By Christopher Weaver

Kaiser Health News/Washington Post, July 1, 2011

Even if UnitedHealth Group isn’t your insurance company, there’s a good chance it touches you in some way. The $100 billion behemoth sells technology to hospitals and other insurers, distributes drugs, manages clinical trials and offers continuing medical education, among other things, through the growing web of firms it owns.

Now, that touch could get a lot more personal. United’s health services wing is quietly taking control of doctors who treat patients covered by United plans in several areas of the country — buying medical groups and launching physician management companies, for example.

It’s the latest sign that the barrier between companies that provide health coverage and those that actually provide care to patients is crumbling. Other large insurers, including Humana and WellPoint, have announced deals involving doctors in recent months, part of a strategy to curb rising health costs that could cut into profits and to weather new challenges to their business arising from the federal health law. But United is the biggest insurer by revenue, making the trend much more significant.

Many patients insured by these companies are going to see much tighter management of their care.

“Health care costs are still going to rise,” said Wayne DeVeydt, chief financial officer of WellPoint, which entered the business of running clinics in June with the announcement that it would acquire CareMore, a health plan operator based near Los Angeles that owns 26 clinics. “But the only way to stem those costs in the long term is to manage care on the front end.”

That means enlisting doctors. Their orders drive most health care spending, including the wasteful share: treating heart patients with expensive stents when cheaper drugs might work, or overusing high-tech imaging devices, for example. By managing doctors directly, insurers believe they can reshape the practice of medicine – and protect their profits.

For instance, CIGNA, another large insurer, saves 9 percent on patients treated by doctors in a Phoenix medical group it controls, said Stephanie Gorman, president of CIGNA Arizona. CIGNA has expanded the group over the last 18 months in response to the health law, and it now serves patients at 32 locations.

Insurance companies are pursuing doctors in response to increasing financial pressure. The health law cuts government spending on private Medicare plans that many insurers offer, imposes rules that could limit profits, and increases scrutiny of their rates. Adding to the pressure, the insurers’ customers are tired of rising prices.

Employers and other customers “are saying, I want more value for the dollars I spend in health care,” said Dawn Owens, chief executive officer of OptumHealth, United’s health services subsidiary. But, “there’s also a realization that the delivery system isn’t ready for that kind of change. That’s where we come in.”

The tools needed to control costs and improve care are things insurers have “invested in over the years,” she said. “The provider community doesn’t have those tools.”

Dr. Amir Bacchus, chief medical officer of HealthCare Partners of Nevada, a large physician group, said he learned about United’s plans in a phone call from a United recruiter. He was asked if he’d be interested in joining the company to manage 500 doctors at a network of clinics United planned to build around the country, one part of its physician strategy.

By adding physicians in some places, United “can definitely control the health system” in those areas, said Bacchus, who declined United’s overture. “It’s a threat for us,” he added. “They are going to compete directly with our business model.”

United’s OptumHealth subsidiary, meanwhile, is buying doctors’ groups, building management companies to organize physicians, fostering new partnerships with medical groups and hiring doctors at a group it already controls.

Insurers managed physician practices before, especially in the 1990s. But customers rejected those tightly managed plans. Some local plans, and larger insurers such as Kaiser Permanente, continue to employ practicing doctors. But the biggest national insurers shed such arrangements.

One reason the strategy makes sense now is that the health law could reward such arrangements. The law envisions so-called accountable care organizations, groups of doctors and hospitals that take responsibility for patients and the financial risk that comes with them. If they cut spending, they would keep some of the savings.

While hospitals are widely seen as the natural leaders of ACOs, United’s strategy positions it to lead the new systems, too, a company executive acknowledged.

Some observers watching the developments say the health law, which in part was sold as a way to rein in insurers, has had the opposite result, opening the door for the companies to take control of even more parts of the health system.

“There’s a gigantic Murphy’s law emerging here,” said Ian Morrison, a California-based health care consultant who does some work for United, as well as most of its competitors. “The very people who were the demons in all of this, that the public can’t stand” – managed-care firms – “are the big winners.”

http://www.kaiserhealthnews.org/Stories/2011/July/01/unitedhealth-insurers-buy-doctors-groups.aspx

Comment:

By Don McCanne, MD

In the push towards integrated health systems, hospitals have been consolidating within markets in order to gain leverage in the negotiation of insurance contracts. Physicians have been consolidating within medical groups, also giving them greater market leverage. Leading the way, virtually all metropolitan insurance markets are now highly concentrated. In this power play between the health care giants, who is winning and who is losing?

Although the Medicare Shared Savings version of accountable care organizations is not gaining much traction, the underlying concept of integrating physicians and hospitals is. We are witnessing a power play by physician groups that want to be the entry point for health care through primary care medical homes and integrated specialty services. Many of these medical groups are establishing associations with hospitals in order to be able to contract with insurers as providers of comprehensive health care services.

On the other hand, hospitals would like to be in control, so they are not only consolidating but they are also purchasing physician practices. Is it the hospitals or the physicians who are winning this game?

Think back on how health care reform played out. Hospitals and physicians meekly supported the process mostly out of fear that their lot would be much worse off if they weren’t there during the process. But who was placed in control, with representatives actually writing the Affordable Care Act? The insurance industry! Everyone will be required to purchase their products, Medicaid is being converted to managed care organizations, and Medicare Advantage private health plans have been expanding. The private insurers are being given control of much of our national health care spending.

Look what the insurers are doing with that control. In the full version of the article provided at the link above and in many other information resources, you will see that the insurers are very busy trying to buy up enough of the health care delivery system to gain control of the health care markets. They will not only be the money managers for health care, but they will replace the current owners of the health care delivery system. In the worst possible outcome imaginabl

e, they will be the actual providers of our health care!

Karen Ignagni of Americas Health Insurance Plans stated repeatedly during the reform process that the measure must provide effective mechanisms of controlling costs. It doesn’t. But now that the insurers are gaining total control, they will be able to bring us cost containment, but on their terms. How? As the CFO of WellPoint states, by owning the delivery system, they will be able to “manage care at the front end.” They will use their own doctors to prevent “overuse” and “protect their profits.”

A single payer system would be designed to macromanage dollars but would leave micromanagement of health care to the physicians and their patients. Once the insurers become the owners, the insurers will move in as the micromanagers of health care. Patients not only lose choice of their health care providers, but they also lose choice of their health care services and products.

So between the hospitals and the physicians, who comes out the winners? Neither. It’s the insurers who win. You can argue about whether or not the hospitals and physicians would be losers (or rather how much they would lose), but the tragedy of all of this is that the real losers would be those for whom the health care system should be designed – the patients.

For those who support a single payer Medicare for all system and believe that it will only be a matter of time before we’re there, think about this. When we have enacted a single payer system, the government will then negotiate with the providers of health care for delivery of health care services. That will not be with the physicians nor the hospital administrators, but it will be with the owners of the health care delivery system – the private insurers!

Unless we can enlist an outraged public to fight this thing, we will not end up with a single payer health care nirvana for all, but a single payer health care inferno from hell. Never have we had a greater imperative to inform and activate the public than right now. Let’s do it!