Can Innovation In Primary Care Slay The Healthcare Leviathan? (1 Of 2)

This is Part 1 of a two-part series on innovation in primary care. This article covers the importance of primary care and reasons for increasing investment in the space, while Part 2 covers who the players are, how they compete, and who is likely to win.

Why did Amazon buy One Medical? Maybe because it believes in the truth behind myths.

For much of humanity, we have had no reliable way to pass on our wisdom to the next generation. Then cave paintings appeared, and writing followed around 3200 BC. Previously, wisdom was passed down in the form of stories about the world, and various terrifying creatures began appearing in these stories, to serve as allegories.

Ogres. Trolls. Gargoyles. Minotaurs. Yetis. Ghouls. Zombies.

Fortunately, those are mythical creatures, no danger to those of us in the real world.

We do, however, have our own dangerous creature: the leviathan that is the U.S. healthcare system. Currently accounting for 20% of our GDP and growing faster than our economy does, our healthcare system’s appetite has proven insatiable. And for all that it consumes, what is excreted from the system stinks: America ranks poorly among high income countries on measures ranging from healthcare access to equity to outcomes.

The leviathan is one of few topics on which there is bipartisan support. Although the parties have different solutions, they both realize that, as the leviathan grows as a portion of the federal budget, it eats away at our country’s future.

As politicians, industry and policy experts alike search for a solution, an unlikely player has emerged as a potential knight in shining armor: primary care.

The recent history of primary care does not suggest it as a logical place to start trying to tame the $4 trillion healthcare leviathan. Indeed, the data and trends seem to suggest quite the opposite.

For instance, compared to their peers, primary care physicians are among the lowest paid physician specialties, averaging less than half of some specialists. Fewer Americans (including Medicare beneficiaries) report having a primary care physician, and primary care physicians are less likely than other specialties to accept new Medicare patients.

Further, just as technology in the form of social media platforms has encouraged societal fragmentation, new investments in telehealth and direct-to-consumer companies is threatening to further erode the primary of the patient – physician relationship.

Yet during these troublesome times, it is primary care that is innovating. It is primary care that is reporting some of the most encouraging data in terms of patient satisfaction, reduced costs, and improved outcomes. And some of the most innovative companies – from technology-enabled startups to Fortune 100 incumbents to health systems – are investing heavily because they see the opportunity to do well by doing good.

Is primary care the heroine (or hero) we need? If so, is there a reason to believe this is different from the ‘90s, when Health Maintenance Organizations tried – and failed – to position primary care physicians as the gatekeeper of care? And which of the innovative approaches is most likely to succeed?

The answers to these questions, and to what may defeat the leviathan, may well lie in what makes us human: a deep seated desire to form meaningful, deep, and lasting relationships. Part One of this two piece article covers (i) the importance of primary care and (ii) why investors believe now is the time to bet on primary care.

Part Two addresses (a) who the players in primary care are, (b) how the different players compete, (c) who is likely to win, (d) the future role of the primary care physician, and finally offers an answer to the question of whether primary care can indeed slay the healthcare leviathan.

The Importance Of Primary Care

“For a long time, our healthcare system has been predicated on models that treat patients ‘downstream’ — mostly when they are sick. It’s no secret that this has led to soaring costs and lower quality of care in the U.S., and it hasn’t fared as well as when you can move models further ‘upstream,’” explained Jaewon Ryu, MD, JD, president and CEO of Geisinger Health System.

To understand the importance of primary care, it helps to understand the distinction between what policymakers want from a healthcare system and how most doctors are trained. Policymakers seek a system that provides (i) equitable access to medical care for a population, (ii) improving health outcomes over time, (iii) satisfactory patient experiences, and (iv) all of this to be achieved at a reasonable cost.

Training and education for doctors, on the other hand, is focused on developing highly technical and specialized knowledge of medicine, mechanisms of action, and treatment for individuals. The more specialized and technically challenging the type of problem or area of focus, the more training required and ultimately, the more highly reimbursed. Such a system tends to reward specialization, and hence the rise of specialties and subspecialties (e.g., pediatric neuro oncology) among physicians.

Further exacerbating the specialization problem is that policymakers have historically hoped for one thing but paid for another. The type of healthcare system policymakers want requires organization, coordination, and management of groups of patients; meanwhile, the payment system that policymakers developed (in the form of Medicare) financially incentivizes doctors and hospitals to bill for services provided, not to care for the well-being of patients.

Fixing this issue requires a medical specialty that can serve as the entry point to the healthcare system for patients, build trusting and lasting relationships with patients, guide patients toward healthy behaviors and habits, and help them navigate the system when they require attention.

The type of healthcare system policymakers want requires organization, coordination, and management of groups of patients but the payment system that policymakers developed (in the form of Medicare) financially incentivizes doctors and hospitals to bill for services provided, not to care for the well-being of patients.

This is where primary care comes in. While defining primary care is difficult even for academics, in simple terms primary care refers to a clinician or team of clinicians who take accountability for a person’s whole health (see here for a more comprehensive primer).

It turns out that there is a mountain of evidence supporting the notion that investment in primary care is associated with better health outcomes, lower healthcare spend, higher quality of care, and more equitable outcomes. This is in large part because more recent research suggests it is non-medical factors that drive up to 80% of medical spend and the majority of outcomes. Primary care is uniquely positioned to help address these issues. By building trusted relationships over time with patients, primary care providers can discover and potentially help address the underlying social determinants of health and modifiable individual behaviors that are barriers to a healthier life.

