Private investors, retailers and health insurers are pumping billions of dollars into primary-care ventures in a reversal that’s turned one of American medicine’s least-lucrative practice areas into a hot spot.
U.S. companies focused on primary care raised about $16 billion from investors in 2021, according to unpublished research by Harvard scholars. That’s more than four times the amount invested in 2020 and up from just $15 million reported in 2010, they said. The researchers tallied private investment, strategic acquisitions and public-market debuts of primary-care companies in a recent New England Journal of Medicine article.
Hospitals have long sought to fold in physician practices to drive referrals for specialty care. Now, they face more competition from health insurers, drug-store chains, investment firms and tech-focused upstarts.
Those buyers say consolidation can make the notoriously fragmented U.S. health-care system work better for patients at lower costs. They aim to control the gateway to more expensive specialists and influence decisions that affect patients’ later treatment.
It’s why CVS Health Corp., parent of insurer Aetna, plans to put doctors in up to 350 of its retail stores. “What we're trying to really do now is primary care and wield significant influence across the continuum of health care,” CVS Chief Executive Officer Karen Lynch said in February in an interview with Bloomberg Television.
The boom accelerated during the pandemic, as independent practices faced financial stress and some doctors sought early retirement. Primary-care revenue plunged 7% in 2020, according to market researcher IBISWorld, and deals involving medical groups spiked last year.
As a result, a medical profession once defined by solo offices and small partnerships is now dominated by corporate practices and hospital-owned clinics. About 7 in 10 American doctors worked for health systems or corporate owners at the start of 2021, according to an analysis by the nonprofit Physicians Advocacy Institute.
The competition to control physicians is intensifying with CVS and its rivals increasingly vying for doctors. UnitedHealth Group Inc. added about 10,000 last year. Walgreens Boots Alliance Inc. agreed to pay $5.2 billion for a controlling stake in upstart clinic chain VillageMD in October.
The shift is changing how Americans get health care. Moving doctors from medical towers to corner drug stores may ease access for patients. Some clinicians are drawn to corporate practices by the promise of spending more time on care and less time on administrative work. Health-care investors and executives see a chance to profit by wringing waste from the $4 trillion U.S. health-care system, even as some worry that pressure to profit could compromise care.
Big Money
Primary-care doctors like family- or internal-medicine physicians typically make less money than specialists like cardiologists, dermatologists or surgeons. To appreciate why they’re now attracting investment from private equity and corporate health giants, you have to understand the shift underway in how medical care is paid for.
Private health plans and government programs like Medicare increasingly want to make physicians accountable for some or all of the cost of their patients’ care. They’re trying to link doctors’ pay to patients’ health, rather than the number of treatments or tests they perform.
That often means reconfiguring how medical practices operate to focus on managing chronic conditions and reducing preventable hospital visits. Insurers are willing to pay more for this type of care, and doctors who can provide it can capture a piece of the savings.
“If you’re going to ultimately solve the cost crisis, we have to do a better job of taking care of people with chronic disease,” said Tim Barry, CEO of VillageMD. The venture-backed company serves 1.6 million patients in more than 250 locations. About a quarter of VillageMD’s Medicare patients take 10 or more medications, Barry said.
VillageMD is part of a crop of primary-care companies with big money behind them. Many have gone public in the last two years, including One Medical parent 1Life Healthcare, Oak Street Health, Agilon Health, Privia Health Group and Cano Health.