Health Care’s Intertwined Colossus

This article appears in the August 2023 issue of The American Prospect magazine. Subscribe here.

“Do I enjoy being king? Yes, that’s fun,” said Richard Burke in 1987. He had spent over ten years running a health care nonprofit in Minneapolis called Physicians Health Plan (PHP), and also UnitedHealth, the for-profit company that was managing it. In 1986, the nonprofit paid him $267,823; the for-profit, $418,342, not including stock options. The average income for the highest-earning doctors at the time (orthopedic surgeons) was just 16 percent of that. But Burke’s salaries weren’t what caused doctors at PHP to rebel.

In 1984, UnitedHealth used PHP to pay $600,000 toward United’s termination costs in a delayed stock offering. At the same time, PHP had quietly agreed to pay United 15 to 17 percent of its revenue for the next 25 years in exchange for future United stock. Doctors at PHP immediately protested, pointing at the conflicts introduced by interlocking boards that were both under Burke’s thumb. United went public with a shorter PHP management contract, but doctors had to pull the SEC documents to learn that, despite being salaried workers, there would be a 20 percent pay cut to cover PHP “bills.” The war waged on, with United filing suit against the outspoken doctors for defamation, and trying unsuccessfully to block their access to PHP audits. The doctors countersued, accusing PHP of financial impropriety. It culminated with a state-appointed mediator and settlement in 1987.

The controversy was enough to dislodge Burke from both PHP and United. Yet doctors still had the feeling that “Burke will be behind the curtains, pulling the levers.” And in many ways, they were right. Because up until last year, Burke chaired the board of directors of UnitedHealth Group, the largest and most powerful health care company in our country’s history.

Today, United is the fifth-largest public company in the U.S., bigger than JPMorgan Chase. Its insurance products serve 50 million members, more than the population of Spain, and its $186 billion health services division, Optum, has 103 million patients, more than Vietnam’s population. Earnings came to $28.4 billion last year, putting it in the top 30 of companies worldwide.

We think of United as an insurance company, but it has never really been exactly that. It began as a health management company, and it is now also the largest employer of physicians in the country, with 70,000 doctors across 2,200 locations. Underneath its corporate umbrella are pharmacies, primary care clinics, surgical centers, urgent care centers, home health agencies, hospice agencies, mental health agencies, a pharmacy benefit manager, an IT division, and plenty more. United has so many subsidiaries that 25 percent of its total revenues come from itself.

United even has a bank. Optum Bank is a way for consumers to manage health savings accounts, but the company’s latest financial service is a payday loan system called Optum Pay Advance for independent physician practices. While they wait for reimbursement from United for their claims but have to make payroll, doctors can get money from United to tide them over … with 35 percent interest. The other option is to succumb to the pressure and sell out to United, giving it an even greater margin.

PR-tested slogans insist United’s reach across the industry allows it to support patients along the “full continuum of care.” But instead, United seems committed to maintaining a level of control to extract profits off the backs of patients, independent providers, and the government. This evolution into a health care supermarket with interlocking conflicts of interest happened slowly but deliberately, bolting on businesses to its core like a Transformer, each one slipping by the antitrust authorities. United is the master of the rollup, with at least 28 purchases of physician groups and providers since 2010; annual revenue in the past decade has grown by more than $100 billion.

Other health care giants are imitating United’s vertical integration strategy. But it took time and practice for the company to perfect it, a function of policy adaptation, creativity, and ruthlessness. To understand UnitedHealth, and the business model that has eaten the health care system, you have to understand people like Richard Burke.

 “AS THE PRICE OF MEDICAL CARE MOUNTS, health insurance has become a necessity; but insurance premiums are becoming more expensive too, while benefits dwindle as rapidly as the costs of medical treatment increase. Money aside, the consumer’s major problem is finding his way about an increasingly impersonal, fragmented, irrationally arranged set of health services.”

While this could be a quote from today, it was written in The New York Review of Books in 1970, just a few years after Lyndon B. Johnson introduced federal health care insurance for the elderly and the poor. Medicare and Medicaid were necessary, but the new multibillion-dollar programs had few guardrails; doctors and hospitals saw them as guaranteed subsidies.

