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UnitedHealth Buys Another Calif. Doctor Group

If you live in Southern California, the chances that your doctor's paycheck will be cut by a UnitedHealth Group company are on the rise.

The insurer, the nation's largest by revenue, is acquiring the operations of Monarch HealthCare, a 2,300-physician group, as reported by the Wall Street Journal and also trade magazine Modern Healthcare.

It's the largest and latest in a series of deals that have put the insurer's health services subsidiary, OptumHealth, in more direct control of doctors around the country — a growing trend throughout the industry, as Kaiser Health News reported in July.

The deal marks OptumHealth's third in California's Orange County. The company bought Memorial Healthcare IPA earlier this year, and picked up AppleCare Medical Group's management arm last year. Brian Kane, an OptumHealth spokesman, said the latest transaction is expected to close in the last few months of this year and that current management would stay in place.

In California, insurers and other companies are barred from directly employing doctors. But executives at other physician management groups say the firms can still exert a lot of control. They often handle contracting with health plans, cut checks to doctors in the groups for services they provide, and make decisions about IT investments, among other things.

Insurers, including WellPoint, CIGNA and Humana, are pursuing doctors to take more control over rising health costs, which eat into their bottom line. As WellPoint's chief financial officer, Wayne DeVeydt, told KHN previously, "the only way to stem those costs in the long term is to manage care on the front end."

WellPoint also acquired a business that employs doctors in Orange County, CareMore, a private Medicare plan operator that runs clinics. The Orange County market is attractive, said Ana Gupte, a Sanford C. Berstein financial analyst, because customers there have come to accept managed care systems that limit patients' choice of doctors.

By managing doctors closely, plans may be able to offer lower-cost health care here, and if they succeed, they're likely to export the model to other markets, Gupte said. Consumers who reject limited lists of doctors – 65 percent said they would in a recent national poll – can expect to pay more for broader choice, she said.

Copyright 2011 Kaiser Health News. To see more, visit http://www.kaiserhealthnews.org/.

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