tv Key Capitol Hill Hearings CSPAN September 24, 2015 10:00pm-12:01am EDT
is the water resources reform and development act, also known as wrda. we also heard about the school meals and going up the -- burnt fish sticks and mystery meat tacos. >> a votal role of the federal government. especially vital for stupes with dippability. >> students and teach efforts can go to the web site, student cam.org, and on the web site find more information about the rules and requirements. but they will also find teacher tips, rubrics to help them incorporate into the classroom, more information at prizes, incorporating c-span video and ways to contact us. the deadline is january 20, 2016, which is exactly one year away from the next presidential up in racing. -- inauguration. >> the commission on presidential debates has announces the sites and dates to here to presidential debates.
the first, monday, september 26, on the campus of wright state university in dayton, ohio. the second debate on a sunday, october 9th, 2016. at washington university in st. louis, missouri, and the third and final debate on wednesday. one vice presidential debate on tuesday, october 4th, 2016, in farmville, virginia. joining us on the phone this co-chair of the commission on presidential debates. ty for being here. >> pleasure. >> what led to these four universities? >> well, in the 27-28 years we have been doing this, we do the year before the debates, we send out to all the colleges and universities in the country in effect a request for bid. we indicate to them what they have to do, what they have to produce. so many hotel rooms within a
certain area because of the reporters there, and then we get in bids elm originally narrow what we lad for this year or next year, down to 16 schools. and then we have a team of technological people, camera people, lighting people, et cetera, who go out, sound people, visit the possible venues, come back to us, then we make some other cuts, and then of course we have the secret service service involved. they have to be able to lock down the site for accurate purposes. the 16 is moved down to five. we also tried, -- we'd trike get some geographic diversity. if we had our way we would do something on the west coast, something in the northeast, something in the south and something in the midwest. doesn't always work out that way. in fact i remember some years oak, we had -- we went to washington university in st. louis, and we counted that
as our we were site because it was on the western side of the mississippi river because we just didn't get enough acceptable bids from the west. so, what we have with this year, for next year, we have chosen this -- it wright state and important in ohio, a very important state in the presidential election. longwood university in virginia there have not been one in virginia before other than the first town hall meeting was held at richmond many, many years ago. and it's a very interesting school because it's primarily one of the schools that was involved in the original brown vs. board of education case. very important case for our nation's history, and the university's being a wonderful job of building around their location and their involvement in that. wash u has been a popular one because of their marvelous facilities and the secret service looks it because of its ability for security, and then
the university of nevada las vegas, our west coast choice. so all kinds of factors that go into a technical and geographic. >> what about the possibility of a third-party candidate? would the criteria be for you to admit a third-party con didn't. >> the criteria has been for some time, since 2007, you have -- 2000, you have to meet the constitutional requirements before being native born and 35 years of age. also have to be on enough ballots to conceivably get 270 electoral votes, and then prior to the debate you had to be at 15% in an average of five major polls. now commission is still considering what we're going to do with regard to criteria. we have had a number of suggestions made to us by a number of different groups. one called for whoever gets the most signatures to get on enough ballots to help qualify for 27 other electoral votes. we have one that says anybody who gets on enough ballots
taught be in it. another one says that it there she be an online voting situation and whoever wins the online votes out to be automatically in the debate. a whole bunch of suggestion have what enough consideration as well as considerations in changing format. we made a very significant change in 2012 by dividing two of the debates, the first and last debate, into six 15-minute segments, and the moderators indicated in advance what particular subjects were going to be covered during that 15 minutes, and that gave the moderator the ability to drill down and really get into the meat of those issues rather than just having a one minute or two-minute response. so we were very, very pleased because the actual result in 2012, you actually had the candidates talking to each other and debatingful also been some criticism, and i think we're taking a hard look wanter we want to continue spin alley, which is the circumstance cause
atmosphere after the debate, where supporters of each candidate go into room with reporters and try to explain their people won. so a whole butch of suggestions we have. one also, the town hall meeting, whether we can't involve modern technology and social media interest the town hall meeting as well as have something questions from citizens there. so, we have a lot of work yet to do. we hope to make some other major announcements, particularly with the cite fear ya -- criteria within the next month. like to announce a year before the election so anyone running for president knows want they have to do in the next year to qualify to be on the debates. >> finally, we are year out but will the debates remain 90 minutes and are you confident whoever the nominees are, they will participate? >> well, there's no law that says someone has to participate. i think we have been in the time i've been on the commission dish
was there with paul kirk happen -- the commission has conducted 19 presidential debates and seven vice presidential debates. i thick it would be pretty hard in today's world for a major candidate to say, well, i'm not going par tills mate debates. that's not impossible. in 1980 when the league of women voters were operating the debates, john anderson was above 15% and was invited to participate, and accepted, and when he accepted, then president jimmy carter said i will not participate. so the first debate that year was between carter and governor reagan. so, we have come a long way since then, but there's no way you can force a candidate who does not want to debate to debate. it's up to them. they're taking that decision in their own hands as to whether the american people would accept that or not. >> the length of debate inside. >> i still think we're looking at 90 minutes. we haven't made a final decision yet. that another format decision
that we'll make. i thought the debate the night being three heroes was extremely long, but by the same token there were 17 people on stage. so we don't -- we hope we don't get to that position but i think if you can keep it a crisp 90 minutes, maybe stretch it to two hours -- like i said those are things we have to consider. >> if you want to get more information on the 2016 debates and the locations, check it out at debates.org. frank fahrenkopf is the co-chair over mission on presidential debates. thank you for with us. >> next on the senate judiciary committee hearing on merger of health insurance provided. the head of anthem and aetna testified about why they think it would be beneficial for in the two companies to consolidate. this is two hours.
