Minnesota-based managed care company UnitedHealth Group Inc. has struck a deal to buy the management arm of Irvine-based Monarch HealthCare, A Medical Group Inc.
A purchase price was not disclosed.
UnitedHealth Group already has a large operation in Cypress, with more than 3,000 employees. That operation stems from Un-itedHealth’s purchase of Cypress-based PacifiCare Health Systems Inc. in 2005.
Monarch’s management arm includes a network of about 2,300 doctors in Southern California, the majority of whom are in Orange County. The Business Journal estimates the privately held company has about $200 million in yearly revenue.
Monarch will fall under UnitedHealth’s Optum health services business unit, which is separate from UnitedHealth’s insurance operation.
Optum, which also provides pharmacy benefit management and healthcare data, had previously taken over the management arms of two smaller doctors’ groups in Southern California, including the Mem-orial HealthCare Independent Practice Association in Signal Hill.
Strategic Relationship
The agreement with UnitedHealth Group is “a strategic relationship with Optum to support our physicians,” Bart Asner, Monarch’s chief executive, said in a report published on industry magazine Modern Healthcare’s website.
Optum shares Monarch’s commitment to bringing patients, doctors, hospitals and payers closer together, Larry Renfro, Optum’s chief executive, told the website.
UnitedHealth’s interest in Monarch could be linked to healthcare reform, which has fueled a trend toward integration and consolidation among doctors and hospitals. That has prompted increased interest among managed care companies looking to make deals with them.
WellPoint Inc., an Indianapolis-based competitor to UnitedHealth, just wrapped up an $800 million buy of CareMore Health Group, a Downey-based company that operates a Medicare Advantage healthcare plan and networks of clinics in California, Arizona and Nevada.
Humana Inc. of Louisville, Ky., bought Concentra Corp., a Dallas-based operator of urgent and occupational-care health clinics, for $790 million last December.
California state law prevents most entities from directly employing practicing doctors.
Because of that, a company such as Optum might buy non-clinical assets and sign long-term management deals with independent practice associations of doctors such as Monarch, Anthony Hunter Schiff, a partner in Los Angeles law firm Schiff and Bernstein, APC, said in a recent article in The Wall Street Journal.
Project
Monarch, in the meantime, is working on a project with a WellPoint unit centered on reducing healthcare costs and improving the health of patients.
Last year, Monarch said that it would create an “accountable care organization” with Torrance-based medical group HealthCare Partners and Anthem Blue Cross of Cal-ifornia, a Woodland Hills-based WellPoint subsidiary.
Accountable care organizations are de-signed to encourage doctors, hospitals and insurers to work together to cut healthcare costs and provide financial rewards to do so.
If doctors meet certain quality measures and deliver healthcare that costs lower than set prices, the group will share in a portion of the savings, Jay Cohen, Monarch president and chairman, said in an interview last year.
UnitedHealth has said that any doctors’ groups acquired by Optum won’t work exclusively with its insurance plan, and that it will continue to contract with a range of insurance carriers.
Monarch came about in 1994 through the combination of three medical practice associations that were affiliated with Mission Hospital in Mission Viejo, Saddleback Memorial Medical Center in Laguna Hills and South Coast Medical Center (now Mission Hospital Laguna) in Laguna Beach.
The company had gotten buyout offers through the years, including some during the late 1990s heyday of MedPartners Inc., the Birmingham, Ala.-based company that once was the country’s largest doctor group operator.
“We said ‘no,’ ” Asner said in an earlier interview.
MedPartners eventually sold its struggling doctors’ groups to focus on its mail-order pharmacy business. It changed its name to Caremark Rx Inc., and was bought in 2007 by CVS Corp., the Woon-socket, R.I.-based drugstore chain.
