Non-hospital physician employment rose sharply during pandemic

While hospitals, payers, and private equity firms have long been competing to acquire independent physician groups, the COVID pandemic spurred a marked acceleration of the physician employment trend, with non-hospital corporate entities leading the charge.

The graphic above uses data released by consulting firm Avalere Health and the nonprofit Physicians Advocacy Institute to show that nearly three quarters of American physicians were employed by a larger entity as of January 2022up from 62 percent just three years prior. 

While hospitals employ a majority of those physicians, corporate entities (a group that includes payers, private equity groups, and non-provider umbrella organizations) have been increasing their physician rolls at a much faster rate. 

Corporate entities employed over 40 percent more physicians in 2022 than in 2019, and in the southern part of the country—a hotspot for growth of Medicare Advantage—corporate physician employment grew by over 50 percent.

We expect the move away from private practice, accelerated by the pandemic, will only continue as physicians seek financial returns, secure a path to retirement, and look to access capital for necessary investments to help grow and manage the increasing complexities of running a practice. 

UnitedHealth Group (UHG) closes its $5.4B acquisition of LHC Group

The deal, first announced in March 2022, will bring LHC’s home health locations, hospice sites, and long-term acute care hospitals across 37 states into UHG’s Optum division. LHC also has over 400 joint-venture arrangements with hospitals. The acquisition received heightened scrutiny from antitrust regulators, but was ultimately allowed to proceed. 

The Gist: LHC’s postacute footprint expands UHG’s Medicare Advantage value play, guaranteeing postacute capacity and providing a platform to funnel care into lower-cost settings

UHG’s strategy is right in line with its peers: Humana fully owns home health provider Kindred at Home (now branded CenterWell Home Health), and CVS Health plans to acquire Signify Health, which provides home care services with an emphasis on risk scoring. But achieving lower cost of care will require integration of postacute referrals and care management across rapidly expanding physician networks.

Humana to exit employer-sponsored insurance market

On Thursday, Louisville, KY-based Humana announced it will wind down its Employer Group Commercial Medical Products business over the next two years. The company said its exit from all fully insured, self-funded, and federal employee medical plans—a book of business that shrunk to under 1M lives in 2022—will allow the company to focus more on its Medicare Advantage (MA) offerings, which covered over 5M lives in 2022. Humana is currently the second largest MA payer behind UnitedHealthcare. 

The Gist: In a move signaled earlier this month, Humana has chosen to double down on its more profitable MA business, rather than continuing to compete with other major payers in the shrinking employer-sponsored commercial market. Humana already offers MA plans in 89 percent of US counties, more than UnitedHealthcare, but its 2022 MA growth was only a third of United’s (250K new lives enrolled, versus 750K). 

This move allows Humana to devote more resources to fielding competitive MA plan offerings and integrating its growing portfolio of physician and postacute care assets. 

Physician Arms Race

After rumors of a possible deal first surfaced in early January, CVS Health announced on Wednesday that it has entered into a definitive agreement to acquire value-based primary care provider Oak Street Health for $10.6B. The Chicago-based company will join CVS’s recently formed Health Care Delivery organization, bringing with it roughly 600 physicians and nurse practitioners working at 169 senior-focused clinics in 21 states. This move is the latest by CVS to expand its care offerings, following its $100M investment last month in primary and urgent care provider Carbon Health, and its $8B acquisition of in-home evaluation company Signify in September.

The Gist: If this deal goes through, CVS will have the key pieces of the national primary care physician network it needs for a value-based care platform focused on Medicare Advantage—although how they will combine Oak Street’s clinics with retail-based HealthHUBs and other primary care assets remains unclear.

The fact that CVS is paying about a 50 percent share price premium shows how competitive the market for large physician organizations has become, driving up bidding prices such that only cash-rich payers, pharmacies, and retailers can afford them as they seek to emulate UnitedHealth Group’s Optum strategy.

Of note, the same day CVS announced the deal, Aetna competitor and erstwhile investor in Oak Street, Humana announced a five-year network partnership with Oak Street competitor ChenMed.

We’ll be watching for whose strategy proves most effective as we enter the next phase of the physician arms race between vertically-integrated payers, and the emphasis shifts from how many providers are employed to how they’re integrated and deployed.

