0:00
There are a few markets where nearly half of the market is is payer operated, and typically those are largely Optum operated,

0:20
welcomed off the chart, a business of medicine podcast featuring lively and informative conversations with health care experts, opinion leaders and practicing physicians about the challenges facing doctors and medical practices. My name is Austin Littrell. I'm the Assistant Editor of medical economics, and I'd like to thank you for joining us today. In today's episode medical economics, senior editor Richard Payerchin speaks with Loren Adler, fellow and Associate Director at the Brookings Institution's Center on Health Policy. Adler is the corresponding author of a Health Affairs study examining the changing landscape of primary care, specifically the rise of payer ownership, and what it means for competition Medicare Advantage and the future of independent practice. They talk about where and sure acquisitions are surging, how this consolidation can shape patient care and Medicare Advantage, and why the effects vary so sharply from one market to another. They also get into the data behind the findings, the policy questions it raises, and what independent practices should be watching as this landscape evolves. If you're interested in more about independent practice and the current landscape, be sure to check out our recent expert panel discussion. Does independent medical practice have a future? Now available on medical economics.com and physicians practice.com Loren Adler, thank you so much for joining us, and now let's get into the episode.

1:35
Thank you for joining us today. Thanks for having me. You're the corresponding author of a new study entitled the changing landscape of primary care and analysis of payer primary care integration published in Health Affairs. Can you talk about how did this study come about?

1:54
Sure, so myself and co authors had gotten interested in the broad issue of payers, insurance companies, starting to buy up and acquire physician practices. There has been a lot of reporting on this trend over the last several years. There have been reports from United Healthcare themselves about how many doctors work with them or contract with them on sort of shared savings type of arrangements, but there really was no hard data out there on just how prevalent payer ownership of physician practices was. And then we also kind of wanted to focus in a little bit more narrowly on primary care practices, which are the sort of the core of what the insurer acquisition strategy has been and also probably has the most influence on the rest of the healthcare system. If the insurer can control the primary care physician, they can control referral patterns, they might be able to gain some leverage over hospitals and the primary care docs are going to be the ones who have the most ability to sort of code and, you know, coordinate care in this in a way that the insurer might

3:05
want with publication. Now, can you summarize the findings? Sure.

3:11
So the basic findings, so we, we wanted to analyze the sort of just the top line question was, what share of primary care physicians, or what share of that market is now operated by payers. And so basically, we found that it's grown from pretty small as recently as 2016 less than 1% of primary of the primary care market was operated by payers. That's up to over 4% of the market by 2020, by 2023, and it actually that's sort of weighting things by how many services are provided. But if you look overall, just at the number of clinicians in primary care, about 6% of clinicians of primary care clinicians now work for a payer, Optum. Obviously, Optum, as part of United Healthcare, is certainly the biggest of those. But they are not alone. Humana also plays a significant role. CVS, Aetna, which there is largely the sort of Minute Clinic, so maybe not quite what you'd naturally think about in the primary care office, but those are kind of the big players here.

4:17
And as you were analyzing the data, what was the most surprising finding

4:22
Sure, so I honestly, finding out how much this had grown was surprising to me, just because I did not have a good sense. There also was, there's sort of been reporting out there that united actually, actually about nine or 10% of clinicians in the whole country work for Optum alone. The CEO of Optum recently clarified CEO of United Health Group recent, recently clarified that that it actually is, I think, in his saying, only 1% of clinicians actually work for Optum, the others are in some sort of arrangement where they don't work for them, but are some sort of somehow affiliated. Is the. Term that they would use with Optum. But we tried to nail nail down a little bit more on that. So, you know, coming to the fact that 6% of clinicians work for payers was sort of a big finding there. And then the other things we wanted to nail down on were, you know, what do the markets look like where payer ownership of physician practices is most common. So in particular, we wanted to look at okay, and really, we found that they are mostly buying up practices in areas where Medicare Advantage is a big thing. So right, seniors can either get their insurance through the big public Medicare plan or buy it through private insurance companies, through Medicare Advantage, that has sort of been a big united and Humana and a CVS are all pretty large players in that market. So it does seem that the acquisitions are more common there then. Interestingly, we found that these acquisitions are actually more common in less consolidated hospital markets, plausibly, the insurance company might think they have, you know, more leverage against vis a vis the hospitals in a market that isn't already heavily consolidated on the hospital side of things. And similarly, we found these acquisitions were more common in markets where the in where the insurance market was also less concentrated. So you know, where it isn't just united, or isn't just Humana, where there's actually at least somewhat decent competition among insurance companies, we found that these sort of acquisitions of physician practices were more common that, you know, this is our to study. Is just sort of, it's more correlational here, so hard to nail down the exact reasons here. But I think the theories are that it might be that, you know, part of the part of the idea of owning a popular physician practice in particular, might mean it might be in order to make your insurance product more popular. So, you know, it's plausible that United's Optum buying up a, you know, a very popular primary care practice in an area might help get them to enroll more people in the United self plans and make more money that way. That was