Combining the traditional fee-for-service model, where more tests and procedures equal more money for health care providers, with generous public insurance created unchecked financial opportunity. Between 1964 and 1969, doctor’s fees rose by 33 percent and hospital charges by 77 percent, spurring a debate about how to reorganize and fund the health care system.

The HMO Act in 1973 offered loans to encourage the development of health maintenance organizations. These were pitched to President Nixon as an alternative to fee-for-service, where members paid a subscription fee to access necessary care without additional costs. The HMO employed doctors directly—members could only visit those doctors—and covered the cost of care. In this setup, the costlier the treatments, the less money available for doctor salaries. In theory, the interests of insurers, looking to pay less for care, and doctors, hoping for higher income, would be aligned.

And here UnitedHealth was born. Founded by Richard Burke in 1974 and originally named Charter Med, it was set up to provide management services to HMOs. It was his way around state HMO laws, which said they must be run as nonprofit organizations advised by physicians. Burke did found nonprofit HMOs, like PHP and MedCenter in St. Louis Park. But he used Charter Med to handle overhead and doctor salaries.

Burke was essentially handed the opportunity by the “father of HMOs,” Paul Ellwood, who hired Burke as an insurance expert at InterStudy, the think tank that developed the concept. Ellwood blamed the nonprofit requirement in Minnesota’s HMO law for delaying necessary “management expertise.” Only decades later would Ellwood acknowledge how this shift, “where insurers instead of physicians managed care,” radically changed the medical system. “We didn’t recognize it as the birth of ‘managed care,’” he said in an oral history.

UnitedHealth was Richard Burke’s way around many state HMO laws, which said they must be run as nonprofit organizations.

From the beginning, HMOs attracted a certain profiteering element. In 1974, newspapers in Florida warned that the new law was a “boon to con men,” who set up “fake clinics.” There was also a power struggle between providers of health care and management middlemen like Burke. The American Medical Association (AMA) initially discouraged physicians from entering into certain contracts with non-physicians, which would hamper the spread of the new model. These principles were certainly self-serving, but they were also an attempt to ban the “corporate practice of medicine” and ensure that trained physicians, rather than business executives, were the ultimate deciders of patient care.

However, in 1979 the Federal Trade Commission, eyeing the potential cost-saving benefits of HMOs, ordered the association to change its guidelines, helping solidify HMOs and managed-care concepts in the heart of our health care system.

As the Minneapolis Star Tribune reported in the mid-1980s, Burke epitomized “the shift in the HMO movement away from its modest origins as a fledgling alternative to conventional insurance, and into an era of big-budget marketing, Wall Street financing and hefty rewards for professional managers in a field once dominated by doctors.” In 1980, Burke dropped 1,600 customers when canceling their plan with Control Data Corp. Burke was still the head of the nonprofit PHP at this time, and he said that the HMO lost roughly $600,000 in 1980 from the Control Data contract alone. He partially blamed the fact that Control Data’s pregnancy rate was double PHP’s other members, effectively saying that pregnancy was an unnecessary expense.

Burke also capitalized on the growing market in prescription drugs. In 1982, United introduced a drug formulary in its Twin Cities market to dictate which drugs its beneficiaries could use. Two years later, it did something no other insurer had done before: tie formulary coverage of brand-name drugs to rebates from manufacturers. This essentially invented an entirely new industry, known as pharmacy benefit managers (PBMs). Since Burke established his PBM, called Diversified Pharmaceutical Services, as its own business line, other HMOs started to hire United to do the same for them.

Giving a drug company a rebate in exchange for access to patients would normally be seen as a kickback. But in the 1990s, the government gave PBMs exemptions to anti-kickback laws. Since bigger list prices lead to bigger rebates, and bigger profits for PBMs, the result of this regime has been higher prices for patients and the preferencing of expensive brand-name drugs over more affordable generics.

Burke’s PHP scandal ended his reign at the top of UnitedHealth. But it didn’t end the business model of seeking growth at all costs, even when it created unavoidable conflicts of interest.

IN THE 1980S, AS STATES STARTED TO RELAX their nonprofit restrictions, UnitedHealth swallowed a number of HMOs, while divesting from plans that hurt its margins. Investors were undecided on investment opportunities from the budding sector, but United was rarely questioned. It had bulked up the non-HMO side of the business; annual revenue grew from $13 million in 1984, its first year as a publicly traded company, to $605.5 million in 1990.

