Optum’s expansion into ambulatory surgery centers (ASCs) tends to raise prices for competing insurers without shifting patient referrals toward those facilities.
Optum – a division of UnitedHealth Group (NYSE: UNH) with an expansive, nationwide ASC footprint – was the subject of a recent analysis in Health Affairs. Authors examined two central questions: whether acquired physician practices shifted referrals from hospital outpatient departments (HOPDs) to ASCs, and whether Optum’s ASC acquisitions affected commercial prices.
On referrals, the authors found no evidence that Optum ownership changed physician behavior after the fact. On pricing, they found a clear and sustained increase in the prices charged to competing insurers.
“Our analysis of twenty-one Optum-acquired physician practices and their controls revealed significant differences in referral patterns before acquisition,” the authors wrote. “Before acquisition, practices acquired by Optum directed a substantially higher proportion of outpatient surgical procedures to ASCs, rather than HOPDs, compared with control practices.”
Rather than using physician ownership to drive ASC volume, the company appears to be focused on which ASCs it buys, the analysis concludes.
Analyzing Medicare fee-for-service claims from 2013 through 2021, the researchers found that Optum’s acquisitions tend to focus on physician practices that already demonstrated a tendency to leverage ASCs.
In fact, the authors wrote that acquired practices referred 5.1 percentage points more patients to ASCs than expected prior to acquisition. Referral patterns did not meaningfully change after the purchase and after adjusting for patient characteristics.
“Postacquisition, there was no significant shift in the site of care,” the authors wrote.
The pricing story looked very different.
Using commercial claims data from 2015 through 2018, the researchers examined what happened after Optum acquired ASCs through its 2017 purchase of Surgical Care Affiliates – today more commonly known as SCA Health. The data excluded UnitedHealthcare, focusing instead on prices paid by competing insurers.
For the 24 acquired ASCs in the sample, prices rose by 11% per procedure (an average of $239) relative to matched control facilities. The increase emerged within two quarters of the acquisition and persisted through the end of the study period.
Optum did not increase horizontal ASC concentration in these markets, the authors noted. As a result, they attributed the effect to vertical integration — ownership of the insurance company, the ASC and the physician practice — rather than consolidation.
“The price increase likely stemmed from the new negotiating power of [Optum’s] integrated physician and facility network,” they wrote.
The price increases were driven primarily by professional fees, which rose only when physicians were employed by Optum. In contrast, facility fees rose similarly for procedures performed by both Optum-employed and independent physicians practicing at Optum ASCs.
“This pattern, where price gains were concentrated in the professional fees of Optum’s own physicians, is consistent with bundled negotiation enabled by vertical integration,” the authors wrote.
Also, the price increases were not uniform across markets.
“We found that these price increases were concentrated in markets where the acquired ASCs had a high existing horizontal market share or a high degree of vertical integration with co-located physician practices,” the authors wrote.
Across the 24 markets studied, the authors estimated that higher prices for just seven common procedures translated into roughly $10 million in additional annual spending. However, because those seven procedures accounted for only about 15% of ASC volume, the total spending impact across all services could exceed $67 million per year.
“These costs are likely passed on to consumers through higher premiums and increased out-of-pocket spending,” the authors wrote.
The analysis also covered regulatory policy implications, with authors arguing that regulators focusing narrowly on horizontal concentration may miss the effects of vertical integration on pricing.
The authors acknowledged key limitations of the analyses, such as small sample sizes and a short postacquisition follow-up period.
Nonetheless, they argue the data strongly support the conclusion that in this case, ownership structure — not referral patterns — drove pricing power and negotiation leverage for ASCs.