>> welcome to the hearing. before we start i'd like to thank rank member klobuchar and her staff for preparing for the hearing and also like to thank the chairman of the full committee, senator grassley, for his support of the hearing. a few housekeeping matters i'd like to cover before we begin after and i then senator klobuchar give some opening remarks belt the hearing. we're going to hear from our panel of witnesses who i'll introduce in a few minutes. and then we'll have five minute question rounds. i should also note we're expecting an important vote on the floor this morning, and so i and other members will likely need to step out briefly to participate. if necessary we may briefly pause the hearing proceedings, although sometimes that doesn't become necessary, depending on the order in which people are asking questions. we're here as you know to
discuss the proposed mergers between four of the nation's five largest health insurance companies. in early july this year, aetna announced it had reached a deal to purchase humana for $37 billion. a few weeks later anthem announced its own deal to purchase cigna for 54 billion. the department of justice is currently reviewing both proposed transactions. and should the department proceed without any objection or substantial modification to health insurance industries so-called big five will be reduce ted to big three, united health care, anthem and it ma. now, as with any merger between two major competitors, each of these acquisitions races the question whether the businesses overlap in any geographic market.
the relevant antitrust inquiry is of course whether the combination will lead to market concentration that may substantially lessen competition. these transactions and their concurrent review also raise questions about the broader issue of consolidation in urination's health insurance industry. it's my hope that our discussions today will assist the public and assist lawmakers in understanding what is causing the trend towards consolidation as well as how it may affect consumers. as we have seen since the passage of the patient protection affordable care act, sudden and drastic changes to the healthcare markets can lead to financial uncertainty and increased strain on the consumers, and on their families. while vibrant competition in every industry is important to our economy, consumers and policymakers pay special attention whenever health care is involved, as it is here. health care markets are
distinguished from those for other goods and service biz their complexity, financial incentives and demand. health-related goods and services reach consumers through a byzantine lab -- labyrinths. states and federal government agencies and sometimes employers. in many instances, those prescribing care, those receiving care, and those paying for care, are all different entitieses. but despite the complexities and the often high cost for health care, everyone will at some point require it. of course, heck, also touches summon of the most extensive and life changing decisions made by consumers. decisions that have a lasting impact on their personal as well as on their economic well-being. that bricks to us at the present
transactions the thirst was between aetna and hugh hand ma. it in serves an estimated 46 million people globally, offering halve insurance products including dental, vision, medicaid, medicare, supplemental, medicare advantage, and commercial policies. aetna's primary focus is commercial health insurance, particularly national accounts and large multisite self-insured employers. humana has over 14 million members and product offerings, focusing on medicare with at least one medicare product in every state. the humana is the second largest medicare provider behind united health care. the second transsis between anthem and cigna proposes to combine the second a and fourth largest national health insurers. anthem is part over the blue
cross blue shield, and anthem has over 38 million health insurance customers spread across the small group. medicare, medicaid, individual, and commercial products, cigna has over 14 million covered lives and focuses on commercial health insurance offings. each of these deals is incredibly complex and raises its own softs unique concerns. industry observers noted the prime area everywhere over overlap betweened a in and hypomanias their met okay are advantage becomes. the american hospital association identified a thousand counties in which the post acquisition concentration level in the mark for medicare advantage raises strong concentration -- 0 strong come pelt different concerns. others question both the accuracy of the data cited and the interpretation of that data. while some are concerned the deal will lead to higher prices
and fewer choices for consumers the companies identified $1.25 billion in potential efficacies. the anthem cigna merger is viewed to involve overlap primarily in the commercial health insurance market. the american associating claim the deal may result in concerning concentration levels for commercial health care insurance products, touch 807 meant areas -- meant areas. the insureash companies strongly dispute the numbers and say if they fail to properly separate out different insurance products in different markets. anthem and cigna believes they're joining complimentary businesses in a way that will allow them to lower coases and improve quality for consumers. anthem's acquisition of cigna raises questions regarding how cigna witness bell integrated into the blue cross blue shield
system. anthem's membership grandma under the association places limits on how much of their business may be conducted outside the blue cross and blue shield brands. it is possible that cigna's ability to compete post acquisition may be constrained by anthem's member shine in the blue cross and blue shield association. for its part, anthem believes the addition of cigna's members will not cause them to run into any limits imposed by the association's membership agreement. in addition, there is the question of how these mergers may effect forms of competition in the health insurance industry, specifically value based reimbursement and treatment models. the approaches to health care seek to improve care and lower costs by focusing on patient outcomes and overall health. particularly through preventive care at any rate than simply paying for service's an fee
basis. as the marketplace evolves in response to consumer demand and government policy it will be important to ensure that consumers are benefiting from vigorous competition antithan being locked into the offerings of just a few dominant companies. finally we can't ignore the far reaching effect of the affordable care act and the effect it's had on the health insurance marketplace in america. while i'd like to emphasize that this is not a hearing on obamacare, a discussion of its role in current industry console edition is -- consolidation is unavoidable. it's important for us to ask how i mate be affecting competition in markets. as we can see these issues that are raised by these proposed transactions and the complexities of the health care space provide apple topics for discussion today.
while the final determination regarding competitive impact will be made be in department of justice. i believe we can make valuable contributions to the conversation today by closely examining any concerns they raise and looking at other forts of market realities may dedriving son kole addition. -- consolidation. at a time when debate continues with great fervor are so, and the mark place is resolve thing to immediate the demands, it's essential that lawmakers and regulators in washington pay close attention to the impact of our actions on competition and the free market. i hope that we can make strides to that end today and i look forward to the testimony of tower witnesses. >> senator. >> thank you very much. thank you for holding holding t. thank you to the witnesses.
an important hearing to examine the consolidation in the health insurance industry and i want to welcome our witnesses. the cost and the quality of health insurance affectses all of us. as a nation, we value competition. the supreme court has called the sherman act the magna carta of free enterprise, as nation we have developed a broad consensus that competition leads to lower prices and higher quality. by protecting competition, the antitrust law delivers those benefits to american consumers. this is true across industries. for a long time, however, people saw the healthcare industry differently. the 1970s, some worried that competition would lead to a medical arms race where providers would unnecessarily duplicate services and increase costs. more recently we have come to understand that competition at all levels of healthcare deliver systems benefits consumers.
consequently the proposed merger of four of the five largest health insurance companies could change the industry. and it's impact on consumers must be carefully scrutinized. fourth the four insurers cover over 90 million people, almost three out of ten americans. we spent over 960 million on health insurance in 2013. and cost effective health insurance as we all know is critical for the access that americans need for quality health care. there are some who are convinced if this merger is approved consumers will pay more for insurance, receive fewer benefits and have less time with their doctors or other healthcare professionals. others with equal fervor believe that competition will remain vigorous because many alternatives will continue to exist in the market, and that each combination will help improve health care. for me i think we need to explore two key questions. first, the effect of these mergers on consumers and second
the impact on the integrity of our healthcare system. i want to make sure that these deal does not harm consumers by increasing premiums or reducing benefits. also, we need to consider whether these mergers will enable insurers to gain undo advantage in dealing with health providers that could reduce the quality of care. equally important we want to consider whether these transactions could enhance competition. here's a questions are broader. healthcare industry is undergoing a significant transition moving towards more coordinated it care and rewarding outcomes instead of paying for procedures. will this merger support or impede the goal of coordinated outcome-based care? the antitrust division of the department of justice has significant experience reviewing health insurance mergers. they have typically analyzed the deals by looking how the merger would affect individuals, small employers, large employers, and medicare advantage plans.
