A Myriad of "Firsts"
When Aetna/US Healthcare positioned itself to take over NYLCare and Prudential Healthcare, DCMS realized the ramifications on patients and physicians, and was determined to fight. The results have been unprecedented.

"This was the first time a medical society has successfully challenged an insurance company and I hope this is the start of a trend," says Robert T. Gunby, Jr, MD, DCMS immediate past president.

The diligence and dedication of DCMS physicians and staff and their counterparts at Harris County Medical Society resulted in an agreement between the Department of Justice and Aetna/US Healthcare that required the divestiture of its NYLCare entity in Dallas and Houston, while the original agreement stands in all other parts of the country. The effort benefits not only Dallas and Harris county physicians, but also those in contiguous counties. The divestiture drops Aetna market coverage in Dallas from 42 percent to 22 percent.

"In many other places in the country, managed care companies have a much higher percentage of the market, compared to Dallas," Dr Gunby says. "But because the medical society requested this investigation, we got some relief. It shows the importance of people being willing to take action and fight for what they believe in."

This fight brought on a myriad of "firsts": The first time the DOJ challenged a merger of health plans. The first time the DOJ based an enforcement action on the threat of a health plan's monopsony power. The first case in which the DOJ alleged that competition in Dallas and Houston would suffer because Aetna would lower reimbursement rates.

"When we learned Aetna was going to buy Prudential, we got calls from members who had left Aetna primarily because of the Genesis situation last summer," says Michael Darrouzet, DCMS executive officer, referring to Aetna's "all products" policy it forced on physicians in the Genesis Physicians Practice Association. "They had stayed with Prudential and were concerned about Prudential being pulled into Aetna/NYLCare. We contacted TMA and AMA, and issued a joint statement opposing the merger."

Soon after, DCMS took its concerns to the DOJ, based on antitrust concerns and bad corporate conduct.

Numbers Game
The DOJ relied heavily on input from physicians and employers to assess the proposed transaction.
"The DOJ asked us for proof of our market share numbers and gave us suggestions on how to prove our assumptions," Mr Darrouzet says. "We worked with our doctors to get that information, instead of participating in a theoretical debate about the monopsony."

DOJ needed proof of the DCMS claims of Aetna/NYLCare/Prudential (ANP) market share-the percentage of a physician's "total patient revenue" from ANP's HMO and POS products. Of the 3800 active DCMS members surveyed, 2200 responded. If the proposal were successful, 33 percent of Dallas physicians would have 25 percent or more of their practice with Aetna, NYLCare, or Prudential.

DCMS then surveyed 100 of the most affected physicians-those whose practices would be 70 percent to 100 percent ANP patients-to determine the percentage of their entire practice dependent on ANP revenue. This showed the original survey was statistically accurate and the DOJ accepted the figures, Mr Darrouzet says.

Physician Involvement
Physician involvement was key throughout the effort, and was the reason the DOJ considered Dallas and Houston differently from the rest of the country.

"Our physicians were willing to step forward and talk candidly to the DOJ and the media about how the merger would affect them," Mr Darrouzet said. "Other markets have greater saturation, such as in Pennsylvania, where Independence Blue Cross has 90 percent of the market, but that went unchallenged. No doctors were willing to talk; they were afraid they would be deselected and lose 90 percent of their practices.

"Our aim with opposing the merger simply was to get the government to listen to what we were saying about the marketplace; we never dreamed it would act," Mr Darrouzet says.

Key Findings
The DOJ action recognizes that physicians' ability to negotiate with an HMO depends on their ability to terminate or threaten termination of the contract. It further acknowledges that substantial barriers exist to physicians compensating for a plan's lost business.

The DOJ acknowledged the argument that replacing lost business expeditiously is more difficult when a plan accounts for a large share of a physician's business, and that Aetna's "all products" policy exacerbates the situation. This limited ability for physicians to reject Aetna's contract terms was key to the allegation of anticompetitive behavior.

The Next Step
Still, Aetna/Prudential will be the largest health insurer in the state and nation, with more than 21 million members nationwide-2.5 million in Texas.

DCMS is working with the AMA and TMA to strengthen the divestiture rules about NYLCare, and how Aetna handles the divestiture. "NYLCare must be a viable company," Mr Darrouzet says. "Aetna can't gut it and delete all the physicians so it's an empty company."

© 2000, Dallas Medical Journal. The above is for private use by viewer only and is not to be reprinted without permission by the Dallas County Medical Society.

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