7:10
something that you really had forecasted among my questions, because I did want to ask about those nuances. So I'm really glad that you touched on that to go, maybe to go back to that finding about in the paper, it was 4.2% if we use on the higher end, you know, an estimated 6% that may not sound like much at first blush. Can you explain why those findings are significant?

7:35
Sure, right. So, yeah. So this is like 4% by if you weight things by volume of services that are operated by payers and 6% of the actual clinicians. Right? That may not sound like a huge part of the market, but right, those national number numbers obscure the fact that they have very large roles in some markets, and, you know, zero role in many other markets. So there are, you know, I think there's about 16 counties over throughout the US where payers operate more than 10% of the primary care market in that state. And there are a few markets where nearly half of the market is is payer operated, and typically those are largely Optum operated. So if you go to Clark County, Nevada, where where Las Vegas is right? That is, you know, nearly 40% of the primary care market is operated by Optum, very similar numbers outside of Seattle and Washington, and then also in Contra Costa County in California. So there are some areas of the country where Optum is playing a very large role. And actually, you know, at that point you are looking at a pretty horizontally consolidated primary care market, where they are, you know, one of the only games in town for folks who are trying to get primary care services, and that that raises more traditional antitrust concerns that we kind of have a better grasp of when It's just okay, we're taking one specialty market and we're consolidating it that, you know, we do see some of that going on, even if that is only in a few pockets throughout the country. But certainly, you know, there are a lot of places where they're operating more than 10% of the market. And, you know, usually they are. These are in more populated areas. That is sort of one of the other pieces of like where they're usually buying. These are not as often in rural areas. They're typically in sort of more populated areas,

9:31
both in the paper and in our conversation, you had mentioned some of the specific payers by name, including Optum, Humana, elevance and Aetna, CVS, health, sort of a two part question. When you were preparing the research, did you have any input from the payers? And since publication, have any of those companies publicly addressed the findings?

9:54
So we did not. We didn't speak to the payers about sort of which practices they owned. We. So my co authors, in particular, did, we've done some stakeholder, stakeholder interviews to sort of understand a little bit about why the payers say they're up there trying to acquire practices, and then also speaking to some of the physician practices themselves, or the people who work there about, you know, why they sold what they were thinking about. So we did do some of that work at the at the front end. Have not heard on the back end of this, although I, you know, I think we feel pretty comfortable with the sort of rough magnitudes that are that we're finding for for the payers share here. But I think part of the attraction was that we wanted to to be somewhat specific in which payers are operating here. And it's worth noting that we are we're focused on payers that you think of primarily in the insurance market. We are purposefully not referring to some of the large payers who are more hospital payer integrated or hospital integrated payers like a Kaiser Permanente or an Intermountain those are very large payers. They are integrated with providers as well. So it's not, you know, it makes some sense to think of them similarly, but our kind of main distinction is that those are largely hospital integrated. Whereas we're looking at payers that are traditionally, now typically not purchasing any hospital, right there they are purchasing physician practices, sometimes ambulatory surgery centers, home health agencies, but they're kind of purposely leaving out the hospital.