A New York Times Marketplace reporter, Phillip Wiggins, identified three midsize HMOs in 1985 that he liked because of their “enormous growth potential.” United ended up buying all three.

In 1991, United named William McGuire, a former physician who had previously been brought in to run the company’s merger and acquisition team, as CEO. He quickly became the top-paid executive in Minnesota. McGuire’s first big move was to sell Diversified, United’s groundbreaking PBM, to SmithKline Beecham for $2.3 billion. He used those proceeds to buy up Metrahealth, a traditional fee-for-service insurer with over ten million customers that gave United a presence in the Northeast, Southwest, West Coast, and rural America. Metrahealth was itself the product of a merger of the health insurance businesses of MetLife and Travelers, consummated just a year earlier and executed by Kenneth Simmons, the man who took over for Burke as CEO of United in 1987 before handing the reins to his colleague McGuire.

Metrahealth managed insurance for 40 of the Fortune 100, including Chevron and General Motors. This was new territory for United. While it served 3.8 million customers comprehensive care, and more limited benefits to 27 million, most were from small- and medium-sized employers. The $1.65 billion deal solidified United as the nation’s largest provider of health care plans. The only person at United who made out badly as a result was VP Michael Mooney, who landed in prison seven years later for insider trading before the deal was made public.

McGuire stated explicitly that the company would be able to apply the managed-care techniques it developed through its HMOs to control costs, even on the fee-for-service side of the business. More importantly, the Metrahealth purchase gave United market power to demand lower prices from doctors and hospitals and undercut rival insurers, driving out competition that may have prioritized quality. As United wrote in a 1995 SEC filing, the acquisition would give the company “critical mass”—a “coded way of saying that the combined HMOs would be so dominant that employers and doctors would have no choice but to do business with them,” according to Pulitzer Prize–winning journalist George Anders in his 1996 book Health Against Wealth.

The HMO model, and its impact on patient care, stirred a backlash. One year after the Metrahealth merger, 400 bills regulating managed-care practices were introduced in state legislatures, all addressing horror stories of health plans denying treatment or incentivizing doctors to limit services. In 1995, Maryland prohibited HMOs from holding back a portion of doctors’ salaries until the end of the year, a practice which sent doctors the message that if costs were not to the HMOs’ liking, pay would be docked. Helen Hunt exemplified the national mood well when she yelled, “Fucking HMO bastard pieces of shit” in her Academy Award–winning performance in 1997’s As Good as It Gets, after her plan refused to cover a standard scratch test for her son. HMOs had wrapped their straitjackets so tightly around doctors and patients that they were now properly seen as a public enemy.

But as outrage mounted, the other trend of the 1990s was HMO consolidation. There was just $1 million in HMO transactions in 1989. By 1996, that grew to $13 billion. United’s plan to acquire its way to dominance was catching on. McGuire insisted that with bigger size came more resources to invest in IT, and the ability to create a kind of “Zagat’s guide” on doctors and hospitals.

United was briefly derailed by losses in the Medicare HMO side of the business. While HMOs have been a perennial option in Medicare, starting in 1982, the government began to offer a per capita rate for each enrollee, meaning HMOs could make more money by authorizing less care. United was one of many to jump into this business, winning a $4 billion-per-year contract in 1997 to provide supplemental benefits to the 5.7 million members of the American Association of Retired Persons who were on Medicare. That deal gave United a massive platform to market its HMO plans to seniors—a “big piece of business,” as McGuire described it.

But Congress’s 1997 budget agreement sharply curtailed payments to Medicare HMO plans. When United reported to Wall Street in August 1998 that some of its Medicare plans were losing money and that it would withdraw from a number of markets, investors dashed for the exits. Its stock dropped 28 percent in a single day, bringing plenty of other insurers down with it.

United regrouped, offsetting the lost revenue by raising premiums and buying companies like AmeriChoice, an insurer for people with Medicaid—the government-funded program for the poor—which had also opened up its program to managed care. The 2002 acquisition brought United’s total Medicaid beneficiaries to more than one million.

In 2002, 700,000 physicians brought a class action suit against United and nine other managed-care companies for fraud and racketeering. They argued that the insurers “systemically deny and delay payments due physicians and profit from the moneys wrongfully retained.” Litigation went on for years, and most insurers chose to settle, but United pressed on, with federal district court judge Federico Moreno, a George H.W. Bush appointee, later deciding to dismiss the charges in 2006. In his ruling, Judge Moreno wrote: “Those desiring changes in the way health care is provided in America must either look for remedies before Congress or allow the free market to dictate the results.”

