A conversation with The Portland Clinic CEO

February 2021

Jim Moloney: Hello. My name is Jim Moloney, Co-Head of Cain Brothers’ Health Systems M&A Group, and I'm pleased to introduce Dick Clark, CEO of the Portland Clinic. The Portland Clinic is a large physician group that serves 90,000 patients in the greater Portland area. Today we're going to talk to Dick about the clinic, its recent experiences, and what it sees for the future. So, Dick, welcome.

Let’s start, with an overview of the Portland Clinic, the number of physicians, as well the kind of number of clinics and services that you offer throughout the Portland area and some of your key hospital partners.

Dick Clark: This is a very special year for the Portland Clinic. We're celebrating our Centennial. We started in 1921 with some humble beginnings with four doctors who trained at the Mayo Clinic in Rochester, that came out to Portland and started what at that time was called the Mayo Clinic of the West. Today we have 100 providers, with a staff of nearly 500 professionals at five different locations in the Portland area, serving 90,000 patients. We're very proud of this tradition. We've always been independently owned by the doctors who serve our patients here, and we're going to continue that tradition as we enter our second century.

Jim Moloney: I’m not sure that 2021 has started off any more smoothly than last year finished, but 2020 was a really challenging year for Portland and certainly for care providers in Portland. Can you talk a little bit about the challenges that you faced last year and specifically how you dealt with the COVID crisis? What were some of the lessons learned?

Dick Clark: I'm a historian. At least I'll say I am an armchair historian. I read a lot of history books, including books about the 1918 Spanish Flu. I never anticipated that we'd be facing something like that in my lifetime. It's hard to say if 2020 was the most difficult year for the Portland Clinic, but I would certainly say in recent history, it was our most difficult year.

The ironic thing is that we entered January and February very strong and we were on an uptick. Our revenue was good. We were serving lots of patients and then everything stopped. We started to see this erosion across the country in late February, early March, when rumors of the COVID virus crept out. Everything fell off a cliff by mid-March. Our governor, along with governors around the nation, was taking extreme measures to encourage people to stay at home. And it really affected healthcare in a lot of ways. In Oregon, the governor suspended nonemergent surgeries, which represents about 35% of our business. We took additional steps and asked any patient over the age of 60, not to come into the clinic for care, to stay at home, because we thought that they were more vulnerable than others.

So, it was like hitting a brick wall back in March. A very dark time. And like you said, we've flipped the calendar from 2020 to 21. It's feeling a lot more hopeful now.

Jim Moloney: You mentioned right before we started that you've spent a lot of time organizing the logistics of vaccines. Hopefully most of this year will be from a very different perspective. You're one of the largest, if not the largest, independent physician groups in the market. Portland has many large health systems, but there are also many smaller physician organizations. I know that you are very active, not just in managing the Portland Clinic, but in helping all providers in the market figure out how to manage through this COVID environment. Can you talk a little bit about how this year has impacted smaller organizations, what you see for some of those smaller physician organizations and how the Portland Clinic and other larger organizations were able to help them through this period?

Dick Clark: In way of context, about 65% or more of all of Oregonians are served by independent healthcare clinics. This is also true in Portland, Eugene, Salem, throughout the whole state. And so, the healthcare system really depends on independent clinics like our ourselves. When COVID hit, we all were just shocked. We had alliances with healthcare systems, but certainly, they were serving the most acute needs of patients. What we needed to do was help each other. This was organic and timely. CEOs of independent clinics started to email each other, “How are you doing, what are you doing? How are you feeling? How are you testing?” We started this almost live chat on a daily basis. In fact, we started meeting every morning via Zoom or telephone to talk about the previous day's experience and what we can learn from each other.

There was no clear strategy here. This got going in mid-March to April, and then we realized that while there was this great spirit here, we also needed to seek some government relations help, because there was certainly a call for the federal government, HHS, to step in and help large health systems. We had no lobbying support, so we contracted with our own lobbyists locally, who helped us navigate the first CARES Act, and applied for money in that provider relief fund. That was essential because a lot of these independents, at the moment, are based on a fee for service model. When you suspend surgeries and you're not having patients come in, then all of a sudden, your cash flow's drying up.