11:29
You know what? I think that's a good segue to what may be kind of a foundational question. And when we talk about the, you know, the accuracy or the reliability of evidence regarding the study, can you talk about what your data

11:39
sources were sure. So primarily, we are basically, so I should have said it, that's all right. So we are looking in the universe of Medicare claims. When we're talking about the Medicare we're really looking at the Medicare market in large part. That is just the best national data source that we have. Medicare is a national program, and everyone, basically everyone over 65 a lot of folks with disabilities under 65 as well. On the program. The government keeps great data, and we are using both data from the traditional public program and then also data from from Medicare Advantage. And interestingly, actually there the presence of payers in physician markets is actually much stronger in Medicare Advantage. So you see that the sort of a lot of the services for Medicare Advantage patients are to to providers owned by that payer, and actually a notably lower percentage, if all in that category in traditional Medicare. But basically we're starting with that universe of providers, and then there is information about the name of a practice, the physicians or clinicians who work at that practice. And we are basically using that and then using to some degree, pitch book and S and P Capital IQ, which are sources that sort of track ownership of different companies, not just medical, but we are using that to help figure out okay this practice is owned by Optum, for instance, and then are kind of tracking when that acquisition took place. We are often relying on press releases. There are often for large, large acquisitions, particularly by publicly traded companies like large insurance companies, are usually pretty well reported on. So we were kind of using that to create a longitudinal data set of all of the practices that ever get acquired by payers, and then sort of nailing down when that acquisition took place. And then within the Medicare data, right? We have the names of the practices. We have the clinicians working there. So then I'm sort of mapping that information on to onto the Medicare data, and then that's how we're sort of calculating these you know how many clinicians work for Optum? You know what percentage of service volume is is now being controlled by Optum.

14:11
Hey there. Keith Reynolds here and welcome to the p2 management minute in just 60 seconds, we deliver proven, real world tactics you can plug into your practice today, whether that means speeding up check in, lifting staff morale or nudging patient satisfaction north, no theory, no fluff, just the kind of guidance that fits between appointments and moves the needle before lunch. But the best ideas don't all come from our newsroom. They come from you got a clever workflow, hack an employee engagement win, or a lesson learned the hard way. I want to feature it. Shoot me an email at K Reynolds, at mjh life sciences.com with your topic, quick outline or even a smartphone clip. We'll handle the rest and get your insights in front of your peers nationwide. Let's make every minute count together. Thanks for watching, and I'll see you in the next p2 management minute.

14:57
Definitely wanted to discuss. Of those potential effects of the integration, or I know the term consolidation is used a lot in healthcare to describe some of those market conditions. The paper noted, and I'll quote, policymakers and researchers, have raised questions about how this integration affects patient care, healthcare costs and market competition. Based on your analysis, what are your biggest questions or concerns about this level of integration?

