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.

Private equity as an enabler of Boomer doctor retirements

https://mailchi.mp/13ef4dd36d77/the-weekly-gist-august-27-2021?e=d1e747d2d8

How Much Money Does a Doctor Need to Retire? — Finity Group, LLC

There’s been a lot of hand wringing over the ongoing feeding frenzy among private equity (PE) firms for physician practice acquisition, which has caused health system executives everywhere to worry about the displacement effect on physician engagement strategies (not to mention the inflationary impact on practice valuations).

While we’ve long believed that PE firms are not long-term owners of practices, instead playing a roll-up function that will ultimately end in broader aggregation by vertically-integrated insurance companies, a recent conversation with one system CEO reframed the phenomenon in a way we hadn’t thought of before. It’s all about a demographic shift, she argued.

There’s a generation of Boomer-aged doctors who followed their entrepreneurial calling and started their own practices, and are now nearing retirement age without an obvious path to exit the business. Many didn’t plan for retirement—rather than a 401(k), what they have is equity in the practice they built.

What the PE industry is doing now is basically helping those docs transition out of practice by monetizing their next ten years of income in the form of a lump-sum cash payout. You could have predicted this phenomenon decades ago.

The real question is what happens to the younger generations of doctors left behind, who have another 20 or 30 years of practice ahead of them? Will they want to work in a PE-owned (or insurer-owned) setting, or would they prefer health system employment—or something else entirely?

The answer to that question will determine the shape of physician practice for decades to come…at least until the Millennials start pondering their own retirement.

Primary Care Faces Existential Threat Over Healthcare Workforce Woes

40% of primary care clinicians worry that the field won’t exist in five years as many in the healthcare workforce experience burnout and plan to leave the field.

 Clinician burnout, lay-offs, and other healthcare workforce challenges coming out of the COVID-19 pandemic are creating issues for primary care, according to a new survey.

About 40 percent of over 700 primary care clinicians recently surveyed by the Larry A. Green Center, Primary Care Collaborative (PCC), and 3rd Conversation worry that primary care won’t exist in five years’ time. Meanwhile, about a fifth say they expect to leave primary care within the next three years.

“Primary care is the front door to the healthcare system for most Americans, and the door is coming off its hinges,” Christine Bechtel, co-founder of 3rd Conversation, a community of patients and clinicians, said in a press release. “The fact that 40 [percent] of clinicians are worried about the future of primary care is of deep concern, and it’s time for new public policies that value primary care for the common good that it is.”

The threat to primary care comes as practices ramp up vaccination efforts. The survey found that more than half of respondents (52 percent) report receiving enough or more than enough vaccines for their patients, and 31 percent are partnering with local organizations or government to prioritize people for vaccination.

Stress levels at primary care practices are also decreasing compared to the height of the pandemic, according to survey results. However, over one in three, or 36 percent, of respondents say they are experiencing hardships, such as feeling constantly lethargic, having trouble finding joy in anything, and/or struggling to maintain clear thinking.

Clinician fatigue could spell trouble for the primary care workforce and the field itself, researchers indicated.

“The administration has now recognized the key role primary care is able to play in reaching vaccination goals,” Rebecca Etz, PhD, co-director of The Larry A. Green Center, said in the release. “While the pressure is now on primary care to convert the most vaccine-hesitant, little has been done to support primary care to date. Policymakers need to bear witness to the quiet heroism of primary care – a workforce that suffered five times more COVID-related deaths than any other medical discipline.”

Many primary care clinicians are hoping the federal government steps in to change policy and bolster primary care and the healthcare workforce. The government can start with how primary care is paid, respondents agreed.

About 46 percent of clinicians responding to the survey said policy should change how primary care is financed so that the field is not in direct competition with specialty care. The same percentage of clinicians also said policy to change how primary care is paid by shifting reimbursement from fee-for-service.

Over half of clinicians (56 percent) also agreed that policy should protect primary care as a common good and make it available to all regardless of ability to pay.

Alternative payment models helped providers during the COVID-19 pandemic, research from healthcare improvement company Premier, Inc. showed. Their study found that organizations in alternative payment models were more likely to leverage care management, remote patient monitoring, and population health data during the pandemic compared to organizations that relied on fee-for-service revenue.

“Many of the practices, especially in primary care, have been extremely cash strapped and have been struggling for many years,” Sanjay Doddamani, MD, told RevCycleIntelligence last year.

This has been a big moment for us to act in accelerating our performance-based incentive payments to our primary care doctors. We moved up our schedule of payments so that they could at least have some continued flow of funds,” added the chief physician executive and COO at Southwestern Health Resources, a clinically integrated network based in Texas.

