Case Study 4 Unit 8 – Sooner Clinics
United Health Services Corporation
United Health Services Corporation (UHSC) is a large integrated healthcare business that serves northern and central Oklahoma. In response to healthcare reform, UHSC has been acquiring primary care practices to capture market share. The basic competitive strategy has been to select geographically well placed practices that will attract and retain patients. UHSC believes this strategy is critical in the shift to population health management.
Initial acquisitions were not entirely successful, primarily because of overvaluation of downstream revenue. In essence, UHSC overpaid for practices in anticipation of higher referrals and revenue after acquisition. Most of these practices were small with only one physician. UHSC quickly learned that, typically, these practices had insufficient patient volume to cover the substantial fixed costs of running a practice, had a payer mix of more than half from less profitable Medicare and Medicaid sources, included a physician who was not seeing an adequate number of patients per day, and paid insufficient attention to the efficient operation of the practice. On the plus side, they had a loyal patient base and were usually seen by their communities as providing an important service.
Perhaps as a result of the less-than-successful experience with small primary care practices, UHSC next acquired a much larger practice- Anderson Clinic. The large patient volume, lucrative payer mix, and busy physicians have made Anderson Clinic a financial success for UHSC. However, there have been substantial problems with this acquisition as well. Most important, changing the culture of a large practice has been difficult. Most Anderson Clinic physicians have been with the practice a long time and resisted many of the clinical and customer processes introduced by UHSC. Many implementation problems have occurred, and complaints from many physicians have required a lot of UHSC management time. One UHSC manager said, ”Anderson gives us most of our profit, but it also gives us most of our headaches.”
This less-than-successful experience with small primary care practices and a large practice prompted UHSC to review its practice acquisition strategy. After several months of study, UHSC decided that, although it can help to reduce practice costs and increase efficiency, the revenue side of the practice is most important. Thus, UHSC has established five criteria for evaluating the acquisition of a practice:
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