Payers buy more primary care practices, boost MA penetration

Payers have scooped up more primary care practices, influencing their Medicare Advantage penetration in local markets.

A recent study published in Health Affairs Scholar found that payer-operated primary care practices accounted for 4.2% of Medicare primary care services in 2023, up from 0.78% in 2016. Although this payer-provider integration varied significantly by area.

Still, payer-operated practices were the dominant source of primary care in some counties. Overall, 15.1% of the U.S. population lived in counties where payers controlled over 10% of the primary care market by 2023.

Primary care services delivered by payer-operated practices were also especially salient in Medicare Advantage, or MA, at 5.73% nationally, compared to 1.84% in Traditional Medicare.

MA penetration was one of the market characteristics associated with the local level of payer operation of primary care practices, according to the study. In 2022, payers operated 5.5% of the primary care market in counties with above-average MA penetration of over 49% compared to just 1.5% in counties with below-average MA penetration.

The finding suggests that payers are more likely to integrate with primary care practices where MA is more popular, the study's researchers said.

Conversely, payers operated fewer primary care practices in areas where hospital market concentration was high, indicating an unwillingness or constrained ability of payers to own primary care practices in areas with major hospitals.

Payer entry into primary care was also significantly less common in counties with highly concentrated payer markets for employer-sponsored insurance.

Additionally, the study found that Optum, part of UnitedHealth Group, controlled the most primary care services delivered by payer-operated practices.

The study showed that Optum controlled 2.71% of the national primary care market by service volume in 2023. In some counties, though, Optum controlled substantially more of the market, with 10.1% of the U.S. population residing in counties where payers controlled over 10% of the primary care market.

Optum's market concentration was over 40% in several counties, including Snohomish County, Washington, where it was 44.9%, Contra Costa County, California, where it was 40.1% and Clark County, Nevada, where it was 35.8%.

Other payers analyzed in the study included Humana, Aetna-CVS Health, Elevance and Cigna.

This vertical integration of payers and providers could improve care coordination, chronic disease management and value-based care adoption, according to the study's researchers. However, increasing consolidation among payers and primary care providers, in particular, raises serious concerns about competition and access to care, they added.

"One concern is that payer-owned physician practices may be used to optimize risk adjustment coding, increasing government payments to their own MA plans without necessarily improving patient care," they explained in the study. "Vertical integration could also give insurers an advantage over competing health plans by steering patients toward their own services or making it harder for other insurers to contract with their physician groups."

Consolidation could also lead to higher prices or fewer choices for patients if payer ownership of physician practices leads to less competition in physician markets, they added.

These concerns have prompted regulatory scrutiny, antitrust investigations and increased calls for market transparency. Notably, former UnitedHealth Group CEO Andrew Witty testified in front of Congress, receiving criticism about the company's alleged monopolistic activities. Witty reported during the hearing that Optum alone employs about 10,000 physicians, or about 1% of all U.S. physicians, while affiliates employ another 80,000 physicians.

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.