The genetic paradox: Yesterday’s solutions are today’s problems. Can U.S. healthcare shift gear faster than our genes?

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In a world where change is the only constant, the swift currents of modern life contrast starkly with the sluggish pace of genetic evolution—and of American healthcare, too.

Two relatively recent scientific discoveries demonstrate how the very genetic traits that once secured humanity’s survival are failing to keep up with the times, producing dire medical consequences. These important biological events offer insights into American medicine—along with a warning about what can happen when healthcare systems fail to change.

The Mysteries Of Sickle Cell And Multiple Sclerosis

For decades, scientists were baffled by what seemed like an evolutionary contradiction.

Sickle cell disease is a condition resulting from a genetic mutation that produces malformed red blood cells. It afflicts approximately 1 in 365 Black Americans, causing severe pain and organ failure.

Its horrific impact on people raises a question: How has this genetic mutation persisted for 7,300 years? Nature is a merciless editor of life, and so you would expect that across seven millennia, people with this inherited problem would be less likely to survive and reproduce. This curiosity seems to defy the teachings of Charles Darwin, who theorized that evolution discards what no longer serves the survival of a species.

Scientists solved this genetic puzzle in 2011, illuminating a significant evolutionary trade-off.

People living with sickle cell disease have two abnormal genes, one inherited from each parent. While the disease, itself, affects a large population (roughly 100,000 African Americans), it turns out that a far larger population in the United States carries one “abnormal” gene and one normal gene (comprising as many as 3 million Americans).

This so called “sickle cell trait” presents milder symptoms or none at all when compared to the full disease. And, unlike those with the disease, individuals who with one (but not both) abnormal genes possess a distinct evolutionary advantage: They have a resistance to severe malaria, which every year claims more than 600,000 lives around the globe.

This genetic adaptation (a resistance to malaria) kept people alive for many millennia in equatorial Africa, protecting them from the continent’s deadliest infectious disease. But in present-day America, malaria is not a major public-health concern due to several factors, including the widespread use of window screens and air conditioning, controlled and limited habitats for the Anopheles mosquitoes (which transmit the disease), and a strong healthcare system capable of managing and containing outbreaks. Therefore, the sickle cell trait is of little value in the United States while sickle cell disease is a life-threatening problem.

The lesson: Genetic changes beneficial in one environment, such as malaria-prone areas, can become harmful in another. This lesson isn’t limited to sickle cell disease.

A similar genetic phenomenon was uncovered through research that was published last month in Nature. This time, scientists discovered an ancient genetic mutation that is, today, linked to multiple sclerosis (MS).

Their research began with data showing that people living in Northern Europe have twice the number of cases of MS per 100,000 individuals as people in the South of Europe. Like sickle cell disease, MS is a terrible affliction—with immune cells attacking neurons in the brain, interfering with both walking and talking.

Having identified this two-fold variance in the prevalence of MS, scientists compared the genetic make-up of the people in Europe with MS versus those without this devastating problem. And they discovered a correlation between a specific mutated gene and the risk of developing MS. Using archeological material, the researchers then connected the introduction of this gene into Northern Europe with cattle, goat and sheep herders from Russia who migrated west as far back as 5,000 years ago.

Suddenly, the explanation comes into focus. Thousands of years ago, this genetic abnormality helped protect herders from livestock disease, which at the time was the greatest threat to their survival. However, in the modern era, this same mutation results in an overactive immune response, leading to the development of MS.

Once again, a trait that was positive in a specific environmental and historical context has become harmful in today’s world.

Evolving Healthcare: Lessons From Our Genes

Just as genetic traits can shift from beneficial to detrimental with changing circumstances, healthcare practices that were once lifesaving can become problematic as medical capabilities advance and societal needs evolve.

Fee-for-service (FFS) payments, the most prevalent reimbursement model in American healthcare, offer an example. Under FFS, insurance providers, the government or patients themselves pay doctors and hospitals for each individual service they provide, such as consultations, tests, and treatments—regardless of the value these services may or may not add.

