Disruptors are circling the health care industry. UnitedHealth Group Inc., the biggest U.S. health insurer, has built an army of tens of thousands of physicians to fend off invaders.
Health care in the U.S. has been plunged into a high-speed reconfiguration that could redraw longstanding relationships between patients, doctors, drugmakers and insurers. Outsiders such as Amazon.com Inc. and Walmart Inc. are looking for ways to shake up the business.
For now, UnitedHealth remains the colossus astride it all. The insurance giant has spent the past decade steadily adding physicians to its ranks, fortifying itself against competing insurers as well as hospitals who are buying up physicians. Once the physician groups it bought from DaVita Inc. are fully under its wing later this year, UnitedHealth’s OptumCare unit will have one of the largest collections of doctors in the United States.
UnitedHealth is betting that controlling many doctors can provide patients better care at a lower cost, and steer them away from expensive hospital stays. Bringing more doctors in-house provides a buffer against rivals and places an imposing moat in the path of upstarts.
“This is obviously scaring the crap out of hospitals in many markets,” said Chas Roades, chief executive officer of Gist Healthcare, a consulting firm.
Hospitals, in the midst of a wave of consolidation, have also been buying doctor practices. About 42% of physicians worked for hospitals by mid-2016, up from about 26% four years earlier, according to a study by Avalere Health. Researchers have found that when hospitals buy doctor groups, it can raise the cost of care.
Acquiring doctors of their own gives insurers a counterweight as hospitals bulk up. CVS Health Corp.’s $68 billion acquisition of Aetna Inc. is driven partly by a desire to provide more care in the pharmacy chain’s stores and keep customers out of the hospital.
OptumCare has about 30,000 employed and affiliated physicians, while Davita Medical Group has 17,000 physicians and other care providers. HCA Healthcare Inc., the biggest for-profit U.S. hospital system, has about 37,000 doctors, while hospital-and-insurance conglomerate Kaiser Permanente has 22,000.
“We’re in an arms race with hospital systems,” said John Gorman, who runs consulting firm Gorman Health Group and works with insurers. “The goal is to better control the means of production in their key markets.”
Conversely, many hospitals that have tried to run insurers have faltered, with systems including New York’s Northwell Health closing down coverage ventures.
UnitedHealth, which insures almost 50 million people and runs a large pharmacy-benefits manager and other businesses, says its doctors serve more than 100 other insurers, and that it has no plans to shut anyone out. The company says it has ambitions for OptumCare to reach 75 markets, from about 30 now, including in California, Florida, New York, and Texas.
“We have been slowly, steadily, methodically aligning and partnering with phenomenal medical groups who choose to join us,” said Andrew Hayek, who oversees the care delivery operation at UnitedHealth. “The shift towards value-based care and enabling medical groups to make that transition to value-based care is an important trend.”