Massachusetts' largest physician group—currently squaring away a buyout deal with Optum—has tracked further into the red in its latest financial filings.
Newton, Mass.-based Atrius Health, an organization with north of 700 physicians across 30 practices, lost $17 million on operations out of $514 million in revenue in the first quarter of 2021 ended March 31. That's even steeper than its $12.1 million operating loss on $2.2 billion in revenue in all of 2020. UnitedHealth Group plans to buy Atrius through its Optum subsidiary, according to the Boston Globe.
Despite its size, Atrius is not immune to the lingering effects of the COVID-19 pandemic. The practice wrote in a note accompanying its financial statement that the crisis has lowered the number of patients with commercial insurance, decreasing its capitated member months. Atrius has also seen more of its patients switch to Medicaid, which has lowered its average capitation rate.
Atrius' capitation revenue—almost 80% of its total revenue—was down 6.8% in the first quarter year over year.
A spokesperson for Atrius did not return a request for comment.
Capitated payments were generally viewed as a more stable revenue source during the pandemic as patient volumes dried up and fee-for-service revenue tanked. But the pandemic has also triggered job losses that have moved patients from commercial policies to government-sponsored programs, which tend to pay providers less.
Despite the operating loss, Atrius said cash, including long-term investments, remained strong through the first quarter, standing at $446.5 million as of March 2021. Cash stood at $357.5 million at the end of March 2020.
The pandemic has also eaten into Atrius' fee-for-service volume, which was down 5.3% year-over-year. The company noted that Massachusetts' public health emergency continued into the first quarter of 2021, resulting in continued declines in demand for services and higher spending on safety precautions. The company said that its patient encounters were down 7.6% year-over-year, which was slightly offset by a 2.5% uptick in average rate per encounter.
Atrius noted a continued high usage of telehealth services, with almost 30% of office visits performed virtually.
The company spent 6.5% less on salaries and benefits in the recently ended quarter because of high turnover in its clinic front-office staff. Atrius said it has also spent less on physician pay because of planned retirements and "losses from a more competitive market for primary care providers."
Optum, which did not respond to a request for comment, has been buying up physician groups at a rapid pace in recent years, and the pending Atrius deal would expand its reach in Massachusetts. Optum acquired Reliant Medical Group in Worcester, Mass. In 2018.
The Boston Globe reported that Optum's Atrius acquisition would need approval from Massachusetts' Health Policy Commission, the Department of Public Health and the Federal Trade Commission.
Optum's rationale for buying Atrius is to increase its touch points with health plan enrollees, David Klink, a senior equity analyst with Huntington Private Bank, wrote in an email. Another attractive quality about Atrius is its work in the home health space, a huge focus for managed care companies in recent years. Hospitals comprise a large share of total healthcare costs in the U.S., so to the extent managed care companies can encourage members to seek care outside of those facilities, it's a "huge win," Klink said.
"The bottom line is that (UnitedHealth) is buying Atrius for another set of eyes on its enrolled members, in the hope that costs of care can be lowered," he said.