Contributors: Amanda Hopkins Tirrell, WG’86, FACHE and Saria Saccocio, MD, FAAFP, MHA
To learn more about Amanda and Saria, click here.
Medical Practice Consolidation – Pre-COVID-19
Before COVID-19, the environment for medical practice consolidation nationally had been accelerating for both specialty practices and primary care, with more and more physicians moving from independent private practice to employed arrangements. Hospital ownership of medical practices increased by 7% per year from 2004 - 20101 while employment of physicians by hospitals increased by 55% from 2003 - 2011 after being relatively constant from 1998-2003.2 From 2010 - 2016 independent primary care practices nationwide declined from 41.6% to 35.3%, and primary care physicians working in hospitals or health systems increased from 27.7% to 43.5%.3 In 2018, for the first time nationwide, there were fewer physician-owned practices (45.9%) than employed physician arrangements (47.4%).4,5
Not all parts of the country have moved as quickly to consolidate medical practices. In the Southeast, for example, in South Carolina specialty practices have been somewhat slower to consolidate. In 2017, the majority of South Carolina physicians in all specialties were self-employed (54.6%) versus employed (40.7%). Primary care, on the other hand, has moved more quickly to consolidation in South Carolina. In 2017, the percentage of primary care physicians in South Carolina was relatively equal with 47.3% self-employed versus 46.8% employed.6
Medical Practice Environment for Consolidation – During and After the Pandemic
As the country adjusts to the “new normal” of living and working with the COVID-19 pandemic, the healthcare industry, including physicians in practice, look ahead to a post-pandemic health care environment of the future. The COVID-19 pandemic has certainly increased the uncertainty of medical practice independence.
Early in the pandemic during the spring of 2020, a Merritt Hawkins survey of physicians predicted significant changes in physician practice patterns. In this survey, sixty-six percent (66%) of physicians reported they would “Stay the Course,” but 32% planned to change practice settings, retire, temporarily close their practice, or opt out of patient care entirely.7
During this early peak of the pandemic, there was significant fear of practice closures, with primary care at greatest risk.8,9 By the fall, nearly 20% of primary care practices surveyed reported practitioners had retired early due to COVID-19. And as these practices headed into flu season, 56% of practitioners surveyed reported record high levels of mental/emotional stress and exhaustion10 with no end in sight, making the viability of these practices just as uncertain as during the early days of the pandemic.
Some hospitals furloughed their physicians or cut compensation, and further consolidation has become much more uncertain as some hospitals face a cash crunch. Yet, there are examples of reverse consolidations or “spin-outs,” as in the case of Mecklenburg Medical and Atrium Health, as well as Steward Physicians and Steward Health’s owners,11 where physicians unwound business relationships with their non-physician group owners.
Assessing Current-State Viability
Given the volatility of the environment, how do physicians assess the current-state viability of their practice? The following questions should be considered:
Patient Visit Volumes – Have post-lock down patient volumes rebounded? The Commonwealth Fund reported that in late April 2020, ambulatory care practice volumes plummeted by nearly 60%.12 How has the practice adapted to the “new normal” for treating patients during a protracted pandemic? Have different channels of treatment and communication, such as telemedicine or remote care, been added to the practice’s workflows? How have patients and staff adjusted to these new processes?
New Patient Channels – For practices that incorporated telemedicine into the practice during the beginning of the pandemic, do they have the support infrastructure to make this a permanent channel? Going forward, the percentage of telemedicine vs. routine in-office visits could be as high as 30% to 50% of total office visits. Does the practice have the ability, resources, and desire to include telemedicine and/or remote care as a permanent patient channel?
Physician-Patient Relationships – How are physician relationships with their patients? How do they know? During the initial peak of the crisis, many physicians reached out to their patients by phone or video conferencing, and they found their “currency” with their patients – their relationship – was strong. As a result, they were confident their patients would return for in-office visits.
Patient as Consumer - How reliable is the practice’s patient or consumer data? The “Patient as Consumer” is a key aspect of assessing and managing patient relationships using data. Customer relationship management (CRM) is a tactic more practices are adopting to be proactive in meeting their patients’ needs. In a pandemic, CRM-generated information can be even more helpful to ensure patient retention in the practice.
