Organized medicine calls on court to block Nevada health plan merger

Physicians are challenging the Dept. of Justice's decision to conditionally approve the merger of UnitedHealth Group -- the nation's largest health insurer -- and Sierra Health Services Inc. -- Nevada's largest health plan.

The American Medical Association, Nevada State Medical Assn. and Clark County Medical Society on May 15 filed comments asking the U.S. District Court for the District of Columbia to reject the Justice Dept.'s proposed judgment. The ruling, which is subject to court approval, was conditioned on United selling its Las Vegas Medicare business, which had more than 25,000 enrollees.

The $2.6 billion merger, first proposed in March 2007, was completed on Feb. 25. The sale of United's Medicare business to Humana was finished May 1. The court could overturn the United-Sierra union or force changes in the combined firm.

Doctors say the Justice Dept. decision, if upheld, would put patient care at risk and could set a dangerous precedent.

"This is an egregious example of monopolistic behavior by the insurance industry that is not allowed in other industries," said AMA Board of Trustees Chair Edward L. Langston, MD.

The merger would give United 56% of the overall commercial health insurance market in Las Vegas and more than 90% of the commercial HMO market, AMA data show. Historically, Dr. Langston said, such mergers have diminished access to care and produced higher premiums.

The court will determine whether the government's proposed action is in the public interest.

"The real danger is the DOJ is setting way too low a bar for future consolidation," said Larry Matheis, executive director of the state medical society. "The DOJ dropped the ball, and we are committed to fighting this to the end."

Doctors and an antitrust expert argue in court documents that the Justice Dept. failed to address the merger's impact on physician services, apart from Medicare. They say the deal would result in a monopoly that would force physicians to accept contracts at lower rates on a take-it-or-leave-it basis.

"Patients ... may be worse off" because quality of care would suffer, wrote David Dranove, PhD, director of the Center for Health Industry Market Economics at Illinois' Northwestern University's Kellogg School of Management, in testimony to the court.

In his affidavit, Dr. Dranove included results from a survey he conducted of Clark County physicians. He said the poll, funded by the AMA, showed many doctors would have little choice but to leave the Las Vegas area or trim their services if they no longer contracted with the combined United-Sierra.

While it is unusual for a court to overturn or amend such a federal order, this case is just as rare, said David A. Balto, a former Justice Dept. attorney representing the medical organizations. In approving the United-Sierra deal, the department strayed from antitrust standards it used in other situations, he said.

For example, in 2005 the Justice Dept. required United to sell portions of PacifiCare's commercial health insurance business in two states before acquiring the company. Government officials cited concerns over higher prices and lower quality of care. The original deal would have given United more than 30% of that market in Tucson, Ariz., and in Boulder, Colo.

Federal order not enough

The federal government's proposed judgment also falls short of the broader protections Nevada Attorney General Catherine Cortez Masto ordered as conditions of the merger, Matheis noted. Final approval of the state decision still is pending in the U.S. District Court for the District of Nevada.

In addition to restricting United's Medicare business, Cortez Masto prohibited the health plan from using all-products clauses, most-favored-nation clauses and exclusive agreements in doctor contracts for two years. Her proposed action would create a physician council to help improve relations between doctors and the insurer.

The Nevada State Medical Assn. said it plans to work with the state attorney general to make sure the company abides by the provisions outlined in her order.

Doctors, supported by the Litigation Center of the American Medical Association and State Medical Societies, filed objections as part of a broader coalition fighting the deal. It includes the Service Employees International Union Nevada and the Clark County Commission. The SEIU and the U.S. House Committee on Small Business filed separate comment letters expressing concerns the merger will dampen competition and hurt access to affordable coverage.

United said the merger is a done deal. The Justice Dept., Nevada attorney general and state insurance regulators approved the acquisition after weighing concerns raised by physicians, public officials and consumer groups in multiple hearings throughout the state, said United spokeswoman Cheryl Randolph.

United plans to comply with the state and federal decrees, Randolph said. The merger would benefit doctors and patients with "the most comprehensive range of cost-effective, innovative health care products and services in the Southwest," she added. United also will contribute $15 million over the next five years to public health programs, a requirement under the state order.

United's history a concern

Doctors say the federal government's decision ignores United's track record of regulatory abuses in multiple states. In one example, California insurance regulators in January fined United for more than 130,000 violations of state law and regulations after acquiring PacifiCare. The alleged infractions included failing to pay claims promptly and wrongfully denying covered medical care.

United officials said there were problems during the transition that were unique to that merger but that the company since has taken corrective steps. "That will not happen in Nevada," Randolph said.

Physicians remain wary. "Why do [federal regulators] think [the proposed settlement] is going to protect Nevadans from United swinging a very big club and violating rules and regulations in state after state?" the state medical society's Matheis asked. "The DOJ clearly protected United and has a responsibility to protect Nevadans, too."