Not much new has come out about Revolution Health, Steve Case’s effort to bring consumerism, education, information, and innovative insurance products to the world of health care. Since the splash of the initial announcement two months ago, the silence has been noticeable, despite the inclusion of such notables as Colin Powell, Jim Barksdale, Steve Wiggins, and Frank Raines.
A front page for a website exists, although it indicates it is coming in 2004. Beyond that, nothing beyond a few brief follow ups to the initial USAToday article.
While it is somewhat of a mystery why there would be such a big splash followed by dead calm, perhaps it is due to the difficulty Case might be having in coming up with a business that actually adds real value. Because all the information to date does not describe a business that is materially different, compelling, or even very interesting.
According to an article on Revolution Health authored by the conservative Heartland Institute;
“RHG plans to acquire controlling interests in promising, innovative health care companies and build them for long-term growth.
Areas to be developed include affordable nurse-provided care at retail locations; health information to help people find a doctor or other health care provider and to learn more about medical issues and conditions; tools for managing health care finances, especially to help small and mid-sized employers help their employees; secure, easy-to-use personal health records; and innovative health coverage offering consumers new choices in how to pay for their health care.
“We will put consumers back in the center of the system by giving them more choice, control, and convenience while building the first comprehensive, consumer-driven health care company,” said Case.”
Leaving aside the obvious error – Definity Health and others have already laid claim to that hype-laden first – let’s deconstruct the business development plan.
1. Nurse provided care at retail locations – sounds like many ER departments, some occ health, company run, and local storefront clinics. Nurse care is almost always under the direction of a physician, and billing usually reflects physician charges. If Case has figured out how to have nurses work differently than they do today there may be something here. Otherwise, nothing new.
2. health information to learn more about conditions – that’s all consumers need, yet another site to go along with the 23 million websites that now offer health information. WebMD, the Centers for Disease Control, Kaiser, Aetna, Intelihealth, familydoctor.com and millions of other sources provide detailed information on everything from drug interactions to arthritis medication to cancer survival rates to new treatments for AIDS. That’s not to mention the thousands of web “businesses” based on health information that have failed over the past five years.
3. information to help consumers find a doctor or other health care provider – again, nothing new here – states are building extensive capabilities to report on hospital quality; health plans have long experience in this area; clinics, professional societies, commercial web sites, and the Yellow Pages all have a substantial head start, a customer base, and experience.
4. tools for managing health care finances for use by smaller employers – sounds like a combination of health information and insurance benefit plan design – yawn.
5. secure easy to use personal health records – Many already exist, including http://www.telemedical.com/records.html, http://www.phdtogo.com/ , your personal health record, and http://www.doctorsforpain.com/capmed.html. And some of these are free, targeted to specific patient populations, and gaining traction. For an excellent summary and more information, see http://www.myphr.com/,
6. new innovative health insurance programs – as much as I’d like to see something new and innovative, and as much press as these “consumer directed health plans” (CDHP) have generated, the reality is they are old wine in new bottles.
CDHPs are simply health insurance plans that marry old-line benefit design based on marrying high deductibles and co-pays with newer HMO delivery systems, coupled with a tax-advantaged personal health account. What’s innovative here? Not the cost-sharing, the delivery system, or the tax-advantaged account, nor the combination of all three.
At their core, CDHPs are cost-shifting from employers and other payers to the insureds. I don’t say that as a value judgment but simply state the facts. They are a reaction to employers’ frustration; after twenty years of HMOs, POS plans, capitated programs, closed and open panels, PBMs, PPOs, and the rest of the answers in the form of managed care, employers adopting these programs are throwing up their hands and saying we just can’t afford double digit increases, so employees will have to pay more.
So let’s stop all the hype and nonsense, and call them what they are. CDHPs are simply a way to get employees to pay more for their health care. And given health care trend rates, that’s not necessarily a bad thing.