they have generally analyzed health insurance markets as local zachen insurer most provide access to providers close to where the consumer works or lives to be viable. the typically the antitrust division has found entry to be difficult, citing the coase of entry into a geographic area, the time it would take and barriers posed by the reputation of the per chant products its prices. significant changes are occurring. we now hey exchanges that empower individuals. some companies adopted the idea and provide private exchanges for their retirees or employees where the consumer chooses from a menu of potential plans. certain provide groups have begun offering their own insurance plans. particularly we weigh potential for harm against likely benefits. will the merger's lower coase or improve quality in way that is unlikely to occur without the
merger? equally important will the benefits flow to consumers in mr. chairman, i'll be interested in hearing from our panel on how they approach these issues. i am personally very interested in another issue related to health care and that is prescription drug prices and i hope it's something we will also consider in the future. senator grassley and i introduced or pay for delay bill with regards to generic and pharmaceutical deal wes think harm consumers. we secondly -- i have a bill with senator mccain on allowing re-importation of drugs from canada, and then a bill that allows for negotiation under medicare part d. so while we're focused today on the health insurance issues we know there's other issues related to costs as well, in this industry that must be examined as we're seeing some greatly escalating costs in the pharmaceutical market especially. thank you, mr. chairman. >> thank you. i'm now going to introduce each
witness before we swear them in and hear from each of them. mark bert lynn any is chairman and ceo of aetna. he joined aetna in 2003 and served in various mats prior to assuming the role of ceo in 20 and is chairman in 2011. mr. bertolin has aning aning thn business administration from wayne state industry and mba in finance from cornell. joseph swedessish the president and ceo of anthem, joining anthem in 2013, his more than 40 years of health care experience including 25 years as ceo for other major hospital and health care systems. mr. swedessish received his bachelors degree from the university of north carolina as charlotte and is masters doing in health administering from duke university. dr. paul beginsberg is the normal topping chair in medicine and public policy at the
university of southern california, where he is affiliated with the schaffer center for health policy and economics. based in the washington, dc area, he teaches graduates, haven't administration coercions and conducts health policy research. until the end of 2013 he was president of the center for studying health system change, which he founded in 1995. dr. ginsburg served as the founding executive director of the physician payment review commission. now the medicare payment advisory commission, and as deputy assistant director at the congressional budget office. he earned his doctorate in economics from harvard university. lee is director of health enter pies heist management and the professor in hospital and health servicees at the kellogg school of management. her research examines competitive interaction among pairs and providers of
healthcare services and the intersection of industry and public policy. dr. dafny earned' h a ph.d in economics from m.i.t., research associate at the national bureau of economic research, editor of an international journal of health economics and management and a board member of the american society of health economists and the healthcare cost institute. in 2012 to 2013, she served as deputy director for health care and antitrust in the bureau of economics at the federal trade commission in washington. she its a current member of the panel of health advisers for the government congressional budget office. rick pollack, president and rowe crowe of the american hospitalization association after serving in various roles of the last 33 years. rick holds bachelors degree in political science and
communications from the state university of new york's college at courtland. he also earned masters degree in public administration from american university. george flover is senior policy council in the washington office of consumers union. the public policy and advocacy division of consumer reports. he previously worked at the justice department's antitrust division, and at the house judiciary committee, where he was lead antitrust counsel and later chief legislative counsel on the advisory moved over the american antitruss institute, an elected member of the american law institute and co-chair of the dc bar's antitrust and consumer law section. holds a jd from the university of texas law school and a master of public affairs from the lbj school. now i'd ask each witness to stand and be sworn.
[witnesses swornbreak] >> we'll now hear brief remarks from each witness. firstmer bertoline. >> good morning, chairman lee. rankbuchar and members of the sub exitee. i am the 14th chairman and ceo of aetna, which was founded in 1853 in hartford, connecticut. i the for having me here today to discuss our acquisition of humana. we are in a time of unprecedent it change in our country as we look out how health care is rendered. how muchest costs and what the outcomes are around health care. and it is our view that we are at this time -- its time for change. pavement reform is on the fortfront, expansion of coverage. every american should have health care coverage. ed na was one of the first
companies in 2005 to call for guaranteed issue and individual mandate for health care coverage. what identity like to talk about today is why the humana acquisition is important to furthering our evolution as a health care company and as a health care system in the university. focused on providing the highest quality available, the best and most affordable coverage available for all americans. after the acquisition and w we'll have a product port foeol balance end between commercial and government products such as medicare and medicaid temp today the market competes on price and choice urediospore hill with not change but to win in the -- and doctors but this will not choose and consumer idaho be able to pick products. the cdc has a term called healthy days. and it is simple survey that an individual takes to determine if they are having a healthy day. both companies see this as an important metric. we both are committed to offer products and services that will
help improve the number of healthy days our members can enjoy each year. i realize the committee's purview is competition and consumer choice, and while you nor doubt concerned about health, let me address the competition and choice issues directly. first, it is important to point out that of the 54 million beneficiaries in medicare today, 37 million or 68% receive their care through medicare fee for service...
>> >> after the transaction other companies have 87 percent of commercial enrollment and public exchanges to overlap an own the eight states. agnon average 10 other insurance company is end it and -- as competitors. with the commercial insurance market as a result. concern a better price of products the premium prices are not determined in the abstract but instead driven by the underlying cost of care such as hospital and prescription in drug costs that makes up nearly 85% of premium prices.
given that this transaction is about and pricing those establishing rates based on the cost of health care in each county and insurance company offering plans must bid against the government's benchmark and are incentivize to be competitive hands many offers zero premium plans or o dollar premium plants. they have increased 6% since 2010 in showing overwhelming support currently with 97% satisfaction rating making it one of the most popular government programs. mergers and acquisitions is not full of business school but to share a common culture when a humana as ceo of the discussion was focused on the compatibility
of the culture and strategy. is to focus on health not to sell products you may be familiar with my own journey with the health care system and as difficult as that was a strengthened my resolve to make it more competitive to improve a basis of the underlying health. we are focused and if we make that have been in medicare we can make it happen across all health insurance segments i know when acquisitions occur there is a great concern for jobs starting as a blue-collar worker i understand living paycheck to paycheck that is why we improve benefits to employees we've raised our minimum wage is $16 an hour and subsidizing those of
household income is less than three tender% of the poverty level impacting 7,000 employees it as part of this transaction the benefits will be extended to 10,000 employees earning less than $16 an hour. there will be some dislocation of jobs initially but the expectation is to increase employment by having affordable products in the market and enclosing about creating positive change in the health care market to be part of an effort to build a modern health care system built the wrote of the consumer not just competing on dimensions but healthy days consumers can enjoy to live the most productive lives possible. we believe it will and frequent dash improve the marketplace with a higher-quality product.
