UnitedHealth Group Bridges the Gap between Insurance Companies and Physicians

UnitedHealth Group Inc. has announced that it will acquire the operations of a major southern California physician group for an undisclosed price. The deal was made in hopes of bridging the gap between insurance companies and health care providers.

With the addition of the management arm of Monarch HealthCare, an association of about 2,300 physicians in a range of specialties in Irvine, CA, it has established United’s Optum health-services unit as a powerful entity in the region. Monarch HealthCare is the latest addition to Optum following its purchases of the management arms of AppleCare Medical Group and Memorial HealthCare Independent Practice Association, two smaller southern California groups.

Deals made involving control of medical groups in California are designed to comply with rules that block most entities from directly employing practicing physicians. Optum will likely buy non-clinical assets and sign a long-term management agreement with an independent practice association of physicians such as Monarch, according to Anthony Hunter Schiff, a health care attorney not involved in the transaction. A management agreement such as this one might involve information technology or contract negotiations.

Optum is a fast-growing arm of United and provides services that include pharmacy benefit management and data services that help improve care, which is separate from United’s own health insurance operation. United has already stated in the past that providers bought by Optum will not work exclusively with United’s health plan, and will continue to contract with an array of insurers.

In regards to the merger, Monarch said in a statement that it “has agreed to enter a strategic relationship with Optum to support our physicians in providing high-quality, cost-effective patient care in Orange County, California.” Optum Chief Executive Larry Renfro agreed with and shared “Monarch HealthCare's commitment to bringing patients, physicians, hospitals and health care payers closer together in the mission to increase the quality and affordability of care.”

Overall, the agreement seems to be positive for both parties, but there is one indicator of potential problems down the road; Monarch is currently part of an arrangement with United competitor WellPoint Inc., geared toward creating a cooperative accountable-care organization.

Related links from the Web

UnitedHealth Buys California Group of 2,300 Doctors [The Wall Street Journal]

UnitedHealth to acquire Monarch HealthCare [ModernHealthcare.com]