In acquisition, Atrius rejected the biggest names in Massachusetts health care. Here’s what it all means.

The consultants Atrius hired agreed: The state’s largest independent physician group needed help.

Atrius Health Inc., the multi-site primary and specialty physician practice, had lost 70 physicians to competitors from 2019 to 2021. It was also hemorrhaging money — recording a $33.4 million operating loss in fiscal 2021 and projecting another $226 million in operating losses over the next three years.

The dire outlook and need for cash pushed Atrius to do something it had long been reluctant to do: be acquired by another organization.

A search for suitors in 2020 would ultimately pit some of the largest names in Massachusetts and national health care against one another, including the state’s largest insurer, Blue Cross Blue Shield of Massachusetts, several large health systems — Mass General Brigham, Tufts Medicine, and Beth Israel Lahey Health — and the country’s largest physician organization, Optum Care.

In the end, Optum won.

Experts say that the behind-the-scenes details, spelled out in court documents, are a microcosm of the jockeying for power and market share happening on the local and national scale. The result, signed off on by Attorney General Maura Healey and the state’s Supreme Judicial Court in April, will significantly expand the presence of a national insurer in Massachusetts and, experts warn, could raise health care spending for the state without improving quality.

“What we need in the commonwealth is to achieve the triple aim — better care, better health, and lower cost,” said Don Berwick, former Administrator of the Centers for Medicare & Medicaid Services. “If they end up raising costs, harming care, or not investing in population health, we will be missing an opportunity.”

Atrius’s model was a shining example of what health care could be. The organization has sought to care for patients for a predetermined reimbursement amount, which incentivized doctors to be creative to keep patients healthy and reduce overall health spending. The idea has been to partner with hospital systems and reinvest savings into the practice when patients don’t use health care.

Yet Atrius said in documents that as operational expenses increased, payments from insurers did not keep pace. Its model of caring for patients on a budget was under siege, as patients drifted to insurance products where doctors were paid for every individual service, making it challenging to control spending or deliver the right kind of care. Hospital consolidation also meant Atrius couldn’t negotiate lower rates with systems with which it did business. Those systems were also poaching its doctors, offering higher compensation and more job security.

The pandemic further upended Atrius’s business, canceling patient visits for half of its clinical sites for a time, thereby slashing revenues.

Experts said the fact that an independent, provider-run group couldn’t successfully keep down spending and remain financially viable is emblematic of the problems of Massachusetts’ health care market, which is dominated by large health systems that can charge higher prices as a result of their market share, and can outcompete smaller groups for clinicians.

Dr. J. Michael McWilliams, a professor of health care policy and medicine at Harvard Medical School, pointed out that the acquisition also exemplified how national trends of consolidation could undermine efforts to control health care spending, even in models that are supposed to reward providers for keeping patients healthy.

“That model, that was ideal, was no longer sustainable because the market structure got out of hand,” McWilliams said. “We can never reap the full rewards of payment reform without preserving competition.”

Atrius, which was created in 2015 from the merger of Harvard Vanguard and two other medical groups in the state, had eyed an acquisition in 2018 but ultimately retained its independence. Yet two years later, executives reached out to six of the biggest names in health care as it looked for an acquiring partner. All except California-based health system Kaiser Permanente submitted a bid.

In choosing Optum, the provider arm of UnitedHealth Group that also owns national insurer United HealthCare, Atrius said in a letter to employees that it would have access to more resources, including innovative technology and a broader range of healthcare expertise, services, and programs. Optum had already acquired Reliant Medical Group, a provider organization that had split off from Atrius, in 2018.

Atrius presented an attractive acquisition target. Berwick said health systems want to acquire physician groups, so the referrals can act as feeder systems into hospitals. McWilliams said insurers might be interested in acquiring a physician group as a defensive move to keep hospital systems from absorbing more doctors and raising prices.

Conversely, insurers may be interested in Atrius to generate higher profits. This can be accomplished by getting providers to record more diagnoses, which boosts reimbursements. Insurers also are required to spend a certain amount of the premium they collect on provider services. But if an insurer or its parent company owns a provider, the insurer can give its providers higher reimbursements, staying within that requirement while keeping revenue within the organization.

“It’s speculative, but it may be United sees an opportunity to code more intensively and increase payments for the existing patient population Atrius serves,” McWilliams said.

Although the bids of several of the largest local organizations showed that the local market was eager to expand, Atrius ultimately rejected all of the local players.

Those rejections say something about the strength of the state’s major health care players. Atrius dismissed advances by Mass General Brigham, the state’s largest health system, citing “insurmountable” regulatory hurdles.

Earlier this year, state regulators blocked MGB from building or expanding outpatient clinics in the suburbs and, in 2014, they rejected its attempted acquisition of South Shore Health. John McDonough, a professor at the Harvard T. H. Chan School of Public Health, said Atrius’s denial suggested that MGB’s reputation as a reliable acquisition partner had been damaged.

Atrius additionally said Tufts Medicine, formerly known as Wellforce, “lacked the financial wherewithal” to fund the capital needs without borrowing, and there was “the limited appeal of Wellforce’s hospitals to Atrius’ providers.”

McDonough said the rejection is emblematic of Tufts’s relatively weaker position in the market, pointing to the closure of Tufts Children’s Hospital.

Tufts Medicine chief executive Michael Dandorph pushed back against characterizations that the organization was financially weak, saying the groups never entered meaningful negotiations for Atrius to assess its financial wherewithal. He also voiced confusion as to why Atrius providers wouldn’t consider his network, given that several Atrius physicians have worked in Tufts Medicine hospitals for years.

Experts warned the shift for Atrius will move a nonprofit to a for-profit model, one with Wall Street’s interests top of mind.

“One of the best nonprofit delivery systems in the country — Atrius — is now owned by one of the most profit-driven organizations, UnitedHealth Group,” Berwick said. “United would claim quality is its business strategy, and it will succeed by giving the best care and won’t interfere with interests of clinicians or patients. But that remains to be proven.”

McDonough also pointed out that Atrius will become a for-profit, a departure for a state where most of the health care players are nonprofits.

In a statement, Optum spokesman Aaron Albright said the group was committed to its model of providing quality health care at lower costs and that spending had remained low for Reliant even after Optum’s acquisition.

Atrius too said it would remain focused on the local market.

“Atrius Health will continue to be locally led and remain committed to our same mission, vision, and values,” said Dr. Laura Lee, chair of Atrius Health’s board of trustees, in a statement.

Jessica Bartlett can be reached at jessica.bartlett@globe.com. Follow her @ByJessBartlett.