thank you for the opportunity to testify at a forward to your questions. >> thank you chairman and ranking member and members of the subcommittee. president and chief executive officer of the of the and it is my honor to appear before you today the work of this committee will help shape the future of health care in america and i appreciate the opportunity with the experience. of the committee has been in the influential advocate for positive change. of light to begin by thanking you for your dedication for leadership am partnership to reinforce the commitment to continue our proud history to provide
high quality affordable health benefits to many local communities and a diverse population that we serve. the written testimony has the impact of this direction and to work cooperatively throughout the process. but i would like to focus my remarks on the most important beneficiaries of these transactions, the consumers. health care is undergoing a a unprecedented transformation. while the goals are shared by the health care system, not universally enjoyed by consumers. together and the men and cigna had can offer a broader portfolio of products and services to keep health benefits more affordable to promote higher
quality health care for consumers. the combination gives better health insurance to more people. we will keep health care affordable by a dressy the number one and it causes of health care the cost of care itself the combined analytic capabilities to a remarkable clinical discovery the combined health and wellness will help to fill gaps to be attractively in gauging consumers to manage their own health conditions. we will expand access to physicians and health care professionals cahow so
consumers and get the best and highest quality care when available to approve quality with a value based accountable care models that represents $50 billion of reimbursement tied to better value am better quality of outcomes for members. many of the attention focuses on competition that is the essential part of the dialogue. as a baseline is important to recognize health care is locally based, locally delivered and locally consumed. across the diverse localities there is robust and growing competition and given the limited no market overlap competition will no
doubt continue to flourish after the transaction is completed there are many opinions expressed with this transaction will mean but the true question is what will this mean for the consumer? and the and and cigna together means better health insurance for more people. i have worked diligently to instill a culture of innovation and collaboration and that combined company is no exception and the man signa have made meaningful progress together we will do much more. we embrace the responsibility of this transaction and the ford to working with you in the health care system to expand
access to affordable high quality health benefits. think he for the opportunity to hear testify at a ford to comments and questions. >> am grateful for the opportunity to testify. the changes of the financing of health care and the impact on people 2.0 they fit into the future changes of health care financing and delivery. mergers are inherently difficult to analyze many insurers operate in numerous market segments by a geographic area. to operate as a buyer and
seller so with the allures prices but then these to analyze if these are passed on. the department of justice will have the detailed analysis and for approval of divestiture i do not have a position if they should be approved. market concentration is only one dimension with competitive health care markets and policy and other factors could have profound effects on competitiveness of conagra's created a bidding process for medicare advantage would be a more competitive the affordable care act makes it far more
competitive than it was the floor and a significant numbers are entering the insurance markets with their own plans that favor their own providers. notwithstanding the focus on consolidation i see upside one austrian ellis believes there will lead to substantial reductions of the administrative cost and will hasten the movement to alternative payment models have a more lives in the market makes the health plan more attractive to providers to create these models they'll tell them to divest more to support better with these models and addresses the a full the ability that many feel about these transition to alternative models as they describe as 1
foot in the boat the other on the dock if they are passed to consumers international comparisons have long shown that higher prices account for an important part of higher health care spending in the united states. the staff past three to comment on the role of the affordable care act and i begin by saying the most controversial parts the subsidies to private insurance are not major factors but others are and these should have been seated in a positive light. the alternative payment models experience the opportunity for insurers to pursue these models as well with cut some of hospital rates rates they also push
this forward. medical loss ratio minimums lower those administrative cost finally cuts of medicare advantage increase the pressure to make the plants more efficient and i'll be happy to answer your questions. thank you. >> to the ranking member thank you for the opportunity to testify today on consolidation in the health care industry i direct the health enterprise management program price steady competition of health care markets using dated driven in economic analysis serving as deputy director of the bureau of economics at the ftc and we are here today because americans are concerned about the steep price hikes of buying health
insurance. even if they rise they looked at increases of deductibles and co-payments i was looking at a lack of competition, and -- contribute to higher premiums and it does. we paid the premium of because of limited competition it is over $200 per person per year. the question is if more consolidation and is likely to benefit in the future. i will describe what we know in the past and what might increase the likelihood that any future consolidation that benefits the public. we noblesse then we should because it covers only a subset sand of market for full medical insurance is
deemed highly concentrated according to the threshold of the ftc and department of justice and 37 percent of medicare beneficiaries would be deemed highly concentrated. concentration has been rising in recent years. the best available evidence evidence, even to studies and my colleagues and i studied such an event between atlanta and prudential to examine the impact on premiums over 139 different geographic markets. where they had the greatest overlap the largest reduction of health care employment and wages we would have expected premiums to go down but it was the opposite it led to reduce payments to a providers but the savings were not passed
through. , their rivals also raise premiums as well and did not receive even after losing significant market share. in texas the department suggested to dash justice demanded them to divest. there was no effect on those markets and bill evidence that mergers leave to innovation or improved quality. so they say that was then that now to face regulations to spend $0.85 out of every dollar collected on medical claims and quality improvement. it does not give a substitute for competition or pertain to the self insured plan that is more than half of the people all and said kent they also
compete on non-financial all dimensions with a chronic disease minister program and what if it is repealed and? so mergers may yield and that is no different than in the past consumers could benefit if there is a bracket imperative it in light of consolidation the imperative is weaker and it could jeopardize further. evidence should not be discounted and the cost of the consolidation now is likely to be undone if proven anti-competitive. the department of justice will eat even i await the merger to see if it violates antitrust laws but whether
it is in the public interest is to different in cit issue than the antitrust i advise you not only ask tough questions that demand greater transparency and regulations to require it. bill be able to monitor market development to intervene if necessary and researchers will provide stronger guidance of consolidation. >> distinguished members of the subcommittee thank you for inviting me to be here today and those proposed acquisition would eliminate two of the largest national health insurance companies leaving just three dominant providers.
with this unprecedented consolidation shed me of extreme concern as well as doctors and hospitals and others working to improve quality and efficiency while making care more affordable to patients. for consumers a cabbie more expensive and less accessible this is from the commercial market as well as medicare vantage. we're concerned about the negative consequences to further entrench the power of blue cross blue shield system that dominates the nearly every state. another casualty derails the momentum of the health care delivery system in pursuit of better health and better health care and lower costs.
