There is renewed focus on the role of primary care and preventive health in U.S. healthcare. Primary care is widely accepted as the gatekeeper for essential services provided by hospitals and specialists. It also serves as the principal vehicle to reduce the cost of chronic disease treatment and management. As a result, primary care delivery has evolved to include integrated physical and mental health services, prophylactic dentistry, nutrition, health coaching, over-the-counter and prescription drug dispensing, and more, with services accessible through modern physical locations and digital networking. This article explores changes to and trends in primary care delivery and why competing in primary care requires hospitals, health systems, and physician organizations to take a fresh look at their strategic positioning in a broader context.
Background: Primary Care in the Spotlight
In the past year, three trends signal resurgence of interest in primary care:
INCREASED PRIVATE INVESTMENTS IN PRIMARY CARE
Private equity and strategic investors have made notable investments in primary care. Private equity has invested $97 billion in medical practices since 2016. Recipients like Paladina, Privia, ChenMed, Iora, Oak Street, and others feature primary care exclusively or prominently while leveraging digital technologies, holistic therapies, and mid-level practitioners to manage population health cost-effectively. United Health employs or contracts with 46,000 physicians under Optum Health, allowing for the expansion of primary care outreach via walk-in clinics, urgent care, and other outpatient services.7 Amazon, Apple, Anthem, and other large-cap companies are also expanding their primary care capabilities, anticipating growing demand. For the majority of primary care clinicians, the four employment options are: independent medical groups, hospitals, insurers, or retailers. Remaining independent is increasingly rare.
RETAIL CLINIC EXPANSION
Retail clinics have been around since 2000. Today, there are more than 3,000—an increase of more than 50 percent since 2014.3 Per Grandview Research, the sector’s revenues are expected to grow at 20 percent annually, totaling $7.3 billion by 2025.4 The scale and scope of services provided has expanded to include preventive health, simple diagnostic tests, and treatments for chronic conditions. Notable big-box retailers like Best Buy and Walmart have announced substantive entry into retail primary care, challenging incumbents such as CVS, Walgreens, Rite Aid, Kroger, and others. Meanwhile disruptive innovators like One Medical, Zoom+Care, MDLive, FetchMD, and DispatchHealth are gaining traction by competing differently, focusing on transparency, a patient experience designed for specific market demographics, and highly-efficient operational models.
PROMOTION OF PRIMARY CARE ALTERNATIVE PAYMENT MODELS BY CENTERS FOR MEDICARE AND MEDICAID SERVICES (CMS)
Since the passage of the Affordable Care Act, primary care has been a key focus for policymakers attending to escalating costs resulting from the growing prevalence of chronic diseases and inadequate access to preventive health in Medicare, Medicaid, underserved, and rural populations. Accountable care organizations (ACOs, aka Medicare Shared Savings Program), next-gen ACOs, and medical home models (aka the Patient-Centered Medical Home) have garnered significant engagement by provider organizations, but have been slow to produce savings for Medicare. The latest and arguably most significant reimbursement models are CMS’ new Primary Care First (PCF) and Direct Contracting (DC) models. These are voluntary programs wherein primary care practices are paid on a full or partial capitated basis to manage Medicare fee-for-service enrollee health. In tandem, the continued enrollment growth and popularity of Medicare Advantage plans is notable. Plan sponsors that integrate supplemental services, such as nutrition, fitness, and over-the-counter remedies with enhanced access to primary care are profitable and gaining market share.
Why the Sudden Interest?
The resurgence of interest in primary care is driven by these trends:
CHANGES IN EMPLOYER-SPONSORED HEALTH INSURANCE COVERAGE
EXPANSION OF PRIMARY CARE INTO WORKPLACES
A third of employers (34 percent) with 5,000 or more employees operate worksite clinics. Mercer and the National Association of Worksite Health Centers report most employees are permitted to use the worksite clinic as their primary care provider. All feature routine preventive health services, treatment for uncomplicated medical conditions, and minor urgent care services. That’s up from 24 percent in 2012 and is expected to continue to increase.8
CONSUMER ACCEPTANCE
Consumers in all age groups want access to primary care services. They embrace holistic primary and preventive health services accessible in conveniently located clinics and digital connectivity. They are receptive to primary care provided in retail and worksite clinics and open to additional new provider models. In response, market activity in primary care by nontraditional players is significant. A few recent developments from disruptive competitors include:
Walmart Health opened its clinic prototype in Dallas, Georgia, telling its investors direct-to-consumer healthcare is a strategic opportunity for America’s biggest retailer.5
Amazon is digesting Pill Pack and Whole Foods to create a new consumer experience for health foods and medication management.5
In the last five years, Microsoft, Google, and Tencent have invested in more than 200 digital health startups. Google acquired Fitbit. Apple has introduced its iWatch and Facebook announced its Preventive Health App. These are all targeted, technology-enabled primary care services for consumers and payers.1
What Does it Mean for Hospitals, Health Systems, and Provider Organizations?
