Blue Cross Blue Shield of Michigan Blue Cross Blue Shield of Michigan plans to boost Triarq’s profile in the specialty space — such as the fast growing specialty of musculoskeletal fields like orthopedists.
Blue Cross Blue Shield of Michigan is even closer to the exam room after its acquisition last week of Royal Oak-based Triarq Health LLC as the health insurer looks to combat rising healthcare costs.
Triarq is a healthcare management services organization or MSO that manages physicians’ offices, including administrative services, financial management, practice improvement and clinical decision support.
Triarq operates by selling management services directly to physician practices but also by forming joint ventures with a practice’s doctors that effectively serves as the operator of the practice. Triarq has agreements or joint ventures with more than 250 physician practices across the U.S. The firm employs 194.
Triarq’s management team will remain in place and the firm will operate as a wholly owned subsidiary in Royal Oak, the company said in a news release.
This is BCBSM’s first acquisition of an MSO.
Terms of the deal were not disclosed but the deal was likely lucrative as MSOs have become one of the hottest sectors for private equity in recent years.
The deal will provide capital for Triarq’s expansion. For the Blues, the acquisition is an experiment in creating a tighter, more coordinated network of physicians to reduce costs without expanding into direct ownership of physicians offices.
Aaron Friedkin
Aaron Friedkin, senior vice president of care delivery for BCBSM, said Triarq will reduce overall costs to patients and the insurer by bundling services under one bill.
“It operates similar to Medicare with the bundled payment program,” Friedkin said. “Triarq coordinates the efforts around, say, knee and hip replacements, but also ensuring the right coordination happens. There is presurgical work, then surgery and rehabilitation that typically takes place disconnected from one another. Under this model, they have created a clinically integrated model where physical therapists and surgeons are all working together and collaborating through Triarq. The care plan is connected through a bundled payment arrangement and performs at a lower cost.”
The move is likely a response to competitor and the country’s largest insurer UnitedHealth Group Inc. The company’s Optum division, the source of more than half of its revenue, has spent years acquiring physician and medical practices.
For instance, United acquired DaVita Medical Group, which operates physician practices and thousands of dialysis outpatient centers across the U.S. and Michigan, for a sidesplitting $4.3 billion
United employs or manages nearly 5 percent of the practicing physician workforce in the country, or about 50,000 doctors, Bloomberg reported.
United offers its own medical network as part of a new insurance plan called Harmony, which has premiums about 20 percent less than its own HMO network. United started selling the Harmony plan to employers in 2019 and then to individuals in California last year.
While HMOs largely fell out of favor in the 1990s over blowback from patients and payors upset with restricted care choices, rising healthcare costs are fueling their regrowth.
Blue Cross and Aetna are expanding their own HMO networks as an attempt to better control rising healthcare costs — which are expected to rise 4.4 percent in 2021, according to human resource consulting firm Mercer.
Susan Moore, president of Ortonville-based managed care consulting firm Managed Healthcare Resources Inc., said Michigan employers are leery of insurers directly owning physician practices, like United, and that may be the reason BCBSM is choosing to expand via an MSO.
“Nationally Blue Cross wants a low-cost, high performing network to sell to employer groups,” Moore said. “This is the first shot across the bow at that. Michigan is a different market, maybe because of the large auto sector employers, but they are just more skeptical about insurance companies controlling practitioners more. Executives are having to be more creative about how they sell insurance and this allows Blue Cross to remain at an arm’s length while having a major impact on costs.”
Employers are also looking to control costs and effectively creating their own healthcare networks.
CVS Health’s Aetna unit announced its Whole Health heath plan last year that has a smaller, more limited provider network and steers employees to its HealthHub offerings, which include visits with physician assistants and nurse practitioners for chronic care issues.
Walmart Inc. also started pushing at least some employees to a selected group of providers this year, Bloomberg reported.
Locally, Amazon Inc., Rocket Cos. and United Wholesale Mortgage also operate or contract with direct primary care practices to control healthcare costs.
Triarq Mike Sappington
More than 31 percent of large employers — those with 5,000 employees or more — offered primary care directly to employees on site or near site in 2020, up from 20 percent in 2019, according to data from New York asset management and consulting firm Mercer.
The point, of course, is that how people receive healthcare is changing and providers, insurers and employers are all competing for physicians’ attention.
Mike Sappington, CEO of Triarq, said the firm’s attractiveness to physicians is because it provides built-in technical capabilities practices increasingly need to be successful.
“Practices need quite a bit of support today to manage the cost and complexity,” Sappington said. “They need support in IT technology, compliance and a lot more. We help relieve the administrative burden of running the practices.”
BCBSM plans to boost Triarq’s profile in the specialty space — such as the fast growing specialty of musculoskeletal fields like orthopedists.
“We do see Triarq having a strong set of capabilities and the opportunity to expand the set of physician practices it works with,” said Todd Van Tol, senior vice president of healthcare value of BCBSM. “There is the opportunity to grow inside and outside the state of Michigan. There is meaningful opportunity to expand in the musculoskeletal space and build out what we can do further in the specialist space. We can create new support models for those procedural bundles that produce better outcomes and more savings.”
But competition is growing.
The private equity sector has used MSOs to invest in large physician practices in recent years. While private equity activity slowed in 2020 overall, deals in healthcare increased. In fact, equity deal volume in the sector rose 21 percent last year to a total 380 deals, according to Colliers.
But BCBSM appears dedicated to winning out.
“We believe our members should have choice in where they receive their care and we already have really strong provider contracting and networking capabilities, but we do think that its is important for us to work within that network to improve and deliver better outcomes for their patients,” Van Tol said. “We think it’s important to help our members in where they seek care and establish care relationships to where they can get appropriate, high quality, cost effective care. That’s raising all boats and we’ll continue to do that.”
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