IN 2003, CONGRESS ESTABLISHED WHAT TODAY IS KNOWN as Medicare Advantage, reversing the lower payments from 1997 and creating a strong foothold for managed-care plans in Medicare. Today, UnitedHealth is the largest supplier of Medicare Advantage plans in the country, with 26 percent market share as of 2020, when the government spent $317 billion on the program.

In the same law, McGuire saw another opportunity. Congress green-lit tax-advantaged “health savings accounts” (HSAs), so patients could use pre-tax money to pay medical expenses in high-deductible health plans. United created an internal bank to offer HSAs. The idea was that patients would be incentivized to shop around for the cheapest care, if not avoid doctors altogether. But United and other insurers also used managed-care techniques like limited physician networks in these plans to keep their own costs down once deductibles were hit. Today, United’s bank is the second-biggest provider of health savings accounts, with $20 billion under management and millions of users.

Wall Street couldn’t get enough of this experimentation. “Attending a UnitedHealth Group investor day is nothing like listening to any other company in the health insurance space,” Prudential analyst David Shove wrote about the company in 2004. “The management has BIG aspirations … This stuff is way beyond health insurance.”

The glory days were short-lived. A law firm hired to review the timing of employee stock options discovered that executives were routinely and illegally backdating securities to maximize returns. The number one abuser was William McGuire, who backdated “most or all” of the 44 million split-adjusted stock options he received over a decade. McGuire also received $5 million in cash bonuses that were only granted due to “errors in stock-based compensation accounting,” per a later Securities and Exchange Commission settlement agreement.

McGuire resigned in October 2006. He gave $600 million back to the company and was fined a record $7 million for his “ill-gotten gains” by the SEC, though he never admitted wrongdoing and retained $800 million from the scheme. It was the largest monetary penalty ever assessed against an individual executive in a backdating case; McGuire was also barred from being director or officer of any public company for ten years.

Stephen Hemsley, United’s president since 1999, took McGuire’s post as CEO. His promotion brightened the mood of financial analysts, who wanted the continuation of the 500 percent growth in UHG’s stock price since Hemsley joined. It was overlooked that Hemsley sprang from the same corporate culture. A 2008 shareholder lawsuit, led by the California Public Employees’ Retirement System, alleged that Hemsley had “personally offered backdated options to new hires.” United denied Hemsley’s role; the company settled the case for $895 million.

Once the McGuire news faded, Hemsley faced further inquiries from New York attorney general Andrew Cuomo about a United subsidiary called Ingenix, America’s largest provider of health care billing information. Ingenix ran a database that determined the industry benchmark rates that providers charge for a service, and in turn, what percent of that rate insurers would cover in “out of network” medical costs.

It seems impossible to have a health care system where an insurance company with a direct incentive to understate “reasonable” rates controlled the industry-standard benchmarking. But United eliminated any other options by acquiring essentially every billing company, while regulators sat and watched.

Cuomo alleged that Ingenix had been manipulating one of its nationwide databases for years; as a result, “real people get stuck with excessive bills and are less likely to seek the care they need,” he said after opening an investigation in 2008. In the investigation, regulators found that United knew that most doctor visits cost $200, but the Ingenix database reported that the typical rate was only $77. Insurers applied the contractual reimbursement rate of 80 percent, but covered only $62 for a $200 bill, leaving the patient with a $138 balance.

“This is like pulling back the curtain on the wizard of Oz,” said Cuomo. Ingenix shut down the database, but paid a meager settlement of $50 million to set up a nonprofit alternative. Renamed OptumInsight, the division generated nearly $15 billion in revenue last year, and served 80 percent of U.S. health plans. It boasts one of the largest claims data assets in the country, with information on 285 million people.

DEMOCRATS SUCCESSFULLY RAN THE ENTIRE 2008 ELECTION on finally delivering universal health care. United prepared for the moment in 2007 by purchasing The Lewin Group, a think tank it could deploy with “unbiased” research on health policy. While Democrats considered including a public option in what would become the Patient Protection and Affordable Care Act (ACA), The Lewin Group helped kill it by publishing studies claiming that a public option could eliminate the private insurance market.