Value-based payments – During the lowest point of the crisis for in-person office visits, providers who had value-based payment arrangements already in place were shored up by a steady source of income.13 Does the practice have the clinical support and data management infrastructure to accept more value-based payments? This support infrastructure includes an Electronic Health Record (EHR) and Practice Management system, reliable decision-support data, clinical and quality management support staff, and payer contracting expertise.
Improving Operating Performance to “Stay the Course”
Pandemic or not, the ability to improve operating performance is key to any medical practice, “staying the course,” and remaining viable. From patient scheduling to revenue cycle management, to IT services and purchasing, physicians and their teams should continually find ways to improve performance.
Practice Management Services – Targets for Performance Improvement
Elements of practice management services to target for improving performance include patient scheduling, revenue cycle management, purchasing, payer contracting, information technology, and human resources management.
To evaluate patient scheduling for performance improvement, on-site and remote access capabilities, telephony and schedule systems, and customer relationship management functionality should be considered. Effective and efficient revenue cycle management (RCM) begins from the point of patient scheduling and expands to include all elements of the RCM cycle: coding, charge capture, collections, patient responsibility financing, and clinical documentation improvement.
Payer contracting capabilities include the practice’s abilities to contract with payers for traditional fee-for-service payments as well as value-based payments arrangements, which are increasing. Provider enrollment effectiveness and credentialing operations efficiency should not be overlooked, as payers are increasing their reliance on narrow network strategies to control costs, and long lag times to credential providers impact collections of non-government payer reimbursement.
The importance of adequate and well-managed medical practice infrastructure in information technology (IT), purchasing, and human resources cannot be understated. Before the pandemic, effective vendor contracting for durable medical equipment (DME) and supplies was standard. During the pandemic, a medical practice’s purchasing power and supply chain access have become a critical priority, especially related to reliable and affordable purchasing of personal protective equipment (PPE) and medical supplies.
In addition to the human resource (HR) management basics of payroll and benefits coordination, HRmanagement effectiveness for recruitment, retention, and managing medical leave for staff became even more critical.
With the advent over the past ten years of EHRs, well-performing information technology support is a given in medical practices, with IT support needed from EHR and practice management systems implementation, training, maintenance, and upgrades. The EHR itself has not kept up with a physician’s need for helpful and accessible clinical data to support patient care. Does the practice have capabilities to implement clinical and business decision-support tools to help physicians care for their patients? During COVID, the IT capabilities to rapidly implement and support telemedicine solutions became critical. Maintaining responsive and effective IT capabilities will remain key to sustain a practice throughout the pandemic and well into the future.
Smaller independent practices that are struggling to keep up with the technology and infrastructure expense demands of these services, especially with the added pressure of the new COVID-19 reality, have outsourcing options working with management services organizations (MSOs). Although the tendency in a crisis may be to go into cost-cutting mode, practices do not want to be “penny wise” and undercut their ability to operate in the long term. MSO’s can offer “a la carte” or “all-in-one” support to medical practices to enable them to retain their independence and viability.
Effective payer contracting is a key aspect of medical practice operations, and physicians should assess whether they have enough contractual expertise to negotiate with payers for value-based payments. Payers nationally and in the Southeast are working to accelerate value-based payment arrangements to help reduce costs and improve quality, as well as support physician practice independence and viability. Blue Cross and Blue Shield of Minnesota and Minnesota Healthcare Network, a group of 47 independent primary care practices in Minnesota and Wisconsin, came to an agreement to accelerate the transition to value-based payment and provide financial resources for long-term stability.14 Blue Cross Blue Shield of North Carolina is also accelerating value-based payment arrangements to physicians but requiring practices to remain independent.15
PARTNERING WITH OTHERS
From Solo to Group Practice – Joining Forces
There are a variety of options for physicians to partner with others. Moving from solo practice to join a group is still a popular option. Medical group practices have been able to weather storms like this by joining forces, and as mentioned previously, some medical groups have even spun back out from prior owners to become independent once more.16
Health Insurance Companies – The New “Payviders”
Health insurance plans have acquired medical group practices to create new “payvider” entities, a combination of payer and provider. There are several examples of health insurers getting into the medical provider business: Optum and ProHealth in Connecticut, Blue Cross and DaVita, Humana and Partners in Primary Care, Blue Cross Blue Shield Illinois and The Blue Door Neighborhood Center.
