Private equity rolls up veterinary practices, with predictable results

https://mailchi.mp/da8db2c9bc41/the-weekly-gist-april-23-2021?e=d1e747d2d8

Amazon.com: The Private Equity Playbook: Management's Guide to Working with Private  Equity (9781544513263): Coffey, Adam: Books

Given regulatory barriers and structural differences in practice, private equity firms have been slow to acquire and roll up physician practices and other care assets in other countries in the same way they’ve done here in the US. But according a fascinating piece in the Financial Times, investors have targeted a different healthcare segment, one ripe for the “efficiencies” that roll-ups can bring—small veterinary practices in the UK and Ireland.

British investment firm IVC bought up hundreds of small vet practices across the UK, only to be acquired itself by Swedish firm Evidensia, which is now the largest owner of veterinary care sites, with more than 1,500 across Europe. Vets describe the deals as too good to refuse: one who sold his practice to IVC said “he ‘almost fell off his chair’ on hearing how much it was offering. The vet, who requested anonymity, says IVC mistook his shock for hesitation—and increased its offer.” (Physician executives in the US, take note.) IVC claims that its model provides more flexible options, especially for female veterinarians seeking more work-life balance than offered by the typical “cottage” veterinary practice. 

But consumers have complained of decreased access to care as some local clinics have been shuttered as a result of roll-ups. Meanwhile prices, particularly for pet medications like painkillers or feline insulin, have risen as much as 40 percent—and vets aren’t given leeway to offer the discounts they previously extended to low-income customers. And with IVC attaining significant market share in some communities (for instance, owning 17 of 32 vet practices in Birmingham), questions have arisen about diminished competition and even price fixing. 

The playbook for private equity is consistent across human and animal healthcare: increase leverage, raise prices for care, and slash practice costs, all with little obvious value for consumers. It remains to be seen whether and how consumers will push back—either on behalf of their beloved pets, or for the sake of their own health.  

Doctor on Demand, Grand Rounds merge to create multibillion-dollar digital health company

Dive Brief:

  • Virtual care company Doctor on Demand and clinical navigator Grand Rounds have announced plans to merge, creating a multibillion-dollar digital health firm.
  • The goal of combining the two venture-backed companies, which will continue to operate under their existing brands for the time being, is to integrate medical and behavioral healthcare with patient navigation and advocacy to try to better coordinate care in the fragmented U.S. medical system.
  • Financial terms of the deal, which is expected to close in the first half of this year, were not disclosed, but it is an all-stock deal with no capital from outside investors, company spokespeople told Healthcare Dive.

Dive Insight:

The digital health boom stemming from the coronavirus pandemic resulted in a flurry of high-profile deals last year, including the biggest U.S. digital health acquisition of all time: Teladoc Health’s $18.5 billion buy of chronic care management company Livongo. Such tie-ups in the virtual care space come as a slew of growing companies race to build out end-to-end offerings, making them more attractive to potential payer and employer clients and helping them snap up valuable market share.

Ten-year-old Grand Rounds peddles a clinical navigation platform and patient advocacy tools to businesses to help their workers navigate the complex and disjointed healthcare system, while nine-year-old Doctor on Demand is one of the major virtual care providers in the U.S.

Merging is meant to ameliorate the problem of uncoordinated care while accelerating telehealth utilization in previously niche areas like primary care, specialty care, behavioral health and chronic condition management, the two companies said in a Tuesday release.

Grand Rounds and Doctor on Demand first started discussing a potential deal in the early days of the coronavirus pandemic, as both companies saw surging demand for their offerings. COVID-19 completely overhauled how healthcare is delivered as consumers sought safe digital access to doctors, resulting in massive tailwinds for digital health companies and unprecedented investor interest in the sector.

Equity funding in digital health globally hit an all-time high of $26.5 billion in 2020, according to CB Insights, with mental and women’s health services seeing particularly fast growth in investor interest.

Both companies reported strong funding rounds in the middle of last year, catapulting Grand Rounds and Doctor on Demand to enterprise valuations of $1.34 billion and $821 million respectively, according to private equity marketplace SharesPost. Doctor on Demand says its current valuation is $875 million.

The combined entity will operate in an increasingly competitive space against such market giants as Teladoc, which currently sits at a market cap of $31.3 billion, and Amwell, which went public in September last year and has a market cap of $5.1 billion.

