Wethersfield ophthalmologist Dr. David Emmel has had lots of experience wrangling with insurance companies reluctant to pay for expensive treatments.
A notable recent example is OCT, a technology highly effective in diagnosing macular degeneration, the top cause of blindness in people over 60. Long after OCT was recognized as a major advance by eye doctors and their associations, insurers insisted it was unproven and refused to pay.
“They typically call anything new ‘experimental’ and dig their heels in for as long as they can to avoid payment,” Emmel said.
So when Emmel and other physicians heard of the trend of insurance companies buying physician practices, they became concerned that insurers’ focus on the bottom line could pose a threat to the quality of patient care.
“The concern of course is the conflict of interest that arises when you have ownership that has goals that can be quite different from the goals set by a physician. They do come in conflict,” Emmel said.
What he perceives as that “inherent conflict of interest” prompted state Sen. Saud Anwar (D-South Windsor), a physician at Manchester Memorial and Rockville General hospitals, to recently propose a bill in January that prohibits insurers from acquiring any ownership interest in medical practices.
Anwar said he and most physicians spend a great deal of time fighting for patient care against the health insurance industry’s medical loss ratio calculations, which he said pit care against administrative costs and profits.
“If they spend a single cent on the well-being of a patient, that is a loss for them,” Anwar said. A total of 29 other states have recognized the conflict and barred insurance companies from buying medical practices, he said, and Connecticut needs to join them.
“It’s not a new idea,” Anwar said of his proposed bill, which is awaiting a public hearing. “There are smart doctors and community members and legislators in other parts of the country that have seen that this trend is a risk at this point.”
Profits vs. care
Market forces act in many ways in modern health care: Anwar works for for-profit Prospect Medical Holdings, which runs Manchester Memorial and Rockville General through its subsidiary, Eastern Connecticut Health Network.
Private equity firms and both for-profit and nonprofit hospital systems have been buying up medical practices in Connecticut and across the nation for years.
Insurance companies buying practices has also become a nationwide trend and the firms shouldn’t be singled out by legislation, industry representatives said.
“Innovation drives quality and affordability,” said Susan Halpin, executive director for the Connecticut Association of Health Plans. “To the extent that this is one option consumers can rely upon to drive in that direction, the state shouldn’t act to prohibit it.”
In fact one of the state’s largest physician practices, ProHealth Physicians, was acquired in 2015 by Optum, the health services division of UnitedHealth Group, parent company of the country’s largest health insurer.
ProHealth employed 219 physicians in Connecticut as of Jan. 2021, according to a state filing.
ProHealth Physicians continues to add new providers in Greater Hartford and seems happy to be part of the UnitedHealth family: “We are grateful to have unfaltering support of a great organization such as Optum,” President and CEO Benito Alvarez said in an advertisement in the Hartford Business Journal in April.
Optum declined to comment for this story, referring questions to the Connecticut Association of Health Plans.
In neighboring Massachusetts, Optum in 2018 bought the Worcester-area’s largest doctor’s group, Reliant Medical. The Boston Business Journal reported earlier this year that Optum was in talks to buy a 715-physician practice in the Boston area.
Insurers are also seeking more direct roles in care: UnitedHealth Group’s insurance unit has created a plan centered around Optum-employed doctors in the Los Angeles area. Hartford’s own Aetna, acquired by CVS Health in 2018, shares a corporate parent with CVS’s growing MinuteClinic chain. Aetna customers pay less to use CVS clinics.
Consolidation trend
With the ever-escalating cost of running a medical practice, including investments in new technology like electronic medical records, it’s little wonder that doctors are signing on with a range of corporate partners, said Dennis Chalke, chief financial officer at healthcare consultant GPMF Holdings. Young doctors also want more of a work-life balance and the demands of a traditional solo practice hold little appeal.
“It’s very difficult for a small practice to survive today,” Chalke said. “You’re seeing physicians enter into so many different types of arrangements.”
A bill like Anwar’s that would restrict acquisition may be too late to arrest the accelerating trend toward consolidation, he added.
Nearly 50% of physicians nationwide are employed by a larger company and Optum alone plans to add 10,000 doctors to its roster this year, he said. Along with independent hospitals, the independent medical practice may be on the path to extinction. Even the COVID-19 pandemic didn’t slow the pace of healthcare mergers in 2020, which are expected to be at the same volume as 2019’s deals.
Private equity remained active in the Hartford area in 2020, with recent deals including a Middletown-based orthopedic group joining forces with a private-equity backed Greenwich practice in September. Private-equity backed PhysicianOne Urgent Care acquired New England Urgent Care and its practice locations in Bristol, Enfield, Manchester and West Hartford in Jan. 2019.
“I think we are early in the stage of venture capital looking to come in and roll up physician groups but I expect that will continue,” said Thomas Marrion, a partner at Hinckley Allen specializing in healthcare, corporate and business law. “Larger groups have more bargaining power with payers – that’s if insurance companies aren’t doing the buying.”
Consolidation has become so marked nationwide that the Federal Trade Commission launched a probe in January to study the impact of physician group and healthcare facility consolidation.
Insurers including Cigna, United Healthcare and Aetna were asked for data from six years’ worth of patient claims to inform the review, seeking “important evidence documenting how mergers and acquisitions of physician groups and healthcare facilities affect the proper functioning of healthcare markets,” the FTC said in a statement.
“It’s something that’s already begun and it’s moving quite quickly,” Chalke said of consolidation. “It’s going to be difficult to stop it.”
With hospitals, insurers and private equity in the mix, unease is growing in the healthcare industry about the fall of traditional barriers between interests, said Arnold I. Menchel, a partner and healthcare specialist at Hartford law firm Halloran & Sage.
“I’m inclined to think that what may be driving [Anwar’s] proposal are two factors. One is to be sure patients’ interests take precedence over shareholders’ interests. And second is a potential blurring of the lines of the roles to be played by various players in the industry.”
Doctor’s concerns
For Anwar, a member of the Public Health Committee, he sees the prospect of insurers becoming further involved in patient care as an urgent issue that resonates with many of his fellow doctors. He said that every colleague he’s approached about his proposed bill has been supportive.
“My hope is that physicians are able to practice … based on medical science and the best interest of the patients without the control of for-profit organizations, which may have different agendas,” Anwar said.
Emmel, who in addition to his ophthalmology practice serves as chairman of the Connecticut State Medical Society’s committee on legislation, agrees that physicians are fired up about the issue.
“Where a bill like this can go is uncertain but the principle is strongly supported by all physicians,” Emmel said.