15:27
Sure, so, so I think there's a few big questions, you know, I think there is, I mean, kind of a first order question that just is helpful, because it's kind of the natural thing that antitrust regulators can look at is, you know, are there some markets where payers are, you know, sort of compiling too large of a share of any one physician market, right? In markets where Optum controls 40, 50% of the market, that raises some sort of traditional antitrust concerns. I do think that's important. I think the the other major concern here is that when payers operate a primary care practice, it likely makes it easier for them to instruct the physicians who work there to jot down every diagnoses diagnosis a patient has ever had, basically to make them look sicker than they really are, or make them look as sick as possible on paper, because that is how payment from the government for Medicare Advantage works. So I should have taken a step back and said, Medicare Advantage when you are on Medicare Advantage plan, you basically get paid a per member per month amount of money that is based on the average risk of your enrollees, and that average risk is calculated based on all of the diagnoses that that patient has had, that's ever had coded. Did they have skin cancer? Do they have diabetes, that sort of thing. And the more diagnoses they have, the sort of sicker they look look on paper, the more money the health plan gets paid to care for that patient. What insurers really want is someone who looks really sick on paper but doesn't actually require that much health care, because then they are. They pocket. They pocket. The difference basically there that is, that's just fundamentally what their their goal is, and it is very plausible that operating your own primary care practice might help you be more aggressive in that matter, we don't have struck we don't have the strongest evidence yet specific to the payers doing the acquiring. Right now, we do have evidence that the Kaiser Permanente type of insurers, that that vertical integration did have some of these effects, where it did look like Kaiser Permanente through their and other payers, other vertically integrated payers like them, were able to basically make equivalent patients look sicker when they were in a Kaiser Permanente plan than that equivalent patient would have been if they were in a different Medicare Advantage plan. So I suspect there is some similar aspect going on in this situation. The Wall Street Journal published a long piece sort of documenting some evidence along this front. But this is actually one thing myself and co authors are working on, trying to evaluate empirically at the moment, so hopefully we'll have results in not too long there. I think that, to me, that is sort of the core concern here. The other big concern folks will talk about here is what often gets termed market foreclosure. But the basic idea is there is some risk that if an insurance company operates a very popular physician practice, they might take that position practice and refuse to contract with other payers in the market, with other insurance companies, or, you know, only contract with you if you pay me twice as much money sort of thing, and that might unfairly advantage the insurance company that owns the physician practice vis a vis their competing insurers and sort of let them consolidate the or let them sort of grow in the insurance market more than would be fair. That's an open question that, and that is fundamentally an empirical question, because you are losing if you take that practice and you stop accepting, you know, if that's an opt in practice and you refuse to accept Humana and Aetna, you're going to lose some money there as well. So it's not clear ex ante that that's actually, you know, using this to foreclose the market is the right strategy. So it is an empirical question here. And then, on the more positive side, I think there's plenty of plausible positive stories to spin here, right? There is the sort of standard care coordination story that the insurer might might be able to coordinate care easier if they own the primary care practice. There is also just sort of an alignment on. Costs where the insurer is, in theory, the agent who cares about health care costs and controlling costs. So if they're operating the provider side of the business right now, right and typically, the providers just want more money, so they want higher costs if the insurer owns them now, the incentives are a little bit more aligned, and particularly when an insurer owns a primary care practice, that's not where most of our dollars are being spent on primary care. So if they can somehow use that to lower hospital prices or keep people out of the hospital, there's plausible to save a lot of money without even sort of hurting the provider side of their business, sort of cannibalizing from the hospital side, which is really where most of the most of the spending dollars go. So I do think, I think that is worth investigating as well, right? Does this, you know, does owning the primary care practice lower hospital prices or lower hospital utilization? Again, these are all open questions that we do not have great evidence on, but to sort of give a picture of what, you know, I think did most things, there are potential pros and cons, and figuring out how they how they shake out against each other, is the kind of key empirical, empirical question here.

21:12
No, that's something that I'm glad you touched on, only because two things, just like you had mentioned, obviously, there's still, you know, plenty of room for research. And frankly, yeah, there may be some findings that show actual benefits to patients ultimately. And maybe that is something I should ask about as well, because with you and the co authors, when you were looking at these different ownership structures, did you, were you looking at any evidence about patient outcomes, good or bad. So in this paper,

21:43
we really, we were not, I think that would be certainly a goal longer term, to see what the plausible outcomes are. Here. I know there is some work looking at sort of areas where care coordination might be, might plausibly be valuable, but we did not. For this study, we did not get to look at actual patient outcomes. And you're writing, certainly, right. There's been, there was a big series from stat and a big series from Wall Street Journal, kind of looking at some of these and finding anecdotal evidence of some what seemed not, not favorable patient experiences. Also, you know, I think documenting some, some physicians who regretted selling their practice, loss of autonomy, that sort of thing. So I think there are some the sort of the physician side dissatisfaction is actually a harder question to nail down from a sort of research perspective, but is, I think, a very interesting question. And then you hear other pretty aggressive schemes in this market where you know, where a payer might say, I'm only you know, to the independent primary care practice. I will only contract with you if you give me the first right of refusal. Should you ever decide to sell your practice? So it is like, if you want to be in United or Humana, whoever's network, you have to give me this first right of refusal. So if you ever do sell your practice, I get to buy it up. That feels a little that feels a little aggressive in terms of So, I think there's some questions like that where, where there probably is some avenue for regulatory oversight.