despite claims that they have elevation they benefit financially from the plant's 289 dash ride the wave resulting in an efficient and higher quality care. studies have shown the quality of care the hospitals provide is increasing at the same time the price growth is at historically low levels and less than 1% in 2015 and 1.3% last year. and a reason to believe to allow all of them to become more of you and from competitive forces would change their incentive to reap those financial rewards. a bite to focus on specific concerns if they were to
close the three largest national health insurance companies who had more than $345 million of revenue to cover more than 131 million lives 40% of americans have no assurance it threatens competition and a leased 870 markets across the nation to serve 45 million consumers because they generate more than $100 million of revenue even a slight increase would cost billions of dollars of health care costs. read well is that nothing is allowed to continue then medicare advantage plants that serve 2.7 million seniors is even in more
concentrated that threatens the protection that it provides to results higher out of pocket cost it would not only eliminate the competition but the possibility of enter competition between them and it is concerning because even now there is almost no competition in the medicare advantage markets and the commonwealth steady found that they are highly concentrated and in conclusion very concerned to results in fewer choices of what remains and higher premiums with out-of-pocket cost lifeboat acquisitions merit the closest scrutiny of the antitrust division.
some compare the deals to telecommunications with the potential to harm consumers the department of justice was ready to challenge those deals in should be ready to challenge these if it finds these transactions threaten the vitality of the health care system and health and welfare across the nation we look forward to working with the subcommittee that they continue to have access to high quality affordable health care. thank you. >> the queue chairman. consumer is what competition to have choice and easy to compare and responsive to what is important choice give leverage to have lower prices and better quality.
from our founding we have worked to make quality health care available and affordable. the marketplace is complex and regulation helps to insure safety to make better health care available. you cannot let the free market go where it will their pre-existing conditions is the prime example. some collaboration can be good for the system but too much concentration among hospitals of doctors or insurers can undermine the system to harm consumers to dictate to others closing of choices to compare the quality of clubby receive. they play a key role in cost
i the difference from what the provider wants to charge of what it is willing to except but it could push doctors and hospitals beyond the cost to degrade below what they consider -- what they need briard concerned they have too much concentration into new markets with too much harm. different kinds of insurance sailors are not giving up medicare advantage we need to look at current competition but also where it could be. active throughout the country and their prime position to expand to new markets we to be skeptical got relying on new entry if they decide expanding on their own is not worth the
trouble how can we count on expansion by nonexistent insurers? for one thing to minimarkets are affected. second divestitures don't always work supposedly this other company is ready to jump in with the same capability to compete over the long haul. if it is so committed why wasn't it there already? it is risky the there is no margin for error. the law cannot forsake company to stay in business some say the offsets the doctor groups but not to give them their own market power the day pope that they'll use it but to add
market power at one point to stand up to somewhere else. if they shake hands to find a path to riches them both than everyone else clinics and medical practice is is tossed around with what providers motivated without cutting corners for says knuckling under but the market dictator. to get providers to except rates by offering access where the former giants were not passed that you think they to get there to expand on their own. and to attract providers and consumers is different than
having the power to make them an offer they can refuse. competition keeps the business interest better aligned with the interest of consumers. the justice department investigation is just getting under way. we want them to be very thorough and for the department to act aggressively to protect. thank you to for
they have had very high quality scores. all of our markets are an 80 pea four plus star rating which seniors value. last year alone over 85 percent is based upon quality rankings. an affordable price in the market. 6% has6 percent has gone down. the study was published as a rate of pay increases across the united states for seniors next year. weyear. we continue to see a decrease in pricing, broader benefit structure for an offering of seniors and few the product as high quality and very affordable. the vast majority of our members are low income members. >> from your point of you.
>> a very important question with respect to how we are going to engage in the marketplace triggering the combination of these two great companies. and some believes that there are three core pillars with respect to how we engage in the marketplace focusing on provider collaboration, building out affordability for our customers and finally recognizing that this is a locally driven pursuit in terms of creating true value for customers. having said that we believe that the synergies we have identified will translate the benefit for the consumer conference since building out much more sophisticated and highly integrated
information management systems that take real data and converting it into information that can best be used for delivering better care in terms of how providers are engaging with their patients. we believe that we will be of to combine that with many other opportunities. there is a commitment we have repeatedly made enough evidence to that effect and believe it will play are going in the future as well. >> hi market concentration, to the remedy is for justice to require. in both of your letters you appear skeptical that it will remedy antitrust concerns. why don'tconcerns. why don't you believe that the best teacher can remedy antitrust concerns which may arise?
>> thank you, sen. if you look at the notion of what would be suitable acquiring in the arrangement where you will have identified over 1,000 counties and 38 states that serve 2.7 million people, the question is who would be suitable and that's kind of divestiture arrangement, and the scale of the proposed deal just seems so large the finding someone can come in a particular network. >> without objection. >> thank you. >> thank you very much, mr. chairman. i'll start with you. you have explainedyou have explained what you see as
some of the images of the mergers. can you explain why you have to have these mergers to get to where you want to be. >> thank you, ranking member. we believe our acquisition is not one of seismic capability. humana has taken a step forward in making sure that health care can be provided in the home. 2014 humana had 496,000 member days than the prior year of providing care and though and bringing logistics of people, stuff, people, stuff, and technology to make sure they can live more productively. our view is that we want to acquire capabilities and expand the scale across business as part of our acquisition. >> acquisition. >> can you do that on your
own without them? >> we can. it would take longer. >> keep it short. >> to companies that have distinctly different portfolios that were highly complementary where each company has obvious strengths, the other company will benefit and vice versa. as an example in terms of the complementary nature they are serving a very large national accounts environment. having said that, we recognize that national account typically administrative service only by arrangement and by doing so we create the opportunity
for those employers to the benefit of savings going directly to the employers. will we know is whether it is a national account or an individual account with respect to serving exchanges , this is all local. every service that we provide is spilling down to a local engagement. >> i wondered if some of the other witnesses, if there are other factors, given the changes in the industry benefactors we should be looking at.