We had to oversee it independently. We all had to apply for provider relief funds. And these lobbyists really helped us advocate, especially with our local congressional staff. We ended up talking to all five of our congressional delegates and our two US senators. We were sending up flares, because in a lot of cases, if this was a convoy of ships, all the ships were taking in water, some were sinking, and we needed to help each other. There was a lot of spirit there, and it's evolved into several other areas now and we continue to be very strong. In fact, tomorrow morning, we have another conference call. We have monthly check-ins with an agenda, and we're going to see how everyone's doing as we flip the page to vaccinations.

Jim Moloney: You mentioned the CARES Act - can you talk a little bit about how those programs helped the Portland Clinic? Could you give us a sense for how much of your revenue is fee for service versus some form of sort of capitated or other type of reimbursement that was less volatile through that period? That would be helpful.

Dick Clark: Absolutely. The CARES Act provided what I’ll call bridge funding. Certainly, there were a lot of programs under the CARES Act. The PPP loans are one example. If you're in rural areas, you had access to some additional money. And then there was the general pot of provider relief funds. Some members of this coalition qualified for PPP loans because they were under 500 employees. There were some that were smaller and some that were larger. The Portland Clinic did not qualify for a PPP loan. Instead, we qualified for some general funds from the Provider Relief Act. We received about $1.6 million, but to put it in context, we have a $90 million gross budget. Our revenue had dropped off considerably in April, so that $1.6 million was the equivalent of four days of gross revenue for us. While we very much appreciated the relief, it certainly was not a full recovery act for us. So, we really had to help ourselves.

You asked about our division or our payer mix of fee for service to value or to total cost of care. There's a shift happening in healthcare right now, but it's a slow shift. And the pandemic has affected that to a certain extent. Our fee for service revenue before COVID was probably in the 95% range with 5% for value. It grew in 2020 to about 11to 12% total cost of care. But a lot of that was due to the lack of utilization by people because they were staying away from healthcare. Thankfully we had some contracts that we've benefited from during this time.

But the flip side of this is that there's a lot of delay in care. It will be interesting, and maybe sobering, in 2021 when people return more fully to healthcare to see what maladies have gone untended to in 2020. We will be looking at more our current and future contracts moving toward value-based care. And certainly, this data is going to requiring that the payers move in that direction. We're situated for that model and COVID has provided a sense of urgency to get moving in that direction.

Jim Moloney: There's been a lot of attention placed on the financial pain and challenges that providers have faced from this drop-in utilization from COVID. There's been far less attention placed on the windfall benefit that payers received. It's kind of interesting, car insurance companies returned premiums because there were fewer people driving and therefore fewer accidents. You didn't see the same with healthcare insurers. One of the things that is starting to come out is pretty good evidence that for provider entities that took capitation or had capitationlike payments, these payments serve as an important buffer through this period. What has been the dialogue with your payer partners? Did the payer partners offer to be a source of help to the providers that were suffering through this revenue drop in the March, April, May period? And how do you see that that dynamic changing over time?

Dick Clark: I don't want to be critical of our payer partners because they're in business as well. There's a lot of synergy between us, but it was an interesting time where, because of the lack of utilization and because they were collecting premiums, they were able to benefit. As we went forward, this gave us an opportunity to ask our payer partners for advanced payments on some of the value and total cost of care that we would earn this year.

For example, in a normal year, we get our cash settlements of the prior year in June, July, or August as settlements are completed. And usually that works out fine. But we knew that they were sitting on a lot of premium payments and we asked them for a good chunk of that now to help us with cashflow. They've been very receptive to that.

So, we've received when you look back at that 11 or 12% that we earned, 8 or 9% of that in cash already. And that's been very welcome, and the insurers been very receptive to that. Likewise, they reached out to us to ask us what help that they could provide, and they took into consideration that we were hurting, even with those advanced payments. They knew we were still going to be hurting as we entered into '21. So that did influence our contract negotiations for '21. I think that they were more receptive and a better understanding of our vulnerability, so it made for some creative negotiations, and they were responsible, responsive and responsible to us.

I think everyone's looking at this greater shift to value-based care. We have to figure it out, and, I think we'll be in a better position than we were back in January or February of 2020.

Jim Moloney: Let’s talk about that pivot to the future. What are some of the operational changes? What are some modifications that you've made to your practice that you think will help make the clinic better able to serve patients and better able to deliver the value equation that everybody's looking for in healthcare today?

