Health insurers respond to overhaul law by acquiring less-regulated lines of business

By Christopher Weaver
Kaiser Health News
Sunday, March 20, 2011; 3:27 PM

Here's one change few were talking about when the health overhaul law passed: It's sent insurers - worried the law could stunt profits and growth - looking for new types of business.

Where are they investing? In less-regulated companies that could yield strong profits and make the main business - insurance - more lucrative. The purchases also could increase insurers' control over more parts of the health system.

Insurers have moved into technology, health-care delivery, physician management, workplace wellness, financial services and overseas ventures in wide-ranging efforts to mitigate the new rules imposed by the law. Since June 2009, seven of the nation's largest insurers have made 25 major deals, and only six of those acquisitions run health plans, according to an analysis of data collected by FactSet Research Systems, a private company.

At an investors meeting in February, Rick Jelinek, UnitedHealth Group's top executive for emerging businesses, said the company's future growth would be in services that are "much less regulated" than insurance plans.

In 2010, UnitedHealth Group bought ChinaGate, which helps bring medical treatments to market in China; Picis, a technology vendor specializing in clinical and financial management systems for hospital emergency departments and intensive care units; the medical screening company Wellness; and six other firms.

In December, Aetna acquired Medicity, a business that helps hospitals share patient information. The federal government will reward hospitals and doctors with more than $30 billion in increased Medicaid and Medicare payments by 2015 for adopting electronic medical records, but only if they can share their data.

Also in December, Humana bought Concentra, a Texas-based urgent- and occupational-care provider with clinics in 40 states. More than one-third of Humana members live within 10 miles of a Concentra clinic, making its services convenient for the insurer's members. Last year it also bought a health coaching firm that helps employers keep workers healthy, and in February it partnered with a South African company to launch new wellness services in the United States.

Those moves represent only big-ticket buys that require regulatory approval or that companies chose to announce. Insurers can buy smaller firms or create businesses from scratch without disclosing details.

For instance, OptumHealth, a UnitedHealth subsidiary, has quietly taken control of Memorial Healthcare IPA, a Los Angeles company that manages more than 400 doctors, according to a document filed with the California Secretary of State's office. OptumHealth declined to discuss details of the deal. A Memorial Healthcare executive, Patty Page LaPenn, said in a statement that relationships with patients and other businesses "will continue as usual."

The trend shifts

Insurers have been on buying binges before - in the past decade, the seven large firms publicly acquired 137 companies. However - with the exception of UnitedHealth, which has been building its technology arm, Ingenix, since 1997 - they focused on acquiring rival health plans and insurance services firms. For instance, 10 of 13 deals Humana struck before 2010 involved health plans.

The current trend is largely driven by the health law, said Ana Gupte, an analyst with Sanford C. Bernstein & Co.

The newer ventures will not replace the core business of selling health coverage.

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