>> the blue cross blue shield rules there is an extensive interconnection among the system seeing if the deal will add to blue dominance and create larger barriers to entry which is something that would also need to be tempted as well. the consolidation of the insurance side. youyou seem to believe we need more of it on the provider side. some consolidation that there are advantages to it? >> i appreciate the question what we have seen his cosco price growth growing up at 1 pe.
more significantly is the objective of hospital consolidation which is to provide together networks of teams of caregivers that can move us in a direction to better coordinate care. a study looking at hospital mergers over five years i would say were 607 12 percent over that time, and we found that when you looked at the section and seven all put most of them were saving hospitals from going bankrupt.
it goes beyond being able to provide a better service and being able to exert leverage over others to reduce their ability to make choices and ultimately that reduces consumer's abilities to make choices. the 1st hospital network that has too much of the power in the local market that reduces choices for providers they are the only game in town. i think it needs to be looked out across the board. >> i will start with you.
how sick know of the integrated. >> my understanding is that a member of the blue cross blue shield association, they are subject to something called the blue subject rule which requires among other things that no more than one 3rd of anthems total healthcare revenue may come from non- branded health plans we do not compete in other states
by way of the so-called license agreement we have the association and are strictly performing in those 14 states. what will then happen with respect to the acquisition is the fact that in our so-called non- blue states outside of our 14 state domain, cigna will compete and be aa competitor in the marketplace competing against the blue cross blue shield plans. otherother than our own 14 states he cigna brand and product may come into our blue cross portfolio. however, in the national accountsaccount space and will continue to compete. it is a combination of a place within the country based upon our blue state and our non- blue state
where cigna will,we will, in fact, compete. with respect to the best effort rule we need to comply with that will and do not need to respond to pull in terms of how it will comply until after the transaction closes, and then closes, and then we went two years thereafter to adjust our portfolio,, but we do not believe that be an impediment to the portfolio have a competitive deterioration in the marketplace. >> today cigna has every incentive, necessarily limit and future competitiveness.
>> thank you for the question, mr. chairman. it is about capability and presence in the marketplace, having a footprint of products that you are able to contract with the provider system. this discussion earlier of living in two worlds, fee-for-service and value -based insurance design, the more the revenue you include the easier it is for the provider to transition. having that opportunity to provide a broader breadth of product where we can engage in a full conversation about changing revenue model to a value -based model is our intent. >> with respect we believe there are three core elements focused on the consumer, the provider and then building value that has been delivered the consumer only can label them
alternative payment models of value -based payment reimbursement effort than that totals 53 percent we have an infrastructure combined with the cigna have a structure that we believe will accelerate at a fast-paced that does go to the consumer. as an example we have a hundred and 50 aco's. cigna has 114. we have 780 hospital 5780 hospitals now affiliated. cigna has likewise built a very elegant infrastructure that in alignment with us engaging in the marketplace we believe will deliver tremendous uptick in value.
>> we are not going to recess for votes now just listening to the answers now which is competing in ma or competing against blue cross blue shield won't be able to , and i saw some skepticism about your answers, and i want to make them short. doctor daphne, did you share with me skepticism because i think that all of the cigna plans will not be able to compete with the blue plan
and many of these markets. >> i thank you for your question. my 1st response is with regard to the national plan the notion that they continue to compete in that segment, they will be the same entity, so they might have two names, but i don't see how that is competition. with respect to whether the agreement would inherit the expansion as a brand, that very much depends upon how big they are in the various markets and whether they would exceed the threshold, and icommand i sure wish i had the data to assess the veracity of the claim that constrained. >> i am going to continue on because you spoke to that. i have to go pretty soon to vote. they tried to do this fast.
i wrote the medical loss ratio provision which everyone knows requires insurers to pay at least 80 to 85 percent of premium dollars on health care. mor is saving which the billions of dollars for consumers. i am just a little worried about a couple of things. you said something about that it could be repealed. i hope not. can you talk to how mor has been saving money for consumers and made competition better in the insurance market?
>> yes,yes, senator. we are strong supporters of the medical loss ratio requirement and are glad it is in law. he has brought tremendous benefit to consumers, as you indicated, it has to support disciplined insurers bending, but it works only in that one dimension to put a floor on the percentage of premiums that have to go to paying for health care and quality improvement. does not address the otherwise competition can be affected by mergers,mergers, and if we lose the competition, insurance companies and the nonprice ways on the price is the easiest way to measure it. we think for all the great work the analyze done it works better in conjunction with the competitive marketplace.
>> absolutely. you both describe the things will be passed along to consumers. areare you saying that you will commit passing the savings on to your policyholders? >> it is our intention to make our products more affordable and we continue to commit to drive affordability across the system. >> that is not quite an answer to my question. >> okay. >> do you commit to passing along savings to policyholders? >> the savings and you will have by virtue of being able to do this merger? >> we need that and more. >> that is not quite an answer. but youanswer. but you commit to passing along savings to your
policyholders? >> are savings will be passed along. >> do you commit to passing along the savings to policyholders? >> committed to driving forward affordability, balancing the investments necessary to improve product for the benefit of consumers, and by definition that generates savings that goes to the consumer. >> to the extent that we are providing a very balanced portfolio that is driven by great value. by the desire of the customers want us to address them and icommand i believe that translates to improve distribution of savings to the consumer. >> i am out of time. i'm not quite sure if those answers are yes.
>> okay. i am going to vote right now i am going to be fast. i hope will be back by the time he finishes. if not we will go into recess. >> thank you, mr. chairman. >> thank you, mr. chairman. opponents argue that entry is difficult because it requires input to the broad provider network comparable i would like the answer from both of you.
>> our acquisition is largely a medicare acquisition. convergence and see no competitive impact related to market entrants. there are 400 and the place today. there are new entrants, 75 in the last three years in the public exchanges. as they begin to offer products and services there is a robust, competitive market. ten in the markets, ten commercial competitors.
>> the entry points are many command is producing tremendous opportunity for the market to receive products and services going forward. >> and my pronouncing that right? based upon past experience how likely are enrollees to change plans and premiums go up or benefits are cut? if the merger were to amp prices how likely is it to say? >> there probably is some sticking affect up to the point has consumers will stay with you they have got and employers will stay with you there god and the place where they can get as good a coverage as they had him work on better coverage will
we are concerned about, and this is something the justice department will have to look at, is how this combination will affect that and risk losing the benefit. >> can you comment on his comments? >> sen., with all politics health carehealthcare is local, and there are competitors and variability in each marketplace. in the medicare advantage place which was a large driver behind her acquisition there are 18 different plan options available to seniors in nonrural and global markets. lots of choice still available.
medicare advantage rates have dropped and the benchmark, government benchmark is still dropping every year. we see the market very competitive. wall street is an besting. the plan called oscar just received 32 and a half million dollar investment to open that marketplace up. >> senator, i simply -underscore what was brought out by referencing doctor ginsberg paper. speaks to the growth of one's sector of the industry and states that a recent analysis reports 15 of the 28 entrants between two to 12 and 2015 our health systems.
