The economic fallout of COVID-19 may accelerate acquisitions of independent practices unless practice leaders consider new, but not necessarily novel, ways of doing business.
“The jury is out, but COVID is probably going to exacerbate larger systems buying up independent practices because a lot of folks just aren’t going to be able to weather the storm long enough,” says Ryan Schmid, MBA, president, and CEO of Vera Whole Health.
It is, however, important to note that by independent practices Schmid is talking about the traditional physician practice built on fee-for-service.
“We have not seen any kind of financial disruption because our contracts are value-based, which means that literally overnight, we were able to shift to mostly virtual care,” Schmid explains. “And we’ve been able to continue to perform against those requirements because we’ve been able to keep engaging members.”
The company actually gained more capacity to do the activities it specializes in, like care coordination, closing care gaps and member outreach.
“It [COVID-19] shone a light on the differences between the traditional, hospital-owned, fee-for-service primary care and advanced primary care with respect to one’s ability to actually provide comprehensive services,” Schmid states.
Adding a service line may be too heavy of an investment for most practices though, especially for services that have been historically under-reimbursed by payers, like behavioral health and telehealth.
Value-based contracts like those used by Vera Whole Health, however, can help practices integrate a new service line and start generating value from it immediately.
That is because of the economics of the model, Schmid explains.
At-risk payment models, like capitation, give providers the flexibility to deliver the care their patients need without being tied to the actual volume of services rendered.
A study conducted by Harvard Medical School and American Board of Family Medicine early during the pandemic found that primary care practices are on track to lose a significant amount of revenue (an average of $325,000 per typical five-person practice) from fee-for-service payments, even under the relatively optimistic assumption that practices quickly pivoted to virtual care to recoup revenue from lost in-person visits.
Practices are now experiencing historic income reductions because of COVID-19, but for those who are still unsure of the effects alternative payment models will have on their practice, there is another way.
Accountable care organizations, independent practice associations, and other group-based models can also help practices with the back-office investment needed for alternative payment models. Fortunately, many of these types of collaborations already exist in most markets.
“In some markets, direct primary care is more prevalent than others so if they happen to be in a market where they can essentially sell memberships to individual consumers, look for ways to do that,” Schmid advises.
But payers are interested in keeping independent practices independent, Schmid says, so if practices can pull together, they can “create some bargaining power to go to the payers to get better value-based contracts.”
Practices jumping into value-based contracts should consider how patients will be assigned to them under the arrangement. Schmid recommends that practices think of how they will control downstream spend and influence patient behavior to ensure optimal care delivery whenever possible.
In addition, practices need a strategy for documenting care delivery to ensure potential gaps in care are identified and to prove providers delivered the most appropriate care for that patient.
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