Jonathan Bush says payer M&A signals downfall of innovation: 4 thoughts

The bubble of activity among the five big healthcare payers continued this week when Cigna rejected Anthem's latest takeover bid. Talks of mergers and acquisitions in healthcare continue to permeate in the industry, but according to Jonathan Bush, cofounder and CEO of Watertown, Mass.-based athenahealth, M&A activity is a signal of an industry downfall.

Mr. Bush was a guest on CNBC's "Power Lunch" show Monday, when he said M&As are indicative of a decline in innovation.

Here are four key thoughts Mr. Bush shared on the segment:

On the link between M&A and innovation: "This is what happens in mature markets when the ability to innovate is smaller than the ability to consolidate. These guys are looking for savings and some pricing power and some market power. It's what happens anywhere where innovation slows down."

On the effect the regulatory environment has on innovation: "In healthcare, innovation is borderline illegal with the federal government defining exactly what is and isn't healthcare," he said. "They're running out of ways to invent, and so they're consolidating down."

On consolidating payers: "In this country we've got a very strong government and we want to protect large employers, and so we put them on life support and sort of keep them as paraplegic pets for a while," Mr. Bush said. "Hopefully what will happen is there will be disruptive innovation and the role of the traditional health insurance company will be obsolete."

On the effect a payer M&A would have on athenahealth: "At some level, fewer people to handle [billing and medical records and recording] with is more profit for us," Mr. Bush said. "Insurance companies kind of receding back into commodity status is an opportunity both in the short term and the long term if we take it seriously."

More articles on payer issues:

UnitedHealth leaves health insurers' largest trade group
Cigna rejects latest takeover bid from Anthem
125 things to know about the 'big five' insurers

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