In the 1930s, this “mutation” emerged as a solution to the Great Depression. Organizations like Blue Cross began providing health insurance, ensuring healthcare affordability for struggling Americans in need of hospitalization while guaranteeing appropriate compensation for medical providers.

FFS, which linked payments to the quantity of care delivered, proved beneficial when the problems physicians treated were acute, one-time issues (e.g., appendicitis, trauma, pneumonia) and relatively inexpensive to resolve.

Today, the widespread prevalence of chronic diseases in 6 out of 10 Americans underlines the limitations of the fee-for-service (FFS) model. In contrast to “pay for value” models, FFS, with its “pay for volume” approach, fails to prioritize preventive services, the avoidance of chronic disease complications, or the elimination of redundant treatments through coordinated, team-based care. This leads to increased healthcare costs without corresponding improvements in quality.

This situation is reminiscent of the evolutionary narrative surrounding genetic mutations like sickle cell disease and MS. These mutations, which provided protective benefits in the past, have become detrimental in the present. Similarly, healthcare systems must adapt to the evolving medical and societal landscape to better meet current needs.

Research demonstrates that it takes 17 years on average for a proven innovation in healthcare to become common practice. When it comes to evolution of healthcare delivery and financing, the pace of change is even more glacial.

In 1934, the Committee on the Cost of Medical Care (CCMC) concluded that better clinical outcomes would be achieved if doctors (a) worked in groups rather than as fragmented solo practices and (b) were paid based on the value they provided, rather than just the volume of work they did.

Nearly a century later, these improvements remain elusive. Well-led medical groups remain the minority of all practices while fee-for-service is still the dominant healthcare reimbursed method.

Things progress slowly in the biological sphere because chance is what initiates change. It takes a long time for evolution to catch up to new environments.

But change in healthcare doesn’t have to be random or painfully slow. Humans have a unique ability to anticipate challenges and proactively implement solutions. Healthcare, unlike biology, can advance rapidly in response to new medical knowledge and societal needs. We have the opportunity to leverage our knowledge, technology, and collaborative skills to address and adapt to change much faster than random genetic mutations. But it isn’t happening.

Standing in the way is a combination of fear (of the risks involved), culture (the norms doctors learn in training) and lack of leadership (the ability to translate vision into action).

Genetics teaches us that evolution ultimately triumphs. Mutations that save lives and improve health become dominant in nature over time. And when those adaptations no longer serve a useful purpose, they’re replaced.

I hope the leaders of American medicine will learn to adapt, embracing the power of collaborative medicine while replacing fee-for-service payments with capitation (a single annual payment to group of clinicians to provide the medical care for a population of patients.) If they wait too long, dinosaurs will provide them with the next set of biological lessons.

“Be careful what you wish for.”

https://mailchi.mp/3ed7bdd7f54b/the-weekly-gist-june-2-2023?e=d1e747d2d8

A recent chat with a former physician entrepreneur who recently sold his practice to a large health system highlighted the fact that “hospital-physician integration” can sometimes be a misnomer. “I feel like we were sold a bill of goods,” he told us, referring to his ten-person primary care group.

“We worked hard to build this practice, and the health system CEO made a lot of promises about the value of bringing us in, and the investments they’d make in our growth.” Instead, the group has experienced a different reality: little meaningful integration, an unclear bureaucracy to navigate, zero transparency into the finances of the medical group or system, leadership turnover, and a lack of strategic vision. 

“We would never sign this deal again,” he said, “and we’re not the only ones—they might not realize it, but this system is on the precipice of a full-on physician mutiny.”

Of course, there are two sides to every story, but the anecdote reinforced in our minds the importance of careful planning and attention to integration following practice acquisitions. There needs to be a plan, it needs to be clear, and it needs to be resourced. 

Otherwise, systems risk ending up with unhappy, disengaged doctors—a situation to be avoided at all costs.

