“We would have given up more independence selling to a hospital or insurer,” said Dr. Steven Morris, co-founder of Atlanta Gastroenterology Associates. His group closed a deal last December with Seattle-based Frazier Healthcare Partners to form a management services organization platform called United Digestive, of which he’s now chief medical officer.
“We’ll still be able to privately practice medicine, with no one interfering with our clinical judgment,” he added.
The goal of the 33-physician Orthopaedic Institute, one of Florida’s largest orthopedic groups, was to expand in other Florida markets and move into at least two other states.
The management services organization hired a new CEO and chief financial officer, along with merger specialists and a physician recruiter. The management firm already has helped the group expand from 33 physicians in seven locations to 44 in 11 locations, through practice acquisitions and new hires.
The group is scheduled to soon open a large new clinic near The Villages, a major retirement community in central Florida. And it’s renegotiating all the group’s managed-care contracts and launching four bundled-payment deals. The revenue growth target is 25% per year.
“We’re looking to join with like-minded, high-quality groups that want to be part of something larger,” said Dr. Richard Gilbert, the new CEO, who touts the many different revenue streams associated with orthopedic practices as making that specialty a smart investment. “It portends ongoing growth to a multistate organization.”
While critics warn that private equity investors may unduly pressure physicians to see too many patients, Rocca said he and his colleagues welcome the management firm’s focus on measuring the number of visits with new and established patients.
“We were a well-run practice but metrics weren’t a high priority,” he said. “It’s a high priority for them, and it’s helpful. We’ve seen total throughput increase.”
Frazier and Atlanta Gastroenterology partnered in United Digestive with the aim of establishing a powerful network of gastrointestinal services in three or four Southeastern states.
The lure for Frazier was that the 96-physican group already made up nearly a third of all gastroenterologists in Georgia, had its own ambulatory surgery centers, and provided all ancillary services including pathology, pharmacy, infusion and anesthesiology.
“You can sit with a payer and say we provide quality medicine with broad geographic coverage at reasonable rates,” said Nader Naini, managing partner at Frazier. “You have leverage to negotiate.”
For their part, the doctors welcomed having a management company handle their business operations and provide capital to expand, with the management services organization serving as a hub for new GI groups that sign on.
Morris said the Frazier partnership will better position the group for value-based payment arrangements and enable it to get “fairer deals” from insurers as it acquires other practices and gets bigger.
Still, he acknowledged uncertainty about the future given the limited time frame of private equity investors. “There’s always apprehension about the second owner and the second bite of the apple,” Morris said, referring to the moment when the first private equity owner sells and the doctors receive their second cash payout. “You’re still going to be looking for someone who wants to be a good steward and grow it even more. There still should be significant bandwidth to expand.”
That uncertainty also weighed on Rocca and his colleagues in Gainesville when they were negotiating the deal with Varsity. Nearly two years in, he’s feeling more confident.
“One thing we told them was, ‘We all want to practice medicine the way we want. Will you tell us to do it differently?’ ” he recalled. “They said, ‘No.’ Thus far I’d say that’s accurate.”
