AUGUST 31, 2011, 1:40 P.M. ET.

UnitedHealth Buys California Doctor Group .

By ANNA WILDE MATHEWS

UnitedHealth Group Inc. will acquire the operations of a major southern California physician group, in the latest example of how lines are blurring between insurance companies and health-care providers.

The purchase of the management arm of Monarch HealthCare, an Irvine, Calif., association that includes approximately 2,300 physicians in a range of specialties, establishes United's Optum health-services unit as a formidable presence in the region. Optum had previously taken over the management arms of two smaller southern California groups, AppleCare Medical Group and Memorial HealthCare Independent Practice Association.

Monarch said in a statement that it "has agreed to enter a strategic relationship with Optum to support our physicians in providing high-quality, cost-effective patient care in Orange County, California."

In California, deals involving control of medical groups are structured to comply with rules that block most entities from directly employing practicing physicians. Typically, a company like Optum might buy non-clinical assets and sign a long-term management agreement with an independent practice association of physicians such as Monarch, according to Anthony Hunter Schiff, a health-care attorney who isn't involved in the transaction. A management agreement might involve things such as information technology or contract negotiations.

A price was not disclosed.

Through various structures, Optum owns a physician group in Nevada and holds stakes in others elsewhere in the country. Optum, a fast-growing arm of United that provides services such as pharmacy-benefit management and data services to help improve care, is separate from United's own health-insurance operation.

United has said in the past that providers acquired by Optum will not work exclusively with United's health plan, and will continue to contract with an array of insurers. But in one sign of the potential complications that might ensue, Monarch is currently in an arrangement with United competitor WellPoint Inc. to create a cooperative "accountable-care organization" aimed at bringing down health-care costs and improving quality.

Many insurers are investing in providers, though not all plan to make those operations available to other health plans. WellPoint recently closed its acquisition of senior health provider and Medicare Advantage plan CareMore Health Group, which is also based in southern California. Last December, Humana Inc. bought Concentra, which has urgent- and occupational-care clinics. In June, Pittsburgh insurer Highmark Inc. struck a deal to buy West Penn Allegheny Health System, a five-hospital operator that was struggling financially.

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