Markets

Cigna's New Regional Exec Toes the Dartmouth Atlas Line -- Up To a Point

By David Hamilton

Updated on: January 14, 2009 / 11:00 AM EST / MoneyWatch

Health-insurance executives aren't known either for candor or for embracing the ideas of healthcare reformers, but apparently the new leaders of Cigna Healthcare's Mountain States Division -- recently created by Cigna's acquisition of local insurer Great-West Healthcare -- haven't gotten the memo.

Joyzelle Davis of the Rocky Mountain News recently sat down with Daryl Edmonds, the new president and GM of the new Cigna unit. To my surprise, Edmonds actually had some interesting observations about the high cost of health insurance in Colorado, where premiums apparently exceed the national average despite the state's low rate of obesity. Among the causes Edmonds cited were:

The medical arms race. "[W]e have seen a proliferation of free-standing radiology centers with CTs and MRIs, and the ordering of CT scans and MRIs over the past five years has probably increased by 20 percent," Edmonds noted. Of course, insurers generally believe that hospitals overuse CT and MRI scans, but in this case, just because a health-insurance company says so doesn't mean it's not true. After all, as longtime BNET Healthcare readers know, the supply of medical services effectively creates its own demand -- however perverse an inversion of standard economics that seems when you first hear it.
Hospitals are flexing their newfound clout to demand higher reimbursements. Edmonds again: "[H]ospital systems have joined together, and they're able to negotiate higher reimbursements. When you take a look at the level of uninsured, there's going to be cost shifting -- understandably -- from physicians and hospitals." In other words, Joe Paduda was right.

What's striking about these observations -- self-serving though they are from a health insurer's point of view -- is how closely they parallel the findings of the still underappreciated Dartmouth Atlas of Healthcare project, which for more than 20 years has sounded alarms over the misallocation of healthcare resources and overspending on high-tech treatments and procedures of limited value. Health-insurance executives aren't known for their appreciation of the Dartmouth work, especially when it cuts against their own enthusiasm for "consumer-directed" health plans that shift costs onto patients.

Of course, Edmonds didn't say whether either Great-West or Cigna have embraced evidence-based medicine or done much of anything else to hold down costs outside of simply trying to jaw down hospital reimbursement rates. Neither did he address the question of whether the health insurer's own overhead actually pays for much beyond those attempts to shift costs back onto doctors and hospitals. But I guess you can only expect so much straight talk in a single interview.

BNET Healthcare on rising medical costs: