UnitedHealth wants to be Kaiser

What the company seems to be building is a software suite that will help it see, and reduce, the real costs of using hospitals.

UnitedHealth has tried many ways to control its cost chain.

Often it works through its Ingenix unit, which its press releases don't always identify as a subsidiary.

The link became public a few years ago when New York attorney general Andrew Cuomo called Ingenix a scheme to defraud.

Its database was low-balling the "usual and customary" charge on which out-of-network reimbursements were based, costing consumers billions.

As part of its New York settlement Ingenix had to set up an independent cost database and shut down the one it had built for itself and the rest of the industry.

Yesterday's news, that Ingenix was buying Picis, a hospital software firm focused on emergency rooms and intensive care, shows it's now trying a new strategy.

It's trying to be more like Kaiser. That is it wants to control the hospitals and clinics it pays money to and see that they're managed efficiently. Kaiser does this directly. It owns hospitals and clinics. UnitedHealth plans to do this indirectly, through Ingenix.

Through Ingenix, UnitedHealth has been on a health IT buying spree.

Last June it bought AIM Healthcare, whose software detects errors in health claims. In November it bought CareMetric, which handles hospital payments. In March it bought QualityMetrics, which measures patient outcomes. Now Picis.

Picis is important because the emergency room and intensive care units of a hospital are where costs can easily spiral out of control.

What the company seems to be building is a software suite that will help it see, and reduce, the real costs of using hospitals.

At the same time UnitedHealth is looking to cut the number of doctors and hospitals patients can see in its plans. It is profiling physicians and adding only those to its new networks who charge the least.

It doesn't take a rocket scientist to figure out those who stay in its plans will also be those using the software Ingenix is buying to gain visibility and limits on costs. Who needs a profile when your software is watching them in real time?

In other words, UnitedHealth wants to control its cost chain, even if it doesn't own it.

The moves are getting rave reviews on Wall Street. Profits are way up. The software diversification could also be behind industry moves to guarantee it can be paid for these "non-medical" costs. Lobbyists tell the press they want to pay for wellness. In fact UnitedHealth wants to pay for technology that does cost control.

Would United be doing this without health reform? I believe the answer is yes. It began its spending spree almost as soon as its previous cost control gambit, the "usual and customary" database game, was found out.

And from a public policy perspective we should ask, is this a bad thing? I think not.

Absent cost controls health care was becoming unaffordable for all but the wealthy, and the wealthy were being tempted by medical tourism. The costs of the poor were being shifted onto the middle class, and those who could afford to go without insurance.

Unless a common pool of health funds can defend itself through cost controls it can't survive. To many it looks like the devil's work, but in this case UnitedHealth is on the side of the angels.

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