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Colorado attorney general intervenes in $4.3 billion DaVita-UnitedHealth merger just as deal is finalized

DaVita Medical Group owns two large physicians’ groups in Colorado Springs totaling more than 100 doctors, meaning the sale would have affected patients in the region

Colorado Attorney General Phil Weiser at a news conference in March announcing a lawsuit against the Trump administration. (Jesse Paul, The Colorado Sun)
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Colorado’s attorney general has negotiated an agreement that he hopes will prevent thousands of Colorado Springs-area patients from paying higher prices and losing access to care after two health care giants merge.

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The deal involves UnitedHealth Group, which operates one of the biggest insurers in the state, and a couple of large doctors’ offices owned by Denver-based DaVita, which is best known for its separate kidney dialysis operations. DaVita announced in 2017 that it would sell its DaVita Medical Group to United for a price that eventually settled at $4.3 billion under an agreement finalized Wednesday.

DaVita Medical Group employs more than 750 primary care doctors around the country, including more than 100 at two practices in Colorado Springs. By merging with United, DaVita Medical Group’s doctors would combine with United’s much bigger Optum network, which is one of the largest employers of physicians in the country with more than 30,000 doctors.

And therein lies the concern for Colorado Attorney General Phil Weiser, a Democrat.

Through its UnitedHealthcare arm, United covers more than 16,000 people in Medicare Advantage plans in El Paso and Teller counties, making it the largest Medicare Advantage insurer in the area. (Medicare Advantage plans are private plans that administer Medicare coverage for seniors.)

Those members have in-network access to Optum doctors, and United had also negotiated exclusive access for its Medicare Advantage members at Centura Health facilities, including Penrose Hospital in Colorado Springs.

DaVita Medical Group, meanwhile, had previously negotiated an in-network agreement with Humana, United’s top competitor in the Medicare Advantage market in Colorado Springs, according to the attorney general’s office.

A rainbow hangs in the evening sky above downtown Colorado Springs in this undated photo. (Mark Reis, Special to The Colorado Sun)

By merging the two large doctors’ groups, United could have potentially amassed doctors for its members and left patients with Medicare Advantage plans through other companies out in the cold, the attorney general’s office feared.

“The combination of Optum and DaVita Medical Group would create significant market power with the ability and incentive to raise DaVita Medical Group’s price to other insurance companies that serve Medicare Advantage patients in the Colorado Springs Area,” Weiser said in a statement. “If left unchecked, the merger would result in reduced competition, higher health care costs, reduced benefits, and fewer choices for seniors.”

So Weiser intervened in the merger — initially slated to close last year — and succeeded in winning some guarantees from the company.

On Wednesday morning, Weiser’s office filed a complaint against the merger in district court in El Paso County and, simultaneously, filed the terms of a deal with the companies where they agree to preserve access to doctors for people who have Medicare Advantage plans with other companies.

United will give up its exclusive in-network agreement with Centura for at least three-and-a-half years. And Davita Medical Group will maintain its deal with Humana through at least 2020.

“We are pleased to have reached an agreement with the Colorado attorney general’s office and we continue working to complete the Optum/Davita Medical Group combination,” Courtney Culpepper, a DaVita spokeswoman, said in a written statement.

UnitedHealth Group did not immediately provide comment on Wednesday morning when contacted by The Colorado Sun.

Weiser, who worked as an antitrust attorney in the U.S. Department of Justice, has said he plans to make antitrust enforcement a key part of his tenure as Colorado’s chief law officer.

MORE: Democrat attorneys general are among Trump’s largest roadblocks. Where does Colorado’s Phil Weiser fit in?

His move to intervene in this merger is still unusual, though, because it came without the backing of other state attorneys general or the Federal Trade Commission, which signed off on the merger Wednesday with conditions.

The FTC required that UnitedHealth Group to divest DaVita Medical Group’s health care operation in the Las Vegas area to Utah-based Intermountain Healthcare. The regulatory agency was worried that intervention, competition in the Medicare Advantage market there would be reduced and costs would increase because UnitedHealth and DaVita combined would control 80 percent of the market.

Weiser’s intervention represents the collision of two increasingly strong trends — activism by state attorneys general on antitrust issues and the gobbling up of doctors’ offices by insurance companies.

Just last week, Weiser signed onto a multi-state lawsuit seeking to block the merger of telecom giants T-Mobile and Sprint — another case in which the FTC declined to intervene.

State attorneys general have also fought mergers in the energy and agriculture industries recently.

“Clearance from federal antitrust agencies may not be the last word over the next several years,” the law firm Gibson Dunn wrote on its blog back in 2017, looking at the trend of state antitrust actions.

On the other side of the collision is the increasing appetite of insurance companies to buy up doctors’ offices as a way to control costs for their members and boost profits, especially in the Medicare Advantage market.

Optum has been especially aggressive, snatching up several smaller physicians’ groups on its way to more than $100 billion in annual revenue, according to Becker’s Hospital Review.

The trend caused one commissioner on the FTC to speak out this year in favor of tougher reviews of health care mergers. Weiser said that’s something he will do, regardless.

“I am committed to protecting all Coloradans from anticompetitive consolidation and practices,” he said in a statement, “and will do so whether or not the federal government acts to protect Coloradans.”

Staff writer Jesse Paul contributed to this report.


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