Dive Brief:
- For-profit hospital operator Universal Health Services has inked a deal to absorb financial responsibility of George Washington University’s struggling physician practice group.
- UHS will establish a new nonprofit physician practice group, dubbed Capital Medical Group, to absorb operations of Medical Faculty Associates. MFA provides clinics operations at hospitals and outpatient departments in the Washington, D.C. area, including GW Hospital and Cedar Hill Regional Medical Center.
- The deal, announced this week, effectively hands physician clinical operations at those facilities over to UHS, following years of financial losses at MFA and accusations of understaffing at Cedar Hill. Executives from the three organizations told Healthcare Dive they hoped the transaction would unify the physician group and stabilize operations.
Dive Insight:
George Washington University and UHS have a longstanding relationship to deliver healthcare in the Washington, D.C. area. The university and the for-profit hospital operator have a partnership to train residents and medical students, and they also partner on physician staffing and clinical operations.
MFA, which has been under George Washington University’s umbrella, provides clinical operations at GW Hospital and Cedar Hill. UHS has relationships with both facilities: In 2022, it acquired the remaining stake in GW Hospital from the university, and it also runs operations at Cedar Hill.
However, the physician group has been plagued by financial losses for several years, which the university attributed to declining demand for medical services following the coronavirus pandemic and a “persistent imbalance” between costs and revenue. MFA has lost more than $450 million since 2022.
“These losses, they’ve been $100 million a year over the last several years – unsustainable,” Bruno Fernandes, finance chief and treasurer of George Washington University, told Healthcare Dive. “The losses the university was suffering was obviously something that was a major concern for us. I think we solved that issue.”
MFA had attempted to stem losses for years, according to Bill Elliott, CEO of the MFA.
Operational improvements still weren’t enough to get to the bottom of the losses, he said, and the parties had to deal with some structural contract issues.
Ultimately, Elliott said an acquisition by UHS will allow MFA to align expenses and revenue associated with care under one umbrella, instead of having multiple entities trying to split those line items.
The deal, which has been in the works for months, allows George Washington University to offload long-term financial responsibility for its physician practice group, while retaining academic and teaching relationships with the facilities. GW Hospital will continue to be a teaching hospital, and clinicians moving to Capital Medical Group will retain their faculty appointments at the medical school.
The deal “gets the university out of the clinical operations aspect, which we’re just not very good at,” Fernandes said. “It allows us to focus more on the education part of it.”
The university will provide UHS up to $230 million to support the transition of the physician group and absorb prior loans. After five years, UHS will assume full financial responsibility of the physician group. The deal is expected to close this summer, and the majority of physicians from MFA are expected to transfer to Capital Medical Group.
Moving the physician group under UHS’ umbrella should improve its financial stability given the for-profit’s large balance sheet, according to Jason Barrett, group vice president of UHS’ D.C. region and CEO of GW Hospital. UHS, which operates 29 acute care hospitals across the country through its subsidiaries, logged over $17 billion in revenue last year.
Barrett said the deal also signifies a growing alignment between the companies that hasn’t always existed, and gives physicians a sense of firm ground given the growing instability of MFA.
In 2019, George Washington University sued UHS, alleging the for-profit hospital operator improperly siphoned $100 million from GW Hospital revenues. Five years later, UHS and MFA were embroiled in a lawsuit.
“There’s no secret that there’s been disagreement between the three parties over the previous years,” Barrett said.
The deal should also create appropriate physician “network adequacy” for Cedar Hill, Barrett told Healthcare Dive.
The hospital, which opened last year, has come under scrutiny from local lawmakers after news reports said the facility was suffering from understaffing and safety issues.
The 136-bed facility is operated by UHS as part of a partnership with the city of D.C. In January, Wayne Turnage, deputy mayor of D.C.’s department for health and human services, said at a local oversight hearing that the hospital had struggled to find nurses — which meant some services weren’t fully staffed — and that the facility was unable to handle a “rush” of demand from local residents. Turnage also implied negotiations between MFA and UHS had hindered outpatient staffing.
“I think they have struggled, struggled mightily in some cases,” Turnage said at the hearing. “But I also think their future is still very bright.