​Grand Rounds CEO Owen Tripp will serve as CEO of the combined business, while Doctor on Demand’s current CEO Hill Ferguson will continue to lead the Doctor on Demand business as the two companies integrate and will join the combined company’s board.

Large health systems band together on monetize clinical data

https://mailchi.mp/41540f595c92/the-weekly-gist-february-12-2021?e=d1e747d2d8

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Fourteen of the nation’s largest health systems announced this week that they have joined together to form a new, for-profit data company aimed at aggregating and mining their clinical data. Called Truveta, the company will draw on the de-identified health records of millions of patients from thousands of care sites across 40 states, allowing researchers, physicians, biopharma companies, and others to draw insights aimed at “improving the lives of those they serve.” 

Health system participants include the multi-state Catholic systems CommonSpirit Health, Trinity Health, Providence, and Bon Secours Mercy, the for-profit system Tenet Healthcare, and a number of regional systems. The new company will be led by former Microsoft executive Terry Myerson, who has been working on the project since March of last year. As large technology companies like Amazon and Google continue to build out healthcare offerings, and national insurers like UnitedHealth Group and Aetna continue to grow their analytical capabilities based on physician, hospital, and pharmacy encounters, it’s surprising that hospital systems are only now mobilizing in a concerted way to monetize the clinical data they generate.

Like Civica, an earlier health system collaboration around pharmaceutical manufacturing, Truveta’s launch signals that large national and regional systems are waking up to the value of scale they’ve amassed over time, moving beyond pricing leverage to capture other benefits from the size of their clinical operations—and exploring non-merger partnerships to create value from collaboration. There will inevitably be questions about how patient data is used by Truveta and its eventual customers, but we believe the venture holds real promise for harnessing the power of massive clinical datasets to drive improvement in how care is delivered.

Haven, the Amazon-Berkshire-JPMorgan venture to disrupt health care, is disbanding after 3 years

https://www.cnbc.com/2021/01/04/haven-the-amazon-berkshire-jpmorgan-venture-to-disrupt-healthcare-is-disbanding-after-3-years.html

Haven, the Amazon-Berkshire-JPMorgan venture to disrupt health care, is disbanding  after 3 years

KEY POINTS

  • Haven began informing employees Monday that it will shut down by the end of next month, according to people with direct knowledge of the matter.
  • Many of the Boston-based firm’s 57 workers are expected to be placed at Amazon, Berkshire Hathaway or JPMorgan Chase as the firms each individually push forward in their efforts, the people said.
  • One key issue facing Haven was that each of the three founding companies executed their own projects separately with their own employees, obviating the need for the joint venture to begin with, according to the people, who declined to be identified speaking about the matter.

Haven, the joint venture formed by three of America’s most powerful companies to lower costs and improve outcomes in health care, is disbanding after three years, CNBC has learned exclusively.

The company began informing employees Monday that it will shut down by the end of next month, according to people with direct knowledge of the matter.

Many of the Boston-based firm’s 57 workers are expected to be placed at AmazonBerkshire Hathaway or JPMorgan Chase as the firms each individually push forward in their efforts, and the three companies are still expected to collaborate informally on health-care projects, the people said.

The announcement three years ago that the CEOs of Amazon, Berkshire Hathaway and JPMorgan Chase had teamed up to tackle one of the biggest problems facing corporate America – high and rising costs for employee health care  – sent shock waves throughout the world of medicine. Shares of health-care companies tumbled on fears about how the combined might of leaders in technology and finance could wring costs out of the system.

The move to shutter Haven may be a sign of how difficult it is to radically improve American health care, a complicated and entrenched system of doctors, insurers, drugmakers and middlemen that costs the country $3.5 trillion every year. Last year, Berkshire CEO Warren Buffett seemed to indicate as much, saying that were was no guarantee that Haven would succeed in improving health care.

Shares of UnitedHealth GroupHumana and CVS Health each climbed more than 2% after the Haven news broke.

One key issue facing Haven was that while the firm came up with ideas, each of the three founding companies executed their own projects separately with their own employees, obviating the need for the joint venture to begin with, according to the people, who declined to be identified speaking about the matter.

Coming just three years after the initial rush of fanfare about the possibilities for what Haven could accomplish, its closure is a disappointment to some. But insiders claim that it will allow the founding companies to implement ideas from the project on their own, tailoring them to the specific needs of their employees, who are mostly concentrated in different cities.

