The COVID-19 pandemic is fundamentally changing healthcare delivery in the United States, from the acceptance of virtual physician visits to payment reform, and from the consolidation of integrated delivery networks to the very survival of independent physician practices. Clarivate market access expert Heather Johnson discusses how physician practice ownership is expected to evolve due to the pandemic.
Many physician offices in the United States have struggled financially due to COVID-19-related losses, fostering changes that may influence healthcare access patterns in the future. It’s likely that current physician ownership models will morph into greater corporate ownership, with national payers, private equity firms and retail chains absorbing practices or offering alternatives.
Physicians consider acquisitions to shore up revenue
Left with several months of lost income, many physicians must turn to viable financial models for the future. Small and single-physician offices face the highest financial burden, leaving many to either close, file for bankruptcy or adopt a more creative reimbursement strategy. Federal funding from the Coronavirus Aid, Relief, and Economic Security Act largely went to hospitals, while upfront Medicare/Medicaid payments doled out in the spring acted as temporary loans. The possibility of more federal aid continues to evolve as the Biden administration promotes its own healthcare agenda. Physicians still call for an end to Medicare payment cuts, and Congress seems prepared to pass a bill pausing cuts until the end of 2021.
Physician offices in less-populated or underfunded areas likely have concerns about the future, although the Biden administration’s American Rescue Plan Act of 2021 includes funding specifically for rural hospitals and providers. Within a market-driven system, help commonly comes from private equity firms or insurers and integrated delivery networks looking for employed physicians.
Similarly, IDNs based in metro areas may not have the incentive to acquire struggling rural practices. Insurers like UnitedHealthcare and Humana, which have also been acquiring physician practices at a rapid clip, have the most incentive to support groups in areas with limited access to keep members healthier and avoid more expensive care interventions.
Value-based contracts offer consistent income
Meanwhile, the number of physicians willing to accept capitated rates through HMO-style products, such as the expansive care coordination payments offered by Blue Cross Blue Shield of Michigan, could increase significantly. Physicians benefit from the security of consistent monthly revenue based on an attributed patient base, instead of fee-for-service, which can vary based on pandemic-related shutdowns.
Concierge medicine appeals in wealthy areas
Subscription model offices could see growth as well, and give physicians added patient volume, as long as enough patients are willing to pay out-of-pocket for extra attention. Umbrella organizations like Direct Primary Care Coalition, Iora Health and MedLion coordinate concierge practices across the country.
This model offers even more potential when tied to a sought-after health system. San Francisco-based One Medical partners, for example, works with integrated delivery networks to grow its volume and revenues, including systems like MedStar Health in greater Washington, D.C.; Providence St. Joseph Health in Portland and Orange County, California; UCSF Health in San Francisco and San Diego; Mount Sinai of New York in New York City; Dignity Health in Phoenix; Advocate Aurora in Chicago; and Emory Healthcare in Atlanta.
Retail clinics bring competition
Just as physicians face greater financial pressure, they also face more competition from clinics staffed with advanced practice providers. For example, an expansion planned by CVS would open 1,500 HealthHUB locations by the end of 2021. The HealthHUB clinics pave the way for a narrow network for the company’s Aetna members, possibly reducing more revenue from physician offices.
Other clinic expansions from Walmart and Walgreens include physician-led clinics, but with lower-cost services that could limit physician reimbursement. Walmart plans more stand-alone health centers— which include primary-care, labs and imaging services—in Florida, adding to locations in Georgia and Arkansas. Meanwhile, Walgreens has partnered with Illinois-based VillageMD to open 500 to 700 primary-care clinics, another source of competition for stand-alone practices.
Consolidations could enter rapid phase
Physician practices may emerge as a prime acquisition target since many of these small groups are not subject to merger reporting and anti-competition requirements. IDNs and insurers may target unconsolidated markets first, acquiring physician practices as a way to increase control over healthcare delivery. Federal regulators, including Federal Trade Commissioner Rohit Chopra, warned these power grabs could increase healthcare costs in an August 5, 2020, hearing in front of the Senate Commerce, Science and Transportation Committee.
Key takeaway: Watch for increased consolidation of physician office ownership in 2020 and 2021. Payers and providers want to ensure widespread access and avoid the long-term health consequences of avoiding care. The wave of consolidations sweeping through IDNs and insurers may not stop at the physician office, especially when primary care is essential to achieving population health goals and success with value-based contracts.
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