Consequences of Market Concentration in Healthcare

Paul Levy, CEO of Beth Israel Deaconess Medical Center in Boston, wrote in his blog about dangers of market concentration in the provider segment earlier this week.   Levy’s main point is that large provider groups can negotiate better rates from payer organizations and put smaller provider organizations at a disadvantage and that the accountable care organization (ACO) model could exacerbate the negotiating power.  Furthermore, there are consequences to consumers when market power is highly concentrated.  Also this week, John Moore of Chilmark Research wrote about the recent acquisition of Axolotl by Ingenix, a healthcare data analytics company.  In this post, I connect and extend these two topics and address issues related to vertical market concentration in healthcare with Ingenix as the example.

Ingenix is a wholly-owned subsidiary of UnitedHealth Group, an $87 billion (2009 revenue) company with approximately 80,000 employees in its four major divisions:  health benefits, benefits management, data and information services, and pharmacy benefits management (PBM).   The health benefits (insurance) segment is the largest by far with 2009 revenue of $81.3 billion, and Ingenix (the data and information services segment) is the smallest with 2009 revenue of $1.8 billion.

However, Ingenix has an operating margin of 13.5% vs. the health benefits margin of 5.9% and Ingenix’s recent top line growth is stronger than the other segments.  Considering the number of acquisitions made by Ingenix, it’s not a surprise that revenue is growing.  According to Ingenix’s careers page, the group has acquired over 50 companies in the past 10 years.  See Alacra’s headlines and timeline of the Ingenix acquisitions since 1998 (as well as their offer to sell you more information).

A few notable acquisitions include The Lewin Group, a healthcare consulting company, QualityMetric, a health outcomes measurement company, and PICIS, a clinical workflow IT vendor to hospital emergency departments.  I find these deals of note because they clearly extend Ingenix’s purview beyond the payer and pharma analytics segment into the clinical analytics segment. 

The Lewin Group, for instance, received a contract from HHS last year to develop the framework for comparative effectiveness research.

Lewin describes how the resources of its sister companies within Ingenix position it well to develop the framework that will be used to determine the relative effectiveness of treatments on its own site as follows (emphasis mine):

The Lewin Group Center for Comparative Effectiveness Research has unique capabilities for conducting and supporting CER, combining The Lewin Group’s broad and widely recognized record of independent analysis of health information technology, evidence-based medicine, health care policy and other issues; affiliate company i3’s expertise in clinical trials and study design, drug safety, health economics and outcomes research; and Ingenix data.  Through Ingenix, the Center will have access to robust longitudinal de-identified patient data sets including integrated medical, disability, laboratory results and pharmacy claims data.  The staff available to the Center includes more than 1200 health services researchers, clinicians, clinical trial design experts, epidemiologists, biostatisticians, health data experts, health economists, and others.

In John Moore’s post, Ingenix’s EVP for provider solutions states that he “sees a convergence of administrative and clinical processes”.  I agree that analytic processes and platforms that have been developed for the payer market are being adapted for use in clinical settings, and I’d add that the same type of convergence is occurring between life science research analytic platforms and clinical platforms.  In fact, I’ve drawn a 3 circle Venn diagram illustrating the convergence in healthcare data analytics between these three domains in recent client reports.  

Should we be concerned that a large payer analytics company (Ingenix), owned by one of the largest health insurance providers, is on a path toward becoming a dominant clinical data analytics company?  I think so.  There are so many reasons to be optimistic about the benefits of data analytics in healthcare applications that can lead to improved personalized care and drug treatments.  But, like Levy, I have concerns about the concentration of power in large organizations and the implications of such market power on the future of clinical decision support systems.