Bloomberg Law
Jan. 26, 2023, 10:35 AM

Employer Health Plans Face Competition for High-Quality Doctors

Sara Hansard
Sara Hansard
Senior Reporter

Commercial health plans offered by employers will have to do more to hold on to high-quality medical providers who are being attracted to high-paying Medicare Advantage plans, the head of JPMorgan Chase’s health-care business said.

In some areas where Morgan Health operates, it’s encountering provider groups that are more interested in contracting with Medicare Advantage than with commercial plans because the providers are paid better for providing high-quality services in Medicare Advantage, Morgan Health CEO Dan Mendelson said in an interview.

Employer-sponsored commercial plans, which cover about 157 million people in the US, typically pay higher rates for health-care services than Medicare’s fee-for-service system, which pays for each individual service. But Medicare Advantage, a private plan alternative to traditional Medicare, is rapidly gaining popularity, covering more than 28 million people in 2022.

“Right now, Medicare Advantage plans are paid on the basis of quality,” factoring in such things as keeping patients’ blood pressure, cholesterol, and blood sugar under control, Mendelson said. That aligns keeping patients healthy with the profitability of the health plan, he said. “You can’t operate a profitable Medicare Advantage plan without doing well on quality.”

Medicare Advantage is based on a value-based care type of system that rewards practitioners for providing high-quality care that helps keep patients healthy and out of the hospital. It’s a shift from traditional fee-for-service payments based on the volume of individual services performed.

Employers have long struggled to curb soaring health-care expenses. They’ve lagged in offering value-based care, which seeks to control costs by providing high-quality care.

High-quality providers meet quality measurements, such as controlling patients’ blood pressure, diabetes, and cholesterol, to improve patients’ health, Mendelson said.

Obstacles for Employer Plans

Employer plans, constantly facing health-care costs that have long outpaced inflation, now could struggle to add high-quality providers to their provider networks.

In the short run, health plans might have to increase payments to primary care providers, Mendelson said.

“There are some medical groups that are doing a lot of business with Medicare Advantage plans, and the Medicare Advantage plans share the economics back with the medical groups,” which can be “very lucrative” for the providers, Mendelson said.

If a medical group is doing really well on Medicare Advantage and doesn’t have the same incentives in a commercial plan, the commercial plan could be at a competitive disadvantage, he said.

Mendelson pointed to the Columbus, Ohio, area, where JPMorgan has seen this dynamic play out.

Columbus is where Morgan Health, started by the giant investment firm in 2021 with the aim of selling services to employer health plans, has invested in apree health to provide primary care to JPMorgan employees and other workers in that area.

apree health uses a value-based care approach, which it combines with primary care clinics used by employees. A key feature of apree health, which contracts with Central Ohio Primary Care, is that Morgan Health pays a “capitated” fee per member per month, apree health CEO Donald Trigg said in an interview. That removes provider incentives to increase the volume of services to get higher payments.

“Our view is that purchasers are looking for an integrated solution,” and they want to contract for “total outcomes,” he said. But, he added, “We’re early in terms of creating a consistent way in which purchasers can think about contracting for value, or contracting for total cost of care.”

It’s difficult for employers to adopt value-based care models because “it’s hard to do kind of half way,” Marla McLaughlin, associate chief medical officer at apree health, said in an interview. “To do it you have to go all in and align financial incentives: the financial incentives for JPMorgan, for apree health,” as well as for the health-care providers and patients, she said.

That’s “a big shift for people,” McLaughlin said. “I think that’s why it’s been slower to come to commercial than it needs to.”

Popular With Physician Practices

Chet Speed, chief policy officer for the American Medical Group Association, which represents health systems and doctor-owned groups, said in an interview that “Medicare Advantage is a very popular program with the AMGA membership.”

The program provides a “stable, financial platform within Medicare,” he said. About 175,000 doctors are in the 400-plus groups that are members of the AMGA.

The AMGA’s 2022 risk survey found that 53% of its members’ revenues are from private commercial payers, Speed said.

He said medical providers aren’t bypassing commercial payers and only serving Medicare Advantage plans.

Nevertheless, there are fewer value-based arrangements at the commercial level than in the Medicare programs, Speed said.

In 2022, only 17% of member’s revenue payments came from commercial shared-risk arrangements, in which providers must meet measures for such things as diabetes care or cancer screenings to share in savings, and payments are reduced if the measures aren’t met, Speed said.

Another 12% of member revenues came from participation in arrangements under which the providers only received upside payments for meeting the measures without taking on risk for reduced payments, he said.

Pandemic Delays Investments

The Covid-19 pandemic delayed many from taking more risk, Speed said.

“They were losing so much money, particularly in the first eight months of Covid, they did not have the revenues to invest in value strategies, which are very expensive,” he said.

Starting accountable care organizations, which are based on total care costs, requires multi-million dollar initial investments, he said.

In addition, value-based arrangements may have narrower networks, Speed said.

“If you talk to a large employer HR department, what they want is their employees to have the widest access to providers possible,” Speed said. “That’s what keeps the employees happy.”

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editors responsible for this story: Brent Bierman at; Cheryl Saenz at