Physicians Band Together to Fend Off Private-Equity Firms

Marco Fernandez, M.D., says he was blindsided in 2021 when his anesthesiology group, Midwest Anesthesia Partners in Arlington Heights, Illinois, lost two hospital contracts in two weeks to private equity-owned anesthesiology groups. What was more surprising to Fernandez, the group’s president, was that the person contracting on behalf of the private-equity group was an executive board member for the American Society of Anesthesiologists. “I was in disbelief,” Fernandez said.

Fernandez and his colleagues at Midwest Anesthesia Partners and three other anesthesiology groups subsequently started the Association for Independent Medicine (AIM) to push back against private equity-owned takeovers. Take Medicine Back was formed by emergency medicine physicians for similar reasons.

Private-equity firms are investing in or buying healthcare providers across the spectrum —nursing homes, home health agencies, hospitals and physician practices. “It’s in every aspect of health,” Eileen O’Grady, research and campaign director for healthcare at the Private Equity Stakeholder Project, said during a session about private equity at the Association of Health Care Journalists’ annual meeting in March.

Private-equity firms share common characteristics, O’Grady told the journalists. They typically want to double or triple their investment before selling in four to seven years, she said. They often rely on leveraged buyouts and heavy debt to finance their purchase. Another common tactic is to buy small companies and “roll them up” up into larger organizations.

Some private-equity firms use the sale-leaseback model, which involves selling an organization’s real estate and leasing it back to the organization. It may provide an infusion of cash from the sale, but real estate is often a healthcare organization’s biggest asset. O’Grady said she is most troubled by the practice of dividend recapitalizations, which she called “one of the most inexcusable practices of PE (private-equity) firms.” Dividend recapitalizations involve the organization taking on a loan secured by its healthcare business and using some proceeds to pay the private-equity firm a cash dividend, O’Grady explained. This is expensive, as loan funds must be repaid with interest. She shared one example: A hospital system took out a $1.2 billion loan, paying the private equity firm $457 million in dividends. “The hospitals were on the hook to pay that back, while the hospitals were also suffering profound quality issues. There was no value to anyone but the private- equity firm with this transaction.”

Fernandez said that when private equity takes over medical practices, quality suffers. “The cost of care is not going down. The quality is not going up. It’s quite the reverse,” he said. He is hoping AIM can help physicians who want to stay independent. When private- equity firms buy up practices or takes contracts, “there are very few options. You either have to leave the city or just work for them.”

Is private equity health care’s bad guy?

Radio Advisory’s Rachel Woods sat down with Advisory Board’s Sarah Hostetter and Vidal Seegobin to discuss the good and bad elements of private equity and what leaders can do to make it a valuable partner to their practices.

Private equity (PE) tends to get a bad rap when it comes to health care. Some see it as a disruptive force that prioritizes profits over the patient experience, and that it’s hurting the industry by creating a more consolidated marketplace. Others, however, see it as an opportunity for innovation, growth, and more movement towards value-based care.

Radio Advisory’s Rachel Woods sat down with Advisory Board‘s Sarah Hostetter and Vidal Seegobin to discuss the good and bad elements of PE and what leaders can do to make it be a valuable partner to their practices.

Read a lightly edited excerpt from the interview below and download the episode for the full conversation. https://player.fireside.fm/v2/HO0EUJAe+KzkqmeWH?theme=dark

Rachel Woods: Clearly there are a lot of feelings about private equity. I’m frankly not that surprised, because the more we see PE get involved in the health care space, we hear more negative feelings about what that means for health care.

Frankly, this bad guy persona is even seen in mainstream media. I can think of several cable medical dramas that have made private equity, or maybe it’s specific investors, as the literal enemy, right? The enemy of the docs that are the saviors of their hospital or ER or medical practice. Is that the right way we should be thinking about private equity? Are they the bad guy?

Sarah Hostetter: The short answer is no. I think private equity is a scapegoat for a lot of the other problems we’re seeing in the industry. So the influx of money and where it’s going and the influence that that has on health care. I think private equity is a prime example of that.

I also think the horror stories all get lumped together. So we don’t think about who the PE firm is or what is being invested in. We put together physician practices and health systems and SNPs, and we lump every story all together, as opposed to considering those on their individual merits.