The move comes after Haven’s CEO, Dr. Atul Gawande, stepped down from day-to-day management of the nonprofit in May, a change that sparked a search for his successor.

Brooke Thurston, a spokeswoman for Haven, confirmed the company’s plans to close and gave this statement:

The Haven team made good progress exploring a wide range of healthcare solutions, as well as piloting new ways to make primary care easier to access, insurance benefits simpler to understand and easier to use, and prescription drugs more affordable,” Thurston said in an email.

Moving forward, Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. will leverage these insights and continue to collaborate informally to design programs tailored to address the specific needs of our individual employee populations and locations,” she said.

Physicians acquire 35-hospital health system from private equity firm

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/physicians-acquire-35-hospital-health-system-from-private-equity-firm.html?utm_medium=email

Sources: Boston-based Steward Health Care System to relocate ...

The 35-hospital system announced June 2 that a management group of Steward physicians led by the company’s CEO and founder acquired a controlling interest of Steward from Cerberus Capital Management, a private equity firm. The physicians will control 90 percent of the company and Medical Properties Trust will maintain its 10 percent stake. 

“The COVID-19 global pandemic has exposed serious deficiencies in the world’s health care systems, with a disproportionate impact on underserved communities and populations,” Steward CEO and Founder Ralph de la Torre, MD, said in a news release. “We believe that future health care management must completely integrate long-term clinical needs with investments. As physicians first, we will focus on creating structures and timelines that meet the long-term needs of our communities and the short-term needs of our patients.”

Steward was founded more than a decade ago, and Cerberus invested in the company in 2010. Today, Steward has 35 hospitals in nine states and more than 40,000 employees. 

 

 

 

 

Private equity lands $1.5B in Medicare loans

https://www.beckershospitalreview.com/finance/private-equity-lands-1-5b-in-medicare-loans.html?utm_medium=email

One-Click To Private Equity Yields Up To 9%

Private equity companies have borrowed at least $1.5 billion from HHS through two programs intended to provide funding to healthcare providers facing financial damage due to the COVID-19 pandemic, according to Bloomberg‘s analysis of more than 40,000 loans disclosed by HHS. 

The Medicare loans were made to hospitals, clinics and treatment centers controlled by private equity firms through two programs administered by CMS: the Advance Payments Program and the Accelerated Payments Program. Those programs were expanded earlier this year to help offset the financial impact of COVID-19.

HHS approved loans totaling more than $60 million to subsidiaries of companies owned by private equity firm KKR, which has roughly $58 billion of cash to invest, according to Bloomberg. Healthcare facilities owned by private equity firm Apollo Global Management received $500 million in loans, and Cerberus Capital Management’s Steward Health Care System received roughly $400 million in loans. Steward physicians announced June 2 that they’re acquiring the health system from Cerberus.

CMS Administrator Seema Verma said the goal of the programs was to get funds to healthcare providers as quickly as possible. The loan applications did not include questions about beneficial ownership of the healthcare companies seeking loans. 

“We don’t look into ownership, what we look into is are they Medicare-enrolled providers,” Ms. Verma told Bloomberg.

Access the full Bloomberg article here.

 

 

 

Envision Healthcare considering bankruptcy filing

https://mailchi.mp/0d4b1a52108c/the-weekly-gist-april-24-2020?e=d1e747d2d8

KKR-backed Envision Healthcare hires restructuring advisers ...

 

National physician staffing firm Envision Healthcare is considering filing for bankruptcy, according a report from Bloomberg. Sources say the company, backed by private equity (PE) firm KKR, which acquired Envision for $9.9B in June 2018, has hired restructuring advisors and is working with an investment bank. The abrupt halt to elective surgeries and reduction in emergency room volumes due to COVID-19 has caused Envision’s business to shrink by 65 to 75 percent in just two weeks at its 168 open ambulatory surgery centers (ASCs), compared to the same time period last year.

The Nashville-based company, which employs over 25,000 physicians and advanced practitioners, has already been reducing pay for providers and executives, in addition to implementing temporary furloughs. Envision is also struggling with a debt load of more than $7B, resulting from its 2018 leveraged buyout, and has been unable to convince its bondholders to approve a debt swap.

