UCSF To Buy Stake In Pacific Partners

UCSF Medical Center has agreed to purchase a stake in the management services organization for the 800-physician Santa Clara County IPA, part of what officials said this week is a plan to create an integrated and risk-bearing healthcare system in the Bay Area.

UCSF signed a letter of intent late last month to acquire a minority stake in the Foster City-based Pacific Partners Management Service. The deal is expected to close by mid June, according to Randall Frakes, Pacific Partners' chief executive officer.

“By joining the expertise of an academic medical center with a highly regarded management services organization and an established community of physicians, we are laying the foundation to answer society’s call for more integrated models of care,” said Jay Harris, chief strategy and business development officer for UCSF Medical Center.

Although UCSF officials are citing the more humanistic points of the deal, at least one industry observer said the deal is part of a plan to keep patients flowing to UCSF after it opens its new hospital in the Mission Bay neighborhood of San Francisco in early 2015.

“This is going to be a huge new hospital, and they're going to need to pay closer attention to their network,” said Lucy Johns of the firm Health Care Planning & Consulting in San Francisco.

After the deal is closed, a Pacific Partners subsidiary, Pacific Partners Health Plan, will use the new relationship with UCSF to obtain a Knox-Keene license to bear risk from the Department of Managed Health Care. The license would be of the plan-to-plan variety, once known as a limited license. 

Johns noted having a risk-bearing license would allow UCSF and Pacific to retain more of the overall medical payment.

“The way Kaiser (Permanente) stays full is by offering an insurance product,” she said. “Many other providers have looked at that model and said 'we need to do that.'”

Pacific Partners has also created a new physician entity, known as Pacific Partners Medical Group, that follows an employed physicians model. Some of Santa Clara's physicians are expected to transition to the new group. However, it is also expected to recruit other doctors, either working in the Bay Area, or those who have recently completed residency at UCSF and are seeking employment, Frakes noted.

“Having an employed model is vital to an organization like SCCIPA,” he said. “A lot of the physicians now want to affiliate with an employed model. They want to have a salary and a vacation.”

Frakes said that some of the SCCIPA physicians have already migrated to the new medical group, or plan to do so.

“We’re excited to offer an integrated group practice model for physicians who prefer to be employed by PPMG, as well as

ontinue to help independent practices maintain autonomy and financial stability,” said SCIPPA President J. Kersten Kraft.

The new medical group will also serve as a springboard to create a wholly integrated network, not only in San Francisco and Santa Clara Counties, but in eventually in San Mateo 

County as well, according to Frakes. Harris suggested relationships with other providers could also be created.

There are no plans to recruit physicians from other large IPAs, such as the Hill Physicians Medical Group, which already has an existing relationship with UCSF, Frakes said.

Harris also noted that Hill has no presence in Santa Clara County, therefore obviating any potential overlap.

Nevertheless, Johns observed the deal is likely to create friction with the powerhouse providers south of San Francisco, such as Stanford Hospital and Clinics.

“Their doctors are closer to Stanford,” Johns said.