Blue Cross joins the doctors practice party

If you can't beat 'em, buy 'em: It's a mantra health insurance giants like UnitedHealth Group and Humana have embraced for years as they've snapped up doctors practices to curb the cost of medical care. Now the parent of Blue Cross & Blue Shield of Illinois is getting into the game.

Health Care Service Corp., which owns Blue Cross plans in five states, is following its rivals' lead, opening 10 primary care clinics in Texas next year and, in Pullman, launching a neighborhood center that offers everything from workshops on managing heart disease to yoga and meditation classes. As with its rivals' earlier forays into physician practice acquisition, HCSC's latest moves are made with several goals in mind, some that immediately redound to the bottom line—more tightly controlling where members seek care, for one—and others, like addressing social conditions from housing to food insecurity, that may improve results over the long haul.

A decade ago, the notion of insurers owning physicians groups was fairly unusual. There was a hope that payers and providers would be able to stay in different lanes and still bring costs down, says Carl McDonald, divisional senior vice president of treasury and business development at HCSC. "It just hasn't quite worked out like that."

In value-based payment models, which are slowly being adopted in many U.S. markets, insurers pay doctors a set amount per patient rather than reimbursing for each medical service. The arrangement aims to reward doctors who offer high-quality care at lower costs, but not all providers are open to the possibility of a financial loss.

Owning and operating medical practices, it turns out, is proving to be a more efficient way for insurers to trim hefty price tags for everything from lab tests to specialist visits. Getting closer to patients enables insurers to direct care, getting the cost outcomes they crave while controlling quality.

"HCSC is a little behind" when it comes to buying practices, says Nate Akers, associate director of healthcare at Chicago-based Navigant Consulting. The recent move is "a signal to the market that they're going to be really investing in this. . . .That's where you want to be if you're a payer."

The 10 Dallas and Houston clinics are part of a joint venture between HCSC's venture-capital arm and medical center operator Sanitas USA. The clinics are expected to control costs by referring patients to reasonably priced, quality specialists, and by educating patients about services that are covered, such as telemedicine or diabetes management. Terms of the deal were not disclosed.

"Everybody is basically playing catch-up to Optum," the consulting and services unit of UnitedHealth, Akers says. Optum's fast-growing medical care arm has been aggressively buying doctors groups. It's acquiring DaVita Medical Group, which has 300 clinics in six states, for $4.3 billion.

Only about 2 percent of doctors work in practices owned by insurers, according to 2018 data from the American Medical Association. However, America's Health Insurance Plans, a lobbying group, says about 25 percent of its members are so-called integrated delivery systems, or organizations that include both payers and providers.

The new clinics from HCSC-owned Blue Cross & Blue Shield of Texas will be open to all Blue Cross members, as well as self-pay and Medicare patients. Sanitas is no stranger to the Blues. It already operates clinics with Florida Blue and Horizon Blue Cross & Blue Shield of New Jersey.

In 2018, Blue Cross members seen at South Florida Sanitas clinics—which opened in late 2015—had 32 percent fewer inpatient admissions, 34 percent fewer outpatient visits and 20 percent fewer emergency room visits compared with members who went to nonaffiliated clinics.

But HCSC isn't the only group looking to replicate such gains in Texas. In addition to traditional physicians groups, HCSC will be competing with Humana's Partners in Primary Care unit, which plans to open five Houston clinics for patients with Medicare and Medicare Advantage, in which private companies contract with the government to offer Medicare beneficiaries additional benefits, such as dental care and wellness programs. Walgreens and VillageMD are also opening primary care clinics next to five Houston-area drugstores.

Blue Cross dominates the Illinois market, but that's not the case in Texas. The Sanitas deal could help the insurer attract more members in the area, enabling it to more quickly grow its Medicare Advantage business.

Relatively high medical costs and more risk-averse doctors are among reasons HCSC, which also owns Blue Cross & Blue Shield plans in Montana, Oklahoma and New Mexico, says it chose to launch its new venture in Dallas and Houston.

Blue Cross of Illinois' experiment in Pullman differs from a traditional clinic. The Blue Door Neighborhood Center, which opened late last month, works to address social determinants of health, including homelessness and food insecurity, by connecting residents—regardless of insurance carrier—with community resources. It also offers seminars on nutrition, behavioral health, diabetes and other conditions, as well as exercise classes.

"We can't cure or solve all of the social issues that different community members are affected by," Blue Door director Laron Taylor says. However, "we can provide resources and information to Blue Door participants to ensure they get the assistance they need."

Blue Door is a sign of the times, says Lyndean Brick, CEO of Advis Group, a healthcare consultancy in Chicago. "There is clear recognition, finally, that when we address (social determinants), overall healthcare improves," she says. "All these other issues are really what cost the system incredible amounts of money. So while insurance companies are being good citizens when they do this, they're also looking at the need to continue to drive financial profits."

"Blue Cross joins the doctors practice party" was originally published in Crain's Chicago Business.