The rationale for health plans to also become medical providers of care includes expanding their network of providers to improve access; using “big data” analytics to change clinical practice patterns and reduce costs for subscribers and employers; narrowing ancillary service and outpatient diagnostic options to reduce variability and costs; and increasing their market competitiveness.17 The payvider phenomenon is still a new concept. According to a 2018 American Medical Association Survey, only 2% of physicians nationally work in practices owned by insurers.18 The pandemic has also impacted payers financially. Over the next couple of years, the ability of payers to keep the payvider trend going by investing in physician practices will depend upon how well health insurance companies weather the current COVID storm.
Investor-Owned Health Services Companies
Large investor-owned health services companies such as Teladoc, CVS/Aetna, and Walgreens are acquiring medical groups, networks, and hiring physicians.
Retail medicine is also booming and recruiting physicians, especially in primary care. CVS and Aetna have partnered to support the pharmacy chain’s corner store Minute Clinics and to channel retail pharmacy business. Retail giants like Walmart are building clinics all over the country or are buying existing medical groups, such as Walgreens acquiring Village MD,19 and investing in these practices. The retail medicine space is highly uncertain however, and physicians need to be prepared for a rollercoaster ride, as these companies’ primary goal always is to support and grow shareholder value for their core retail business.
Telemedicine has taken off like a rocket thanks to COVID-19. Physicians are finding opportunities to join telemedicine companies or are even striking out on their own as independent contractors with the help of colleagues in organizations like the Institute for Telemedicine Mastery, greatly increasing their independence while maintaining or even improving their income.
Fields of practice in telemedicine have expanded rapidly to include urgent care, family medicine, behavioral health, dermatology, OB-GYN, oncology, and pediatrics. The list of top telemedicine companies20 (e.g., Teladoc, AmWell, Doctors On Demand, MDLive, IM-Primary, etc.) is impressive and keeps growing. With the rapid adoption of telemedicine by patients and providers due to the COVID-19 pandemic, investors are accelerating their funding of these ventures.
Although CMS and the commercial payers will likely adjust telemedicine reimbursement downward from the current expanded services and increased rates due to the pandemic, telemedicine is here to stay. Consumers expect its availability, chronic care management is enhanced through telemedicine support, and well-organized telemedicine can improve productivity and efficiency in medical practices.
Concierge Plus – Direct Primary Care
Direct primary care (DPC) is another model of medical practice that enables physicians to remain independent versus having to partner or become employed. Concierge medicine has been in place for decades and provides an additional source of income for physicians. For a monthly or annual fee, patients can purchase immediate, first-in- line access to their physician. Out-of-pocket concierge medicine fees are collected, and, in some models, fee- for-service payments are collected from government and commercial payers.
DPC goes a step further and allows physicians in practice to eliminate the overhead expense associated with revenue cycle management of billing and collecting from government and commercial insurance companies. Direct primary care is a membership fee model where patients (or their employers) pay a monthly and/or an annual fee directly to the practice. Physicians in direct primary care have the freedom and flexibility to establish the price of membership fees either directly with the patient as consumer or an employer. In markets with reduced or limited access to marketplace health insurance, the DPC option is attractive to people who are uninsured or underinsured or desire improved access to a primary care provider and wish to pay the additional membership fee.
Access in these direct primary care practices is often superior to traditional practices, with same day or next day access the patient expectation and norm. DPC physicians can offer a higher level of care to their patients, noting that they are not hampered by the burdens of fee-for-service medicine and the insurance reimbursement treadmill. Physicians in these DPC practices have the flexibility to choose the size of their patient panel, which can be less than half the size of a traditional primary care physician’s panel. Because they can personally spend more time with their patients with this model, DPC physicians do not require additional clinical support staff or extended care teams, which also reduces overhead costs in their practices without sacrificing accessibility. With the reduction in overhead costs, increased physician and patient (and employer) satisfaction, and the preservation of practice autonomy, direct primary care is growing as an option for primary care physicians to remain independent.
