New Year, New Deals? Breaking Down Health Plan, Doctor Alliances

New Year, New Deals? Breaking Down Health Plan, Doctor Alliances

Is California driving the next health care earthquake? A striking batch of insurers and physician groups are teaming up -- and shaking up the industry -- with the Golden State at the epicenter.

The Washington Post‘s annual In/Out List doesn’t crossover much with “Road to Reform.” (Possibly for good reason; the latest edition says “wonks” are officially out this year.)

But this column is nothing if not occasionally gimmicky. So here’s a one-time, two-line trend-spotting bonus for 2012:

Regular California Healthline readers know that several big payer-doctor deals were struck in 2011, disproportionately in the Golden State. UnitedHealth’s Optum division acquired a handful of physician groups, most notably 2,300-member Irvine-based Monarch HealthCare. Other health plans teamed up with independent practice associations to launch accountable care organizations.

Are these deals an industry blip or the beginning of a boom?

Check back at year-end. For now, it’s too soon to know.

The high-profile deals are garnering plenty of buzz, however. And given the rumblings, many other doctor groups and plans are scrambling to evaluate whether similar partnerships make sense.

Changes Afoot for Everyone

It’s old news that industry players are taking on new roles.

Hospitals in 2011 ramped up the pace of physician acquisition, seeking to integrate care and gain reimbursement. More employers added responsibilities for their employees’ wellness, hoping to cut costs.

But the physician and insurer deals are particularly striking because of the sectors’ oft-contentious relationship. If doctors and health insurance plans aren’t fighting over reimbursement, they’re battling over paperwork or even public scorecards. Outside of Kaiser Permanente, many efforts at vertically integrated systems with insurers running doctor groups have largely failed.

Even the CEO of Monarch HealthCare is surprised by his own partnership with UnitedHealth.

“Not 10 years ago I would not have thought of something like this,” Bart Asner told Modern Healthcare‘s Rebecca Vesely. But when seeking a partner, “[UnitedHealth] showed up on our doorstep.”

What’s Driving the New Partnerships

UnitedHealth’s pursuit of Monarch — and by extension, other plans looking to partner with physicians — isn’t a shock.

Given ongoing industry efforts to coordinate care, lock up primary care providers and cut costs, physician groups have many suitors.

But Vesely concludes that the reasons for physicians to team up with health plans, rather than merge with other doctors’ groups or join a hospital, are less cut-and-dry.

One driver may be that national plans have much more financial wherewithal to meet the sales price for large groups, as well as their strategic ambitions. UnitedHealth projected profits of more than $5 billion in 2011. The average hospital clears about one-1000th of that per year.

Alternately, IPAs and health plans may be pushed together as dance partners while hospitals bulk up. The growing “dominance” of hospital-led health systems means that physician groups are losing market power and the ability to recruit new doctors, health care consultant Penny Stroud told American Medical News late last year, making plan ownership more appealing.

California at the Epicenter

These drivers can all be seen in the unlikely Monarch-UnitedHealth deal, which Vesely neatly breaks down in Modern Healthcare.

A good share of these new physician-payer deals are unfolding in California.

That’s partly because the state’s long history with managed care offers fertile ground for such partnerships. The entrenched HMOs, large multidisciplinary physician groups and concentrated market have set up an ideal laboratory for attempting this kind of coordination.

CMS’ efforts to reward integrated care also are pushing California’s strong IPAs to the forefront. No state had more organizations named as Pioneer ACOs last month than the Golden State’s six, which includes Monarch.

Reaction and Reassessment

Modern Healthcare calls the new deals a “marriage of convenience” — and there’s certainly little romance and a lot of number-crunching to the proceedings.

Monarch also leaves behind a pair of jilted ex-partners.

Blue Shield of California will end its contract with Monarch in May, citing the IPA’s new relationship with UnitedHealth. Anthem Blue Cross has pulled out of the physician group’s planned ACO pilot.

That ACO effort may become an early litmus test for the UnitedHealth-Monarch relationship. Other payers are watching how smaller-scale initiatives, like regional insurers’ efforts to acquire physician clinics, are unfolding.

If the partnerships prove successful, expect a flurry of activity across 2012 as more payers and physicians make sure they’re dealt in — and not left out.

Here’s what else to watch as the new year begins.

In the States

Challenges to Reform

Inside the Industry

On the Campaign Trail

Exit mobile version