Doctors testify against United-PacifiCare merger

For organized medicine, Colorado is ground zero in the fight against the proposed merger of UnitedHealth Group and PacifiCare Health Services Inc.

The Colorado Medical Society and the AMA on Nov. 21 testified against United's proposed $8.1 billion purchase of PacifiCare, saying that the deal would give the newly combined health plans far too much market power over physicians and patients.

"The AMA believes that the market power that results from mergers like the proposed United-PacifiCare merger directs money away from patient care and into corporate profits," said AMA Trustee Edward Langston, MD, who testified at the hearing.

At the least, the AMA and the Colorado Medical Society told the Colorado Division of Insurance during the hearing in Denver, United and PacifiCare should have to give back for public health initiatives an amount equal to the $315 million the companies plan to hand out in executive bonuses if the merger is approved, like similar deals made with California and Georgia regulators when WellPoint acquired Blues plans in those states. The medical associations also argued that United should not try to pay for the merger by cutting spending on health care.

Minnetonka, Minn.-based United's proposed acquisition of Cypress, Calif-based PacifiCare has been approved by PacifiCare's stockholders, and by six of the 10 states in which the companies do business. The deal still needs the Justice Dept.'s approval.

Physicians concentrated their battle in Colorado because it's the only state in which United and PacifiCare are equal in market share, and thus would have the greatest impact on competition. Dr. Langston, a family physician from Lafayette, Ind., said he believes the decision made in Colorado could have an effect in how the Justice Dept. rules on the merger.

Citing statistics gathered by the medical societies, the AMA and Colorado Medical Society say that, after the merger, United and another plan, WellPoint-owned Blue Cross Blue Shield of Colorado, would account for 60% of the health plan market.

"No state is more impacted by this merger than Colorado," the state medical society's president, Richard May, MD, an orthopedic surgeon from Parker, said during the hearing. "UnitedHealth Group's market share in Colorado will increase from 12% to 22%. In individual metropolitan statistical areas, that increase is even more significant. ... In Boulder, [United's] market share will increase ... from 26% to 42%."

However, the Colorado Division of Insurance's financial analysts put the combined United-WellPoint market share, based on the companies' filings with the state, at 39%, with Kaiser Permanente also holding a 20% market share. The insurance department's financial analysts declared that the effect of a combined United-PacifiCare merger on market competition would be "minimal."

However, Colorado Medical Society spokesman Dean Holzkamp said including Kaiser's market share is not a way to gauge the level of competition among health plans because independent physicians cannot be a part of the company's network. "From the point of view of individual practices, this will have a huge impact," Holzkamp said.

United spokesman Mark Lindsay said his company plans to work with doctors to address concerns raised during the hearing, but he disputed the claim that a merger would weaken physicians' contract negotiations. United's objective is "to have broader networks that empower more physicians," Lindsay said. "The number of doctors in our network is growing, not shrinking, and we negotiate with physicians sometimes one-by-one, so they are choosing to come with us."

Insurance commissioner David Rivera has until Dec. 21 to make a final ruling. He can either approve or reject the deal, or he can approve the merger with conditions attached to it. Among the conditions he's considering are those recommended by the Colorado Medical Society and the AMA.

"I've been thinking about this issue for a while," Rivera said. "The most important point is how is this going to affect the Colorado consumer, and everything else revolves around that. I haven't made any decisions yet."