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When payer becomes provider

Kaiser Health News (KHN) reports on what could become a growing trend:  Health insurers buying medical groups and forming physician management companies.  “It’s the latest sign that the barrier between companies that provide health coverage and those that actually provide care to patients is crumbling,” writes KHN’s Christopher Weaver.

The key driver is payers’ desire to clamp down on rising medical costs that are passed on to consumers as higher insurance and managed care plan premiums.  Those fast rising premiums are threatening the viability of payers’ individual and small group market segments by heightening the danger of adverse selection and insolvency.

The trend also fits nicely with a provision of the Patient Protection and Affordable Care Act allowing providers to form so-called Accountable Care Organizations (ACOs).  Authorized to begin operating in January 2012 under the PPACA, ACOs are designed to incentivize doctors and hospitals to band together to improve value and outcomes for Medicare patients and sharing any reduced Medicare reimbursements with them.  ACOs could also become a template for a new managed care model for privately insured patients as well.

Going forward, there could be tension between the degree of ownership and involvement of payers with physician practices, leading to regulatory and legal scrutiny relative to state laws that bar corporations from directly practicing medicine in order to protect the independent medical judgment of physicians from business management decisions.

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