Investor-owned Alternatives – “Concierge Plus”
Like direct primary care, but with the government payor paying the “concierge” fee through a Medicare Advantage plan, investor-owned “Concierge Plus” companies like ChenMed, Iora Health, and Oak Street Health offer physicians practice model alternatives to the fee-for-service treadmill, either in their independent private practices or employed as part of a health system-owned medical practice. These companies are often enterprising physician owned and led companies that have raised capital from private equity firms to fuel their practices or fund their exit strategies. These investor-owned companies are expanding to build direct care concierge-type practices across the country, targeting seniors and taking risk with Medicare Advantage plans. They are actively recruiting physicians out of private practice and health systems, with the promise of a significantly smaller patient panel (i.e., as few as 450 patients working for ChenMed), brand new clinic or practice facilities, a user-friendly, physician-built EMR, and chronic care management resources for physicians and their senior patients. Iora Health, for example, adds an holistic care team model which helps to address health inequities resulting in a better experience for both physicians and patients.
There are concerns the ChenMed model may be light on accountable care, using Medicare Advantage as their sole play, and there are concerns about their impact on primary care access in general, with dramatically reduced patient panels. However, this model increases physician and patient satisfaction and offers physicians who are burning out in private practice or disappointed with their involvement in health system operated practices an opportunity to jump ship and get on board with a fast-growing health services company. At #51, ChenMed was showcased by Fortunemagazine as one of the Top 100 Companies that will change the world:
“Many think ChenMed’s model is the cure for America’s ailing high-cost health system. The primary care provider has focused on helping seniors avoid expensive hospital stays by preventing problems from getting bad in the first place.”21
Management Services Organizations (MSOs)
A management services organization or MSO strategy allows physicians to remain independent while reducing some of the operating and/or reimbursement risk. To boost operating performance, especially with the stressors caused by COVID-19, physicians can contract with MSOs that offer practice management services, such as EHR implementation support, revenue cycle management services, and payor contracting support.
MSOs allow practices to remain independent while providing a shot in the arm for overstretched business operations. Companies like Privia in Florida and Equality Health in Arizona are examples of MSOs whose strength is often in negotiating at-risk contracts with payors and then supporting practices with other outsourced practice management services, such as revenue cycle management, central call center scheduling, and EMR implementation support. Private equity owned MSOs offer a full array of practice management services to physicians that allow them to remain independent. Using a single tax ID billing strategy, these types of MSOs lead payor contracting efforts, consolidated payor contracting, and promise superior revenue cycle management performance. In addition, physicians are offered opportunities to participate in value- based care reimbursement arrangements that offer performance bonuses.
Investor-owned private equity (PE) backed MSOs also invest in medical practices by infusing capital for recruitment, equipment, facilities upgrades, or practice location expansion. These companies can also help facilitate the owner’s exit strategy, readying the practice for a future merger with another practice or company. PE-backed MSOs come with high valuation, profitability, and return on investment (ROI) expectations. With the COVID-19 pandemic, there has also been uncertainty in the PE-backed MSO marketplace, with increasing consolidation trends for these companies which will likely continue.
Clinically Integrated Networks (CINs)
There are a couple of different ways for physicians to partner with hospitals or health systems – including joining health system sponsored clinically integrated networks. A clinically integrated network (CIN) is defined as: “A collection of health providers, such as physicians, hospitals, and post-acute specialists that join together to improve care and reduce costs.”22
CINs have been a relatively recent “vehicle” for health systems and independent physicians or medical groups to come together to reduce cost and waste in the healthcare system, improve patient quality, and position both entities for managing populations and taking value-based payments. With their size, infrastructure, and representation across the continuum of care, CINs have more resources and patient lives than physicians in solo or smaller private practice. As such they may be better able to succeed in Accountable Care Organization (ACO) programs offering alternative payments models with government payers such as Medicare Shared Savings Plans (MSSP) and Pioneer ACOs. The positives for joining a clinically integrated network include an opportunity to increase patient quality of care and reduce cost and waste in the system. In addition to positioning a practice for population health and value-based payments, physicians can remain independent and earn incentives for improving quality and reducing costs.