CVS Health is close to acquiring Oak Street Health for $10.5B

CVS Health is close to a deal to acquire primary care provider Oak Street Health for around $10.5 billion, including debt, marking the latest move among major healthcare stakeholders in acquiring primary care companies, the Wall Street Journal reports.

According to people with knowledge of the matter who spoke to the Journal, the two companies are discussing a deal in which CVS would acquire Oak Street for a price of around $39 a share. If the deal goes through, it could be announced as soon as this week.

According to the Journal, “the Oak Street acquisition would further the company’s long-term shift to broaden into businesses beyond retail pharmacy by adding doctors who can more fully manage patients’ care.”

Oak Street has more than 160 centers across 21 states and focuses mainly on caring for patients enrolled in Medicare. The company, which is based in Chicago, was founded in 2012 and specializes in caring for patients under value-based care arrangements.

Aetna, which is owned by CVS, has a growing Medicare Advantage business that would likely tie in with Oak Street’s clinics, which care for about 159,000 patients under value-based arrangements, the Journal reports.

The move is the latest among major healthcare stakeholders acquiring primary care companies. In September 2022, CVS announced an $8 billion deal to acquire home healthcare company Signify Health.

Meanwhile, Amazon in July 2022 announced a $3.9 billion deal to acquire primary care company One MedicalHumana in September 2022 announced its intention to spend up to $550 million to purchase 20 CenterWell Senior Primary Care clinics, and Walgreens Boots Alliance in November 2022 announced a roughly $9 billion deal to acquire Summit Health.

CMS finalizes audit plan to recapture overpayments to MA insurers

This week, the Centers for Medicare and Medicaid Services (CMS) finalized a 2018 proposed rule that will impose aggressive audits on Medicare Advantage (MA) insurers. By extrapolating the audits to insurers’ entire contracts, CMS expects to claw back almost $500M annually in overpayments since 2018, but has opted not to extrapolate the audits for 2011 to 2017. While MA insurers threaten to sue over the rule’s exclusion of a “fee-for-service adjustor” that would have reduced the degree of overpayments, CMS officials note that the estimated repayments under the final rule constitute less than 0.2 percent of total MA spending. 

The Gist: This MA overpayment audit is overdue, especially given how well-documented MA overbilling has become. This week the Biden administration also announced a proposed change to MA risk adjustment that would reduce MA spending by $11B annually.

Though nearly half of all US seniors are now enrolled in MA plans, the program has yet to achieve its original purpose of saving the government money by encouraging competition around delivering care more efficiently. 

MA cannot continue to cost more per enrollee than traditional Medicare in perpetuity, and an eventual reduction in per-member per-year payments is inevitable.

Elevance to acquire Blue Cross Blue Shield of Louisiana

On Monday, Indiana-based Elevance Health, formerly known as Anthem, announced it has signed a deal to add Blue Cross Blue Shield of Louisiana (BCBSLA) to its network of Blues plans for an undisclosed sum. BCBSLA covers two-thirds of the state’s commercial insurance market, and has partnered with Elevance for five years to serve Louisiana’s dual-eligible population.

Elevance will operate BCBS plans in 15 states and cover 49M beneficiaries should the acquisition go through, though the move faces regulatory obstacles around folding nonprofit BCBSLA into its for-profit business.

The Gist: This deal is a harbinger for similar combinations to come. We’ve long been expecting more roll-ups of state- and regional-level plans as they struggle to compete with the for-profit national giants. 

Standalone regional plans often lack the scale to diversify their businesses and emulate the successful strategic playbooks of national insurers like UnitedHealth Group and Humana, which have rapidly expanded into the more profitable areas of care provision, provider support services, and pharmacy benefit management. 

State-level Blues plans have long been dominant in the PPO-driven commercial market, but have experienced mixed success in expanding into Medicare Advantage and other segments. If these mid-sized insurance players find they can’t compete alone, it won’t bode well for the cohort of much smaller “insurtech” startups. 

More payer consolidation ahead.  

Be Ready for the Reorganized Healthcare Landscape

Running a health system recently has proven to be a very hard job. Mounting losses in the face of higher operating expenses, softer than expected volumes, deferred capex, and strained C-suite succession planning are just a few of the immediate issues with which CEOs and boards must deal.

