“The world has changed in the last few years,” said Jefferies analyst Brian Tanquilut. “Two years ago, we were not talking about Oak, Agilon, all the value-based primary-care providers and now there are like eight of them that are public.” Wall Street’s early enthusiasm for the strategy has dimmed: Many of the newcomers have yet to show profits, and most are trading near or below their initial listing prices.
Adding to the rapidly growing competition are health insurers seeking their own piece of the market. They see delivering care directly as a way to grow since the 2010 Affordable Care Act capped the share of premium revenue insurers could put toward administrative costs and profits.
Many insurers have lucrative businesses managing older or disabled patients on private Medicare Advantage plans where they assume the full risk of patients’ cost of care. Working with physician groups gives insurers a way to offload risk, especially for patients with chronic diseases and complex medical conditions, Tanquilut said.
“It really is about moving the center of gravity from patients being managed by hospital systems to really being managed by primary-care doctors.”
The biggest sellers of private Medicare Advantage plans—UnitedHealth, Humana and CVS’s Aetna unit—are expanding their primary-care capacities. UnitedHealth’s Optum unit now has more than 60,000 employed or “aligned” physicians, about half of them in primary care. Humana plans to open 26 new clinics under its CenterWell brand this year, bringing the company’s total primary-care footprint to about 250 locations, and expects to add 30 to 50 more annually.
At CVS, Lynch envisions a future where customers can see a doctor inside one of the company’s stores, pick up prescriptions and buy health and wellness products in the same place.
The company’s retail rivals have similar designs: Walmart Inc. started opening Walmart Health clinics with nurse practitioners in 2019 and now has about 20 locations, mostly in Georgia, according to the company’s website. Walgreens plans to install physician clinics in 1,000 of its stores by 2027 through its partnership with VillageMD. Meanwhile, Amazon.com Inc. said in February that it will expand Amazon Care, which offers online and in-home visits, to 20 more cities this year.
Shifting Incentives
Companies say shifting incentives to make doctors accountable for patients’ costs will encourage them to deliver better care. At the JPMorgan conference, Walgreens’ CEO Rosalind Brewer touted the savings she said VillageMD delivers: $2,300 a year for Medicare Advantage patients; $1,000 for Medicare patients; $720 for commercially insured patients.
Moving away from a system where doctors are paid for every service they provide could help temper ballooning health-care costs in the U.S., said Zirui Song, an associate professor of health care policy at Harvard Medical School and a co-author of the November paper on investment in primary care in the journal NEJM Catalyst Innovations in Care Delivery. At the same time, encouraging providers to spend less introduces the risk of undertreating patients.
Song, who’s also a primary-care physician at Massachusetts General Hospital, said the flood of private capital into the field raises the risk that profit motives could eclipse the best interest of patients.
“The trust between a patient and a primary-care clinician is especially important for the patient’s care trajectory through the health-care system,” Song said. “If private equity somehow infringes on that relationship of trust between a patient and their health-care providers, especially their primary-care provider, then society should be more concerned about the current influx of private equity acquisitions within health care.”
Still, investors betting on the shift see it as a needed correction for a health system that steers resources to the most intensive settings, says Annie Lamont, co-founder of venture firm Oak HC/FT, which has invested in startups such as One Medical and VillageMD.
“It really is about moving the center of gravity,” Lamont said, “from patients being managed by hospital systems to really being managed by primary-care doctors.”
This article was provided by Bloomberg News.