At UnitedHealth Group’s (UHG’s) 2023 investor conference, Optum Health CEO Amar Desai, MD, revealed that Optum has added nearly 20K physicians in 2023, bringing its total physician count to nearly 90K.
None of these acquisitions were formally disclosed, including this year’s largest known pickup, Crystal Run Healthcare—a Middletown, NY-based group with over 400 doctors—which only became public after an internal email was shared with the press. Optum was already the nation’s largest employer of physicians by far, and its nearly 30 percent growth in 2023 only extends its lead.
The next two largest physician employers, Ascension and HCA Healthcare, manage a combined total of around 100K. Optum also employs or affiliates with an additional 40K advanced practice clinicians.
The Gist: Optum’s physician acquisition binge continues at a stunning pace: it has tripledits physician ranks since 2017, and now controls nearly 10 percent of all physicians in the US. But now that it has amassed a veritable physician army, there are emerging signs that it’s turning attention to right-sizing and rationalizing this massive portfolio.
Recent layoffs at the Everett Clinic and the Polyclinic in greater Seattle suggest an end to Optum’s more hands-off initial approach to integration. While each of Optum’s myriad medical group acquisitions has been too small, relative to total company revenue, to trigger regulatory review, the proposed updates to federal merger reporting requirements could put a damper on its unfettered provider buying spree.
Payers have historically been the financial support for patients receiving medical care. Through scale, predictive analytics and actuarial insights, large insurers have been able to smoothly calibrate pricing and earnings so that members have health coverage no matter the economic environment. Over time different insurance products such as Medicare Advantage, managed Medicaid, Commercial insurance, and self-funded benefits were created to provide optionality for consumers. The demand for more services under one umbrella has resulted in six large public insurers, known collectively as the “Nationals.” As for-profit public entities, these organizations have utilized M&A to drive growth by acquiring smaller health plans. This horizontal consolidation has grown membership and diversified their membership geographically, as well as by line of business. The diversification enables these Nationals to reduce volatility in earnings, which eases concerns of public investors, while sustaining top line growth each year. However, with the changing tide in healthcare business models, payers have begun to look elsewhere for new growth opportunities.
The emergence of value-based care has garnered significant interest within the healthcare ecosystem. Consumers of healthcare value their personalized interactions with their providers / doctors and are typically somewhat agnostic about their payer. The payers have come to the realization that to further drive profits, they must create stickiness with their members by aligning with the providers that are delivering the care. Collaboration between the payers and providers will help increase the efficiencies in care management and drive unnecessary costs out the care delivery process, when fully integrated. By being “closer” to the patients, payers can use the data from providers to create valuable insights that proactively address a patient’s needs before catastrophic, high-cost treatments are required. This trend of vertical integration, turning payers to pay-(pro)viders, has started to play out and should be beneficial to patients, payers, providers, investors, and U.S. healthcare as a whole.
UnitedHealthcare recently closed its $5.4 billion acquisition of LHC Group in February 2023. LHC Group provides home health solutions and community-based care to over 12 million patients annually in their homes. This acquisition is UnitedHealthcare’s opportunity to increase patient engagement for the high acuity populations that LHC Group traditionally services. UnitedHealthcare also announced the acquisition of Amedisys, another home health and hospice provider, for $3.3 billion in 2023. UnitedHealthcare will be able to leverage the expertise from these two organizations, while utilizing its data analytical capabilities to synchronize care efficiently and effectively. As the U.S. population continues to age, optimizing care for seniors will be a key focal point for the healthcare services industry.
CVS Health acquired Oak Street Health, a primary care provider that specializes in value-based care, for $10.6 billion in 2023. This acquisition will help CVS Health address costs and patient health in underserved communities that Oak Street Health currently services. CVS Health also acquired Signify Health, a technology and services company that focuses on care at home, in 2023 for $8 billion. The acquisitions of Oak Street Health and Signify Health will expand CVS Health’s healthcare delivery arm as it looks to become a one-stop shop for all patient’s needs.
As other payers see the value, both in better health outcomes and economics, created through the vertical integration of services by their competitors, they too will follow the trend. The definition of the payer will continue to evolve, and healthcare consumers will increasingly receive lower cost of care, greater accessibility to care and preferential outcomes into the future. It will be exciting to see which pay-vider acts next and capitalizes on this opportunity.
HENRY KOTULA 