It remains to be seen whether Envision will be a bellwether for how other PE-backed physician groups will weather the ongoing COVID crisis. While Envision’s composition of mainly hospital- and ASC-based providers, coupled with its huge debt load, leave it on especially shaky financial footing, many PE-backed physician groups will struggle this year to achieve anything close to the 20 percent annual rate of return often promised to investors.

If high-profile PE-backed groups like Envision end up declaring bankruptcy, it will likely impact the calculus of the many independent practices which may have previously looked to PE firms for acquisitionand temper the enthusiasm of investors, who might see physician staffing and practice roll-ups as less attractive as volumes continue to fluctuate.

 

 

 

California hospital secures $20M to stave off closure

https://www.beckershospitalreview.com/finance/california-hospital-secures-20m-to-stave-off-closure.html?utm_medium=email

Image result for seton medical center daly city

The San Mateo County (Calif.) Board of Supervisors voted March 10 to allocate $5 million annually over the next four years to keep Seton Medical Center in Daly City, Calif., open, according to Bay City News.

The county supervisors voted 4-1 to give $20 million in funding to the company that buys the hospital from El Segundo, Calif.-based Verity Health. The funding package will come with conditions, including that the purchaser must keep the hospital open and fully functional.

Verity entered Chapter 11 bankruptcy in August 2018. In January, the health system closed St. Vincent Medical Center, a 366-bed hospital in Los Angeles, after a deal to sell four of its hospitals fell through. The system had been planning to close Seton Medical Center as soon as this week, according to the report.

There are currently two companies bidding to purchase the hospital in Daly City and Seton Coastside in Moss Beach, Calif. The funding will help ensure Seton Medical Center, which sees roughly 27,000 patients per year, keeps its doors open.

 

 

 

UnitedHealth likely to keep squeezing physician staffing firms

https://www.healthcaredive.com/news/unitedhealth-likely-to-keep-squeezing-physician-staffing-firms/573679/

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The nation’s largest private insurer has been terminating its contracts with physician staffing firms in a bid to extract lower prices, part of a years-long pattern analysts say could spur other payers to follow.

UnitedHealthcare contends it is simply trying to curb the rising cost of healthcare by driving out high-cost providers that charge far more than the median rate in its network. The payer said it had hoped to keep these firms in network “at rates that reflect fair market prices,” a UnitedHealthcare spokesperson told Healthcare Dive.

The most recent action targeted Mednax, a firm that provides specialty services including anesthesia, neonatology and high-risk obstetrics in both urban and rural areas. United cut Mednax contracts in four states, pushing those providers out of network, potentially putting patients at risk of balance bills.

United also recently canceled its in-network contracts with U.S. Anesthesia Partners in Texas, starting in April, which caused Moody’s to change its outlook to negative for the provider group because the contracts represent 10% of its annual consolidated revenue.

These latest moves to end relationships with certain physician staffing firms seem to have escalated in recent years, Sarah Kahn, a credit analyst for S&P Global, told Healthcare Dive.

Since the insurer’s 2018 tussle with ER staffing firm Envision, “it’s sort of ramped up and become more aggressive and more abrupt and more pervasive,” Kahn said of the contract disputes.

 

United said the volume of negotiations it’s involved in has not changed in recent years, and added that it expects to renegotiate the same amount of contracts in 2020 that it did in 2019. However, United pointed a finger at a small number of physician staffing firms, backed by private equity, that are attempting to apply pressure on United to preserve the same high rates.

Private equity firms have been increasingly interested in healthcare over the past few years, accelerating acquisitions of medical practices from 2013 to 2016. Private equity acquired 355 physician practices, representing 1,426 sites of care and more than 5,700 physicians over that time frame, according to recent research in JAMA. The firms had a particular focus on anesthesiology with 69 practices acquired, followed by emergency physicians at 43.

Mednax is a publicly traded company. But Envision is owned by investment firm KKR; TeamHealth is owned by private equity firm Blackstone; and U.S. Anesthesia Partners is backed by Welsh, Carson, Anderson & Stowe.

 

Proposed legislation around surprise billing may be influencing United’s actions, Kailash Chhaya, vice president and senior analyst at Moody’s, told Healthcare Dive. Congress has been weighing legislation that seeks to eliminate surprise billing, mainly through two vehicles, either using benchmark rates or arbitration.