Just as there are some positives to joining a CIN, there are some pitfalls. Physicians may be reluctant to contribute membership fees to the CIN if they are skeptical of the promised cost savings performance tied to quality bonuses. Hospital-operated CINs, although well-intentioned, have inherent conflicts of interest built into their models. Despite the implementation of penalties over the past several years by government and commercial payers for overutilization, fee-for-service revenues in deep end services (e.g., hospital admissions, ER visits, high-end diagnostics) still drive the financial engines of hospitals and health systems.
EHR interoperability and data quality are both still big challenges for CINs. Access to useful clinical quality information, data analytics, and decision-support is still not consistent or easy for physicians to obtain. Before joining a CIN, physicians should investigate the management services offered by the CINs to help them meet the performance goals that result in cost savings and therefore bonuses for providers. Physicians should also be aware of certain exclusions for joining a CIN. For example, primary care physicians can only join one CIN and cannot be members in multiple CINs.
Finally, physicians should make sure that cost savings and quality goals are aligned in the CIN between the hospital and the physician practice. The biggest cost savings in an alternative payment arrangement happen when the “big ticket” items are reduced – hospital admissions/readmissions, emergency room visits, surgeries – the core businesses of a hospital.
Accountable Care Organizations (ACOs)
Physicians are not required to join a CIN to participate or succeed in an ACO program. Investing in or joining an ACO is another way to help physicians remain independent. Physicians can join an ACO that is hospital or health system-owned or physician-led and owned. In the world of accountable care, the covered lives in a physician’s panel are their “currency.” The way they clinically manage the care of this precious panel of patients is at the center of truly accountable care, so incentives must be aligned to support physicians.
With the advent of payment reform and the development of the Accountable Care Organization (ACO) model, policymakers and stakeholders feared that physician practice consolidation would accelerate, and physician practices would merge with hospitals because of the accountable care model and its payment methods. However, researchers have found little evidence to support this assertion, noting that physician practice consolidation was well underway before the accountable care programs were established.23
Physician-owned and led medium and large medical group practices, especially in primary care, can have a very positive impact on costs and quality, often greater than the results of health system-led ACOs. Participation in ACOs can also help physicians remain independent. Physician-owned, or “low revenue” ACOs, versus hospital-operated, or “high revenue” ACOs, perform better and have a better chance of passing on a tangible amount of incentive dollars to participating physicians. These incentives for care improvement and cost reduction shared savings provide another revenue stream for physicians, especially in primary care. And as value-based payments become more prevalent than fee-for-service payments, physicians involved in ACOs will benefit.
Private equity backed MSOs (e.g., Aledade, Agilon) have grown in the past few years and focus on government payor value-based reimbursement arrangements in the Managed Medicaid and Medicare Advantage space. These MSOs partner with independent primary care physicians and practices providing practice management services, big data analytics, and value-based care contracting capabilities for private practice physicians to take advantage of and remain independent. Using delegated contracting methods, for example, these companies partner with physician practices to take full-risk arrangements, while providing a variety of management services (e.g., case management, utilization management, credentialing, etc.) that help physicians achieve better patient outcomes and reduce the costs of care. Improved value-based care performance drives shared savings bonuses and other financial incentives. These MSOs tend to be larger in size and scope and more dispersed geographically across multiple markets. It will be interesting to see how well this model performs across a much more diffused landscape and if the incentives offered to physicians to participate will be adequate to sustain them.
Conclusion – Part 1
We conclude Part 1 of our series Should I Stay or Should I Let It Go? Accelerating Partnerships in a Pandemic noting how significant Covid-19’s impact has been on the healthcare system in our country and especially on physicians in practice. To date, in the U.S. there are 28 million COVID-19 cases reported with nearly half a million deaths. Physicians in practice on the front lines have experienced tremendous stress, as both practitioners and small business owners.
The pandemic has dramatically accelerated concerns about independent medical practice viability.
