Potential Atrius sale evokes sadness, concerns

Shift from non-profit to for-profit raises many issues

IN MARCH, Atrius Health announced it was going to be acquired by Optum, a division of the country’s largest for-profit health insurance company, UnitedHealth Group. The deal evokes sadness in me, but also some serious concerns.

Atrius evolved out of the Harvard Community Health Plan, which was the state’s initial foray in the 1960s into what was then called a pre-paid medical group practice built around the notions of prevention, comprehensive primary care practice, capitation, and health care affordability.

Harvard Community Health was founded by Dr. Robert Ebert, who was then the dean of Harvard Medical School. He moved to the medical school from Massachusetts General Hospital, where his idea for this sort of model of care and financing was not found to be a welcome one

Harvard Community Health first became Harvard Vanguard and ultimately Atrius. The one constant was that it remained an independent, non-profit public charity. To the present day, the 700-plus physician practice has worked hard to hold on to notions of comprehensive primary care and capitated payment. These aspects of Atrius are unlikely to disappear if the Optum acquisition is approved, but I worry that when an organization’s main purpose is to earn profits, some decisions at the margin are more likely to put money concerns over people.

For this particular sale, a legitimate worry is that Optum may try to put pressure on the practice to reduce its number of Medicaid patients, as well as possibly back away from long-standing health profession educational commitments that actually are an expense to Atrius.

With Atrius receiving 80 percent of its patient care revenue from capitation, one would have assumed it would have been more financially protected during COVID—at least as compared to those practices that live or die based purely on patient volume and activity. But with growing proportions of Medicaid patients and challenges in growing overall patient revenues, Atrius did not get to break even last year, despite furloughing a good number of workers.  Like other providers, it did receive some COVID-related government support, and so ended the year with only a slight operating loss of $2.1 million for the year.

Atrius is still not doing well, losing $17 million during the first quarter ending March 31. “So, given that number, which comes after a number of years of some continuing financial challenges, Atrius may well be able to credibly claim that continued operation in its current form is “impossible or impracticable”—a criteria that must be satisfied for the conversion to go forward.

Some will find my collective set of worries to be overblown. They might say that by combining Atrius with its previous acquisiton, Reliant Medical Group, Optum may actually spur some additional competition from hospital providers wanting patient referrals and willing to offer some price discounts in return. Certainly, some will also express a sigh of relief that Atrius didn’t end up in non-profit Mass General Brigham’s hands—only adding to that system’s negotiating leverage with insurers, and ratcheting up total state health care spending as Atrius patients are funneled into more highly priced hospital care settings.

A final criteria that must be satisfied to allow the sale to go forward is that the continuing nonprofit organization that will carry on the Atrius charitable mission must receive fair market value for the assets that are sold. While it could be a new entity that is created with this transaction, I predict, based on what took place with Reliant conversion, the continuing organization will be the existing Atrius Health Foundation.

The foundation’s stated purpose is to find new ways to deliver high quality, more affordable care; solve the issue of clinician burnout; support medical education that teaches a new generation of clinicians about  delivering effective preventive and evidence-based care; and conducting research about patient-centered models of care, provider well-being, health technologies, quality improvement, and implementation science.

I’d add one tweak to this list of purposes. Perhaps the overwhelming number of dollars given out each year should have some connection to wanting to advance equity tied to race, ethnicity, gender, income, wealth, and educational opportunity. I would also hope there would be an emphasis on grants tied to the first stated purpose:  to create a more affordable health care system in our state.

The $64 million question is, of course, how much Optum should pay into this foundation for buying and converting Atrius to for-profit status.

For sure, it should be a lot more than $64 million.

The most recent financials I could find are from 2018, showing net assets to be about $270 million. Recently, it was reported that Atrius has about $450 million of cash and long-term investments—but liabilities were not stated. I believe any net assets built up over the years while Atrius was a public charity should go to fund the foundation.

Meet the Author

Paul A. Hattis

Retired associate professor, Tufts University Medical School
Optum has plenty of other money to invest in Atrius. With Reliant, the company invested more than $180 million beyond what it deposited into the Reliant Foundation. We must rely on Attorney General Maura Healey’s staff and their evaluation consultants to make sure that adequate compensation is paid for Atrius’ assets, so that the mission Dr. Ebert helped to establish over 50 years ago is maintained for the benefit of Massachusetts residents and taxpayers.

Paul Hattis, retired from Tufts University Medical School, is a former member of the state’s Health Policy Commission.