But frankly, none of those are the biggest strategic issue facing health systems. The biggest
strategic issue
is the reorganization of the American healthcare landscape into an ambulatory care
business that emphasizes competing for covered lives at scale in lower cost and convenient settings
of care. This shift in business model has significant ramifications, if you own and operate acute care

Village MD and Optum are two of the organizations driving the business model shift. They are
owned by large publicly traded companies (Walgreens and UnitedHealth Group, respectively). Both
Optum and Village MD have had a string of announced major patient care acquisitions over the past
few years, none of which is in the acute care space.

The future of American healthcare will likely be dominated by large well-organized and well-run
multi-specialty physician groups with a very strong primary care component. These physician
service companies will be payer agnostic and focused on value-based care, though will still be
prepared to operate in markets where fee-for-service dominates. They will deliver highly
coordinated care in lower cost settings than hospital outpatient departments. And these companies
will be armed with tools and analytics that permit them to manage the care for populations of
patients, in order to deliver both better health outcomes and lower costs.

At the same time this is happening, we are experiencing steady growth in Medicare Advantage.
And along with it, a stream of primary care groups who operate purpose-built clinics to take full risk
on Medicare Advantage populations. These companies include ChenMed, Cano Health and Oak
Street, among others. These organizations use strong culture, training, and analytics to better
manage care, significantly reduce utilization, and produce better health outcomes and lower costs.

Public and private equity capital are pouring into the non-acute care sectors, fueling this growth. As
of the start of 2022, nearly three quarters of all physicians in the US were employed by either
corporate entities
(such as private equity, insurance companies, and pharmacy companies), or
employed by health systems. And this employment trend has accelerated since the start of the
pandemic. The corporate entities, rather than health systems, are driving this increasing trend.
Corporate purchases of physician practices increased by 86% from 2019 to 2021.

What can health systems do? To succeed in the future, you must be the nexus of care for the
covered lives in your community. But that does not mean the health system must own all the
healthcare assets or employ all of the physicians. The health system can be the platform to convene these assets and services in the community. In some respects, it is similar to an Apple iPhone. They are the platform that convenes the apps. Some of those apps are developed and owned by Apple. But many more apps are developed by people outside of Apple, and the iPhone is simply the platform to provide access.

Creating this platform requires a change in mindset. And it requires capital. There are many opportunities for health systems to partner with outside capital providers, such as private equity, to position for the future – from both a capital and a mindset point of view.

The change in mindset, and the access to flexible capital, is necessary as the future becomes more and more about reorganizing into an ambulatory care business that emphasizes competing for covered lives at scale in lower cost and convenient settings of care.

50 things to know about Medicare Advantage

Before 2006, Medicare Advantage in its current form didn’t exist. Now, the public-private program is expected to overtake traditional Medicare this year — how did it get here?

Medicare Advantage basics

  1. Medicare is a federal insurance program that started in 1965 to primarily provide health coverage to Americans 65 and older.
  2. Medicare Advantage is a federally-approved plan from a private insurance company that provides more coverage than traditional Medicare.
  3. In 2022, 28.4 million people were enrolled in MA out of 58.6 million Medicare beneficiaries overall – or 48 percent.
  4. Medicare is divided into four parts:
    A: Hospital insurance (hospital, skilled nursing, home health and hospice services)
    B: Medical insurance (outpatient services, physician visits, preventive screenings)
    C: Medicare Advantage
    D: Prescription drug insurance
  5. The Centers for Medicare and Medicaid Services (CMS) oversees all Medicare plans. In 1997, Part C (MA) was created, and Part D was introduced in 2006.
  6. Traditional Medicare includes Parts A and B, though Part B is optional. MA plans cover Parts A, B and D benefits. 
  7. When Congress created MA, it was initially called Medicare+Choice. In 2003, most Medicare+Choice plans were rebranded as Medicare Advantage.
  8. Supplemental Medicare, or Medigap, are plans that can be purchased from commercial payers by traditional enrollees to cover more services.
  9. Part C (MA) operates under a capitated fee, or when MA insurers are paid a set amount per beneficiary, and then pay for their health expenses. Traditional Medicare is fee-for-service, where providers are paid per service delivered.
  10. If a provider accepts Medicare, enrollees are able to receive care there. MA members are typically confined to a select network of providers for non-emergency care, but coverage must meet or exceed traditional Medicare standards.

