INSURERS:

Competition heads up for payers, providers

Unusual deals foster rising competition between payers, providers

New and uncommon alliances in the latest wave of healthcare dealmaking have brought increased competition and friction among providers and payers. Blue Shield of California filed an arbitration complaint last week against Monarch HealthCare, an independent practice association, alleging the insurer lost business after the physicians agreed to be acquired by a rival.

Blue Shield alleges in the complaint that Monarch urged brokers and patients to switch to another health plan from Blue Shield after the doctors were acquired in November by UnitedHealth Group’s Optumhealth (Jan. 2, p. 6). Some patients were told Monarch doctors would no longer treat them, Blue Shield claimed.

The insurer “has lost a majority of its Medicare members who were assigned to Monarch physicians” and potential members, the complaint said. Blue Shield is seeking at least $10.5 million in damages for breach of contract.

Dr. Bart Asner, Monarch Healthcare’s CEO, said in a written statement its physicians “may freely communicate” with patients about “any aspect of their health status and treatment.” Asner rejected the assertion that doctors turned away patients who are Blue Shield members. “We object to the mischaracterizations made by Blue Shield.”

Blue Shield officials also exercised a contractual right to deny consent for the sale, the complaint said. Juan Davila, senior vice president of network management for Blue Shield, said the insurer did so because “it seems illogical that we would be comfortable working with someone owned by our competitor.”

Davila said Blue Shield of California has so far approached doctor’s groups with contracts, not acquisition deals, including eight accountable-care agreements under way or in development. But that could change should its rival continue to buy up physician practices. “It would be problematic not to do so,” he said.

About 19,200 Blue Shield members receive care from Monarch physicians. Davila said about 40% of members are treated by doctors exclusive to Monarch. The company will terminate its contract if Monarch fails to address the alleged breach by May 1, according to the complaint.

Orange County isn’t the only market where dealmaking has prompted competition for physician groups. In Pittsburgh, Highmark has moved to acquire West Penn Allegheny Health System (Nov. 7, 2011, p. 14), where officials have launched efforts to “significantly grow” its physician network in the coming years, said Tony Farah, West Penn Allegheny’s chief medical officer and president of its physician organization.

Highmark is the region’s dominant insurer, and the University of Pittsburgh Medical Center—west Penn Allegheny’s rival—is the area’s largest health system. Doctors are under increasing pressure to join one or the other, Farah said.