Throughout the 20th century, most Americans saw their doctors in small, independent offices. Today, many of those practices have been bought up by large corporations, including hospitals, private-equity firms and even health-insurance companies. It’s a shift that not only has changed how money moves through the health care system, but may also be helping some insurers boost their profits, according to new research published in Health Affairs.
A study from researchers at Brown University’s Center for Advancing Health Policy through Research and the University of California Berkeley found that UnitedHealthcare, the nation’s largest health insurer, pays doctors who work for its own physician network, Optum, more than it pays independent practices for the same care.
Both UnitedHealthcare and Optum are owned by UnitedHealth Group, the country’s largest health care company. UnitedHealthcare is the biggest private insurer in the nation and Optum oversees more than 90,000 physicians.
Using newly available federal price transparency data, the researchers found that UnitedHealthcare pays Optum physician practices about 17% more than non-Optum practices in the same region. In markets where UnitedHealthcare holds a large share of the insurance business, that difference was even larger, up to 61%.
The findings echo a STAT investigation from last year, which found that UnitedHealthcare paid 13 of 16 Optum practices more than other providers in the same market. That finding helped prompt the researchers to examine the issue on a broader scale.
“What we saw in the data was that UnitedHealthcare is paying its doctor practices at Optum well above the market rate,” said the study’s lead author Daniel Arnold, a senior research scientist at the Brown University School of Public Health. “Normally, an insurance company wouldn’t pay above market rate because it costs them money, but here it’s not really a cost. It’s just money moving within the same company.”
The findings suggest UnitedHealthcare may be benefiting from a regulatory loophole designed to keep insurance prices fair, Arnold said. Under the Affordable Care Act, insurers are required to spend at least 80 to 85 percent of the premiums they collect on medical care and quality improvement — a rule known as the Medical Loss Ratio. If they fall short, they’re supposed to issue rebates to customers. But by paying their own physician groups more, insurers can make it appear that more money is going toward care, even though the payments stay within the same company.
“It’s a way of gaming the system,” Arnold explained. “When insurers fall below that spending threshold, they’re supposed to give some of that money back to customers through rebates. This structure allows companies to meet that requirement on paper instead of returning it to consumers.”
The study also suggests that paying in-house doctors more while squeezing payments to independent practices could make it harder for smaller offices to survive. That pressure, the study explains, may push more doctors to sell their practices, further concentrating control among large corporate systems.
UnitedHealth strongly disputed the study’s findings in statements to STAT and Healthcare Dive.
To be clear, the study doesn’t accuse UnitedHealth of breaking any laws, Arnold said. The researchers also point out that the study has several limitations, including looking at only a snapshot in time. Overall, the paper is meant to highlight how current rules may allow health care giants that run both insurance and doctor networks to profit in ways that drive up costs and limit patient choice.
“It’s important to see where all the money is going,” Arnold said. “Right now, there’s a black box around these internal payments and patients are the ones who end up paying more.”