How Primary Care Acquisitions Can Advance Value-Based Care

May 02, 2023 - As value-based care becomes the end goal for many healthcare organizations, health systems across the country are acquiring primary care practices to achieve this mission.

Critical aspects of these acquisitions include ensuring that clinician-patient relationships are uninterrupted and establishing operations that generate value for consumers, according to Matthew Weiss, MD, managing director of the EY-Parthenon practice of Ernst & Young LLP, and Mallory Caldwell, a partner with the firm who leads EY America’s healthcare practice.

Primary care in itself is an essential part of value-based care.

“[Healthcare organizations] are buying primary care to get ready for a world where value-based care is the game of the day,” Caldwell told RevCycleIntelligence.

“If the objective of value-based care is to keep people healthy, so out of the system and out of the hospital, then you need more primary care to ensure that you’re focusing on health rather than just the sick care that comes from unmanaged patients.”

The COVID-19 pandemic highlighted the value of primary care and increased consumer expectations. Specifically, consumers began seeking primary care services at non-traditional locations, such as urgent care centers. Consumers turned to these new settings as primary care physicians filled their open slots with follow-up visits to maintain financial performance, Weiss explained.

Major companies like CVS, Walmart, and Amazon took advantage of this shift and have started investing in primary care services.

The financial instability brought on by the pandemic has also incentivized primary care physicians to join a health system.

“From the physician perspective, there’s been an increased appetite to be a part of the system. When we shut down care and you’re a solo primary care physician, whether you’re part of a group or not, your business, revenue, economics, and economic livelihood goes to the tank. Those that were part of systems have a more sustaining backstop,” Caldwell said.

“There’s also a lot of pressure for upgrading tech systems and EHRs. It’s  really expensive and that’s getting harder and harder for independent physicians, whether in a group or not, to afford. So, I would say there’s been an appetite for physicians, in particular, to join larger and larger groups since the pandemic.”

Primary care acquisitions can satisfy a practice’s desire for financial stability and the overall healthcare industry’s push for value-based care, which many organizations cite as the primary reason for mergers and acquisitions in the first place.  

“When you look at these primary care physicians in terms of the services they provide—in the value-based sense of terms—of enhancing health outcomes and preventing more costly episodes of care through prevention and through being more parsimonious about testing and procedures, the primary care is able to serve that role for the health system,” Weiss shared.

“But also, the primary care doctors, when they do need specialist referrals, are ordering MRIs, CT scans, lab studies, colonoscopies, and things of that nature that are providing more revenue to the health system.”

While value-based care is not the norm yet in the healthcare industry, one subsector that has successfully leveraged the model for primary care is Medicare Advantage, Caldwell pointed out.

“The physicians and clinical groups who have decided to take on that risk of having a Medicare Advantage plan that collects all the revenue upfront, and then they’ve got to ensure that the care is provided to that population, they are investing in things like managing knee pain rather than just making the referral for knee surgery,” Caldwell explained.

“They are investing in keeping people with chronic conditions managing those chronic conditions and out of the acute episode portions of that chronic condition that send them to the hospital.”

“Seniors are much higher spend categories than the working population,” Caldwell continued. “The experiment of saying let’s go take that population and really make a difference in how their care is managed, how their care is coordinated, and how we can keep them healthy and out of the system is the place where we’re seeing the most traction.”

Mergers and acquisitions in the healthcare space can sometimes leave the industry divided due to the negative impacts deals can have on market competition. However, this is not necessarily the case for primary care acquisitions.

Primary care group practices are typically small and fragmented, according to Caldwell.

“The concern about mergers and acquisitions is about having too much market power relative to the payers and relative to the consumer. When you have an industry that’s so fragmented, that’s not the issue,” he stated.

“That fragmentation to the extent that it interferes with patients’ experiences of care, access to specialists, and being able to have a seamless experience through different venues for an episode [means] having primary care sit within a broader health system. This is something that a lot of people recognize as a benefit as well,” Weiss added.

When investing in primary care assets, health systems must realize that closing the deal is just the first step, and they must prioritize fully integrating the acquired primary care practice. Moving a primary care practice from an independent organization to part of a larger health system could mean higher incentives and benefit costs.

“All of these things need to be anticipated and taken into account, not just to make sure that you’re deriving the value that you expect from the transaction on a spreadsheet, but also that the true source of value in that transaction, which are the clinicians and the relationships they have with patients and the care that they provide, are able to be maintained without interruption,” Weiss said.

While healthcare organizations have historically focused on back-office integration, Caldwell believes front-of-house integration is the way to move forward.

“Now is the time to think about not only transacting and bringing these groups in but leveraging the power of the combined organization to offer a fundamentally different care model than has been offered before,” Caldwell concluded.

“We’re on the beginnings of an evolution where those new care models are going to change, and that’s going to be fueled by transactions getting the right scale, getting the right mix of specialists, and then through all of that putting out something for consumers that’s different from what we’ve had before.”