Pathologists and clinical laboratory managers should not be surprised to see today’s nontraditional healthcare delivery models becoming tomorrow’s industry norm

Big healthcare players are spending hundreds of millions of dollars to acquire unexpected targets. The biggest of these deals signal that healthcare consolidation and integration is a continuing trend. It is also a reminder to clinical laboratory managers and pathologists that the competitive healthcare marketplace is transforming at a steady pace.

Three such deals emphasize that the consolidation trend is alive and well:

  • Dignity Health purchased U.S. Healthworks this summer. No terms were disclosed, but some analysts estimate that the purchase price may have been more than $500 million.
  • DaVita Partners, a major player in dialysis services, is to purchase Healthcare Partners for $4.4 billion. Healthcare Partners operates 150 clinics in three states, plus has a national network of 8,300 independent physicians.
  • United HealthGroup, Inc., in deal announced last fall, acquired Monarch Healthcare, an independent physician association with 2,300 doctors in Southern California. Purchase price was not announced.

Acquisitions Have Potential to Reshape Competitive Landscape

The first unexpected acquisition listed above involved Dignity Health (formerly Catholic Healthcare West), which announced in July that it would acquire U.S. HealthWorks Medical Groups, a chain of urgent care centers. Modern Healthcare (MH) reported the story.

It was a healthcare acquisition that surprised observers. This summer, Dignity Health, a major integrated health system, purchased U.S. HealthWorks, which was the largest independent operator of operational health clinics in the United States. It is these types of unexpected acquisitions which will reshape the existing market for clinical laboratory services.

It was a healthcare acquisition that surprised observers. This summer, Dignity Health, a major integrated health system, purchased U.S. HealthWorks, which was the largest independent operator of operational health clinics in the United States. It is these types of unexpected acquisitions which will reshape the existing market for clinical laboratory services.

Dignity is a large San Francisco-based health system that operates 40 acute-care hospitals and more than 150 ancillary care facilities in California, Arizona, and Nevada, a U.S. HealthWorks press release stated. The system has 10,000 physicians and 55,000 employees.

U.S. HealthWorks is the nation’s largest independent operator of occupational healthcare centers, according to the release. Its 172 clinics and worksites serve more than 12,000 patients daily in 15 states. It employs 2,700 people, including about 800 medical providers.

This is the first time a regional health system has purchased a national chain of urgent-care centers, observed Lou Ellen Horwitz, Executive Director of Chicago-based Urgent Care Association of America in the MH story. Horwitz compared the Dignity deal to insurance giant Humana’s (NYSE:HUM), 2010 acquisition of Concentra, Inc.. The insurer paid $790 million to purchase the Texas-based occupational health and urgent care company and its 548 clinics in 42 states.

“It’s part of a larger strategic plan for the purchasing organization,” Horwitz said. “It’s not necessarily because they want to grow the urgent-care business.”

Dignity Wants to Beef Up to Serve ACA’s Newly-Insured

Dignity’s goal is to become a national delivery network by 2020, the MH reporter wrote. The deal will further that goal by expanding the company’s presence to 16 states.

Horwitz also noted that, under the Affordable Health Care for America Act, millions of newly insured patients will need to find a place for medical care. There is a shortage of primary-care providers in many communities. “[T]he only logical places are going to be urgent-care centers,” Horwitz noted.

Need to Grow in Scale Drives Nontraditional Partnerships

The demands of the evolving healthcare marketplace mean that providers must find ways to deliver better care, while lowering costs. That means integrated care and coordinated services. That requires capital investment and collaborative services capabilities—something office-based physicians do not have, but hospitals do.

The Dignity deal is analogous to the formation of an accountable care organization (ACO) or nontraditional partnerships of payers and providers collaborating to reduce costs, noted Lisa Goldstein, Associate Managing Director for Health Practices at Moody’s Investors Service, in the MH story.

“What’s untraditional now…may become the new norm for the industry,” she stated. “We see it as indicative of the new type of partnerships that we are seeing now driven by the need to grow in scale and the need to expand outpatient or ambulatory care.”

Michael D. Blaszyk, M.A., Chief Financial Officer at Dignity, concurred with Goldstein’s appraisal. “That’s what this national health reform is about,” he stated “[W]e think this moves us down the road to this journey.”

Terms for the deal were undisclosed, but Blaszyk said U.S. HealthWorks cleared $375 million to $400 million in organizational revenue last year, MH reported. In a story published in the Sacramento Business Journal, Blaszyk confirmed that Dignity paid a multiple of that. This would indicate a likely sales price of over $500 million.

DaVita Is Among Companies Pairing Up with Nontraditional Partners

There are other examples of “strange bedfellows” that are emerging in the new world of integrated care. Renal-care provider DaVita, Inc. recently announced that it will pay $4.42 billion in cash and stock to acquire HealthCare Partners. Last year, a division of UnitedHealth Group, Inc. (NYSE:UNH) bought Monarch HealthCare.

Savvy pathologists  and clinical laboratory managers will want to ramp up their efforts to develop strategies to assure continued access and to provide added value to office-based physicians, regardless of ownership umbrella.

Readers of our sister publication, The Dark Report, will remember last year’s story about hospitals and health insurers buying up physicians groups. (See The Dark Report, “Why Health Insurers Are Buying Office-Based Physicians”.) This Dark Daily  e-briefing shows that this trend toward integrated healthcare and coordinated care is gaining momentum.

—Pamela Scherer McLeod

 

Related Information:

Dignity Health completes purchase of U.S. HealthWorks

Dignity Health to Acquire U.S. HealthWorks Health system will expand to 16 states, adding 172 medical centers

DaVita to Acquire HealthCare Partners for $4.4 Billion

Defining success – UnitedHealth acquires Monarch HealthCare, UnitedHealth Buys California Group of 2,300 Doctors

The Dark Report, “Why Health Insurers Are Buying Office-Based Physicians”

MH Going Vertical

Dignity Health to Acquire U.S. HealthWorks

The Dark Report membership lab intelligence services

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