Value-based contracting could be the key to primary care’s existence in the future, that is, if practices get on board with alternative payment models. A majority of respondents to the latest Value-Based Care Assessment from Insights said over 75 percent of their organization’s revenue is from fee-for-service contracts. This was especially true for respondents working in physician practices, of which 64 percent relied almost entirely on fee-for-service payments.

A mounting specialist access crisis

https://mailchi.mp/b5daf4456328/the-weekly-gist-july-23-2021?e=d1e747d2d8

Types of Doctors: Some Common Physician Specialties

We’ve been hearing a growing number of stories from patients about difficulties scheduling appointments for specialist consults.

A friend’s 8-year-old son experienced a new-onset seizure and was told that the earliest she could schedule a new patient appointment with a pediatric neurologist at the local children’s hospital was the end of November. Concerned about a five-month wait time after the scary episode, she asked what she should do in the meantime: “They told me if I want him to be seen sooner, bring him to the ED at the hospital if it happens again.”

A colleague shared his frustration after his PCP advised him to see a gastroenterologist. Calling six practices on the recommended referral list, the earliest appointment he could find was nine weeks out; the scheduler at one practice noted that with everyone now scheduling colonoscopies and other procedures postponed during the pandemic, they are busier than they’ve been in years. Recent conversations with medical group leaders confirm a specialist access crunch. 

Patients who delayed care last year are reemerging, and ones who were seen by telemedicine now want to come in person. “We are booked solid in almost every specialty, with wait times double what they were before COVID,” one medical group president shared. The spike in demand is compounded by staffing challenges: “I pray every day that another one of our nurses doesn’t quit, because it will take us months to replace them.”

Doctors and hospitals are now seeing a rise in acuity—cancers diagnosed at a more advanced stage, chronic disease patients presenting with more severe complications—due to care delayed by the pandemic. If patients can’t schedule needed appointments and procedures, this spike in severity could be prolonged, or even made worse. 

For medical groups who can find ways to open additional access, it’s also an opportunity to capture new business and engender greater patient loyalty.

Physician employment continues to gather pace

https://mailchi.mp/b5daf4456328/the-weekly-gist-july-23-2021?e=d1e747d2d8

The number of independent physician practices continued to decline nationwide as health systems, payers, and investors accelerated their physician acquisition and employment strategies during the pandemic.

The graphic above highlights recent analysis from consulting firm Avalere Health and the nonprofit Physicians Advocacy Institute, finding that nearly half of physician practices are now owned by hospital or corporate entities, meaning insurers, disruptors, or other investor-owned companies.

This increase has been driven mainly by a surge in the number of corporate-owned practices, which has grown over 50 percent across the last two years. (Researchers said they were unable to accurately break down corporate employers more specifically, and that the study likely undercounts the number of practices owned by private equity firms, given the lack of transparency in that segment.

It’s no surprise that we’re seeing an uptick in physician employment, as about a quarter of physicians surveyed a year ago claimed COVID was making them more likely to sell or partner with other entities, and last year saw independent physicians’ average salary falling below that of hospital-employed physicians. 

We expect the move away from private practice will continue throughout this year and beyond, as physicians seek financial stability and access to capital for necessary investments to remain competitive. 

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.

Cleveland Clinic-owned hospital system pays $21M to settle False Claims allegations

Dive Brief:

  • A Cleveland Clinic-owned hospital system in Akron, Ohio, is paying the federal government $21.3 million to settle claims it illegally billed the Medicare program.
  • Akron General Health System allegedly overpaid physicians well above market value for referring physicians to the system, violating the Anti-Kickback Statute and Physician Self-Referral Law, and then billed Medicare for the improperly referred business, violating the False Claims Act, between August 2010 and March 2016.
  • Along with an AGHS whistleblower, the Cleveland Clinic Foundation, which acquired the system at the end of 2015, voluntarily disclosed to the federal government its concerns with the compensation arrangements, which were enacted by AGHS’ prior leadership, the Department of Justice said Friday.

Dive Insight:

The Anti-Kickback Statute forbids providers from paying for or otherwise soliciting other parties to get them to refer patients covered by federal programs like Medicare, while the Physician Self-Referral Law, otherwise known as the Stark Law, prohibits a hospital from billing for those services. Despite the laws and a bevy of other regulations resulting in a barrage of DOJ lawsuits and been a thorn in the side of providers for decades, fraud is still rampant in healthcare.

Of the more than $3 billion recovered by the government in 2019 from fraud and false claims, almost 90% involved the healthcare industry, according to DOJ data.

