Physician office consolidation has become so commonplace that it's hard to take notice. But last week's announcement of a $4.42 billion deal by DaVita Inc. to purchase HealthCare Partners is so large and strategic that it may prove to be a harbinger of a new day in the provider world.
First, the size of the purchase dwarfs anything in recent physician practice deals. Last year, UnitedHealth Group bought the management arm of Monarch Health, the largest independent practice association in Orange County, Calif., in a deal that includes relationships with 2,300 physicians. But the HealthCare Partners deal involves more than three and a half times that many physicians -- 8,000 at 152 clinics in three states (California, Florida and Nevada). That includes 715 group physicians and 7,370 affiliated physicians.
Second, the market is interested in physician groups that know how to manage medical risk. HealthCare Partners accepts capitation from payers, meaning it receives a payment per member, per month, and it is also responsible for quality outcomes and care coordination efforts. As such, it was among the first round of medical groups chosen by the federal government to be Pioneer ACOs. Those organizations are responsible for managing care for a specified group of seniors and will have to adhere to quality-of-care standards in order to get the maximum reimbursement.
Third, the revenue stream for HealthPartners is a sure thing. Its 2011 revenue was $2.4 billion computed by physician, that's $289,000 per doctor. Right now, some 26 percent of the company's 667,000 patients receive Medicare benefits; that is sure to grow as baby boomers age rapidly into the program.
DaVita executives said the deal is a combination of two highly successful clinical enterprises. DaVita operates or provides administrative services for 1,841 outpatient kidney dialysis centers across the United States. Founded in 1999, it is a Fortune 500 company based in Denver.
An organization representing 8,300 physicians already has a lot of leverage with payers, pharmaceutical companies and other contractors. Joining it with a company with competencies in senior and disease care management tilts the advantage even more to DaVita/HealthCare Partners.
With or without a go-ahead ruling on the Affordable Care Act, the consolidation train and its care-coordination cars has left the station. There may be no looking back now.