," said Lisa Goldstein, one of the authors of the report. (Read more)

Same Catholic health system considering University Hospital's request for proposals

Though Gov. Steve Beshear twice rejected a proposal that would have merged it with a Catholic health system, University Hospital's expected release of a request for proposals is drawing attention from the same Catholic health system, reports Laura Ungar of The Courier-Journal. (C-J photo by John Rott)

"We still believe that a close working relationship with the University of Louisville School of Medicine and University Medical Center is important to our vision as an organization, to this community and citizens across the commonwealth," wrote Ruth Brinkley, chief executive officer of KentuckyOne Health, the company created after St. Joseph Health System, owned by Catholic Health Initiatives, and Jewish Hospital & St. Mary's HealthCare merged earlier this year.

If the deal had gone through as planned, University Hospital would also have been part of that merger. But since University Hospital would have been subject to Catholic health directives — which includes forbidding sterilization and in-vitro fertilization — under the merger, Beshear rejected the deal; University Hospital has been ruled a public entity. The New York Times notes the episode in a story today saying the expansion of Catholic hospitals could limit reproductive health care.

Last week, University Hospital's operator was given permission to make a request for proposals "aimed at attracting interest from other health care entities that could stabilize the finances of the area's main safety-net hospital," reports The Associated Press. Finding such a partner is "very" critical, said Dr. David Dunn, U of L's executive vice president for health affairs.(Read more)

But after The C-J reported permission for the RFP had been granted, Brinkley sent out a note to physicians and administrators of KentuckyOne Health. "As we more closely examine the RFP and begin our planning process, we will share additional information with you," she wrote.

Merger critics said pairing up with KentuckyOne Health would lead to the same problems as the first proposal. "It's still the same pig. They're still trying to make it into a silk purse," said Honi Goldman of Louisville. "It's a dangerous road to go down ... Why are they stuck on this one suitor?" (Read more)

Beshear says no for second time to University Hospital merger

For the second time, Gov. Steve Beshear has rejected a proposed merger for Louisville's University Hospital, saying he still didn't think ideas suggested in a meeting last week would be enough to allay his concerns. Beshear said no to a controversial proposal Dec. 30 that would have merged University Hospital with Jewish Hospital & St. Mary's HealthCare and St. Joseph Health System.

Beshear would not go into details about what ideas University Hospital officials presented last week, saying only that he remains "committed to working with the university to explore all appropriate paths forward for the hospital and for our Kentucky taxpayers," Patrick Howington and Laura Ungar report for The Courier-Journal.

The merger would have give majority control to St. Joseph, which is owned by Catholic Health Initiatives, so all three health systems would have been subject to Catholic health directives. Jewish & St. Mary's and St. Joseph announced last Friday they will merge without University Hospital and call the system KentuckyOne Health. Beshear said he rejected the merger because it would mean the loss of control of a public asset and raised "constitutional church-and-state issues," Howington and Ungar report. (Read more)

St. Joseph Health System announces merger with Jewish Hospital & St. Mary's HealthCare

Rebuffed in its bid to take over Louisville's University Hospital, Catholic Health Initatives announced today that its St. Joseph Health System had merged with Jewish Hospital & St. Mary’s HealthCare, effective retroactively to Jan. 1. Gov. Steve Beshear rejected the original merger plan because of University Hospital's public status and the proposed control of CHI, which follows Catholic health directives.

The new organization is called KentuckyOne Health and is headed by Ruth W. Brinkley, as president and chief executive officer. She is a former executive at CHI and Ascension Health. The organization "includes hospitals, clinics, specialty institutes, home health agencies, satellite primary care centers, and physician groups with more than 80 locations, 2,500 staff physicians and more than 13,000 employees across the state of Kentucky and southern Indiana," CHI said in a press release. It said it will invest $320 million into the merger.

"As part of KentuckyOne Health, historically Jewish facilities will remain Jewish," the release said. "Historically Catholic facilities will remain Catholic." Dr. Gerald Temes, chair of Jewish Hospital HealthCare Services, said in the release, “We have had a mutually beneficial relationship with Catholic Health Initiatives for the last six years. We’re confident this is the right direction for the Jewish Hospital organization.” (Read more)