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 income, and widely divergent interests? While there are no easy answers, putting patients and consumers first must be the guiding goal of the system.
Many physician practices weathered 2020 better than they would have predicted last spring. We had anticipated many doctors would look to health systems or payers for support, but the Paycheck Protection Program (PPP) loans kept practices going until patient volume returned. But as they now see an end to the pandemic, many doctors are experiencing a new round of uncertainty about the future. Post-pandemic fatigue, coupled with a long-anticipated wave of retiring Baby Boomer partners, is leading many more independent practices to consider their options. And layered on top of this, private equity investors are injecting a ton of money into the physician market, extending offers that leave some doctors feeling, according to one doctor we spoke with, that“you’d have to be an idiot to say no to a deal this good”.
2021 is already shaping up to be a record year for physician practice deals.Butsome of our recent conversations made us wonder if we had time-traveled back to the early 2000s, when hospital-physician partnerships were dominated by bespoke financial arrangements aimed at securing call coverage and referrals. Some health system leaders are flustered by specialist practices wanting a quick response to an investor proposal. Hospitals worry the joint ventures or co-management agreements that seemed to work well for years may not be enough, and wonder if they should begin recruiting new doctors or courting competitors, “just in case” current partners might jump ship for a better deal.
In contrast to other areas of strategy, where a ten-year vision can guide today’s decisions, it has always been hard for health systems to take the long view with physician partnerships.
When most “strategies” are really just responses to the fires of the day, health systems run the risk of relationships devolving to mere economic terms.Health systems may find themselves once again with a messy patchwork of doctors aligned by contractual relationships, rather than a tight network of physician partners who can work together to move care forward.