Primary Care in the Crosshairs of Market Structure Changes 

Focus Area:
Primary Care Transformation Sustainable Health Care Costs
Health Care Consolidation

“If this is love I want my money back” – Hot Tuna 

This sentiment may well capture the mood in US primary care today. The 2021 National Academies of Sciences, Engineering, and Medicine (NASEM) report on primary care described the urgent need to adopt an updated vision and roadmap to improve primary care in the United States, starting with this comprehensive definition: 

High-quality primary care is the provision of whole-person, integrated, accessible, and equitable health care by interprofessional teams who are accountable for addressing the majority of an individual’s health and wellness needs across settings and through sustained relationships with patients, families, and communities. 

The report stimulated a new wave of policy attention on primary care focused on payment reform and workforce issues. It seemed like the time had finally come for a spotlight on this health care sector. However, another important dimension — rapidly changing market forces — is having a more immediate effect on the structure and financing of primary care and will affect the progress called for by NASEM. 

Will New Business Models Support High-Quality Primary Care? 

Corporations and private equity firms have been buying up primary care practices and clinics, creating big market disruptions with uncertain results. A sample of recent headlines illustrates the extent of the problem: 

Many Massachusetts physician practices that joined Steward Health Care, the for-profit health system that recently declared bankruptcy, are now in a bind. According to the Commonwealth Beacon article cited here, these physicians aligned with Steward to get enough patients in their panels (10,000 per practice) to allow them to participate in a Blue Cross quality incentive program. With the proposed sale of the Steward physicians’ network to Optum, these physicians may not recoup funds that they are currently owed and would be subject to new terms and potential costs. It’s fair to assume these physicians were not naïve, but it illustrates how quickly the business of health care — including primary care — can change. 

If the new business models for primary care emphasize short-term return on investment, primary care becomes more of an inventory of goods than an essential part of health care infrastructure.  The headlines about Walgreens closing clinics and CVS opening them show nuanced trends in consolidation, suggesting that private money still thinks that bigger is better, until it isn’t. What’s going on here, you ask? Walgreens VillageMD was not successful in creating stable patient panels. By contrast, CVS, which acquired Oak Street and owns Aetna, has a more direct link with patients’ insurance, including Medicare Advantage plans, which is complemented by a strategic partnership with AARP to further drum up business.    

Aside from the instability triggered by these business contortions, we need to ask if the new models support the NASEM vision for high-quality primary care by providing resources for team-based care, digital health tools, and data analytics, among other things. It remains to be seen whether the corporate giants see such investments in care improvement as part of their business model, and whether current and future primary care practitioners will trust them to do so in a sustained manner. 

Few Options for Today’s Primary Care Practices 

Either way, it’s clear that the options for primary care practices are narrowing, and that the business of primary care must change. To survive in the new marketplace, practices can join a hospital system like Steward, build or join a primary care–focused accountable care organization (ACO), or participate in a new retail practice model like CVS’s Oak Street clinics. Each of these options has its own risks and rewards, but the ownership and investment models for retail clinics seem less stable than the other two options. It’s tough to ask primary care physicians to accept what seems to be a gamble in these uncertain business arrangements, let alone encourage new health professional graduates to enter the primary care field.   

Proposals to Protect Physician Practices and Incentivize Investment in High-Quality Care 

With public payers covering a larger portion of the population, and the public’s health at stake, government needs to take a more directive role in regulating these new primary care business models to ensure patient needs are met, taxpayer dollars are used wisely, and cost growth doesn’t accelerate.  

Some policymakers are moving toward increased oversight of physician practice acquisition, which could have a big impact on primary care. This year Oregon’s legislature  considered legislation to restrict corporate investments in physician practices. Advocates for the bill argued it would help maintain the independence of practices and stave off increased costs associated with private equity acquisitions. Opponents argued it would reduce access to capital investment that could support physician groups.   

In Connecticut, the Governor proposed adding physician practice acquisition to the state’s existing certificate of need laws, which is a regulatory approval process for capital expenditures or projects of certain health care facilities. This would allow the state to consider impacts on access and cost to consumers as it determines if a new transaction meets community needs.   

In addition, the Centers for Medicare and Medicaid Services has rolled out several programs that provide Medicare financial incentives for advanced primary care and encourage state Medicaid and private payer alignment with those models. Enhanced Medicare payment incentives, if combined with Medicaid and/or private payer incentives, could provide an alternative path to financial sustainability for primary care. 

A strong primary care system is the foundation for a better health care system. So, the question is not whether, but how, the public sector can create the best incentives to support not only financial investment in primary care but also attention to organizational structures and business models that are better aligned with the NASEM vision. In this way we can offer primary care more love with fewer regrets.

July 1, 2024, Postscript: This blog reported on growing turmoil surrounding primary care practice, including consolidation fueled by private equity investment. Unsurprising, there are already new developments in the story. Optum has announced it is withdrawing from a proposed deal to acquire the Steward physician network in Massachusetts, creating further uncertainty for the physicians and the public. Also, it was reported that Walgreens plans to end its ownership interest in Village MD all together (and accept an even bigger financial loss). These changes further underscore the need for stronger public accountability measures to ensure that increased primary care investment supports sustainable models of care delivery and payment.