thirty-seven provider sponsored plans offer coverage on public exchanges i simplyi simply want to underscore there are many new entrants into the marketplace, one more recent and called out quite frequently as an entrant having great success in the marketplace. competition is becoming more robust in every sector of the health plan marketplace. >> professor and what is development market or market share? >> what is the relevant market share? ..
score for commercial health insurance was 200 points in 600 concentrated markets. now, do you agree with them and if not why not? if those calculations are correct, that means they have presumptively increased market power. all pound point to a comment that was made earlier. they are looking at anti- competitive divisions. i am not an expert on the hh and documents. as we look at the markets where
they compete, we have 18 competitors and we have ten plans in non-role non- role markets. we see plenty of competition, plenty of entrance. more than half over the last three years have been hospital systems. we view that in the event we get to the department of justice that we need to invest in divestitures and we think ther will be people to enter the market. >> likewise senator i'm not completely familiar with the analytics that you've mentioned. in particular the research results. i would rather respond back to the committee at another time. very soon and the department of
justice regarding their assessment of the combination of these two companies. that's probably the best i can offer at the moment. >> it's interesting to me. until further notice, they will be back shortly from the vote. we will just recess until the senators get back. were going to reconvene. >> thank you very much. i talked a little bit about the health insurance consolidation and i know we had some quick answers from both of you. we have a little more luxury of time now. if you could finish up, they were asking about why you needed the merger to achieve some of these cost goals that you have. >> thank you for the follow-up
question. what i would like to do is describe to you the various products and services that we do offer and how we segment our business. this is a highly segmented industry that serves a very focused effort in and around local markets. for instance, we are very active as is cigna in the national marketplace serving large accounts, large national accounts. these are very sophisticated, highly educated buyers of healthcare services typically using consultants who then rely on to make selections for the health plan that will serve them in the national markets place that they reside in. typically they will choose two or three health plans. again it's a very competitive landscape so it's specific to your question about why come together, we will both be better able to serve that customer base
of national accounts and really highly desires our support as administrative services only support team to what they need in terms of health plan delivery. what's fascinating when people ask about the competitive landscape specific to national accounts is that there are 130 unique companies serving that self insured marketplace. in 2014 there were 30 new companies that began competing in that space. the gao reported in 2014 2014 that there is an average of 11 insurers competing in that large group market for specific contracts. you can see that the combination of our two companies is an area where we are most tactic is very valuable to the customer. let me briefly go to another environment. small group, we do not cross
over at all. they don't have small group. we will continue to have our small group coverage with competition in the markets that we serve. with respect to the individual space, especially in the exchange environment, they have a very small market presence in the individual space. today consumers can choose from an average of 40 plans that support their choices. it's all about choice but it's a national account, small group, individual plans, we plans, we are coming together and finally the compliment complementary measure allows us to combine their expertise in international market which we do not have a presence in that space and finally services like wellness programs are very vital to
moving the needle on value to the customer and cigna has a phenomenal wellness program that will integrate with us and then translates to more value for the consumer. the combination of all of those products and services really brings value to the marketplace that i would argue is exponentially significant in value in terms of what we can offer to standalone organizations. we both believe one and one equals three in terms of the combination and how we can serve the customer. >> okay there are these studies that you're relying on on consolidation that you've talked about. could you explain them in more lehman or leigh woman terms? where do you see this market going when you look at the big picture view and how it will affect consumers? i would say certainly the litter sure the literature is a very limited one. i think this daddy of the merger
which was 15 years ago which was well regarded, she also explained how difficult it is to do these studies. the information on provider mergers is much clear. >> what does that show? >> hospital mergers lead to higher prices without an impact on quality. it's a very extensive literature that has been synthesized by some very good people. nevertheless i think there are other dimensions that are quite relevant besides consolidation that either policies, the policies can make some markets much more competitive. this is what has happened in the affordable care act. we do have a lot of that in our state with the geographic
disparities in parts of the country and the fact that certain states in certain regions of the country have more and incentives or different cultures and that's certainly what we have in our state and that's what were trying to get out as well that could be a potential solution. the affordable care act has those benefits but we still haven't seen the full results of them. we have seen some. >> i think one of the upsides to consider and perhaps not overdo it is that we are placing a big bet as a country in alternative payment models, value of payments, it's really the only thing we've got to try to address cost for the long-term basis. i think there are some specifics where insurer consolidation can
lead to this trend moving forward more rapidly. i think the role of medicare has been and will be very important in these trends because providers need to move all of their patients to value payment models. >> i'm delighted by the question, what can we learn from prior research on this. in addition, there is a study on another large merger in nevada. they found a large increase of 14% in small group premium. i have myself done a study on the individual insurance exchanges which demonstrate that it also leads to lower prices. we estimate that no area, where
they had a bigger market, prices were higher. competition matters today and it mattered then. >> very good, thank you. >> thank you all for being here today and for the excellent testimony you have offered so far i am deeply concerned about these mergers because of the potential effect on competition and the concentration of power in fewer hands. i've expressed those concerns publicly in some sense i have a feeling that like the saying about marriage, this merger may be the triumph of hope over experience. consolidation is so rapidly taking over this industry and we've seen it in other industries and we've seen the consequences of it in higher prices in this case potentially higher premiums and i am deeply
troubled by the evidence that shows that neither providers nor consumers benefit from these consolidations. in other words that the experience shows that premiums are not lowered and consumers do not benefit and that the savings are not passed along to consumers. when viewed together, i think both of these proposed deals raise serious concerns and in addition to conducting a market by market analysis, i believe the department of justice must also scrutinize these mergers together altogether, as part of a single national healthcare market and the goal has to be to sustain and enhance the possible
competition in protecting consumers. i want to focus in particular on an area that has not been covered so far and that is the issue about barriers to entry. as you may know in 2010 christine burney explained the results of a review of the antitrust division into the question of the entry into the marketplace. this was her consist conclusion before the american bar association. our conclusions reinforce our concern about strong barriers to entry and expansion in health insurance markets and are particularly significance in light of the affordable care act. it is imperative that we prevent mergers or acquisitions that will create or increase the size
of dominant health insurance plans. particularly in the small group and individual markets. they will generally be viewed with skepticism. they will almost never justify an anti-competitive merger. the suggestion has been made and i think it is a pillar of the arguments for this merger that these barriers to entry are insignificant i think experience belies that contention. i would like responses if you would please. >> thank you for the question senator i understand your point of view. i would like to make clear what the data shows us in the markets where we compete.
