For-profit companies competing for primary-care patients with new models

The horns of Stevie Wonder’s “Sir Duke” blast out of speakers. Patient art hangs on the wall. Scrabble, Boggle and other board games sit on a bookshelf.

The “waiting room” of the Oak Street Health clinic in Chicago’s Bronzeville neighborhood on the city’s South Side looks more like a community center than a doctor’s office, and that’s how patients treat it.

On a recent afternoon, conversations between caregivers and patients span Mandarin, Cantonese, Spanish and English. Some are using a row of computers to stay atop their daily tasks. Others huddle around a table like friends having lunch.

Shedding the stereotypical medical office vibe is important, said Dr. Griffin Myers, chief medical officer and co-founder of privately owned Oak Street Health, which tailors care specifically for Medicare, Medicare Advantage, Medigap and Medicare-Medicaid beneficiaries through capitated, or full-risk, models.

“We work with folks who justifiably don’t trust the healthcare system anymore,” he said. “Before care, we have to make sure they trust us.”

Oak Street is one of a rapidly growing number of primary-care providers that offer services like transportation and mental healthcare to seniors with complex conditions, and other specific segments of the population. They aim to flip the notion of an “unprofitable patient” by delivering targeted treatments via a lower-cost concierge approach to medicine to stem complications and ultimately avoid hospital stays.

“There is enough money in Medicare and Medicaid, we just don’t have the proper delivery models,” Myers said, describing what he sees as an underinvestment in preventive care and a reliance on reactive care. “At this point, it is more risky not to have a full-risk model.”

Health systems are getting on board, either by developing a similar model in-house or via partnerships. But as the primary-care providers expand into new markets and their ranks increase, experts question whether they can grow successfully given the limited number of family physicians as well as capital efficiency problems, amid other obstacles.

Intermountain Healthcare, for instance, recently spun off Castell, a company built on its preventive primary-care model that offers data analytics, affiliated network management guidance and other best practices aimed at delivering value-based care. The integrated not-for-profit health system joins the likes of Stanford Medicine, Johns Hopkins Medicine, UnityPoint Health, Mount Sinai Health Systems and others that have built similar models.

Intermountain’s Reimagined Primary Care has allowed physicians to spend more time with high-risk patients to get ahead of potential health problems, reducing hospitalizations and costs, executives said. 

Intermountain CEO Dr. Marc Harrison has pointed to primary-care provider Iora Health—another privately owned company offering a risk-based model that mainly serves Medicare Advantage and Medicare patients—as a catalyst to change how care is delivered. “What would I do if Iora Health came to Salt Lake City and took us apart? I’d much rather we disrupt ourselves,” Harrison said.

Meanwhile, Downers Grove, Ill.-based Advocate Aurora Health is partnering with Oak Street to open a high-touch clinic for seniors in the Chicago area.

Partnering is more efficient and cost-effective than building something internally, executives say. “There is a whole range of things that are outside of the traditional purview of a hospital or even a physician practice,” Scott Powder, chief strategy officer at Advocate Aurora, told Modern Healthcare sister publication Crain’s Chicago Business last year. “As big as we are and as good as we are, we can’t do everything.”

Oak Street is financially at risk for each of its patients, receiving money upfront from payers and determining care accordingly.

Patients are paired with a doctor, nurse, assistant and scribe. Oak Street provides transportation to and from appointments and even social events; same-day appointments; more face time with doctors; a 24/7 support line; insurance education; and supplemental services, such as behavioral health, eye exams, podiatry and in-center pharmacies. Each center hosts hundreds of social, fitness and learning activities throughout the year.

“There’s no CPT code for getting a ride to a community center,” Myers said.

Since its founding in 2012, Oak Street has helped reduce patient hospital visits by 41%. It entered the North Carolina market in November, expanding its more than 50-center network across seven states.

Other emerging primary-care models also are growing rapidly, often with the backing of private equity, venture capital and insurers. Direct primary-care clinics grew nearly 400% from 2014 to 2017, according to a recent report from the Advisory Board.

Miami-based primary-care provider ChenMed has charted expansions into Cincinnati, Cleveland, Memphis, Tenn., Orlando, Fla., and St. Louis, where it plans to open 20 for-profit senior medical centers this year. It is also growing within its current footprint of 39 cities in eight states, where it operates 59 clinics.

ChenMed similarly offers transportation, unlimited visits, same-day appointments, lifestyle classes as well as on-site cardiology, medication dispensing, imaging, labs and acupuncture to predominantly elderly patients with multiple chronic conditions. The full-risk practice has contracts with more than 20 Medicare Advantage plans from which it receives per member/per month payments. Like other models, the more ChenMed saves and the better the patients do, the more income it makes.

Primary-care doctors are typically employed by these companies, which contract with specialists like cardiologists.

“Population segmentation is key,” ChenMed CEO Dr. Christopher Chen said. “The mistake we have made in this country is that one size fits all. Each population has very specific needs, and you need to create focused factories designed to meet specific needs of populations.”

Iora Health’s care team consists of a health coach and either a doctor or nurse practitioner. Each market has at least one behavioral-care specialist and primary-care teams are coached on behavioral health basics. Its network of nearly 50 clinics is designed specifically for older adults.

“There is enough local autonomy to support and scale great ideas that are born close to patients,” said Dr. Andrew Schutzbank, Iora’s senior vice president of development.

