Neap tide

Fast  Foreward

---

When Office Depot acquired/merged with rival OfficeMax, federal regulators barely seemed to blink perhaps because they were distracted by the sounds of chirping crickets. Not even media observers and industry pundits decrying the loss of competition by brandishing lit matchsticks for torches drew more than yawns.

When Staples subsequently announced it was acquiring/merging with Office Depot-OfficeMax, corporate pulse oximeters registered a minor surge that dissipated rather quickly.

Two of the nation’s largest insurers each agreed to acquire two competitors this past summer (Aetna with Humana, Anthem with Cigna) in a pair of multi-billion-dollar deals that seemed to inflame Congressional itching rather briefly. Even as the Department of Justice and state insurance regulators closely review these decisions, which would create a Big Three of nationwide for-profit health insurers, they likely will go forward.

Why? Remarkably, people still have choices.

Regulators don’t feel the emerging “SuperStaples” will dent competition because consumers can buy office supplies at Walmart, Target, Sears/Kmart and Amazon. Plus, Staples sells cleaning and other consumables typically found at the “big box” stores as well, further blurring the lines for regulators.

Regarding health insurers, obviously three are better than two or one, particularly if you factor in a fourth known as the Centers for Medicare and Medicaid Services.

So it’s no surprise that the recent acquisition by VHA-UHC Alliance NewCo Inc. of a large part of MedAssets barely seems to register a blip on federal regulators’ competitive shock-o-meter.

At press-time, venture capital firm Pamplona Capital agreed to acquire the publicly traded MedAssets for $2.7 billion in a multi-faceted deal that included splitting MedAssets in three, retaining the revenue cycle and technology unit to be fused with Pamplona’s Precyse enterprise, which already enjoyed a “strategic partnership” with MedAssets prior to this deal. Pamplona agreed to spin off MedAssets’ clinical consulting and group purchasing segments to VHA-UHC. This would solidify VHA-UHC’s perch atop HPN’s “GPO Headliners” list in terms of annual purchasing volume at somewhere north of the $110-billion range, depending on the reliability of data source material.

While MedAssets had been “in play” for some time, what was more surprising than VHA-UHC acquiring a portion of the company was who didn’t. HPN had heard from reliable sources a major insurer was interested in the company that would have tipped the balance and turned supply chain management on its head.

Certainly, Pamplona foresees more profit potential, relevance and value in the healthcare information technology and revenue cycle segments (motivated by ICD-10 and EHR momentum) than it does in the clinical consulting and group purchasing arenas.

Regulators apparently concur because in Washington, not a creature seems to be stirring about this, not even the House.

So why isn’t this deal spooking the feds? Here’s a theory. The economic firepower and competitive threat long-term really isn’t there. The bottom line: Opportunities to dominate exist; compliance may not. Hence, market share may not be shifting enough for regulators to throw out a yellow flag. VHA-UHC likely won’t retain all of MedAssets’ members, some of whom will jump ship to other groups or form smaller shared-service organizations with one another.

MedAssets logically included providers that didn’t want to work with its leading competitors, one of which now “owns” MedAssets and the other of which has launched an all-out offensive to promote itself as a viable alternative to the new owners. That’s competition.

The next two players on HPN’s “GPO Headliners” list have been pursuing their competitive agendas in their own ways. One lured a major MedAssets member to its stable as the Pamplona-VHA-UHC deal was progressing; the other strategically reorganized with different leadership and an ambitious aim to resurrect group purchasing practices from the pre-1970s era.

Anticipating smaller groups splintering off with more homogenized and self-compliant shared-service arrangements seems like a curious development once the smoke clears and the dust settles by early 2017.

Still, retro may be shaping up as the new black in 2016 so long as the transition doesn’t have providers seeing red.