in medicare advantage, there is plenty of competition. twenty-eight new entrants and more than half the hospital systems over the last three years. more more hospital more hospital provider systems are in the market. in the public exchange where we have overlap between aetna and humana there are at least ten other competitors. investors by wall street is evidenced by oscar in new york where google just invested $32.5 $32.5 million in furthering their expansion in the new york marketplace. at the local level it continues to see more and more entrance and we see more competition. we are not at all concerned about the lack of compensation competition in local markets.
there is a benchmark that the government requires us to be and so we have, have, over the last five years in 2010 reduced rate by 6% in medicare advantage to the benefit of seniors with a higher quality product in a more affordable product each year. five understand the question is barriers to entry and i understand they do exist that there are powerful barriers to entry i understand your point and i respect it. i can't just start an insurance company that will have any hope of competing with the combined entity once this transaction is completed yet all healthcare is
local like politics are local but there are national politics and national markets and those markets are profoundly important for the department of justice to review in scrutinizing this merger because of the barriers to entry. that's true of other industries as well so that's the perspective yes sir,. >> i certainly appreciate that perspective. what i can share with you are there are many new players that have entered the market and continue to enter the market. i would like to begin with reference to oscar serving new york and new jersey. they accumulated 45,000 new members. the company was founded based on venture capital funds and just recently a google investment
that will accelerate their engagement in the marketplace by way of going to california next year. again, one company, multiple products, demonstrated success your one. let me emphasize the bigger view. as we deal with the national marketplace with large group and national accounts, what we've witnessed is 30 new companies that have entered the marketplace competing in the national account sector. they brought out the fact that on average there are 11 insurers competing amongst themselves for national accounts. with respect to another slice of development in the marketplace, in 2014 they revealed that 50% of u.s. healthcare systems have or intend to apply for an insurance license. in fact it was just brought out a little while ago that with
respect to serving public exchanges 37 providers are in the marketplace offering coverage for enrollees in the exchange environment. my point is that competition is becoming more robust, not less with respect to cigna, we are compatible and complementary companies without a lot of overlap in how we engage in the marketplace and in that regard i believe we will bring great value to our customers and we will compete very effectively in the marketplace by virtue of this combination. >> my time has expired but i want to think both of you for your very informative responses. i think we have only begun to scratch the surface in terms of the data and the material that has to be reviewed by the department of justice. i hope the scrutiny will be
exacting and demanding as you expect it but there seem to be two very different perspectives here. one offered by professor daphne in the charts and testimony that she has offered and the other that you presented and i think it may result from the way markets are sliced and diced in the different analyses that are done. my hope is that the department of justice will look at the national market rather than only the local markets because insurance is not all local. thank you. >> thank you mr. chair, i want to welcome all the panelist. i want to thank you for your testimony. i had another meeting before i got back here but it's not for
lack of interest. i will certainly be reviewing the comments from some of my colleagues. this is a very complex process. not only the issues that you have to deal with in terms of the geographic market in the competition in the saturation and all these other things, a number of other things that doctor daphne mentioned go beyond the things that we tend to look at. i for one am glad that congress saw their way fit to make this past something that the doj would do. for a variety of reasons. as far as i'm concerned with market concentration, when i'm at the grocery store and try to figure out went right wife asked me to buy when i went there. the way you're looking at market concentration here and all the other factors i think is appropriately in an area that should be making judgments on an political nonpolitical basis
based on factors that have been outlined. here's the concern that i have with this particular transaction. it's been alluded to, that different policies have been outside forces that are causing some of these things to incur in the industry of insurance or the hospital industry. my question is in light of some biases on the administration part and where we should go with healthcare in this nation, do you feel the process we have in place from the doj is likely to produce a decision based on the parameters set forth versus something that may potentially be influenced by an outcome that better serves legacy agenda item. i'll start with doctor ginsberg. >> certainly the department of justice is guided by the
antitrust laws which have served the country very well. clearly there are judgments that are hard judgments to make. i can't get into the minds of the justice as to how they will come out but they are committed to an extensive review. >> what are your thoughts. >> senator i think the process is very thorough and complete. we expect it will be a fair and appropriate process. >> doctor daphne, you mentioned, i'm at data my self, i ran a data analytics business myself. you and i may be coming from a different frame about the argument that the data would support, but do you feel the process appropriately
incorporates consideration for the kinds of things that you are considering? >> i'm confident in the department of justice but i wish the public had access to the information so we could perform analyses as well. >> i think that's a valid point in terms of transparency. i have another question and it seems to me that one trend would cause the other trend to occur. i know north carolina we've had a lot of consolidation. to your point, we've had problem hospitals in rural area that were acquired and before that may have gone out of business, diminishing our ability to serve the most rural community which is generally the most underserved. by the same talking token, you
have mentioned how it improved outcomes and possibly improved the delivery of services. it has also created a large provider network. one of the advantages to the kinds of mergers that we are talking about, as long as that trend continues, it seems to me that someone who is involved in strategic sourcing and negotiations from suppliers, that there is a valid argument to the extent that you have the ability to negotiate better price points. i'll start with mr. swedish and time allowing all have one other person respond. thank you. >> if i understand the question it's about provider consolidation.
>> know that is something that the hospital has used as an argument for reducing cost. i would think part of your argument, there is a model model you want to adopt and have pervasive in terms of the product and services you provide, but what i'm getting to is the business of your business where you have to get out there and ultimately negotiate provider rates that can fit within them models that been the cost curve and reduce the cost of the medical services provided. my point is, it seems inconsistent to argue that the consolidation of hospitals to address their challenges is okay but the consolidation of an insurance company would not be okay. i'm just trying to understand why that is not inconsistent. >> if you can indulge me, i would like to give you a tale of two cities.
one as i mentioned earlier, our our organization, and thumb, has developed a value -based payment infrastructure that 53% of our payments to providers are value -based driven. they are alternative based payment models. we have 106,000 physicians participating in that model. cygnus infrastructure likewise has multiple models and a variety of value-based models that will integrate with our model at the close of the transaction let me shift now to a different perspective. as you heard earlier, i served for 15 years so i know those delivery systems extremely well.
i've keenly observed combinations and consolidations happening on that front so i am well aware of what is happening in that state as well as 49 other states given the view that i have today from my perk of a health plan executive. what i can tell you about my experience in that world is for the last 15 years we were focused heavily on acquisitions, consolidations, purchasing hospitals, purchasing physician practices all built under the premise that we will integrate. i will further submit that the buildout had a lot to do with negotiating better price. it was all about negotiating better price. i way of delivering better quality. i would argue today in terms of our commitment to value