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 companies a way to gain control over their health insurance costs, while providing better, more convenient care for their workers. Employers are increasingly involving themselves more deeply in the health care system to rein in spending, after efforts to cut costs through high-deductible plans and other changes fell short.
“Employers are under incredible pressure from a cost basis,” said Scott Shreeve, chief executive officer of Crossover Health, another operator of workplace clinics. “They’re starting to realize that this is the last part of their supply chain that they really don’t manage.”
Investors are focusing on primary care for its potential to help limit costs and restructure care in other parts of the $3.5 trillion U.S. health system. Primary-care physicians, who are among the cheapest doctors to employ, can play a big role in helping patients navigate the system, reducing the need for costly tests, specialist visits and hospital stays. Insurers and the U.S. government are increasingly striking deals where the care providers get to keep some of those savings for themselves, a potentially lucrative arrangement.
“There’s a lot of momentum behind providing value-based care,” said Chris Miller, Paladina’s CEO. “Everyone is seeing health care costs rise dramatically.”
Other private investors have also recently put large sums into workplace clinics. The private-equity firm Carlyle Group LP is investing up to $350 million in One Medical, which is also working to sign up employer clients for its clinics. Iora Health, which operates primary-care sites for elderly patients in the U.S. Medicare program, raised $100 million earlier this year.
About 33% of companies with more than 5,000 employees offer clinics on or near their work sites, up from 24% five years ago, according to an annual survey conducted by the consulting firm Mercer.
Companies like Paladina and One Medical promise savings from keeping workers healthy and out of the hospital, and by providing them with quick access to medical care without the need for a visit to an urgent-care clinic or emergency room. Denver-based Paladina says its doctors can help guide patients, making sure they see specialists who provide care at a low cost.
“Our primary-care physicians become the quarterback of care,” Miller said. “We can save patients money by doing things that cost a lot less.”