Woods: And feeds to this bad guy kind of persona that’s out there.

Hostetter: Yeah. And like you said, the media doesn’t help, right? If the average consumer is watching and seeing different portrayals or lumped portrayals, it’s not helping.

Vidal Seegobin: Private equity, as all actors in our complex ecosystem, is not a monolith, and no one has the monopoly on great decisions in health care, nor do they have a monopoly on the bad decisions in health care. And so if you attribute a bad case to private equity, then you also have to attribute the positive returns done from a private equity investment as well.

Hostetter: Agree with what Vidal’s saying, but bottom line is that every stakeholder is not going to have the same outcomes or ripple effects from a private equity deal. It really depends on the deal itself, the market, and the vantage points that you take.

Woods: I want to actually play out a scenario with the two of you and I want you to talk about the positive and the potentially negative consequences for different sectors or different stakeholders.

So let’s take the newest manifestation that Sarah, you talked to us through. Let’s say that there is a PE packed multi-specialty practice heavily in value-based care. That practice starts to get bigger. They acquire other practices, including maybe even some big practices in a market and they start employing all of the unaffiliated or loosely affiliated practices in the market.

I am guessing that every health system leader listening to this episode is already starting to sweat. What does this mean for the incumbent health system?

Seegobin: So I think one thing that’s going to be pretty clear is that size does confer clear advantages and health care is part and parcel that kind of benefit. What I think is challenging is when we’re entering into a moment where access to capital is challenging for health systems in particular and we’re going to need to scale up investments, health systems could see themselves falling further and further behind as private equity makes smart investments into these practices to both capture and retain volume. And as a consequence of that, reduces the amount of inpatient demand or the demand to their bread and butter services.

Hostetter: And I think it’s really important that you phrase the question, Rae, as health system. Because we so often equate health system and hospital.

But a health system includes lots of hospitals, it includes ambulatory facilities, a range of services. And so I think for systems to equate health system and hospital, it’s really hard when any type of super practice or large backed practice comes into the market.

Whether we are talking about a plan backed practice, a PE backed practice, or just a really large independent group. There are pressures on health systems who think of their job or their primary service as the hospital. And there is a moment where the power dynamics can shift in markets away from the health system, if they aren’t able to pivot their strategy beyond just the hospital.

Woods: Which is exactly why health systems see this scenario as, let’s just say it, threatening. Sarah, then how do the physicians feel? Do they have the opposite feelings as the incumbent health systems?

Hostetter: There’s a huge range. Private equity is incredibly polarizing in the physician practice world, the same way that it is in other parts of the industry. So I think there is a hope from some practices that private equity is a type of investor that is aligned with them.

Physicians who go into private practice historically tend to be more entrepreneurial. They are shareholders in their own practice, so there are some natural synergies between private equity, business minded folks, and these physicians.

Also, even though I go into a small business, it takes a lot to run a small business, so there are potentially welcome synergies and help that you can get from a PE firm. On the flip side of that, there are groups who would never in a million years consider taking a private equity investment and are unwilling to have these conversations.

Woods: There is a tendency, especially in the conversation that we’re having, for folks to think about private equity as being something that primarily impacts the provider space, at least when it comes to health care. But I’m not sure that that’s actually true. So what consequences, good or bad, might the payers feel? Might the life sciences companies feel?

Seegobin: So one common refrain when talking about private equity and their acquisition or partnering with traditional health care businesses like physician practices is that they are immediately focused on cutting costs. So they are going to consolidate all of the purchasing contracts, they are going to make pretty aggressive decisions about real estate, all the types of cost components that run the business.

Now, if you are a kind of life sciences or a diagnostic business for whom you would depend on being an incumbent in those contracting decisions, you’re worried that the private equity is either going to direct you to a lower cost provider, or in many cases, another business that the private equity firm owns as well, right?