After passage, United positioned itself to grab much of the $27 billion in subsidies Congress authorized in the Health Information Technology for Economic and Clinical Health (HITECH) Act for medical providers to start using electronic health records systems, designed to cut waste by streamlining testing and procedures. Despite continual failures in its technology, United’s software was first in line for the benefits.

In 2012, United purchased QSSI, just months after the company won a contract to build the government’s ACA website. Two congressmen wrote to the companies saying, “This raises serious questions about the conflicts of interest that may exist.” Not only could United position itself advantageously on the website, but there were questions around how the contract was given; Steve Larsen, a top regulator at the Centers for Medicare & Medicaid Services, which administers the government programs, was hired by United just after it had acquired QSSI.

United and its rivals also got Democrats to walk back plans to slash Medicare Advantage. The ACA had ordered cuts of $200 billion in payments to the private Medicare option over the next decade to help pay for the bill. But after a seven-figure lobbying blitz from the insurance industry, CMS announced it would increase Medicare Advantage rates.

UnitedHealth is the largest supplier of Medicare Advantage plans in the country, with 26 percent market share as of 2020.

A few years later, a 2011 whistleblower lawsuit was unsealed. In it, former United finance director Benjamin Poehling detailed how the company gamed the “risk adjustment” rules the government used to provide Medicare Advantage plans that had sicker patient populations with compensation. This was intended to prevent companies from cherry-picking patients, but it became a huge revenue opportunity for insurance companies.

United, Poehling alleged, would use data mining tools to identify patient diagnoses, and modify records to justify larger payments from the government. A senior with diabetes and kidney failure, for example, could justify thousands in extra dollars if United claimed the diabetes caused the kidney failure. An email from the CFO of Poehling’s division urged him and his colleagues “to really go after the potential risk scoring you have consistently indicated is out there … with huge $ opportunities. Let’s turn on the gas!”

Democrats tried to use other methods in the ACA to rein in insurers. They talked up a provision called the medical loss ratio (MLR) that forced companies to spend 80 to 85 percent of their premium revenue on patient care, so executives wouldn’t be able to pad their wallets as much. The provision might have been meaningful had the government been dealing with a traditional insurer with no other business lines, but it ignored that insurance companies had diversified well beyond insurance, encompassing physician practices, pharmacy benefit management, claims processing, and information technology.

At United, these ancillary businesses, which United combined under the rebranded Optum name, were growing at a much faster rate than its health plans. In 2011, Optum brought in $29 billion, just over 30 percent of what the insurance unit generated. By 2016, Optum posted $84 billion in revenue, more than 56 percent of the insurer’s haul.

The MLR also incentivized United to get bigger, because more premium revenue translated to more profit. As ProPublica explained so well: “It’s like if a mom told her son he could have 3 percent of a bowl of ice cream. A clever child would say, ‘Make it a bigger bowl.’”

But the biggest loophole in the MLR was this: It capped profits when it came to claims reimbursement at the point of service, but if a physician is a salaried employee of an insurer, their treatment doesn’t count against the MLR—meaning the insurer gets away with spending much less than 80 to 85 percent on patient care because it goes directly back to its own accounts. That created a powerful incentive for United to sign up doctors to work for them, and yet another reason to extend their tentacles further across health care.

Hemsley oversaw much of this growth by using the same M&A strategy as his predecessor, Bill McGuire, who by then was busy donating his $41 million collection of rare moths to the University of Florida. Before the ACA, Hemsley brought United into the market of its biggest adversaries through its 2007 acquisition of Sierra Health Services. While regulators focused on United’s growing market power in Nevada’s insurance market, they ignored that it also gained control of Sierra’s subsidiary Southwest Medical Associates, Nevada’s largest multispecialty physician group.

Joining United may have seemed shocking to most physicians then, but Sierra’s founder, an entrepreneurial cardiologist named Anthony Marlon, felt that centralization was most efficient. Physicians “did not initiate the changes, they were brought along into the 21st century kicking and screaming,” he said in 2009, when he was working as a consultant for United.

By the time Obamacare passed, a wave of mergers proliferated among providers. They were trying to get leverage over negotiations with insurers, using the new rules to maximize billing for services. But United’s simultaneous motivation to game the MLR by scooping up physician practices was facilitated by this provider consolidation, giving the company easy targets to choose from.