Dick Clark: Well, we started planning some of this before COVID, but then because of the circumstances that we've just talked about, we needed to move more purposely forward. So, you have to look at the environmental context of what's happening in healthcare in the United States We have a tremendous shortage of primary care doctors in this country. In fact, some people would say that there's a deficit of some 80,000 doctors that are not going into either internal medicine or family practice. They're going into other specialties.

We have to evaluate who's going to see the patient. What we're doing at the Portland Clinic is reevaluating the model where a primary physician is responsible for seeing patients. While we are still recruiting primary care docs, we're also surrounding that primary care doc with help so that they can have larger patient panels, but not necessarily see everyone in that panel. Essentially, we’re talking about nurse practitioners, physician assistants, pharmacists, behaviorists, scribes. The primary care doctor becomes the quarterback and sees the most acute patient, and these other professionals can help see the less acute patients on a regular basis. And that's allowing us to expand into and serve more patients with the deficit in primary care docs.

As we switch over to more value-based care, we really have to level set the panels, so that one doctor doesn't have all the highest acute patients. And so that's risk stratifying, which we've been doing for some time to make sure that there's a fair distribution of patients. Now, that's all been happening on the healthcare side on our side, but what we also need to do, and what we need to do as a society is to take on a greater responsibility for our own healthcare. We need individuals to develop healthy habits, so that we don't need to access healthcare as much. And this might be one of the silver linings of COVID where many of us have had to take responsibility for our own healthcare, more so than in the past, by wearing masks, social distancing, and practicing good hygiene. It'll be interesting to see how much that's become embedded into our practices, which can translate into better health in the future.

Jim Moloney: Your description of the primary care physician as a quarterback is a good one. It really encapsulates that perspective of primary care physicians managing the full healthcare needs of their patients. And it requires being able to leverage technology and other services that a group like the Portland Clinic can provide. How are you seeing providers at different levels of tenure within your group transitioning through that? Is it equally easy for the more senior providers to make that transition, or are you seeing the providers that are more recent graduates from medical school and residency programs make that transition more smoothly?

Dick Clark: I'd like to say that it's really smooth and equal but it’s all over the map. It depends on if a doctor's associated with an independent clinic, which tends to be nimbler than the large health systems. I also think it also depends on what type of education and real-life experience they're getting before they come out. This is a story that's still being written. I believe that the independent doctors tend to be more accepting of change because they know that the business depends on their ability to adapt. Whether the doctor here is 35 years old or 60 years old, what we have is more of a personal relationship with that doctor- and we're able to explain the change, the perspective, the need. More direct communication is key to getting a greater adoption of the necessary changes. In larger health systems, which still do a very good job, information tends to be a little bit more top-down, so you don't understand why the change is necessary. And maybe there's a little bit of additional pushback.

Lots more to come on this story, but doctors, at the end of the day, want to serve their patients. If we can explain how this is going to help serve patients better, then the doctors are all in, but we have to always keep it patient focused as to why these changes are important.

Jim Moloney: I think that's an important lesson. Doctors tend to be very data-driven and they want to see the connection to how this helps their patients.

Independent organizations like the Portland Clinic are much more exposed to shocks and changes in the external environment, right? You can't really blame anybody when you're a physician at a clinic like the Portland Clinic, because if there's a reimbursement change, it affects the organization. And there's not as many layers that insulate you from that market reality to what it means in the exam rooms with your patients.

This has been a really interesting conversation but let's finish with a question for you about 2021. What gives you hope as we start 2021? While there are lots of reasons to look back on 2020 and a tendency to focus on some of the negative outcomes, there are still a lot of opportunity in 2021. What gives you the most hope today?

Dick Clark: I'm an optimist by nature. Certainly, 2020 ran out a lot of that optimism, but it's been refreshed this year. I think the biggest thing on the horizon happening right now in Portland and across this nation is vaccinations. And that is that lifeline that people are looking for, that shield we need against this virus.

