“You’re all going to become Widgets for WellPoint, ” said the guest presidential speaker at an annual meeting of the North American Spine Society a couple of years ago.
The speaker was referring to the trend of healthcare systems buying up physician groups and healthcare insurers and healthcare systems gobbling each other up. Hence physicians would, ultimately, be working for the payers.
Take for example the early April 2016 announcement that Minneapolis-based provider Fairview Health Services and struggling health insurer UCare had signed a letter of intent to combine their operations. Under the agreement, the insurer will become a wholly owned subsidiary of the provider.
“This proposed combination mirrors a growing trend of payer/provider partnerships and has the potential to transform how healthcare is delivered and financed in Minnesota, ” said David Murphy, Fairview interim CEO.
As many surgeons give up private practice to collect paychecks, as the Affordable Care Act (ACA) continues its Medicare moratorium on the expansions of physician-owned hospitals and healthcare systems, as we’ve reported, move to acquire physician-owned ambulatory surgical centers, it begs the question of whether or not surgeons have indeed become “widgets.”
Insurers Buying Hospitals
Let’s take a look at history.
Insurance companies first experimented with buying hospitals in the 1990s, a trial-run which, Ted Schwab, partner at the Health and Life Sciences practice of Oliver Wyman, called “an unbelievable failure.”
Louisville-based Humana, for instance, had to give up on its strategy of jointly operating healthcare plans and 76 hospitals across the country. Industry experts, like Schwab, had warned that the dual structure would likely lead to internal conflicts and weakened profits. Bond raters said it alienated physicians, who would not refer patients to Humana hospitals if they objected to certain managed-care practices. Humana ended up dividing the hospital operations in 1993 into a spinoff company called Galen Health Care.
Kaiser Health News (KHN) reported in 2011 that the national deficit and skyrocketing healthcare costs may now play in payers’ favor. Providers are already collaborating with payers through care coordination initiatives and accountable care organizations.
But collaboration and coordination is much different from command and control and involves a different set of political, economic and cultural factors. “Every politician and big employer is pointing to healthcare as one of the major reasons the country is going bankrupt, ” Schwab told KHN. “Insurance companies believe they can bring efficiencies to the table, and the integration of insurer and delivery system can bring a 20-30 percent reduction to the cost structure.”
In 2006 CIGNA Medical Group launched its CareToday clinics in Arizona , providing “an alternative to traditional [physicians’] offices.” In June 2010, Indianapolis-based WellPoint acquired CareMore Health Group, a health plan operator based in Cerritos, California, that owns 26 clinics.
Four of the five largest health insurers increased physician holdings in 2010, according to the KHN report. Recently, UnitedHealth Group has been buying medical groups and launching physician management companies. The same report said the strategy has stirred little controversy largely because few people know about it. One physician group mentioned in the report learned of United’s new strategy only when it received a phone call from company with an offer.
“There is definitely a national landgrab over primary care physicians, ” said Schwab. “We work with insurance companies all over the country, and every single one of them is discussing this in their board rooms. Some are very aggressive; some have decided not to do it.”
Docs and Payers
It turns out, however, that only a sliver of employed physicians work for an insurance company-owned provider instead of their local hospital or health system. And that’s probably not going to change much, according to published reports from multiple industry surveys and expert interviews.
In an October 2015 interview in Modern Healthcare, Laura Palmer, a senior fellow at the Medical Group Management Association, said her organization has not heard of any situations in which physician members are directly selling or looking to be employed by a health insurer. In the American Medical Association’s recent employment survey, physicians can indicate if they practice in an HMO or managed-care organization (MCO). But “the share of physicians who work for HMOs or MCOs is so small we don’t break it out, ” an AMA spokesman said. Roughly 2% of approximately 34, 000 primary-care physicians in the American Academy of Family Physicians’ (AAFP) annual survey said they were employed by an insurer.
Instead, insurers are doing what they do best, manage risk, mine patient data and work with providers to find and treat patients who need the most upfront care, says Stephen Shortell, Ph.D., MPH, MBA, a health policy professor at the University of California at Berkeley.