Terminology: Words and phrases associated with MA

  1. Preferred Provider Organization (PPO): An MA plan with a large provider network that members pay less to use. Out-of-network providers can provide covered services for a higher cost, and emergency care is always covered. PPOs make up 40 percent of MA offerings in 2023.
  2. Health Maintenance Organization (HMO): An MA plan where care is only covered with in-network providers, except for emergency care. HMOs account for 58 percent of MA offerings in 2023.
  3. HMO-Point-of-Service (HMO-POS): HMO plans that allow some out-of-network services for a higher copayment.
  4. Dual-Eligible Special Needs Plans (D-SNP): Special MA plans that provide coverage to beneficiaries eligible for both Medicare and Medicaid.
  5. Private Fee-for-Service (PFFS): A fee-for-service MA plan that pays set amounts for care. Most PFFS plans have provider networks that charge less. They must cover out-of-network care, but usually at a higher cost – these make up less than 1 percent of plans.
  6. Accountable Care Organization (ACO): A group of providers who join together to provide high-quality care to Medicare patients. ACO models are overseen by CMS, and several types now exist.
  7. Prior authorization: Permission needed from the insurer for coverage, often for specialists or out-of-network care. Part D plans usually require PA for specialty drugs, but the process is plan specific.
  8. Star ratings: An annual performance rating from CMS ranging from 1 to 5 stars, with 5 being the highest. Plans with four or more stars receive monetary bonuses that then must be used to improve benefits.

Medicare Advantage today

  1. MA is expected to make up half of all Medicare enrollment in 2023. Under current growth, the program will hit 69 percent by 2030. 
  2. record 3,998 MA plans are available nationwide in 2023, up 6 percent from the previous year.
  3. The average beneficiary has 43 MA plans to choose from in 2023, up from 38 in 2022.
  4. In 2023, 57 MA and Part D plans earned a five star designation, a decline from 2022, when 74 plans earned the designation. 
  5. The average star rating across all plans for 2023 is 4.15, down from 4.37 in 2022.
  6. The top five reasons enrollees chose MA plans over traditional in 2022:
    More benefits: 24 percent
    Out-of-pocket limit: 20 percent
    Recommended by trusted people: 15 percent
    Offered by former employer: 11 percent
    Maintain same insurer: 9 percent 
  7. The largest MA insurers in 2022:
    UnitedHealthcare: 7 million
    Humana: 5.1 million
    BCBS plans: 4.1 million
    CVS Health/Aetna: 3.3 million
    Kaiser Permanente: 1.8 million
    Centene: 1.5 million
    Cigna: 540,000
  8. The average monthly MA premium is projected to be $18 for 2023, down from $19.52 in 2022. 
  9. Part D average premiums for 2023 are expected to be $31.50, down from $32.08 in 2022. 
  10. The standard monthly premium for Part B enrollees is $164.90 for 2023, a decrease of $5.20 from 2022.
  11. Traditional Medicare members spent about 7 percent more on average for healthcare compared to MA members in 2019, according to an AHIP study published Sept. 21.
  12. MA members spent $1,965 less on average on out-of-pocket costs and premiums annually compared to traditional Medicare beneficiaries in 2019, an April 19 study from the Better Medicare Alliance found.
  13. Around 16 percent of MA enrollees switch insurance after one year of enrollment, an Oct. 4 study in the American Journal of Managed Care found. Nearly half switched insurers by their fifth year.
  14. MA enrollees received 9.2 percent fewer low-value services than their counterparts using traditional Medicare, a study published Sept. 9 in JAMA Open Network found.
  15. About a third, or 31.6 percent, of the 57 MA plans that earned five stars in 2023 are a part of the Alliance of Community Health Plans, a trade group representing integrated payer-providers.
  16. MA plans were the most likely health plans to use alternative payment models in 2022, with 57 percent using some kind of alternative payment. Of those, 35 percent used a risk-based model. 
  17. Half of the 13 percent of employers who offered retirement health benefits in 2022 did so through MA plans, up from 26 percent in 2017, according to a report from Kaiser Family Foundation published Dec. 1. 
  18. In 2023, 1,111 MA plans will offer extra benefits beyond vision, dental and hearing, which is up from 351 in 2020.
  19. Percentage of MA plans offering extra benefits in 2022:
    Vision: 99 percent
    Hearing: 98 percent
    Fitness: 98 percent
    Dental: 96 percent
    Remote access: 72 percent
    Meals: 71 percent
    Acupuncture: 45 percent
    Transportation: 39 percent
    In-home support: 12 percent
    Bathroom safety: 9 percent
    Part B rebate: 7 percent
    Telemonitoring: 4 percent
    Plans with caregiver support: 4 percent