They would love to keep synergies within the portfolio of businesses that they’ve acquired and they partner. So if you were relying on incumbent or historical purchasing practices with these physician practices, it can be disrupted, depending on the arrangement.

Hostetter: And then I think there’s a range of potential implications for payers. So you have some payers who themselves are aggregating independent practices, and they’re targeting the same type of practices that the PE firms that are betting on value-based care are targeting. They are targeting primary care groups who are big in Medicare Advantage. So there’s some inherent competition potentially for the physician practice landscape there.

Woods: Well, and I think they’re trying to offer the same thing, right? They’re trying to offer capital. They’re trying to do that with the promise of autonomy. And they’re coming up against a competitive partner that is saying, “I can do both of those things and I can do it better and faster.”

Hostetter: Yeah. And both of them are saying we can do it better and faster than hospitals. That’s the other thing, right?

Woods: Which, that part is probably true.

Hostetter: Yeah. Their goals are aligned and they believe they can get there different ways. And I think autonomy is a big sticking point here for me or a big bellwether for me, because I think whoever can get to value-based care while preserving autonomy is going to win. You have to have some level of standardization to do value-based care well. You can’t just let everyone do whatever they want. You need high quality results for lower cost. That inherently requires standardization. So who can thread the needle of getting that standardization while preserving a degree of autonomy?

It’s fascinating, as we’ve had this call, it was suggested multiple times that payers actually might be the end of the line for some of these PE deals. That there’s a lot of alignment between what payers are trying to do with their aggregation and what PE firms who are investing in primary care do, and hey, payers have a lot of money too. So could we actually see some of these PE deals end with a payer acquisition? Because they’re trying to achieve similar things, just differently.

Optum looks to acquire Houston-based Kelsey-Seybold Clinic

According to unnamed Axios sources, UnitedHealth Group’s Optum has signed a deal to acquire the independent 500-physician multispecialty group, which operates more than 30 clinic locations and one of the largest ambulatory surgery centers in Texas. With more than 41,000 enrollees, Kelsey-Seybold controls 8 percent of the lucrative Medicare Advantage market in the Houston metro area.

In January 2020, private equity firm TPG Capital made a minority investment in the 73-year-old group, valuing it at $1.3B, to help expand its footprint. Should the current deal come to fruition, Kelsey-Seybold’s physicians would join the ranks of over 60K physicians owned by, or exclusively affiliated with, Optum.

The Gist: Fresh off last year’s acquisition of 700-physician, Boston-based Atrius Health, Optum is continuing its buying spree of large physician groups with a history of managing risk. It will be interesting to see how quickly UnitedHealth Group can combine its Optum-owned physician assets with its commercial insurance platform to create a compelling, lower-cost option for employers and Medicare Advantage enrollees—building on the model of its Harmony network in Southern California.

Of note, Kelsey-Seybold and United Healthcare have offered a co-branded insurance product for years, and UHG executives have said they plan to roll out Harmony in Texas and Seattle next. 

Kelsey-Seybold is one a dwindling number of very large, independent multispecialty groups, and its sale to Optum may have other groups wondering about their ability to remain independent in an increasingly concentrated healthcare market.  

MedPAC declines to recommend to Congress additional pay bumps for doctors, hospitals

Medicare spending costs money

A top Medicare advisory board did not recommend any new payment hikes for acute care hospitals or doctors for 2023, stating that targeted relief funding has helped blunt the impact of the COVID-19 pandemic.

The Medicare Payment Advisory Commission (MedPAC), which makes recommendations to Congress and the federal government on Medicare issues, voted on the payment changes to Congress during its Thursday meeting. The panel decided against recommending any pay hikes.

The commission unanimously voted to update 2023 rates for acute care hospitals by the amounts determined under current law. The Centers for Medicare & Medicaid Services will publish its update to the current law payment rates this summer.

MedPAC estimated that the rates will increase 2% and that there would be 3.1% growth in hospital wages and benefits, but these “may be higher or lower by the time this is finalized,” said MedPAC staff member Alison Binkowski.

She added there will be another estimated 0.5% increase in inpatient rates.