In 2011 and 2012, United made eight physician group acquisitions, one of which had over 15,000 doctor’s offices that would now be under United’s control. They capitalized on a rollup strategy: Buying small physician groups one at a time kept them under the Hart-Scott-Rodino Act threshold that would force them to inform government regulators. It made the deals difficult to detect until United achieved a dominant position.

There were other motivations to directly employ physicians. For years, physician practices have filed suit against United’s “downcoding,” which refers to when an insurer records that doctors provide less expensive care than they claim to avoid paying the doctor fairly. By owning the physician practices, United can more easily force individual physicians into unprofitable fee schedules and redefine what reasonable pay looks like. Without competition, United can set reimbursement rates to whatever they’d like, this time with no database for regulators to discover. Perhaps most important, United could steer beneficiaries to its internal physicians and block payments to others.

OptumHealth, which includes its physician groups, generated more than $71 billion in revenue last year. “It’s wearing people down,” one New York doctor said this year after United acquired his group, previously known as CareMount. “I love what I do, and I have no regrets that I became a physician and chose my specialty … But what we see is the administration running the group poorly, and patients continue to complain.”

“Now you want to leave, but you’re trapped.”

DOCTORS MAY FIND KINSHIP WITH INDEPENDENT PHARMACISTS, who are being forced out of business thanks to the practices of United and other insurers that have copied it. PBMs like United’s OptumRx consistently under-reimburse stand-alone drugstores and dictate which medications their patients can take.

Decades after helping invent PBMs, United led the charge to reconsolidate the industry under insurers when it took over Prescription Care Solutions as part of the acquisition of PacifiCare Health Systems in 2005. United rebranded it OptumRx, which, in 2015, bought the fourth-largest PBM, Catamaran, for $12.8 billion. Optum CEO Larry Renfro boasted that United Healthcare’s data mining capabilities “can all be combined with the pharmacy side,” setting it apart from its rivals.

Today, every one of the Big Three PBMs is under the ownership of a large insurer: United has OptumRx, CVS/Aetna has Caremark, and Cigna has Express Scripts. All of them can steer patients to their preferred pharmacies, like United does with OptumRx’s mail-order service, the fourth-largest pharmacy in America. Last year, OptumRx made just under $100 billion in revenue.Republicans, traditionally more sympathetic to Big Pharma, have elevated PBMs as the culprit behind escalating drug prices. In 2020, Donald Trump’s Health and Human Services Department tried to ban many of the kickbacks that drugmakers give these middlemen, but in three successive laws in 2021 and 2022, the rule was delayed, as part of an elaborate legislative maneuver to help “pay for” roads and bridges, gun safety implementation, and green-energy investments. That prescription drug users would ultimately pay the price was left undiscussed.

In 2021, United announced one of its most critical mergers, again through the OptumInsight arm. Change Healthcare was a claims integrity processor, which meant it served as the “mediator” between insurers and providers, allowing insurers to process claims from each patient visit and address any mistakes or disputes. Optum ran the same service as a competitor to Change, but it was important to have claims integrity processing remain independent from providers and insurers due to the clear conflict of interest if captured by one side—not to mention by one company that can then self-preference.

Jonathan Kanter, President Biden’s antitrust enforcer at the Department of Justice, saw the potential for harm and filed a lawsuit, but after Optum voluntarily divested a small asset, the case became harder to argue and the DOJ lost in court. As the Prospect warned back in 2021, the defeat and subsequent merger brings United “one step closer to creating their private single-payer system.”

United’s brawls with whistleblowers and disgruntled physicians have also not let up. In one notable case from 2020, Maxwell Ollivant, a United nurse practitioner for a skilled nursing home, revealed that the company’s Medicare Advantage plans “withheld or unduly delayed necessary services such as hospitalization,” refusing to transfer patients out of Optum facilities. This, Ollivant stated, enabled Optum to keep receiving payments for their care, while also saving United on hospital bills that the insurer would have to pay. In one case, according to the lawsuit, a nurse reported that a patient was “vomiting what she described … as appearing like ‘fecal material,’” yet Ollivant’s supervisor refused to send the patient to the hospital.