These are vitally important companies that meet an unmet need, said Jeff Goldsmith, national adviser at consulting firm Navigant. Providers can’t rely on a patient to show up, identify their health issues and maintain treatment programs, and these models help parcel out what specific conditions are causing instability, he said.

“But trying to get the financials on them and figure out the real business here is really hard. I am not sure if they are making money,” Goldsmith said. “A lot are trying to make it on medical management fees.”

They typically don’t have the delegated risk, freedom and flexibility that earlier generations of primary-care providers like HealthCare Partners, Scan Health Plan, Health Net or PacifiCare—now UnitedHealthcare of California—had, he added.

One Medical is expanding in the Chicago area through a partnership with Advocate Aurora. Although One Medical shares some features of the team-based model, it operates mainly through fee-for-service payment through commercial contracts.

The San Francisco-based company, which recently filed for an IPO, mainly targets the younger demographic through contracts with big employers like Google. Individual membership runs $199 a year, which covers around-the-clock video visits with nurses and physician assistants and unlimited visits to its clinics, among other services.

But aligning care with large academic medical centers and tertiary hospitals typically increases costs, experts said.

“Unfortunately, when you make primary care fully beholden to a health system contract, there’s an inherent risk in compromising the patient experience and patient outcomes,” said Owen Tripp, co-founder and CEO of healthcare navigation service Grand Rounds.  “And that is a sad reality.”

The need for primary care in this country is so vast and the existing options are so poor that these companies have a terrific opportunity in front of them, he said. 

“The limiting constraint is just whether they can scale the member experience by hiring enough people to do the work—primary-care physicians, physician assistants and nurse practitioners,” Tripp said, adding that there are also capital efficiency issues.

The Affordable Care Act, the CMS, states, insurers and employers and have aimed to bolster primary care through many avenues.

The CMS, for instance, launched the Direct Contracting and Primary Care First models, both of which encourage primary-care practices to take on varying levels of risk.

Rhode Island required insurers to increase primary care’s share of total medical spending by 1 percentage point per year from 2010 to 2014, while nudging them toward outcome-oriented payments. That led to a $27 million boost in total primary-care spending from 2010 to 2017 and a $115 million decrease in total healthcare expenditures, according to the Advisory Board.

PepsiCo last year encouraged employees to choose a high-value primary-care physician by covering their health insurance premiums for a year and offered a bonus for individuals who see a doctor within the first three months of the year.

But wide-scale preventive-care implementation has been slow and major access gaps remain as more medical school graduates continue to opt for specialty-care slots rather than go the lower-paying primary-care route. An estimated $8.3 billion is spent each year on ED care that could be provided in another setting, research shows.

As a result, average wait time to see a physician grew from 18.5 days in 2015 to 29.3 day in 2019, according to the Advisory Board. Average primary-care net promoter scores, which measure the willingness of patients to recommend a company, decreased from 2.7 to -1.21 and primary-care doctors’ self-reported burnout increased from 43% to 49% during that same period.

Broad deployment of low panel sizes—a hallmark of the new primary-care companies that allow physicians to spend more time with patients—would require 3.6-times more primary-care physicians by 2025, the Advisory Board estimated. About 490,000 more doctors will be needed to meet that demand.

Given those numbers, advanced-practice providers are a critical component of the primary-care companies. Nurse practitioners and physician assistants are expected to fill some of the supply shortage, but their scope of practice and autonomy varies by state. Increasingly, advance-practice clinicians are being compensated on team-based outcomes, similarly to doctors, said Jason Tackett, a principal at consulting firm SullivanCotter.

But the primary-care companies have to be wary of the Stark and anti-kickback laws that penalize providers for self-referrals, he said. Advanced-practice providers “play a vital role in treating patients with chronic conditions,” Tackett said. “It requires clarity around the role of the physician and APP and other members of the team. The physician’s role may evolve from being a primary patient provider to perhaps serving as backstop if you will, stepping in when care is more in flux.”

Some members of Congress suggested that expanding the scope of the Medicare graduate medical education program to include nurse practitioners and physician assistants could help mitigate the effects of a physician shortage. But the U.S. Government Accountability Office noted in a recent report that such a change would require “substantial changes to current payment formulas.”

“These models have shown that there is no such thing as an unprofitable patient,” said Christopher Kerns, vice president for executive research at the Advisory Board, explaining that these segmented primary-care providers find savings in treating the sickest patients, making money on risk-models by delivering and steering them toward lower-cost care. “They also create a new series of winners and losers as referral patterns change.”

The intensive preventive-care model threatens a key hospital revenue source. Hospitals continue to straddle fee-for-service and risk-based payment models, presenting conflicting incentives that often slow progress. Primary-care physicians are often seen as feeders for more specialty care, which can undermine so-called “value-based” efforts.

Health systems will likely need to embrace external partners that compete with their medical groups, the Advisory Board said in its report.

Health systems have generally been more willing to develop internal specialized primary-care models rather than partner with existing providers, said Trish Anen, a principal and the advanced-practice provider workforce practice leader at SullivanCotter.

“They do it internally because they want to keep patients within their system,” she said.

Whether through health systems or independent for-profit providers, the specialized primary-care sector will likely continue to grow at a fast rate, experts said.

The alternative is to continue to add inpatient facilities, EDs and urgent-care centers, which likely isn’t sustainable, Grand Rounds’ Tripp said.

“There is more enrollment in Medicare Advantage, which has strong incentives to manage care coordination and medical cost outside of the hospital,” he said. “These companies are vehicles that can help do that.”