N.Y. Life’s Sale To Aetna Triggers Physician Worries

Aetna’s announcement that it would purchase the health care operations of New York Life Insurance Co. wasn’t much of a surprise, but it sparked concern on Wall Street and in doctors’ offices. The $1 billion merger transfers the care of 2.2 million people–1.5 million of whom are enrolled in New York Life’s managed care unit, NYLCare–to Aetna. Aetna U.S. Healthcare thus becomes a stronger player in several markets, particularly Texas and the Baltimore-Washington area.

Several credit services placed Aetna’s ratings under review, citing the company’s difficulty digesting its 1996 acquisition of U.S. Healthcare. But analysts are optimistic that Aetna’s plan to blend NYLCare into its operations more slowly than it did when it bought U.S. Healthcare will prevent a replay of the difficulties experienced with the earlier merger.

Physicians are concerned that the deal will be a raw one for them once Aetna U.S. Healthcare assumes management of NYLCare enrollees. While NYLCare has a good reputation with doctors in Texas, physicians there have been at war with Aetna U.S. Healthcare over what they consider low compensation and burdensome contract terms.

The move may set the stage for an all-out shootout between Texas physicians and Aetna U.S. Healthcare. Fed up with what they consider take-it-or-leave- it contracts, a number of physician groups in the state have walked away from the HMO when time has come to re-up. The situation got more play when Methodist Hospitals of Dallas terminated its relationship with Aetna U.S. Healthcare April 20 over delayed payments and what it called “annoying requests for documentation.”

Acting on complaints from physicians in Texas and other states, the AMA sent Aetna U.S. Healthcare a letter protesting what it called contracts of adhesion and interference with medical decisions. In a point-by-point response, Aetna denied offering contracts of adhesion (“No one is forced to sign,” the company said in a statement) and said that physicians are being held accountable for their own decisions.

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