Management Companies and Health System Joint Ventures

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Clik here to view.With urgent care as an ever-growing market, the popularity of joint ventures between management companies and hospital health systems to further expand urgent care brands has grown over the years. The Ambulatory M&A Advisor reveals why the popularity exists, what the risks and benefits are to these ventures, and what types of partners management companies are looking for in an investment.

Steve Sellars, CEO of Premier Health based in Baton Rouge, Louisiana says his company currently owns and operates 32 urgent care centers with the majority of them being joint venture partnerships with hospital systems.

“Our model is such that we brand our center under the hospital’s name. To the general public, they see these urgent care centers as a department of the hospital system. We are a little different in that regard. There are some other operators that partner with hospital systems but I don’t usually see them branding the urgent care centers under the hospital’s name. Sometimes I see some co-branding or branding under the urgent care operator’s name but really haven’t seen too many models where the centers are branded under the hospital’s name when there is a partnership like we have,” Sellars says.

Todd Latz, CEO of Access Clinical Partners (ACP), says that all of ACP’s“GoHealth”urgent care clinics are joint ventured with leading health systems and are co-branded.. Currently, ACP/GoHealth is joint ventured with the North Shore – Long Island Jewishhealth system in New York and Legacy Health in Portland, Oregon.

How Old is the Boom for Health System Joint Ventures?

Latz has been in ambulatory, multi-site healthcare services for over a decade. Latz says in the past seven or eight years, the market has seen an increase in joint venturing with health systemsoverall.

According to Latz, joint venturing urgent care centers with health systems is a more recent trend when compared to the lengthier history of joint ventured ambulatory surgical centers and other ancillaries.

“I have seen the activity with respect to urgent care joint venturing pick up over the last three to four years,” Latz says.

Sellars says over the last five years, he has seen a lot more hospital urgent care ownership activity, and he expects that to increase going forward.

“We are seeing more and more hospital systems owning and acquiring urgent care centers. While we started sixteen years ago and I believe there has been a lot of growth in that area, I think there is more to come over the next five years,” Sellars says.

Latz says that he thinks that we all will continue to see a significant amount of activity in urgent care.

“That’s both in terms of development of independent urgent care centers, whether that’s physician or private investor owned, as well as the joint venture model, which has been the GoHealth model from the very beginning,” Latz says. GoHealth expects to have approximately 30 joint ventured urgent care centers by the end of the year.

“In my mind, urgent care is at the intersection point of consumer/patient choice and health care service delivery. You have patients who are becoming more and more active every day in terms of when, how, and where they want to be cared for. There are also demographic and broader industry trends, such as higher deductible plans, more price transparency, and patients are becoming more and more educated consumers every day that are fueling urgent care growth. I think that patient consumers are clearly defining how and when they want to receive that care.”

Latz also believes that when looking at the population health movement, and fee-for-service morphing into a more value based model, urgent care will continue to be a key component in that continuum of care and demographic trends will make the space very active for quite some time.

Risks and Benefits of Joint Ventures with Health Systems?

Like any type of transaction on the market, there are obvious risks and benefits that come with the territory.

Sellars likes to look on the brighter side of the venture for starters.

“I would say for one, we are improving access to care in a market. In most cases, when we partner with a hospital, it’s not to open just one clinic. It’s to build a network of urgent care centers within a certain market to improve overall access to care within that market area,” Sellars says.

Another benefit is that the venture expands the brand name recognition for the hospital system throughout the community; another alleviates emergency department overcrowding, Sellars says.

“It gets the urgent care patients out of the ER and in a more appropriate and cost-effective setting for care,” Sellars says.

“Some other benefits I think are worth noting are, the partnership provides a more coordinated approach to after-hours care. It eases pressure on primary care physicians in the community that are able to refer to the affiliated urgent care center after-hours and on weekends. Partnerships also provide negotiating leverage with payors. The more comprehensive the service line is for the health system, I think that only benefits the health system in terms of negotiating leverage.”

Latz says that another major benefit is the synergies that are created when an urgent care provider effectively collaborates with a large, integrated health system.

“The joint venture has the clinical quality endorsement; you know that you can work with that system on credentialing, on clinical care pathways, and all of the things that have made that large health system so successful, from a clinical quality and safety standpoint,” Latz says.

Latz says some of the challenges when it comes to entering ventures with larger health systems include the numerous different constituencies involved in decision making.

“You have to foster each different component of the health system’s understanding of how the joint venture can help them achieve their goals. That could include working closely with their primary care providers to ensure that they understand that your joint venture in urgent care is not a competitive model with their existing primary care network, but rather can be a real value additive partner to that network. Or generating more access points in the community that drive both up- and downstream activity for the health system. It also has to be about delivering value back to the system’s patients and valued consumers,” Latz says.

Sellars says the risks and challenges are similar to any other operator.

“We are faced with the same challenges of finding the right location, making sure that we have the right efficiencies in place from an operating standpoint. There are some recruiting challenges. We are recruiting physicians that a lot of hospitals are recruiting for primary care practices. There are certainly some challenges associated with that,” he says.

Initiating the Deal and What Management Companies Want

For Sellars, initiating a deal is making sure that all goals are aligned from a philosophical standpoint.

“That’s normally the first step. Do we agree on how big the model will be? How many locations are we interested in? How many locations is the hospital interested in? What payors will we contract with?You have to make sure that there is some agreement around the philosophy of payor contracting , the staffing of the center, hours of operation,” Sellars says.

Likewise, Latz says his company seeks out health system partners that are large, access minded, integrated and clinically sophisticated delivery systems.

Latz wants to find health systems that are looking to move care delivery more deeply into their communities and that want to accelerate their speed to market.

“The reason we look for those types of partners is because we believe that creates a great combination of their strengths with our very focused, innovative and customer service-centric approach to urgent care,” Latz says.

“As we think about our health system partners, we believe that we can bring together the best of both worlds: a dynamic, integrated health system with a very focused ambulatory urgent care provider. We are able to do things, like integrated electronic health records, that independent urgent cares or stand-alone urgent cares simply cannot do.”

Latz adds that when initiating a joint venture, he thinks a solid management company needs to have deep experience with health system partnerships.

“Health systems are very large, complex, and diverse organizations and putting together a joint venture in such a heavily regulated environment is difficult anyway,” Latz says.

“You need to understand how to deliver value back to your partner in the venture and help them achieve their goals. We look for health system partners that are forward thinking, that are a good cultural fit, and that have the same goals in terms of what we are trying to achieve with respect to access and consumer focus.”