Prior to the pandemic, the healthcare industry had been undergoing dramatic changes which made conditions favorable for physician practices to consolidate. Over the years, physicians increasingly moved from practicing independently to becoming employed by other organizations such as hospitals, health systems, and even insurance companies. More recently, with the growth of value-based reimbursement, physician-led and built companies backed by private equity investors have offered physicians opportunities to participate in new models of clinical practice that offer an alternative to the fee-for-service treadmill.
In Part 2 we will explore physician partnerships with health systems from pre-COVID to the present. We will highlight the strengths, weaknesses, and opportunities for medical practice partnerships from the health system’s perspective. For physicians contemplating their next steps during challenging times made more urgent by the pandemic, we will offer a practical multi-dimensional framework to assist decision making.
Contact Saria at:
- MGMA/ACMPE State of Medical Practice Report, Medical Group Management Association and American College of Medical Practice Executives (January 2012)
- Reforming America’s Healthcare System Through Choice and Competition, U.S. Department of Health and Human Services, et. al. (December 2018)
- Ibid, p. 28
- Kane C. “Updated Data on Physician Practice Arrangements: For the First Time, Fewer Physicians are Owners Than Employees.” American Medical Association, AMA Economic and Health Policy Research. (May 2019)
- Henry, TA. “Employed physicians now exceed those who own their own practices.” American Medical Association (May 2019)
- Gaul K. South Carolina Area Health Education Consortium (AHEC) in the South Carolina Office for Healthcare Workforce based on 2017 licensure data. (July 2020)
- Survey: Physician Practice Patterns Changing as a Result of COVID-19, Merritt Hawkins and The Physicians Foundation (April 2020)
- Grundy P and Terry K. “Primary Care Practices Need Help to Survive the COVID-19 Pandemic.” The Health Care Blog (May 2020)
- Moench M.“1 in 3 primary care doctors fears having to close practice over coronavirus.” San Francisco Chronicle (May 2020)
- Quick COVID-19 Primary Care Survey, Larry Green Center and Primary Care Collaborative (May 2020 & September 2020)
- Livingston S. “Physicians Acquire Steward Health from Private Equity Firm.” Modern Healthcare (June 2020)
- Mehrotra A, Chernow M, et.al. “The Impact of the COVID-19 Pandemic on Outpatient Visits: Practices Are Adapting to the New Normal.” The Commonwealth Fund (June 2020)
- Livingston S. “COVID-19 May End Up Boosting Value-Based Payment.” Modern Healthcare (June 2020)
- Blue Cross and Blue Shield of Minnesota press release (September 2020)
- Livingston S. “N.C. Blues to pay primary-care practices to stay open, join value-based care.” Modern Healthcare (June 2020)
- Roberts D. “Mecklenburg Medical doctors leaving Atrium share details about their new group.” The Charlotte Observer (June 2018)
- Terry K. “Why Are Health Plans Buying Physician Groups?” Hospitals and Health Networks (January 2012)
- Goldberg S. “Blue Cross joins the doctors practice party.” Modern Healthcare (May 2019)
- Repko M. “Walgreens strikes deal with primary-care company to open doctor offices in hundreds of drugstores.” CNBC News (July 2020)
- Roland J and Potter D. “10 Best Telemedicine Companies.” Healthline (June 2020)
- Fry E and Heimer M. “Fortune Special Report: Change the World.” p. 118 Fortune (October 2020)
- Gallegos A. “Clinically integrated networks: 5 roadblocks and how to overcome them.” OB-GYN News (July 2017)
- Neprash H, Chernow M, and McWilliams. “Little Evidence Exists to Support the Expectation that Providers Would Consolidate to Enter New Payment Models.” Health Affairs (February 2017)
- Kane C and Emmons D. “New Data on Physician Practice Arrangements: Private Practice Remains Strong Despite Shifts Toward Hospital Employment.” American Medical Association (September 2013)
- Tirrell AH and Saccocio S. “Should I Stay or Should I Let it Go? – Accelerating Post-Pandemic Partnerships.” South Carolina Medical Association Webinar (June 2020)
- Pandemic Recovery: Gearing Up for Business Development and Marketing, Strategic Healthcare Marketing Association Webinar (May 2020)
- Hegwar L. “Top 5 Approaches to Physician Satisfaction.” Healthcare Executive (July/Aug 2020)