A reader (Don Moyle) asked me to “elaborate on a comment I made about “…my skepticism re United HealthGroup”. The comment was in reference to Matthew Holt’s observation that “Empire BCBS has led the way (in) putting its members’ patient records online. It looks like the rest of the Wellpoint organization (which bought Empire last year) will adopt the technology this year. That will force competitors like United to follow suit.”
United was known as the most respected managed care firm in the nation when I joined it as a result of its acquisition of MetraHealth (the short-lived result of the merger of MetLife and the Travelers’ group health operations). I was excited to be part of this great company, but quickly came to find out that the emperor’s clothes were, at the least, quite threadbare.
As an ex-United employee, I had first-hand knowledge of some of the company’s practices (or lack thereof). Example – while their accreditation required the company to recredential providers every two years, at least one of their larger midwest plans had not recredentialed for four years (this was back in the mid-nineties; perhaps they have begun recredentialing since then…).
On the clinical management side, there did not appear to be much going on. Their work was remarkably similar to the utilization review and case management that had been conducted at the Travelers while I was running product development for the Travelers’ Health Company.
What United did do quite well was exercise market power in contracting with providers. Their market share in areas such as St. Louis and Chicago enabled UHC (now known as UHG) to drive down provider prices, thus giving them a competitive advantage (lower cost of goods sold, aka lower medical loss ratio (MLR).
Watching United today reveals not much has changed; United still seeks dominant market share; have publicly disavowed pre-cert and medical management; and are not the leading light in any of the promising new areas such as electronic member records, physician profiling, etc. In fact, they appear to be well behind their competitors in some of these (see Aetna for member education, Wellpoint for electronic member records).
That is not to say that UHG will not succeed, is not a dominant player in the industry, and has not done well. What I’m skeptical about is UHG’s ability to really manage care any better than anyone else. They can exercise buying power, but as the market continues to evolve to oligarchy status, their buying power will not be sufficient.
Don, that may be more than you wanted…
Jan
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C’mon Joe, you’ve missed the real place where UHG leads the league by a mile — it’s called executive compensation! http://hcrenewal.blogspot.com/2005/05/how-can-1248-million-year-ceo-make.html
my bad. perhaps they’re taking all those medical management dollars and allocating them to executive comp. I didn’t stick around long enough to get any…
Actually, where United excels probably more than any other plan is in acquisitions. They are very good at calculating what an acquisition will bring them in terms of cash flow, market share, etc., and then they are good at making the integration work. Much of the time, of course, they do this by not actually doing much integrating (as with MAMSI and Oxford) at first.
Haven’t we all been a little bit awed by United’s willingness to pay record prices per member when other plans shied away, and then their ability to make the deal improve their bottom line?
While I don’t see much evidence that United is a progressive force in healthcare, they certainly have some of the best economic minds.
Excellent analysis, Joe. I also have two observations about United, one of which you can, perhaps, confirm.
First off, consistent with their practice of pushing hard to keep down their provider reimbursements, they are the last holdout in the Cincinnati-area provider lawsuit; they and their recent acquisition, PacifiCare, join Coventry as final holdouts in the Miami provider class action; and in the Kansas City provider lawsuit, they will likely be a holdout as well, where Aetna, CIGNA and others have already settled. A healthcare payor that would rather pay the lawyers than the docs? Hmmmm.
The second observation, which perhaps you can offer some input on, is that UHG seems to have a cultural bias against publicity. Their PR apparatus is creaky at best, and functions like a secret society at worst. I’ve observed signs of improvement in the last year, but I attended a speech by Dr. McGuire, and found a tactful way to pose a question to him about this issue. His answer, and I’m paraphrasing, is that the company doesn’t talk to the media because the media is biased in favor of single-payor and gets it all wrong anyway. Can you add anything about this?
Rick – when I was there which was quite a bit ago United was definitely publicity-adverse. As McGuire is still there, my bet is nothing has changed. He is also somewhat reclusive, or introverted, or just not that interested in talking to people. That’s not a negative, but consistent with the company’s external image.
I can tell you that their experience with pharma rebating publicity a couple years ago caused much thunder and lightning in the corporate offices. Perhaps their view is “there is no good publicity”.
If United spentone-tenth of what Nike does on branding they’d own the industry.
Having also been a part of the Travelers to MetraHealth to United transformation, there’s no question that they are a much different company today – and better. The investment community clearly approves of the way that United invests their resources, and at the end of the day customers do benefit from working with growing, profitable companies. I think UHG has a bright future.
I haven’t had a lot of experience in markets where United is a big player (California/Washington) but I have been impressed with the products offered by Ingenix – one of their companies. Any sense whether United is leveraging the expertise @ ingenix as fully as they could?
I hope I didn’t sound negative about them earlier. As an investor I’d be with them for the long haul, and my Mom is on their AARP Med Supp plan and is very happy. She’s debating between AARP’s Part D plan and Humana’s. I also have in-laws working for their Golden Rule subsidiary out in Lawrenceburg.
I think very highly of Ingenix, and their strategy of selling Ingenix products and services to competitors is a sound one.
But as Joe correctly observes, UHG is, at its core, all about the money. The clinical side is an afterthought, as demonstrated by the ham-handed rollout of their Performance PPO in St. Louis and elsewhere. It was, and still is, a promising product. But the communication about it (or lack of) and the way they just dropped what looked like an unfinished product on providers was just wrong. Really shot themselves in the foot. Performance was an Ingenix-driven product.