  1. Texas saw the most growth in MA offerings from 2022 to 2023, with 42 more plans. That was followed by Florida (26) and Pennsylvania (21). 
  2. Alabama had the highest MA enrollment rate (53 percent of all Medicare) in 2022, while Wyoming had the lowest (6 percent).
  3. In 34 percent of metropolitan areas, one payer controls more than half of the MA market, according to a 2022 AMA report. In 91 percent of metros, one payer controls at least 30 percent of the market.
  4. Humana offers MA plans in 89 percent of U.S. counties in 2023, and UnitedHealthcare offers plans in 84 percent.
  5. Number of counties payers offering MA plans in 2023:
    *There are 3,143 counties

    Humana: 2,860
    UnitedHealthcare: 2,709
    BCBS affiliate: 2,466
    CVS Health/Aetna: 1,978
    Centene: 1,739
    Cigna: 581
  6. Counties with the most MA plans available:
    1. Summit County, Ohio: 87
    T-2. Cuyahoga County, Ohio: 84
    T-2. Medina County, Ohio: 84
    T-4: Lake County, Ohio: 83
    T-4: Stark County, Ohio: 83
  7. Alaska, Montana, South Dakota and Wyoming have the least 5-star MA plans available, with one in 2022. New York and Ohio have the most 5-star plans, with 12 available.


  1. To date, nearly every major insurer has been accused of or settled allegations of MA fraud from the federal government. Payers have been accused of exploiting the program through elaborate coding schemes that make patients appear sicker on medical records than they actually are — thereby leading to higher payments from CMS. Insurers dispute these claims. MA overpayments to payers are estimated to have cost as much as $25 billion in 2020. Physicians told The Washington Post in June that it is common practice for payers and health systems to “data mine” a patient’s medical history if that individual is covered by MA because the program pays a set amount based on patient risk.
  2. Some experts have said the issue stems from the flexibility of interpretation around current MA risk adjustment coding guidelines — others expect there to be increased scrutiny of the program in 2023.

Recent policy moves

  1. CMS issued a proposed rule Dec. 6 that would require electronic prior authorization processes among MA organizations. 
  2. CMS is cracking down on deceptive marketing practices and no longer allows MA or Part D prescription drug plans to advertise on television without agency approval as of Jan. 1. The agency said it issued the new policy after reviewing thousands of beneficiary complaints regarding confusing, misleading or inaccurate information from plans — plan sponsors are also responsible for all marketing activities from brokers and third-party agencies.
  3. CMS issued a proposed rule Dec. 14 to continue its efforts to overhaul prior authorization and marketing practices around MA and Part D plans, along with adding health equity measures to star ratings and boosting behavioral health network adequacy requirements.
  4. A CMS rule revising MA and Part D marketing and communication regulations went into effect June 28 to increase oversight over third-party marketing organizations.

West Coast nonprofit health plans announce agreement to combine

Two nonprofit insurers, Long Beach, CA-based SCAN Group and Portland, OR-based CareOregon, have agreed to merge. The new organization—which will take the name HealthRight Group, while retaining the SCAN and CareOregon brands in local markets—will have $6.8B in annual revenue and cover around 800K lives.

Continuing their previous areas of focus, SCAN will cater primarily to Medicare Advantage (MA) beneficiaries, and CareOregon will prioritize serving managed Medicaid enrollees. Executives from both companies cited scale as the primary motivation for the merger, with the companies aiming to both strengthen their foothold in current markets and expand their reach into new ones.

The deal, which still needs approval from state regulators, is expected to close in 2023.

The Gist: HealthRight stands to be a strong player in the booming government-backed, managed care market in states currently dominated by large payers like Kaiser Permanente and UnitedHealthcare. 

SCAN has differentiated itself with services dedicated to underserved populations, including creating a MA plan designed for LGBTQ+ seniors, and offering California’s only integrated dual-eligible, special needs plans. We expect the addition of CareOregon’s 319K managed Medicaid members to provide a larger platform for these targeted initiatives, and we wouldn’t be surprised to see more nonprofit insurers joining forces with HealthRight to better compete with current market heavyweights.