MedPAC decided not to recommend any pay rates beyond current law after looking at the financial picture for hospitals and found the indicators of payment adequacy are generally positive.

Hospitals maintained strong access to capital thanks to substantial federal support, including targeted federal relief funds to rural hospitals which raised their all-payer total margin to a near-record total high,” Binkowski said.

She added fewer hospitals closed, and facilities continued to have positive marginal Medicare profits.

It was also difficult to interpret changes in quality that traditionally would determine whether a payment boost would be needed.

“For example, mortality rates increased in 2020, but this reflects the tragic effects of the pandemic on the elderly rather than a change in the quality of care provided to Medicare beneficiaries or the adequacy of Medicare payments,” Binkowski said.

Even though commission members agreed with the recommendation for hospitals, they were concerned whether it was enough to help facilities meet drastic increases in labor expenses.

“With labor, it is more than just a salary increase these hospitals are seeing,” said commission member Brian DeBusk.

He noted that hospitals haven’t just seen an increase in rates for contract or temporary nurses, but in nursing education as well.

MedPAC also recommended no changes to the statutory payment update for dialysis facilities and shouldn’t give a payment update to ambulatory surgery centers (ASCs) due to confidence in payment adequacy for the facilities.

“Despite the public health emergency, the number of ASCs increased by 2% in 2020,” said MedPAC staff member Daniel Zabinski. “The growth that we saw in the number of ASCs also suggests access to capital remains adequate.”

Physician fee schedule recommendation

The commission decided to take a similar estimate with the physician fee schedule, calling for any update to be tied to current law, which is estimated to have no change in spending.

Medicare payments to clinicians declined by $9 billion in 2020 but were offset thanks to congressional relief funds. Physicians also got a 4% bump to payments through 2022 compared to prior law.

The temporary rate hike is expected to go away at the start of 2023, but physician groups are likely to lobby Congress to keep the pay bump intact.

Physician groups already blasted the recommendation from MedPAC.

Anders Gilberg, senior vice president of government affairs for the Medical Group Management Association, tweeted that the recommendation was out of touch, especially after new reports of inflation.

“Hard to conceive of a more misguided recommendation to Congress at a time when practices face massive staffing shortages and skyrocketing expenses,” he tweeted.

We’ve been defining the independent physician landscape wrong—here’s a new approach

Physician groups and their funders—you've been thinking about their  relationship wrong

We’ve historically divided the physician landscape in two parts: hospital-employed or independent. But over time, the “independent” segment has become more complex and inclusive of more types of groups who don’t fit the traditional definition of shareholder-owned and shareholder-governed. Even true independent groups don’t look like they once did, adapting in ways like receiving funding from a range of investors or adding more employed physicians.

So our standard way of thinking—hospital-employed or independent—has become obsolete. It’s time for a more nuanced approach to a diversified market.

When the pace of investment and aggregation in the independent space picked up, we conceptualized the changes primarily in terms of funder: private equity, a health plan, a health system, or another independent group.

That made sense at the time because each type of funder was using similar methods to partner with groups—health systems acquired, private equity invested directly in the independent group, and so forth.

But the market has shifted such that remaining independent groups are both stronger and more committed to independence. So organizations who want to partner with these groups have had to refine and diversify their value propositions—and often times are doing so without all-out acquisition. For more information on themes within these funder organizations, see our companion blog.

We set out to make sense of an ever-changing independent physician landscape in a way that would make it easier to understand for both independent groups and for those who work with them. Instead of dividing the landscape by funder, we assessed organizations based on their level of autonomy vs. integration, their growth model, and their geographic reach.

The map above has five physician practice archetypes and is oriented around two axes: local to national and autonomy to integration. The four archetypes on the top are larger in scale than a traditional independent medical group, often moving regionally and then nationally.

The archetypes are also ordered based on the degree of physician and practice autonomy, with organizations on the right using more of an integrated and standardized model for care delivery and sharing a brand identity.