I was at one of our clinics on Saturday in which we have vaccinated about 200 of our healthcare workers from our business and across the community. And it was unbelievable, the exhaling that was happening as a person received their vaccination and realized that they now had a shield of safety of sorts. Not a shield that couldn't be broken, but they did have a shield. And it was a visible exhaling and emotional for these folks who've been serving very sick patients. And yet that was the gift that they were being given through the vaccination. So that has given me tremendous hope. We want to provide that to everyone, not just healthcare workers, but to the whole general public. It's going to take a while. Obviously, it's been a bumpy rollout of the vaccination so far, but I believe that as we get further into '21, there'll be an unleashing that will happen. So that gives me a lot of cause for hope.

The second cause of her hope is that as folks are vaccinated, they will be able to continue in the workforce, whether that's working at home or working in offices, hopefully regaining employment. And as they do, they're going to be able to access affordable healthcare because some of these folks have lost their insurance, whether it be commercial or through other means. And we want to make sure that the other issues that they face can be taken care of. And so that gives me hope. Heart disease, cancer, and a lot of other things didn't go away because of COVID. And so, we need to keep on treating these patients. And so, as the economy improves, I think also healthcare will improve.

Finally, I would say there were a lot of these lessons learned during the months of COVID, and we’re not going to forget them. We're going to execute on them. We're going to be smarter for the future and not just because of a pandemic, but because of a just general healthcare delivery system.

All of those things give me optimism for 2021.

Jim Moloney: I think you're right. I think the challenges that we all lived through in 2020 gave us new tools. And I think some of those tools will be pretty powerful going forward. I think creating a return for the community, which you guys have been investing heavily in, is a big piece of what we're hoping to see in 2021.

I congratulate you for the leadership that you've provided to your group, but also to the community in Portland, and look forward to another 100 years of growth and success for the Portland Clinic.

Dick Clark: Thanks, Jim. It's a team effort. I just happened to be one of the team members. It takes an army to tackle this, and that's what we're doing. So, thank you for this opportunity today.

www.Cainbrothers.com


Dick Clark, Portland Clinic CEO discusses the clinic, it's recent experiences, and the future.

Jim Moloney
James Moloney

Jim Moloney is the Co-Head of Cain Brothers’ Health Systems M&A Group and a member of the Firm’s Executive Committee. Mr. Moloney joined Cain Brothers in 1995 and has 29 years of experience in health care mergers, acquisitions, financings, and real estate transactions. Mr. Moloney’s clients include a broad range of academic medical centers, not-for-profit health systems, publicly-traded and privately-owned healthcare providers, medical groups, real estate development companies, and real estate investors. Mr. Moloney’s recent notable engagements include the sale of Verity Health’s hospitals, a joint-venture between UNM Health System and Lovelace Health for the UNM Lovelace Rehabilitation Hospital, Group Health Physicians’ affiliation with Kaiser Permanente, MultiCare Health System’s acquisition of Rockwood Health System from Community Health Systems, Tenet’s sale of five Atlanta area hospitals to WellStar and Meriter Health Services’ affiliation with UnityPoint. Prior to his current role, Mr. Moloney founded and was the head of the Firm’s Real Estate Group and has advised clients on real estate transactions valued in excess of $2 billion and involving more than 200 healthcare properties.

Dick Clark
Dick Clark, CEO

Dick Clark joined The Portland Clinic as CEO in the summer of 2015, bringing 30 years of senior management and healthcare leadership experience, a strong connection to Portland and its people and enthusiasm leading the Clinic well into the next century of its existence and continuing to build upon past successes. Prior to joining The Portland Clinic, Clark was asked to serve as Development Director of Providence Cancer Center and then Director of the Providence Together Capital Campaign, which exceeded its fundraising goal of $74 million. In 2008 he was elevated to Executive Director of Providence St. Vincent Medical Foundation, Providence’s largest foundation in its system with $185 million in assets. He has been an active member of the Portland Rotary Club since 1996 and served as its President in 2007-2008. He served for two years as Chair of the Oregon Ethics in Business program sponsored by the Rotary Club of Portland. He was named the Club’s Rotarian of the year in 2010 and 2014. Clark currently serves on eight community and industry boards of directors.

A native resident of Portland, Dick and his wife, Liz have been married since 1981 and have two children – Scott, and his wife June, who live in Portland, and Kate, who lives in New York City. A graduate of Central Catholic High School and Oregon State University, Dick’s hobbies include golfing, traveling to visit their children, running 5 & 8K community runs, collecting US postage stamps, reading non-fiction biographies, writing short stories and exploring Portland’s great restaurants.

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