Unfortunately, the U.S. has historically underinvested in primary care. Only 6% to 8% of our healthcare spend goes toward primary care, a figure that is about half of what experts suggest it should be (and what peer OECD countries spend). The good news is that as payers embrace value-based payment systems, more money should flow to primary care.

Some, however, make the case it won’t happen overnight.

“We can’t take the money we pay primary care under a fee for service model and shift it to value-based care and expect things to magically get better. We’ve been underinvesting for years,” says Ann Greiner, CEO of the Primary Care Collaborative. The Primary Care Collaborative was founded in 2006 to advocate for enhanced and comprehensive primary care.

Greiner’s point may be true at a macro level (especially considering changes that individual primary care practices must implement), but there is reason to believe the shift is already under way.

Why Investors Put $16B (And Counting) Into Primary Care, And What’s Different This Time?

Although there’s been momentum building for some time, in just the past few months there have been signs of broadscale recognition that primary care is having a moment. Consider just a few data points:

• On June 1st, Steward Health System announced a partnership whereby it will transition patients in its value-based programs to CareMax, a tech-enabled primary care provider
• In April UnitedHealth Group revealed that 30% of people in its individual exchange plans selected a virtual-first offering featuring team-based care
• In May CVS Health, which had already revealed it was expanding into primary care, announced a “virtual primary care” offering

Further, earlier this year researchers from Harvard found that companies innovating in primary care had raised $16B in 2021 alone.

What’s driving the investment?

Kameron Matthews, MD, JD, FAAFP and Chief Health Officer at Cityblock Health, sees the pandemic as a healthcare touchstone. “The COVID-19 pandemic demonstrated the many inequities and systemic barriers to accessing high-quality preventative care, especially for underserved communities,” says Matthews, a family physician and attorney. Matthews sees changes occurring at a systemic level as a result of the pandemic, accelerating the shift to value-based payment models that are highly aligned to the role that primary care plays.

One way this can be seen playing out is in the evolution of state Medicaid policy. Many states have struggled to manage budgets during the past decade, when enrollment first increased in response to the Affordable Care Act and more recently surged during the pandemic. For instance, Oregon enacted legislation requiring health plans administering its Medicaid benefit to spend at least 12% of healthcare expenditures on primary care services by 2023.

Cityblock Health, a technology-enabled startup founded in 2017 focused on delivering primary care services to Medicaid populations, seems well positioned to meet this growing demand. This past November, the company raised $400M to expand its geographic footprint; now valued at $5.7 billion, investors seem bought into the company’s model and convinced it can be a national player.

But if Cityblock is seeing success with the Medicaid population and attributes Covid-19 as a recent growth driver, others see additional reasons for investors deploying capital into primary care these days. “Investing in primary care is the smart financial move,” says Kyna Fong, CEO of Elation Health, a technology company supporting independent primary care practices that just raised $50M to support its growth.

Among the reasons that the wave of investment into primary care makes sense, Fong and others cite:

• Federal experimentation in payment models: Several major pieces of legislation in the 2010s (including the ACA in 2010 and MACRA in 2015) firmly committed Centers for Medicare and Medicaid Services (CMS) to shifting from paying providers to provide services toward paying them to keep populations healthy. There are numerous models emerging as experiments; Oak Street Health is one primary care company that has contracted with CMS directly to bear full risk and care for a population of patients.
• The rise of Medicare Advantage and risk-shifting: The Medicare Modernization Act of 2003 allowed for commercial health insurers to contract with CMS to enroll Medicare beneficiaries and administer privately-run health plans. These plans now encompass 42% of all Medicare beneficiaries enrolled. These plan sponsors, which bear full financial risk for their members, are increasingly sub-contracting the risk and management of portions of their membership to primary care companies.
• Clinician burnout: Burnout among clinicians has reached epidemic levels, and there have been few areas of refuge. Primary care startups may be a safe haven for primary care physicians, allowing them to focus on clinical care and taking care of administrative overhead.
• Increasing consumer exposure to costs: The increasing use of high deductible health plans and rising premiums and copays are leading consumers to be more judicious with their utilization of healthcare services. There is opportunity for primary care to play a role in helping patients navigate to more cost-effective care.
• Labor and talent shortage for employers: Talent shortages over the past decade, exacerbated recently by the Great Resignation, have led some companies to invest in healthcare benefits and programs in an effort to improve recruitment and retention. Increasingly, companies are turning to primary care as a clear opportunity to benefit themselves and their employees.
• Increasing healthcare costs for employers: Healthcare costs have increased almost 50% over the past ten years (according to this survey from Kaiser Family Foundation), with employer contributions increasing to $16,253 per employee for family coverage in 2021. As employers search for various ways to reduce their expense exposure, one way they are doing so is ‘direct primary care’, with the hopes of reducing low value and high cost care.
• Tech, data and analytics in healthcare: EHR adoption among physicians and hospitals is close to 90%. More than 300M Americans have smartphones. And provider and patient attitudes toward telehealth has advanced dramatically during the pandemic. All of this means more seamless information sharing that can enable care coordination.

All of this suggests that the time is now for primary care. Check out Part 2 to learn more about who the new (and incumbent) primary care players are, how they compete, and who is likely to win in the market.