Richard Merkin founded Heritage Provider Network, the largest private risk-bearing medical group in ... [+]
A lot has been made of CVS’s acquisition of Oak Street Health and Signify and Amazon’s acquisition of One Medical.
Both have fueled speculation about how the marriage of retail and medical care and tech can unlock new innovative models for care.
For those feeling FOMO (fear of missing out) over the One Medical acquisition and Oak Street, one asset stands alone: Heritage Provider Network.
Heritage Provider Network, the privately held medical group, is valued in the billions (bring your check book) and comes with an employed base of physicians and a broad network of affiliated doctors through its independent practice association (IPA).
Operations span California, Arizona, and New York. Lines of business include Commercial, Medicaid, and Medicare.
Heritage was among a group of fore-runner organizations that pioneered value-based care almost 45 years ago. Now, many are trying to copy it but few understand how to do it (much of what they do is patented).
The real value of the group is not its earnings (which are strong), but the fact that it operates almost exclusively in risk-based arrangements (including with my company, SCAN Health Plan). This risk-based agreements allow any value and efficiencies created from innovations to be internalized by the group (in contrast to fee-for-service, where reduced utilization and better care inevitably leads to reduced revenues). The size and number of these risk-based agreements is unrivaled (>500,000).
The ideal buyer? A large strategic acquirer that wants to show how their technology suite of artificial intelligence and other new innovations can drive improvements in care and earnings (Microsoft? Amazon?).
The ideal structure? A full acquisition without integration into a core. The acquirer will need to take time to understand the bespoke nature of the contracting arrangements and the subtle art of managing care and costs.
Inquires will also be entertained from courageous managed care companies and sophisticated investors who demonstrate knowledge of what they are buying.
Minimal anticipated impact from recent changes to Medicare reimbursement.
Company has been rumored for sale for decades, so acquirers will need to work closely with the ownership team directly who sees the asset as their pride and joy. A passion for the work and the platform will be valued along with a compelling offer.
Author’s note: I wrote previously that tech companies who believe their technologies will improve care should buy a medical group and demonstrate as much through integration of these technologies. I am reviving this argument in this piece and suggesting Heritage may be the best asset available to internalize cost savings opportunities and demonstrate the art of the possible.
