Publisher’s Note: No Honeymoon in Vegas

May 1, 2007

Another health plan grows; physicians’ leverage shrinks


When it comes to healthcare, what happens in Vegas isn’t likely to stay in Vegas for much longer.

Health insurance behemoth UnitedHealth Group, Inc. is poised to take over Sierra Health Services Inc. in what’s being billed by the companies as a $2.6 billion “merger.” You know, sort of like how Jonah and the whale merged.

If regulators approve the deal - and precedent strongly suggests they will - Sierra, which is headquartered in Las Vegas, will soon start shipping its handsome profits to Minnetonka, Minn., home of United.

What does this have to do with you? Quite a bit, actually: the potential further erosion of your negotiating power when it comes to payment.

Unfortunately, regulators, who are all that stand in the way of the United-Sierra union, aren’t likely to give physicians’ well-being much thought during their deliberations.

That’s because federal antitrust laws are intended to protect consumers - not businesses such as yours - from anticompetitive corporate practices.

That’s too bad.

Whenever I speak to physicians, it usually takes no more than a minute or two for the topic of payers to come up. As often as not, they refer to payers as “bullies” and other more colorful names.

While it stopped short of name-calling, the AMA expressed profound displeasure with the United-Sierra proposal in a letter to Attorney General Alberto Gonzales.

“Federal authorities must not allow United’s blatant grab for dominant market power,” argues J. James Rohack, MD, a member of the AMA’s board of directors. “The proposed merger would have negative long-term consequences for patients, physicians, hospitals, and employers.”

For its part, United expects the merger to produce a company with “the scale, resources, and commitment to offer the most comprehensive range of affordable services to our clients in the Southwest, as well as for clients with business interests across the country.” So says Stephen J. Hemsley, United’s president and chief executive. The AMA contends that United, if permitted to acquire Sierra, will have 78 percent of the Nevada HMO market and 95 percent of the Las Vegas metropolitan market.

United says those facts are misleading because the AMA is focusing on the “fully insured HMO market” and ignoring other products in Nevada.

Regardless of which side is right, the U.S. Department of Justice will decide the outcome. If past is prologue, the odds of a rejection are long.

During the last 12 years, the government has signed off on more than 400 proposed mergers, never rejecting even one. It did place conditions on two of the deals, including one of United’s previous purchases.

It’s time for federal regulators to start weighing the likely impact on physicians, because what affects you affects your patients, as you know all too well.


Consolidation makes it increasingly difficult to negotiate fair contracts with payers like United, and anyone else who stays in the market. And that, of course, also hurts consumers.

As physicians find it difficult to obtain contracts they can live with, they may decide to stop participating in health plans altogether, reducing the supply of physicians and driving up the cost to patients and further inconveniencing them.

Consolidation also increases the prices that consumers pay for premiums, which can increase the ranks of the uninsured. This too hurts physicians, who are forced to care for patients with no ability to pay.

If we really want to improve healthcare, we should allow the people who provide the care - you - to negotiate openly and fairly. The United merger, while great for United’s shareholders, would be another step in the opposite direction. To say otherwise is to avoid reality.

Ken Karpay is the publisher of Physicians Practice. He can be reached at kkarpay@physicianspractice.com.

This article originally appeared in the May 2007 issue of Physicians Practice.