If Congress ultimately decides on a bill that uses benchmark rates, or ties reimbursement for out-of-network providers to a benchmark rate (or average), it would benefit insurers like United to lower its average rate for certain services, Chhaya said. One way to do that is to end relationships with high-cost providers.

“It would help payers like UnitedHealth if that benchmark rate is low,” Chhaya said.

In late 2018, United threatened to drop Envision from its network, alleging the firm’s rates were responsible for driving up healthcare costs, according to a letter the payer sent hundreds of hospitals across the country. United and Envision eventually agreed to terms, but United seemed to outmuscle Envision as the deal secured “materially lower payment rates for Envision” that resulted in lower earnings, S&P Global analysts wrote in a recent report.

In 2019, United began terminating its contracts with TeamHealth, which has a special focus on emergency medicine. The terminations affect two-thirds of TeamHealth’s contracts through July 1. The squeeze from United caused Moody’s to also change Team Health’s outlook to negative as an eventual agreement would likely mean lower reimbursement and lower profitability for company, the ratings agency said.

“They’re trying to lower their payments to providers. Period,” David Peknay, director at S&P Global, told Healthcare Dive.​

 

Data shows prices — not usage — is driving healthcare spending. Physician staffing firms are frequently used for ER services and the ER and outpatient surgery experienced the largest growth in spending between 2014 and 2018, according to data from the Health Care Cost Institute.

United said it had been negotiating with TeamHealth since 2017 and does not believe TeamHealth should be paid significantly more than other in-network ER doctors for the same services. United alleges its median rate for chest pains is $340. But if a TeamHealth doctor provides the care it charges $1,508.​

“As Team Health continues to see more aggressive and inappropriate behavior by payors to either reduce, delay, or deny payments, we have increased our investment in legal resources to address specific situations where we believe payor behavior is inappropriate or unlawful,” according to a statement provided to Healthcare Dive.

TeamHealth said it will not balance bill patients in the interim.

 

The pressure from payers, particularly United, is unlikely to relent. The payer insures more than 43 million people in the U.S. through its commercial and public plans.

“I don’t think anyone is safe from such abrupt terminations,” Kahn said. However, United disputes the characterization of abruptly terminating contracts and says in many cases it has been negotiating with providers to no avail.

Likely targets in the future may include firms with a focus on emergency services, which tend to be high-cost areas, S&P’s analysts said. In their latest report, Kahn and Peknay pointed to The Schumacher Group, which is the third-largest player in emergency staffing services. However, it commands a market share of less than 10%, far less than its rivals Envision and TeamHealth.

Smaller firms may not be able to weather the pressure as effectively as very large staffing organizations.

For those smaller groups, it may be wise for them “to sit tight on their cash or prepare from some pressure,” Kahn said.

Although some believe it may influence other payers to follow suit, Dean Ungar, vice president and senior analyst with Moody’s, said United may be uniquely placed to exert this pressure because it has its own group of providers it can use and considerable scale.

“They are better positioned to play hardball,” Ungar said.

 

 

 

 

Humana doubles down on its primary care strategy

https://mailchi.mp/192abb940510/the-weekly-gist-february-7-2020?e=d1e747d2d8

Image result for Humana doubles down on its primary care strategy

Humana, the nation’s second largest Medicare Advantage (MA) insurer, is partnering with a private equity (PE) firm to expand its senior-focused subsidiary medical group, Partners in Primary Care.

The arrangement will be structured as a joint venture between Humana and Welsh, Carson, Anderson & Stowe, with a combined initial $600M investment that will give the PE firm majority ownership of the medical group. The new venture is likely to double the number of centers that Humana’s Partners in Primary Care operates—currently 47 throughout Texas, Kansas, Missouri, Florida and the Carolinas.

While Humana has been looking to grow its MA membership, patients need not be Humana members to access care at the centers. Humana has established other partnerships in the physician practice space, including last fall’s announcement that it is teaming up with Iora Health to add 11 additional Iora-branded primary care practices to its MA networks in Arizona, Georgia, and Texas.

Humana has previously partnered with private equity to acquire postacute providers Kindred Healthcare and Curo Health Services. These latest moves suggest the company is shifting its focus to the front end of the delivery system, looking to control costs of care for seniors by quickly building a primary care physician network focused on reducing high-cost referrals to hospitals and specialists.