Roy Poses has some interesting insights into the financial benefits and costs of the pending Pacificare-UnitedHealth merger in his blog Health Care Renewal. Dr Poses notes that two of the execs involved both make over a hundred million this year or will make it if this deal gets done.
He also highlights Dr. Alain Enthoven’s views on the deal, citing his credentials as a:
“charter member of the Jackson Hole group, and long-time advocate of managed competition… “I don’t see this as beneficial to California consumers or employers…I regard this as a loss and doubt there are any economies of scale to be achieved here.”
The LA Times quotes UHG CEO Bill McGuire on the business justification for the deal; “”There is not enough money

It’s official, United HealthGroup intends to acquire Pacificare, increasing their membership to 25.7 million and tripling their Medicare insured business. This will also strengthen UHG’s west coast operations, long a sore spot for the company.
With the announcement came protests from consumer advocacy groups and others in California. These groups were instrumental in delaying the Anthem-Wellpoint deal, which passed after the companies agreed to allocate over $300 million to fund health care for low income citizens. Expect these groups to weigh in aggressively on this deal as well.
That said, UHG is more expert in acquisitions than the Anthem management was at the time of the Wellpoint deal, and are undoubtedly even smarter now. They will likely move things along more expeditiously than some would expect.
If the deal does go thru, UHG will be a close second to Anthem’s membership of 27.7 million. Ratings agency Fitch likes the UHG – Pacificare deal, noting
“Fitch views the transaction as strategically beneficial to UnitedHealth. Approximately 1.8 million, or 57% of Pacificare’s 3.2 million members are located in California, which is a state where UnitedHealth has historically lacked a competitive market share. Pacificare’s provider network within the State of California will be of significant value to UnitedHealth, which currently gains use of a provider network through a network access agreement with Blue Shield of California. In addition, UnitedHealth will be acquiring the largest player in the Medicare Advantage program.”
Frequent readers will note I have ong been talking about constraints on growth for these big managed care plans. There options are to acquire, grow organically, or diversify. While the price seems steep, it is better than cutting rates to gain market share or getting into another line of insurance about which they know little.
Expect there to be renewed interest in plans such as Cigna and Coventry.
This deal reduces UHG’s expenses (it will no longer have to “rent” BC CA’s networks), adds expertise in pharmacy management and Medicare, strengthens its networks nationally, and adds significant depth to their national accounts efforts. A tough competitor just got tougher.
What does this mean for you?
If you are a provider, there will be increasingn pressure in CA as the number of “suppliers” dwindles. Oligopolies have some benefits, but rarely do they spur innovation and intense competition the likes of which have driven the insurance industry over the last two decades.

In yet another sign that the group health world is consolidating, Aetna has purchased PPOM, the dominant non-Blues network in Michigan, along with parent company HMS Health. PPOM looks to be the prize of the deal, as it adds a very strong network to Aetna’s offerings, while removing PPOM from the target list of Anthem, United, et al.
PPOM has 11% market share (defined as 11% of ALL state residents) in Michigan covered by its more than 27 thousand providers in the state. The network also has about 30,000 additional providers contracted in other Midwestern states.
For Aetna, with a paltry 262,000 insureds in Michigan out of its total population of 14 million, the acquisition opens up a significant market where it was previously virtually unable to compete. The acquisition also strengthens the Hartford, CT-based insurer in Colorado, as it includes the Sloans Lake and Mountain Medical networks.
The usual post-deal press releases indicate the new Aetna companies will continue to operate under their present names, staff will not be affected, etc. Perhaps true over the short term, but highly unlikely over the long. This industry is just too competitive to forgo any expense reduction opportunities.
Notably, two of Aetna’s competitors, Humana and MCare, also access PPOM. Although Aetna has said they will continue to provide access to the networks in Michigan to these other entities, one has to wonder how long that will last. Perhaps when Aetna’s membership grows enough to justify losing the other payers’ access fee revenue…
For work comp payers, PPOM is almost the only game in town in Michigan. With Aetna’s workers comp network still struggling to gain traction, one can see a strong push by management to non-renew other WC PPO contracts in an effort to grow the Aetna WC business.
What does this mean for you?
Hold on to your smaller PPO and HMO stock holdings. Someone is bound to come knocking soon. If you are a mid-tier player, sell while you still have some membership left.