So far, we’ve tracked two types of trends within this landscape. First, independent groups partner with national archetypes in one of two ways. Either the groups continue to exist as both independent groups and as part of the corporate identity OR they get integrated into the corporate entity. The exception is that we have not seen national chains integrate existing medical groups—though they may in the future.

The other trend we have seen is the evolution of some of these archetypes. We currently see service partners in the market shift to look more like coalitions. We assume we may see coalitions that start to look more like aggregators, and we know many aggregators have ambitions to function more like national chains. 

Below you will find a brief description of each archetype as well as a more robust table of key characteristics.

Definitions of physician archetypes

Independent medical group

Independent medical groups are traditional shareholder-owned, shareholder-governed practices. They are governed by a board of physician shareholders, and shareholders derive direct profits from the group.

Service partner

A service partner is an organization whose primary ambition is to make profits through providing a service, such as technology, data, or billing infrastructure, to physician groups. This type of partner may create some sort of alignment between practices since it sells to like-minded practices (e.g., those deep in value-based care, within the same specialty), but that alignment is more of a byproduct than the primary goal.

Coalition

Coalitions are formed from physician practices who want to get benefits of scale without giving up any individual autonomy. They join a national organization to share resources, data, and/or knowledge, but each practice also retains its individual local identity and branding. Common coalition models include IPAs, ACOs, and membership models.

Aggregator

Aggregators are the most traditional approach to getting scale from independent medical groups. They acquire practices and usually employ their physicians. The range of aggregators is very diverse. It includes health plans, health systems, private equity investors, and independent medical groups who have shifted to become aggregators themselves.

National chain

We have historically referred to national chains as disruptors, but that name is inclusive of many organizations who are not physician practices and what qualifies as “disruptive” is ever-changing—so we needed a new name that better suited these groups. National chains are corporate organizations who develop a model (e.g., consumerism, value-based care, virtual health) and bring that model to scale, usually by building new practices or hiring new providers. These are highly integrated organizations, with each new location using the same care delivery model and infrastructure.

As the independent physician landscape evolves, it has implications not only for independent groups but for those who work with them. We hope that a shared terminology helps bridge some of the gaps in understanding this complex landscape.

For those who partner with independent groups, we’d suggest reading our companion blog for our take on the three biggest funders and questions to ask yourself to work successful with today’s physician groups.

Telehealth use falls nationally for third month in a row: Fair Health

Dive Brief:

  • Telehealth claim lines as a percentage of all medical claims dropped 13% in April, marking the third straight month of declines, according to new data from nonprofit Fair Health.
  • The dip was greater than the drop of 5.1% in March, but not as large as the decrease of almost 16% in February. However, overall utilization remains significantly higher than pre-COVID-19 levels.
  • The decline appears to be driven by a rebound in in-person services, researchers said. Mental health conditions bucked the trend, however, as the percentage of telehealth claim lines associated with mental conditions — the No. 1 telehealth diagnosis — continued to rise nationally and in every U.S. region.

Dive Insight:

The coronavirus spurred an unprecedented increase in telehealth utilization early last year. But early data from 2021 suggests demand is slowing as vaccinations ramp up and COVID-19 cases decrease across the U.S.

Fair Health has used its database of over 33 billion private claims records to analyze the monthly evolution of telehealth since May last year. Telehealth usage peaked among the privately insured population last April, before easing through September and re-accelerating starting in October, as the coronavirus found a renewed foothold in the U.S.

In January, virtual care claims made up 7% of all medical claim lines, but that fell to 5.9% in February, 5.6% in March and just 4.9% in April, suggesting a steady deceleration in telehealth demand.

The deceleration in April was seen in all U.S. regions, but was particularly pronounced in the South, Fair Health said, which saw a 12.2% decrease in virtual care claims.

The trend doesn’t bode well for the ballooning virtual care sector, which has enjoyed historic levels of funding during COVID-19. Just halfway through the year, 2021 has already blown past 2020’s  record for digital health funding, with a whopping $14.7 billion. This latest data suggests dampening utilization could throw cold water on the red-hot marketplace.