“Physicians must make referrals and other medical decisions based on what is best for patients, not to serve profit-boosting business arrangements,” HHS Office of Inspector General Special Agent in Charge Lamont Pugh said in a statement on the AGHS settlement.

Cleveland Clinic struck a deal with AGHS in 2014, agreeing to pay $100 million for minority ownership in the system. The agreement gave the clinic the option to fully acquire AGHS after a year, which it exercised as soon as that period expired in August 2015.

The settlement stems from a whistleblower suit brought by AGHS’s former Director of Internal Audit Beverly Brouse, who will receive a portion of the settlement, the DOJ said. The False Claims Act allows whistleblowers to share in the proceeds of a suit.

As fraud has increased in healthcare over the past decade — the DOJ reported 247 new matters for potential investigation in 2000, 427 in 2010 and 505 in 2019 — the federal government has renewed its efforts to crack down on illegal schemes. That’s resulted in the formation of groups like the Medicare Fraud Strike Force in 2007 and the Opioid Fraud and Abuse Detection Unit in 2017, which has in turn resulted in the DOJ recovering huge sums in stings, settlements and guilty verdicts.

Some of the biggest settlements reach into the hundreds of millions, and involve billions in false claims.

In 2018, DOJ charged more than 600 people for falsely billing federal programs more than $2 billion; last year federal agencies charged almost 350 people for submitting more than $6 billion in false claims. That last case led to creation of a rapid response strike force to investigate fraud involving major providers in multiple geographies.

Other large settlements include Walgreens’ $270 million fine in 2019 to settle lawsuits accusing the pharmacy giant of improperly billing Medicare and Medicaid for drug reimbursements; hospital operator UHS’ $122 million settlement last summer finalizing a fraudulent billing case with the DOJ after being accused of fraudulently billing Medicare and Medicaid for services at its behavioral healthcare facilities; and West Virginia’s oldest hospital, nonprofit Wheeling Hospital, agreeing in September to pay $50 million to settle allegations it systematically violated the laws against physician kickbacks, improper referrals and false billing.

EHR vendor eClinicalWorks paid $155 million to settle False Claims Act allegations around misrepresentation of software capabilities in 2017, while Florida-based EHR vendor Greenway Health was hit with a $57.3 million fine in 2019 to to settle allegations the vendor caused users to submit false claims to the EHR Incentives Program.

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.

3 Ascension Texas hospitals to pay $20.9M for alleged kickbacks

Kickback Definition

Three Ascension hospitals in Texas agreed to pay $20.9 million for allegedly paying multiple physician groups above fair market value for services, according to a recent news release from the HHS’ Office of Inspector General.

The three Texas hospitals are Ascension’s Dell Seton Medical Center in Austin, Ascension Seton Medical Center Austin and Ascension Seton Williamson in Roundrock. Ascension self-disclosed the conduct to the inspector general.

The hospitals allegedly violated the Civil Monetary Penalties Law, including provisions related to physician self-referrals and kickbacks in seven instances, according to the April 30 news release.

Some of the allegations the report outlined include Dell Seton paying an Austin physician practice above fair market value for on-call coverage; Ascension Seton Austin paying an Austin practice above fair market value for transplant on-call coverage and administrative services; and Ascension Seton Williamson paying a practice above fair market value to lease the practice’s employed registered nurses and surgical technologists who assisted in surgeries at the hospital. 

The release did not disclose the physician groups allegedly involved.

Access the full release here

Hospitals lose jobs for 4th straight month

New FBI Data Show Violent Crime Continued Downward Trend in 2014 |  FreedomWorks

Hospitals lost 5,800 jobs in April, marking the fourth month of job loss this year, according to the latest jobs report from the U.S. Bureau of Labor Statistics.

The April count compares to 600 hospital jobs lost in March, 2,200 jobs lost in February and 2,100 jobs lost in January. Before January, the last job loss was in September, when hospitals lost 6,400 jobs.

Overall, healthcare lost 4,100 jobs last month — compared to 11,500 jobs added in March — and employment in the industry is down by 542,000 since February 2020.

Within ambulatory healthcare services, dentist offices saw 3,700 added jobs; physician offices saw 11,300 job gains; and home healthcare services lost 6,700 jobs in April. 

Nursing and residential care facilities lost 19,500 jobs last month, compared to 3,200 jobs lost the month prior.

The U.S. gained 266,000 in April after gaining 916,000 jobs in March. The unemployment rate was 6.1 percent last month, compared to 6 percent in March.

To view the full jobs report, click here.