“That stops short of actually delivering medical care, ” he said. Insurers “don’t know that business. They’re not trained to do it.”
Instead of full-fledged acquisitions, the Modern Healthcare article stated that Shortell and others have seen many more alliances between insurers and physician practices. Insurers want to reward providers for good quality marks and lower costs, but don’t necessarily want to be the ones writing physicians’ entire paychecks.
A Different Route
Capital District Physicians’ Health Plan (CDPHP), a not-for-profit insurer based in Albany, New York, does not own any medical groups and has no immediate plans to do so. The physician-led company has taken a different route altogether.
CDPHP has reportedly spent $5 million over the past few years buying electronic health record systems for physician groups that are already part of its network but don’t have the time or money to make those investments. Physicians maintained full ownership of their practices.
But some national, corporate insurers have still shown interest in taking over practices that have advanced data crunching capabilities and care coordination techniques. Humana and UnitedHealth Group—the two largest Medicare Advantage insurers in the country—have the most appetite, especially for primary care providers who care for high-risk, high-cost Medicare members.
“In Medicare it really has a lot of value, ” said Ana Gupte, Ph.D., managing director at investment bank Leerink Partners. “It doesn’t make sense for commercial, ” she said, because people in employer-sponsored plans are usually healthier than seniors and don’t need to visit their doctor as frequently.
Humana with its Medicare Advantage focus owned 22 medical centers at the end of 2014, a majority of which are in senior-heavy Florida, according to company documents. Humana’s CAC Florida Medical Centers, which are staffed by primary-care doctors and some specialists, represent a big chunk of that total. Humana employed or had an ownership arrangement with 10, 600 primary-care providers and Medicare-specific clinicians in 2014, compared with 8, 400 in 2013.
OptumCare, the part of UnitedHealth’s Optum unit that handles medical operations, has a direct relationship with 17, 000 physicians. The company employs many of those physicians and assists others in contracting only, OptumCare CEO Jack Larsen said.
Monarch Healthcare has been an Optum-owned medical group for roughly four years now, and it faced some trouble for choosing to sell to a company that shares a balance sheet with the nation’s largest insurer. Monarch had to pay $2.5 million to Blue Shield of California in 2013 to resolve claims it breached its contract and turned Blue Shield Medicare patients away. Monarch denied the claims.
Monarch CEO Bart Asner, M.D., a pediatrician, told Modern Healthcare, he doesn’t view the deal as merging with an insurer. Optum is part of a company that also happens to own an insurer, and it provides the separate services, such as data analytics and predictive modeling that Monarch wouldn’t have been able to develop independently.
If Not Widgets, Then What?
So if the warning for becoming a widget for payers was slightly hyperbolic, where are orthopedic surgeons finding their best opportunities to control their own businesses?
Part of the answer lies in our previously reported efforts by surgeons to establish their own orthopedic urgent care centers, either as joint ventures or franchises.
In Boise, Idaho, Dave Hassinger, M.D., founded Direct Orthopedic Care (DOC) after he and his partners saw their referral base shrinking as local hospitals consolidated. The joint venture provides patients with direct access to orthopedic specialists, but also allows patients to bypass the long waits and high cost of the emergency room.
The group is part of a physician-owned, short term care non-emergency surgery center operated by Surgical Care Affiliates. “We are able to secure some priority arrangements to treat our patients. If a DOC patient has an immediate need, we can typically get the procedure done within 24 hours, ” Hassinger wrote in Orthopedics This Week.
The group got somewhere between 450 and 500 patients a month in less than one year in business (over 3, 000 in just the first eight months). Eighty percent of those were new to the practice. Hassinger and his group are currently expanding to a total of four locations and looking for more.
In 2014, Alejandro Badia, M.D., created an orthopedic urgent care franchise model in Miami, Florida, called OrthoNOW.
According to the company, OrthoNOW has three Florida centers open including: Doral, Biscayne and Aventura. Centers in Coral Way, Pinecrest and two in Georgia are slated to open this spring. And, later this year additional Florida locations will roll out in Broward County and Winter Park, Orlando.
So as many surgeons are choosing to become employees, some are still finding creative ways to practice medicine AND control their own businesses.