And policymakers are still mulling how many telehealth flexibilities should be allowed after the public health emergency expires, expected at the end of this year. Virtual care enjoys broad support on both sides of the aisle and the Biden administration’s top health policy regulators, including CMS administrator Chiquita Brooks-LaSure, have said they support permanently adopting virtual care coverage waivers, but returned restrictions on telehealth access could also stymie use.

Fair Health also found that nationally, mental health conditions increased from 57% from all telehealth claims in March to 59% in April. That month, psychotherapeutic/psychiatric codes jumped nationally as a percentage of telehealth procedure codes, while evaluation and management codes dropped, suggesting a continued need for virtual access to mental health services, which can be some of the rarest and most expensive medical services to find in one’s own geographic area.

Also in April, acute respiratory diseases and infections increased as a percentage of claim lines nationally, and in the Midwest and South, while general signs and symptoms joined the top five telehealth diagnoses in the West. Both trends suggest a return to non-COVID-19 respiratory conditions, like colds and bronchitis, and more ‘normal’ conditions like stomach viruses, researchers said.

The Supreme Court lets site-neutral payment policies proceed

https://mailchi.mp/bfba3731d0e6/the-weekly-gist-july-2-2021?e=d1e747d2d8

Senators urge CMS to reconsider proposal to expand site-neutral policies |  AHA News

This week, the Supreme Court declined to hear an appeal challenging Medicare’s 2019 regulation calling for “site-neutral payment” for services provided by hospitals in outpatient settings, clearing the way for the rule’s implementation. The appeal was filed by the American Hospital Association (AHA), along with numerous hospitals and health systems, after a lower court ruling last year upheld the change to Medicare’s reimbursement policies.

The rule aims to level the playing field between independent providers and hospital-owned clinics by curtailing hospitals’ ability to charge higher “facility fees” for services provided in locations they own. Site-neutral payment has been a longstanding target of criticism by health economists and policymakers, who cite the pricing advantage as a driver of consolidation in the industry, which has tended to push the cost of care upward.

The AHA expressed disappointment in the Court’s decision not to hear the appeal, saying that the changes to payment policy “directly undercut the clear intent of Congress to protect them because of the many real and crucial differences between them and other sites of care.” The primary difference, of course, is hospitals’ need to fully allocate their costs across all the services they bill for, making care in lower-acuity settings more expensive than similar care delivered by practices that don’t have to subsidize inpatient hospitals and other costly assets.

Over the years that legitimate business need has turned into a deliberate business model—purchasing independent practices in order to take advantage of higher hospital pricing. As Medicare looks to manage Baby Boomer-driven cost growth, and employers and consumers grapple with rising health spending, expect increasingly rigorous efforts to push back against these kinds of pricing strategies.

Could physician “income inequality” hold back the medical group?

https://mailchi.mp/f42a034b349e/the-weekly-gist-may-28-2021?e=d1e747d2d8

Physicians' income inequality | British Columbia Medical Journal

We spoke this week with a medical group president looking to deploy a more consistent consumer experience across his health system’s physician practices, beginning with primary care.

The discussion quickly turned to two large primary care practices, acquired several years ago, whose doctors are extremely resistant to change. “These guys have built a fee-for-service model that has been extremely lucrative,” the executive shared. “It was a battle getting them on centralized scheduling a few years ago, and now they’re pushing back against telemedicine.”

With ancillary income included, many of these “entrepreneurial” primary care doctors are making over $700K annually, while the rest of the system’s full-time primary care physicians average around $250K.

The situation raises several questions. Standardized access and consistent experience are foundational to consumer strategy; in the words of one CEO, if our system’s name is on the door, any of our care sites should feel like they are part of the same system, from the patient’s perspective.

But how can we get physicians on board with “systemization” if they think it puts their income at risk? Should the system guarantee income to “keep them whole”, and for how long? And is it possible to create consensus across a group of doctors with a three-fold disparity in incomeand widely divergent interests? While there are no easy answers, putting patients and consumers first must be the guiding goal of the system.