Investors Betting on Workplace Medical Clinics to Help Employers Contain Costs

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A group of investors is putting up $165 million to fuel an expansion of Paladina Health, bringing a recent surge of private funds flowing into companies that run primary-care clinics to more than a half-billion dollars.

The venture capital firm New Enterprise Associates is leading the investment after acquiring Paladina for a reported $100 million earlier this year from dialysis provider DaVita Inc. Paladina, which runs medical clinics for employers, plans to use the money to build new clinics and acquire other firms.
Operators like Paladina promise to give companies control over health insurance costs while providing better and more appropriate care for their workers. Employers are increasingly taking part in the healthcare system to refinance expenditures, as soon as efforts to reduce costs are made with high-yielding plans and other changes are short-lived.

Scott Shreeve, CEO of Crossover Health, another office clinic operator, said, “Employers are under tremendous pressure on a cost basis. “They are starting to realize that the supply chain is the last chapter they really do not manage.”

Investors are focusing on potentially helping to limit costs and restructure care in other parts of the $ 3.5 trillion US healthcare system. Primary care physicians, among the cheapest doctors, can play a major role in directing patients to the system, which reduces the need for costly tests, expert visits and hospital stay. Insurance companies and the US government are becoming increasingly popular as a potentially lucrative agreement that care providers can keep for themselves these savings.

“There is a lot of momentum behind value-oriented care,” said Chris Miller, Paladina’s CEO. “Everyone sees that health spending has increased significantly,” he said.
Carlyle’s Move
Other private investors have also recently introduced large quantities of workplace clinics. Private equity firm Carlyle Group LP is investing up to $ 350 million in One Medical, which is trying to sign up for employer clients in the clinic. Iora Health, which runs primary care sites for elderly patients on the US Medicare program, grew $ 100 million this year.

According to an annual survey by contractor Mercer, about 33 percent of companies with more than 5,000 employees are offering clinics at or near workplaces at a rate of 24 percent five years ago.
Companies like Paladina and One Medical are committed to saving money by keeping workers healthy and out of the hospital and quickly accessing emergency care clinics or medical care without having to go to emergency services. Denver-based Paladina said his doctors could help guide the patient and see specialists providing care at low cost.

Miller said, “Our first-line doctors were playmakers.” “We can save money by doing things that cost less money than the disease.”

Stunning Opportunities
Bets that turn health care services go beyond clinical investments. CVS Health Corp. claims that by buying insurance company Aetna Inc., the combined company’s CVS stores could be converted into health centers, improving care for customers. UnitedHealth Group Inc.’s OptumCare unit is in a doctor-buying madness that prepares a collection of at least 30,000 doctors, including a $ 4.9 billion deal to buy doctors Davaita’s doctors’ groups.

In the meantime, Walmart Inc. and General Motors Co. companies are making striking agreements with their health care systems to look after their workers. Amazon.com Inc., Berkshire Hathaway Inc. and JPMorgan Chase & Co. hired surgeon and journalist Atul Gawande to lead a joint initiative aimed at improving care and reducing costs for workers.

“Employers are trying to be a good representative of healthcare spending and trying to get the highest value from their hands,” says Jeff Dobro, who advises Mercer about how to work with employers and hospitals and other healthcare providers. “What do they look like, why have we slept on the wheel for decades?”

According to a statement, health investors like Oak HC / FT, Alta Partners and Greenspring Associates are also investing in Paladina.

Miller said he would open Paladina’s new funding to additional markets and buy similar companies over the next few months. The company currently has 53 clinics in 10 states. Over time Paladina will consider looking at Medicare patients, Miller said.

A new study by RAND provides some support to the workplace-clinical strategy. Researchers found that the opening of health centers in schools was associated with lower health care costs and hospital visits among teachers using them.

One Medical’s CEO, Amir Dan Rubin, said the company will use Carlyle funds to double the number of clinics it has been operating since 72 now. The company operates at eight locations and said more employers plan to expand more as they try to sign up. In July, One Medical announced plans to enter San Diego next year.

Rubin said that Carlyle invested about $ 220 million in One Medical and would buy about $ 130 million in shares from existing investors. Before investing in Carlyle, One Medical earned about $ 180 million. Rubin refused to provide the current value.

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