United-PacifiCare merger troubles physicians

The companies say the $8.1 billion deal should have no ill effects on doctors, but the AMA and others bristle at the thought of ever-larger health plans.

By Bob Cook, AMNews staff. July 25, 2005.

The big health plans just keep getting bigger. UnitedHealth Group, the second-largest plan in the country, bought itself a beachhead in California by agreeing to pay $8.1 billion for PacifiCare.

But expanding into the most populous state, in which it had little business and in which No. 1 plan WellPoint has a major presence, wasn't the only reason for this deal. Both United and WellPoint have been buying plans as much for their demographics as for their size of membership.

PacifiCare in particular offers United two other beachheads in areas that are expanding -- Medicare managed care and pay-for-performance plans. PacifiCare's Secure Horizons long has been a leader in Medicare managed care, a business that analysts expect to increase significantly as Medicare offers a drug plan starting next year. PacifiCare also has been involved in successful efforts to implement quality bonus programs for physicians, something United has tried, albeit alienating physicians and hospitals with its approach.

Whatever the reasons for the merger, which must get approval from the Justice Dept. and each state in which United and PacifiCare operate, physicians are not thrilled. The AMA and the California Medical Assn., among others, are speaking out against the United-PacifiCare deal, as they have about other recent multibillion-dollar mergers such as Anthem-WellPoint.

"This acquisition highlights the alarming rate of consolidation within the health insurance industry that the AMA has been cautioning about for years," said AMA President-elect William G. Plested III, MD. The AMA has put out reports showing that one or two plans often enroll the majority of private-pay patients in most states and metropolitan areas.