Healthcare Competitive Churn
The lines between insurance companies and healthcare providers are blurring as payers increasingly look to acquire or align with provider groups to control their front-end costs. In doing so, payers are upsetting traditional rules of competitive engagement in many US healthcare markets.
UnitedHealth Group’s acquisition in September of the management arm of Monarch HealthCare, an Irvine, California association that includes approximately 2,300 physicians in a range of specialties, underscores the importance payers are placing on such deals ahead of the full implementation of healthcare reform in the United States in 2014. The deal establishes United’s Optum health-services unit as a significant presence in southern California. According to the Wall Street Journal, Optum had previously acquired the management arms of two smaller southern California groups, AppleCare Medical Group and Memorial HealthCare Independent Practice Association.
Many insurers are investing in providers, according to the Wall Street Journal, though not all plan to make those operations available to other health plans. WellPoint recently closed its acquisition of senior health provider and Medicare Advantage plan CareMore Health Group, which is also based in southern California. Last December, Humana Inc. bought Concentra, which has urgent- and occupational-care clinics. In June, Pittsburgh insurer Highmark Inc. struck a deal to buy West Penn Allegheny Health System, a five-hospital operator that was struggling financially.
As this competitive churn likely intensifies, certain players could find themselves left out. Hospitals, in particular, may be at risk as payers may calculate that they can do better controlling costs in partnership with physicians, who are typically not strongly loyal to any particular hospital and may be happy to refer patients to several hospitals, at payers’ discretion, that can demonstrate lower costs. To avoid being left behind, innovative healthcare providers are using tools like war-gaming and scenario planning to explore the implications of these alignments, identify implications, and strategize to achieve the best positioning possible amid the turmoil.
