Allied Physicians Group announces private equity-funded expansion plans

Melville-based Allied Physicians Group is expanding its health care services with an investment by a private equity firm with Long Island ties.

Allied Physicians, which has more than 35 primary care offices in the New York region, said this week that Ascend Partners, a health care private equity partnership, has acquired an equity stake in the medical group. The two companies declined to disclose the dollar amount of the investment or other terms of the transaction.

Ascend’s investment in Allied Physicians will help the medical group expand by hiring more health care providers and acquiring other practices, according to William G. Nestor III, chief of operations and administration at CareAbout, a management services organization affiliated with Ascend.

The medical group also will branch out “into more advanced models of health care delivery and reimbursement — known as "value-based care" — that tie payments directly to the quality of care delivered and [reward] providers for both efficiency and effectiveness,” Nestor said through a spokesman.

Allied Physicians, which says it has 150 clinicians and more than 180,000 patients, offers services in pediatrics, family medicine, allergy and immunology, pulmonology, sleep medicine, breastfeeding support, nutrition and mental health.

In addition to helping Allied Physicians expand, the investment will aid the growth of Allied Physicians’ affiliated company, Adjuvant.Health, which provides practice management services such as administrative support, marketing and information technology, Allied said.

Dr. Kerry Frommer Fierstein, CEO of Allied Physicians Group and Adjuvant.Health, said in a statement that the two companies and Ascend "share a similar mission of improving health care access, affordability and quality, which will enable us to continue to operate in a way that empowers our physicians and lets us put our patients' needs first."

Manhattan-based Ascend was co-founded by Dr. Richard Park, co-founder and former CEO of CityMD and a former emergency department doctor at Long Island Jewish Medical Center in New Hyde Park and Nassau University Medical Center in East Meadow.

Park, who is one of two managing partners of Ascend, said in a statement that Allied Physicians and Adjuvant.Health “recognize that efficient, technology-driven care and practice administration improve the patient-physician relationship and optimize health outcomes."

Ascend announced in December 2021 that it had raised $570 million from pension funds, financial institutions and other organizations for its first health care fund, which invests in companies that focus on underserved communities.

 Allied Physicians' practice accepts both private insurance and government-funded programs such as Medicaid and New York State's Child Health Plus program.

The practice's pediatric offices in Riverhead and Peconic are partnering with Long Island Cares to help families connect with local food pantries, using a $20,000 grant from the Washington, D.C.-based nonprofit group Share Our Strength.

Private equity investments in health care companies are on the rise, the consulting firm Bain & Co. reported last month. Globally, such investments totaled $90 billion to $100 billion last year, the second-highest on record after 2021, when they added up to $151 billion, Bain reported. That's more than seven times the $21 billion private equity firms invested in 2012.

Private equity firms typically acquire majority stakes in companies, seek to increase their profitability and eventually either sell them to another buyer or take them public. 

Economies of scale

Such investors can make "healthy profits" in certain scenarios, Dr. Jane Zhu, a professor of medicine at the Oregon Health & Science University and co-author of a JAMA Health Forum article about private equity investments in physician practices, said in an email.

For instance, Zhu said, private equity-funded practices might be able to treat more patients, negotiate higher prices with insurers and take other steps to achieve economies of scale and increase profits "in ways that smaller practices can't," she said.  Providing care to patients who have Medicaid insurance "remains an opportunity because it is a huge market" and there are ways to increase the amount of treatment provided to patients and decrease costs, she said. 

In some cases, private equity investments can help health care companies — and patients — by providing additional resources, said professor Donna Hitscherich, director of the private equity program at Columbia Business School.

“To the extent that there is increased access [to health care], that’s a good thing,” she said.

At the same time, she said, “You have more constituencies involved now … It’s the doctor, patient and investor — and the investor has investors.”

By Maura McDermott

maura.mcdermott@newsday.commauramcdermott

Maura McDermott covers health care and other business news on Long Island.