23:15
I was gonna say aggressive and possibly even coercive. I mean, it sounds, yeah, you know, it sounds like because medical economics really still tries to cater to independent physicians, you know, especially in smaller and medium sized practices. It sounds like that. Can, you know, as a business, put you in a potentially bad or difficult situation, I

23:35
guess, for sure. I mean, I just sort of, I guess, in those situations, as long as you never sell, it's not a it's not the issue. But I, but I agree that that feels those are the ones that start creeping into feeling coercive and not really what we're after here, right there is right with, there's been a lot of movement towards care coordination over the last decade or so in US health care a lot more for you know, even with independent practices, a lot are participating in accountable care organizations. Often they're working with a third party who helps to keep them independent, or sort of doing some of the back office work as well. I mean, interestingly, right? Even united, for instance, they'll often operate a IPA, an independent physician Association, where they will, they'll handle a lot of the back office thing, but the back office work, but the practice nominally gets to stay independent. There's, so I'll say, like, there's some of those that are blurring the line of what is an independent practice. Or, you know, they'll also do these market performance partnerships. They would call them versus Optum and John Muir health, for instance, where it is the back office becomes part of Optum, but the physician is their physician. Side of the business, at least nominally, stays independent, but again, it's still Optum. Is the one doing the negotiating for your price, for your payments and stuff like that. But you know, some of that is also primary care. Or has always sort of had a especially the smaller practices have had a hard time getting a seat at the table with insurance companies to sort of get payment. So you know this, there's a reason they, some of them, are sort of joining one of these IPAs to sort of getting, usually, to get better reimbursement.

25:19
One question that comes up in, I think, literally, every interview we do now deals, of course, with the current administration of President Donald Trump and the initiative to make America healthy again. How do healthcare, market conditions and integration fit into the MaHA movement?

25:37
It's a good question. I mean, I think as a general rule, we have a lot of evidence that consolidation, particularly, sort of taking one physician market, and, you know, having one per one company own a very large chart of that share of that market, that tends to not be great for patient outcomes, and certainly not for patient costs. You know, that's sort of the one area, I feel like we have good evidence here the kind of broader impact of the overall trend here, particularly in areas where they're not necessarily consolidated in one market. I think that's somewhat of an open question on you know, what that actually will mean for patient outcomes, that, unfortunately, I don't think we have a clean answer to yet.

26:21
In terms of what we do know about some of those market conditions, what are some policies or government actions that could help or hurt market competition in US healthcare?

26:32
Sure, so I mean, in this area, and in a lot of the sort of corporatization of medicine going on, I do think there's an avenue for government transparency, of keeping better track of the acquisitions that are going on, who the various owners are. And maybe that's more private equity than it is payer ownership. But I certainly think that's one avenue. The other one is, you know, I think there's always a stop digging a hole deeper, you know, a part of things that the government can help with. Some of that is, you know, there probably there are antitrust concerns with some of these. I think there are, you know, to the extent they are using it to sort of leverage their to sort of corner the insurance side of the market. That is an avenue that antitrust regulators could look into there also is just a lot. I mean, this sort of payer provider trend really heightens the need to deal with the fact that there is much more intense coding in Medicare Advantage than there is in the traditional program. And estimates are that the, you know, the marginal enrollee in a Medicare Advantage plan cost the federal government about 20% more than if that enrollee were in the public program. That's a lot of money. You know, the fact that this, probably, this trend, probably heightens the need to deal with that, and that is really dealing with risk adjustment. There are off the shelf ways to basically adjust for the fact that we know they are more intensely coding, sort of claw back money from Medicare Advantage insurers. You can try to change the Medicare the risk adjustment system to make it less gameable. There's also a lot of these risk adjustment, data validation, audits that the Trump administration has said that they're going to do more of, which is basically just investigating. Are the codes? Are the diagnosis codes being jotted down by these practices accurate like, did the patient actually have diabetes? Did they actually have skin cancer? Documenting that is, sorry, figuring out whether there is, you know, misdocumentation going on is important, and those audits have generally saved the government a lot of money, very high ROI when you're thinking about it from the government's perspective. So just doing a lot more of those would be, would be useful here. I think those are kind of some of the main, the main areas to be focused on from the policymaker perspective.

