Caring for oldest, sickest patients now a growth business

Medical clinics that cater to chronically ill seniors are expanding rapidly across the country as they vie for patients in the lucrative, fast-growing Medicare Advantage market.

Clinic operators ChenMed, Oak Street Health and Partners in Primary Care are among companies that have recently unveiled plans to bring senior-focused medical centers to new communities.

Meanwhile, some hospital systems are attempting to get in on the action with their own senior clinics.

“We’re trying to actually push more care outside the hospital into the clinic, into the communities, and this is a huge vehicle by which we do that,” said Dr. Jaewon Ryu, CEO of Danville, Pa.-based Geisinger Health, which created two 65 Forward senior clinics and is adding four more this year. It aims to build another six clinics in 2021.

It may seem counterintuitive to build a business around caring for the oldest, sickest, most-expensive patients in the country. But the clinic operators say that’s where they find the greatest opportunity to save and pocket those costs. Venture capital firms and Medicare Advantage insurers are betting they will succeed.

“Where you have the biggest opportunity for improvement is where the biggest problem in healthcare is, which is around chronic illness and adverse social determinants,” said Dr. Griffin Myers, Oak Street’s chief medical officer. “If you can do it well, it’s a really remarkable opportunity to have an impact and have rewarding economics. If you don’t do it well, you lose your shirt, but we’re really good at it.”

The companies have similar care and payment models. They contract with Medicare Advantage plans to provide primary care “on steroids” to older patients with multiple chronic illnesses, as one executive put it. Because they typically take full financial risk from the Advantage plans, which pay them fixed monthly fees for each patient, the clinics make money by keeping patients out of the hospital.

They do that by providing preventive and behavioral health care along with managing chronic diseases and addressing social needs. Working with a team of clinicians and coordinators, doctors see about a fifth as many patients as they normally would so they can see them more frequently and in longer appointments.

Chicago-based Oak Street serves about 85,000 patients at 66 centers across nine states. It completed an initial public offering in August, which will help it stand up another 10 facilities by year-end. Those don’t include the handful of smaller clinics it is creating inside Walmart stores in Texas.

ChenMed, a decades-old chain based in Miami that only really started expanding in 2011, boasts 76 medical centers in poor, underserved communities in 10 states. It’s planning to open 25 to 35 centers next year and another 40 to 50 in 2022.

Partners in Primary Care, owned by Humana, is also in the midst of a rapid expansion, with plans to double its 50 clinics in the next three years.

Iora Health announced new funding in February that will help it grow its footprint of 48 clinics.

These companies are following the money. In Medicare Advantage, they find more patients to work with and more premium dollars to invest in care programs and technology. The number of seniors enrolled in Advantage plans has grown rapidly over the past decade, a trend that shows no signs of slowing. “The demand is huge, and that’s where we believe the most vulnerable patients are right now,” said Dr. Gordon Chen, ChenMed’s chief medical officer.

The latest federal data show that 25.4 million people were in Advantage plans as of October, which means that roughly 40% of all Medicare beneficiaries receive benefits through private plans. That’s more than double the enrollment a decade ago, when about a quarter of Medicare enrollees were in Advantage plans, according to the Commonwealth Fund.

Seniors increasingly choose Advantage plans over traditional Medicare as they can get extra benefits not offered in the fee-for-service program and are familiar with being limited to a network and having an insurer manage their benefits.

On top of the big pool of potential patients, a medical practice would receive thousands more dollars to care for a Medicare Advantage patient than it would for a younger, healthier commercially insured patient. Keeping an Advantage member out of the hospital could potentially yield more savings that an at-risk provider could pocket.

Average spending per Medicare beneficiary was $14,151 in 2019, according to the 2020 Medicare trustees report. Spending per person with employer-sponsored insurance was about $5,900 in 2018, according to the Health Care Cost Institute’s latest data. The difference in part reflects the difference in health status. “If you’re starting with a patient population that consumes a lot of healthcare because of their age and health conditions, there’s more of an influence you can wield as a provider working on that patient’s health,” said Stephen Tanal, an industry analyst at SVB Leerink.

Of course, capitated primary care isn’t new. Kaiser Permanente and other integrated health systems were built on such models. Capitation was also widespread among HMOs in the 1990s, before an avalanche of backlash from patients and physicians over insurers’ cost-cutting measures ended the movement.

