Patrick Dugan ’82 uses experience to carve out niche in healthcare strategic, transactional matters
Healthcare as many people know it is changing. With large scale reforms already in place with the implementation of the Affordable Care Act, Patrick J. Dugan ‘82, a partner at Squire Patton Boggs who has a niche specialty in representing healthcare providers and payers on strategic and transactional matters, explained there has been a shift toward consolidating providers and payers, to create a better, more cohesive value-based experience for patients nationwide.
“The goal at the end of the day is that the provider system will be responsible, much in the same way an insurance company is currently responsible, for the total cost of care for a patient. The thinking is that it will transform care delivery in a way that will be beneficial to the patient,” he said.
“A simple example would be knee-replacement surgery. If the provider is being reimbursed at one price for that knee-replacement, and that includes all the follow-up care if there are problems, suddenly that provider is interested in the follow-up care and rehab and other work to make sure that in fact the patient has a successful outcome,” he said. “Historically, it was a fee-per-service structure. The surgeon would charge one amount, the hospital would charge another amount, the anesthesiologist would charge yet another amount, and all of the various people who touched the patient would charge a separate amount. Even if there were complications and follow-up care was necessary, they would be paid for those services additionally. By having one total cost of care for that one event, it changes the care.”
Being on the cutting edge of changes in the way health care is delivered is both challenging and exhilarating, Dugan said. It gives him the opportunity to use his vast knowledge of mergers, acquisitions, business, and finance to help craft new partnerships that in the end will benefit all involved.
“If you buy into the trend toward provider-payer convergence, on the one hand you have provider systems that are primarily nonprofit, tax-exempt and on the other hand you have insurance companies that are for profit and often publically held and driven by shareholder return on investment. Trying to get those two to merge their businesses or operations is a real challenge and very difficult from a legal, financial, and business perspective. And that’s frankly, for someone like me, the fun part,” he explained. “It’s where I can bring our expertise to do the design and architecture of the deal. And, while our clients don’t necessarily enjoy it, they do appreciate us trying to solve the riddle of how to make it work.”
When Dugan first decided to attend law school, he didn’t set out with the intent to specialize in health care law. He originally earned his undergraduate degree in accounting and decided to pursue his juris doctorate at The Ohio State University to gain the skills and knowledge he would need to succeed in the business world.
“I had interned with Deloitte & Touche. I loved learning the language of business, but I found I didn’t like accounting itself. One of my professors who taught tax was also a lawyer and that intrigued me. I decided to go onto law school and go into the business side of law because the business lawyers were the ones doing the transactions and work that the accountants were accounting for, and frankly, I wanted to be more involved in doing things as opposed to accounting for things,” he said.
Upon graduation from Ohio State, Dugan joined a prominent boutique business firm, Murphey, Young & Smith, that would eventually merge with Squire Sanders. There he rose through the ranks, becoming a partner and serving as a practice manager in the firm’s corporate practice group, financial services practice group, and business & finance practice area.
Through the years he represented a number of large companies. There was one in particular, however, that would eventually lead him to discover a new area of the law where he could carve out a niche for himself using the merger and transactional skills he honed at the firm.
In 2008, the CEO of Medical Mutual tragically passed in a plane accident. Dugan, who had represented the company for many years and was a close friend of the CEO, was asked to step in as the organization’s chief legal officer and chief compliance officer as it figured out how to move forward.
“The board was facing the dual-crises of replacing the CEO and also health care reform was on the horizon, so they were worried about what that meant. I had always wanted to go over to the other side and practice what I preached, and this was the opportunity to do so. It was one of the most fulfilling five years of my career; I really enjoyed my time at Medical Mutual,” he said.
Dugan was not only able to work with an interdisciplinary team to successfully implement changes mandated by the Affordable Care Act, but he also helped the company reduce its annual outside counsel costs, developed and implemented the organization’s first corporate compliance program, achieved record fraud and financial recoveries, and dramatically improved in-house productivity while holding internal costs flat.
“I really enjoyed not just overseeing all of the legal affairs of the company, but also getting involved in the developing strategy and response to the Affordable Care Act and health care reform,” he said of the experience.
After five years at Medical Mutual, he joked that he had “worked himself out of a job.”
“Early on I identified someone who would ultimately be my successor and she’s now the general counsel there. After five years, I had accomplished all of the things that I thought I could accomplish and wanted to transition back to the firm. I came back and am moving on to new challenges and interesting things.”
Dugan said he rejoined Squire Patton Boggs with a new mission – to combine his expertise in mergers and transactions with healthcare.
“My promise to my firm when I came back was I wasn’t going to come back and poach all of my old clients, I really wanted to get back and work with new clients, and, in particular, use my expertise in historical mergers and acquisitions and corporate governance and marry that with my knowledge in healthcare and in particular healthcare insurance,” he said.
Though the initial reforms mandated by the Affordable Care Act went into effect in 2014, Dugan said there are still a number of major hurdles both providers and insurance companies alike still have to face.
“There continue to be very significant challenges and issues to make sure that the law is fully implemented and is successful. The major changes that had to be done were fully implemented at the beginning of 2014, and now it’s really a matter of ‘OK is it going to work?’ There continue to be financial and business and operational challenges along the way,” he said.
“The notable thing that occurred within the last two months was United Healthcare signaling that it might drop out of the insurance exchanges in various states because of the lack of profitability on those. And that announcement by United Healthcare, a leader of the industry, caused a lot of people to worry whether or not the exchanges will be able to survive and whether or not healthcare reform will be successful. Some think United Healthcare was really just trying to send a message in order to make sure the administration was taking appropriate action to try and support the Affordable Care Act. There is a question that exists concerning the viability of healthcare reform, and as you know, it’s going to be a big part of the debate during this presidential election year.”