Ollivant also said in the suit that nurse practitioners’ compensation was tied to lowering hospitalization rates, and that the facilities would get dividends for keeping hospitalizations down. NPs were also required to push nursing home residents to agree to “do not resuscitate” rules that limited care if the patient stopped breathing. All of this aligned the wishes of providers with insurers, but at the expense of patients. Despite this evidence, the government declined to intervene in the case.

The medical loss ratio incentivized United to get bigger, because more premium revenue translated into more profit.

Today, many providers with enough financial backing to bring lawsuits are owned by the private equity industry. That gives United a convenient line of defense in the public, as private equity investors are known as profit-hunters themselves. Still, the arguments put forth by groups like TeamHealth resemble the complaints from the 700,000 doctors who took on the managed-care industry more than 20 years ago.

In July 2022, for example, TeamHealth filed a lawsuit accusing United of downcoding. In another case, judges in Florida decided that United was paying TeamHealth providers just 30 percent of what they deserved. As of December, United had forked over about $500 million to settle the allegations.

In a similar case, United removed multiple anesthesia practices throughout the country from its networks, a strategy that could “permanently reduce the alternatives for anesthesiology services in favor of UHG’s own employed anesthesiologists” and make the independent practices “more willing to be acquired,” said the American Society of Anesthesiologists.

When the COVID-19 pandemic put great financial pressure on health care providers, who had to focus all their resources on treating patients, the Health and Human Services Department enlisted Optum Bank to distribute $150 billion to hospitals and doctors to help cover expenses. This massive role in delivering money to providers likely helped pave the way for Optum Pay Advance, the company’s payday loan “service” for doctors. The initial offer came with a 35 percent interest rate attached. “You have to have steel balls to actually propose that publicly. I mean, you have to not have any moral compass at all,” said Dr. Alex Shteynshlyuger on the podcast An Arm and a Leg.

Payday lenders are viewed as immoral because of the high interest and fees they take from vulnerable customers. In United’s case, they’re not only doing that, but they’re generating the need among physician practices in the first place. According to data compiled by the Kaiser Family Foundation, United denies almost a quarter of all claims, making it very difficult for independent doctors to meet payroll.

United also has acquired one of the largest home health companies, LHC Group, and has offered to acquire another, Amedisys. This brings their consolidation full circle. Both LHC and Amedisys provide hospice care, giving United its own end-of-life outlet to send patients they cared for with their doctors, supplied with prescriptions, and insured throughout their lives. Hospitals have been accused of pushing costly patients to hospice care to save money; a vertically integrated health giant like United would have plenty of incentives to follow suit.

 “FUNDAMENTAL IMPROVEMENTS IN HEALTH CARE can be achieved only through a head on confrontation with our political and economic system,” that New York Review of Books article concluded in 1970. “In short, the health system should be re-created as a democratic enterprise, in which patients are participants (not customers or objects) and health workers, from physicians to aides, are all colleagues in a common undertaking.”

An examination of United’s reach and breadth makes those words even truer today. The company has pushed the envelope of what an insurer can be, treating the U.S. health care system as its personal well and striving to wring out every last dollar from every spigot it attaches.

Avoiding this profiteering is the reason why advocates have demanded bans on the “corporate practice of medicine.” By opening the floodgates to for-profit managed-care pioneers like United, the government has abandoned this principle. Now, United and its peers are embedded in the fiber of the health care system.

And along the way, United has internalized a critical fact about health care: If you sit on every side of the transaction, from doctors to insurers, drug payers to drug prescribers, lifesavers to end-of-life carers, you not only grow as the system grows, but you have the ability to steer the entire system inside your gaping maw. Conflict of interest is really the business model.

But the fact that United is essentially running a private single-payer system, with more customers than most nations have citizens, could also be the answer to the problems United creates. If you treat the entire network like a utility, you could plug those spigots so that there is no financial gain from gouging patients, pharmacists, physicians, and the government.

Under public utility regulation, premiums could be capped. The government could oversee United’s offerings so closely that it effectively serves as a public option. And conflicts of interest could be eliminated: separating the claims integrity process from the insurers and doctors, separating drug rebates from pharmacy benefit manager profits, and separating insurer financiers from owning health providers altogether.

This could be the only way to prevent the same problems that led doctors to rise up against Burke in the 1980s, which patients are paying for, both financially and with their health.