Today’s versions are different. The models depend on data from medical claims, electronic health records and other sources to pinpoint gaps in care and direct resources toward the greatest needs. They spend more on primary care and behavioral health upfront to help prevent acute conditions. And they address nonclinical needs: most of the clinics feature community centers that patients can come to for yoga or educational classes, for instance, which address the sense of loneliness that some seniors may feel.

“This kind of model of capitation 3.0 has matured. You’ve got standards for referral management, better data for monitoring people, a wider acceptance of lifestyle-related issues as they relate to the cost of care,” said Paul Keckley, a healthcare policy analyst. “Fifteen years ago, we really didn’t have that, and that gives this model more of a tailwind.”

“We built the data systems that allow the health plan data to come through and integrate and we can see how much things cost,” Chen said. “You can’t do a full-risk model without understanding what things cost.”

The financial backing of Medicare Advantage insurers has fueled growth. Humana, which is arguably the biggest bankroller of the model among private insurers, owns about 150 senior-focused primary-care clinics through its Partners in Primary Care and Conviva subsidiaries, which serve members of multiple health plans. The insurer also has partnerships with 108 other clinics operated by Oak Street, ChenMed, Iora and other companies it has invested in.

George Renaudin, senior vice president of Medicare and provider experience at Humana, said the Louisville, Ky.-based insurer helps bring senior-focused primary care to new communities by building clinics that those other companies staff. It plans to help open 50 to 60 more clinics with partners next year. Currently, 8%, or about 300,000, of Humana’s Advantage members, get care in its owned, joint venture and allied clinics.

Humana invests in senior-focused clinics because they do a better job of keeping Advantage members healthy and reducing costs than other providers, Renaudin said. They drive better member satisfaction and score higher on quality measures, such as controlling blood sugar and providing preventive screenings, helping to boost Humana’s CMS star rating, which reflects the quality of services that seniors receive.

A high star rating helps Humana hold onto its members, while lower costs allow it to invest in new benefits. About 92% of Humana Medicare Advantage members are in plans with at least four out of five stars, according to the company.

Partners in Primary Care, which formed a joint venture with a private equity fund in February to double its centers in three years, has been able to lower 30-day hospital readmission rates by nearly 60% compared with the general Medicare population, according to Humana.

Oak Street and ChenMed tout similarly glowing outcomes. Myers said Oak Street patients are half as likely to go to the hospital than patients with similar health conditions who are not patients of the company’s clinics.

A study by ChenMed and the University of Miami published in the American Journal of Managed Care found that ChenMed patients’ healthcare costs were 28% lower per member compared with other Medicare Advantage members who didn’t receive intensive primary care.

Some health systems, particularly those that own Medicare Advantage plans, are hoping to achieve such results by building their own senior-focused clinics or partnering with them. Geisinger’s clinics, which double as community centers, offer concierge-style primary care but also rotate common specialties like cardiology through the clinic. X-rays, lab services and radiology are also offered on-site. Ryu said early results show emergency department use has decreased 40% to 45%, and inpatient hospitalization rates have fallen 20% to 25% among seniors served in the clinics.

Others in the sector include Salt Lake City-based Intermountain Healthcare, which bought a senior-care clinic to support its own health plan’s Medicare Advantage members 15 years ago, and NorthShore University HealthSystem, based in Evanston, Ill., which opened one last year.

Senior-focused clinics aren’t common, despite their purported results. Anders Gilberg, senior vice president of government affairs for the Medical Group Management Association, said such clinics that invest heavily in primary care and social determinants and focus on one patient population would only be tenable for providers that take on most of the financial risk. The vast majority of physician practices don’t.

In general, paying clinicians on a per-member, per-month basis is rare. Among physician practices and hospitals, the median percentage of revenue from capitated contracts was 5% in 2019, according to a Numerof and Associates survey.

The COVID-19 pandemic could prompt more medical practices to accept capitated fees or other value-based payment arrangements. While the pandemic sapped fee-for-service providers of revenue when patients stopped seeking care, capitated practices continued to collect their monthly fees, which for many was a financial lifeline.

CMS has also built payment models to encourage primary-care practices to take on risk. Its direct contracting program, which starts in April 2021, could spur participation.

But transforming a practice to one that accepts financial risk is a massive lift, said Anne Tumlinson, founder of ATI Advisory, a consulting firm focused on senior care. The government’s approach thus far hasn’t produced a sea change.

“If we want to flip the paradigm entirely so every community has a primary-care kind of clinic model for people who have lots of needs … we’re going to have to invest in that at the government level,” she said.

“Scaling isn’t going to happen if we have to wait for 10 more Oak Street Healths to form. It’s just not fast enough.”