29:08
And another question that comes up in just about every interview, because in the last few years especially, we've really seen artificial intelligence and large language model programs revolutionize healthcare and other areas of business as well. We always like to ask about the role of technology in medicine and healthcare policy. Do you think that there's a role for AI in analyzing these market conditions going forward?

29:33
It's a good question. I mean, I do think AI large language models can probably help track better what is happening just by being able to pull from everything on the internet. Honestly, a lot of what myself, co authors and other people who have done a lot of this tracking of private equity, payer, hospital ownership, a lot of what we're doing is compiling things that are on the internet. I've already found that AI is actually pretty decent at. Figuring out who owns what practice. Sorry, so I think there's some elements, from a tracking perspective, that AI can probably be useful for, you know, on the actual I'm replying on Not, not as qualified to speak to the actual medical, you know, the medical care side of of AI,

30:19
we've covered a heck of a heck of a lot of ground in a short amount of time here with some of the major points in the paper. What did I not ask about that you would like our audience to know?

30:28
I think we covered most of the key points here, right? I think one of the things is that this is a big trend. I don't know how I think there are still open questions about will the sort of exponential growth we've seen in payer acquisition of primary care practices? Is that a long term trend, or is that a quick trend, and it levels off, you know, any time now, I don't know the answer to that. I think a lot of people assume that sort of, once a trend starts, it just keeps chugging along. That's not necessarily clear to me, right? To the extent that a lot of this is just a coding game and Medicare Advantage, you probably only need to have a small share of the market to make it work. So I think there's some question of how, sort of how big this trend ever gets, and I don't think we know the answer to that, but that's sort of another avenue here, where that, you know, I think would be good to drill down on

31:26
relating to either your findings or just in general. Of course, our main audience is primary care physicians. What would you like to say to them? Or what would you like them to know? I mean,

31:35
certainly it is. There's been a lot of growing trends in primary care towards hospital. I mean, still, right? This study focuses on payer ownership. I've done other work on private equity ownership. Still the by far the biggest parent company of primary aid, or the biggest employer of primary care clinicians, is hospitals, right? Those are the health systems are still the main driver here from a encouraging independent primary care practices, I still think that is the largest lever to be focused on. There are a lot of pro hospital policies, I would argue, in our country, and in particular in our Medicare system, that from a sort of pro independent physician practice perspective, you know, probably the biggest bang for your buck is still focusing on issues like the fact that Medicare pays two or three times more for the exact same service done in a hospital than in a hospital owned practice than an independent office and just sort of, you know, 340 B policy, where hospitals get to buy drugs at a steep discount that isn't Available to independent offices, right? There are a lot of policies that really kind of incentivize, you know, folks to go work for hospitals, or hospitals to buy up physician practices. So I do always, as much as I'm working on kind of a lot of the other topics, I still think that is the sort of core hindrance, honestly, to having more independent physician practice.

33:04
My guest today has been Loren Adler, a fellow and Associate Director at the Brookings Institutions Center on Health Policy. It's been a great conversation. Thank you for taking the time.

33:14
Yeah, thanks for having me again. You once again,

33:27
that was a conversation between medical economics senior editor Richard Pearson and Loren Adler, fellow and Associate Director of the Brookings Institution's Center on Health Policy. My name is Austin Littrell, and on behalf of the whole medical economics and physicians practice teams. I'd like to thank you for listening to the show and ask that you please subscribe so you don't miss the next episode. Be sure to check back on Monday and Thursday mornings for the latest conversations with experts, sharing strategies, stories and solutions for your practice. You can find us by searching off the chart, wherever you get your podcasts, and if you'd like the best stories from medical economics and physicians practice delivered straight to your email six days of the week. Subscribe to our newsletters at medical economics.com and physicians practice.com off the chart, a business and medicine podcast is executive produced by Chris mazzolini and Keith Reynolds and produced by Austin Latrell. Medical economics and physicians practice are both members of the MGH Life Sciences family. Thank you.