Competing in primary care requires hospitals, health systems, and physician organizations to take a fresh look at their strategic positioning in a broader context. Yesterday’s patients are now discerning consumers armed with many care options and comparative information close at hand. Capturing and retaining them is about more than primary care clinic hours and locations. It’s about…
- Clinical models, therapies, and clinical teams that integrate traditional methods of care with holistic approaches and increasingly coordinated with behavioral health.
- Digital connectivity between healthcare consumers and their caregivers to optimize outcomes, maximize access, and enhance consumer engagement.
- Physical facilities that optimize convenience, accommodate a diverse set of services, and convey a sense of healthiness and wellbeing in every dimension of design. Researching and demonstrating positive outcomes related to design interventions will be a boon for population health management and staff satisfaction, in addition to increasing marketability.
Hospitals should consider four actions to be adequately prepared for the growing significance of retail health and primary care:
- Inventory Primary and Retail Health Services: Primary and retail health services encompass more than physicians and clinics. They incorporate a wide variety of services provided by nutritionists, social services agencies, dental and mental health professionals, and more.
- Develop a Long-Term Vision and Strategy for Primary and Retail Health in the Organization: For some organizations, it will be the formal gatekeeper to the entirety of services provided by the system. In others, it will be the focal point for managing targeted populations.
- Locate Primary and Retail Health Services for Maximum Impact: Convenience, access and ongoing connectivity to an organization’s full range of services depends on the physical locations of its primary care providers and programs and the digital technologies used to maintain relationships between consumers and providers.
- Innovate Primary and Retail Health Clinical Approaches to Keep a Competitive Advantage: The confluence of physical and mental health, integration of social determinants, alternative therapies and more effective engagement of consumers in self-care are certain to enhance the long-term clinical effectiveness of the primary and retail health strategy. They’re constantly changing as we learn more about what works and why.
Per Venrock Capital Ventures, “2020 will be the year the PCPs wake up and realize that they can earn more and be happier working independently of health systems. As a result, payers will try to tempt PCPs to break free by offering them higher reimbursement, start-up capital, and even subsidized office space and technology. We also think that we will begin to see a reprise of the 1990s with lower margin health systems tiring of losing money on their employed doctors and offer to sell them back their practices for peanuts.”6
ERDMAN Analytics
ERDMAN Analytics is experienced in analyzing opportunities for and execution of a primary care and retail clinic strategy customized to an organization’s unique opportunity.
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- CB Insights. (Oct. 28, 2019). “Where tech giants are betting on digital health.” https://interactives.cbinsights.com/tech-giants-digital-healthcare-investments/.
- Claxton, G.; Rae, M.; Damico, A.; Young, G.; McDermott, D. (Sep. 25, 2019). “2019 Employer health benefits survey” Kaiser Family Foundation. https://www.kff.org/report-section/ehbs-2019-section-1-cost-of-health-insurance/.
- Convenient Care Association. (2017). “Convenient care clinics: Increasing access [Fact sheet].” http://www.ccaclinics.org/images/PDF/CCA_IncreasingAccess_2017.pdf.
- Grandview Research Inc. (Sept. 2017). “U.S. retail clinics market size industry research report, 2018-2025.” https://www.grandviewresearch.com/press-release/us-retail-clinics-market-analysis
- Howland, D.(Aug. 30, 2019). “In challenge to CVS, Walmart to pilot healthcare store concept.” Retail Dive. https://www.retaildive.com/news/in-challenge-to-cvswalmart-to-pilot-healthcare-store-concept/562040/.
- Kocher, B. and Roberts, B. (Dec. 6, 2019). “Health care investors predict 10 ways the industry will change in 2020.” Fortune. https://fortune.com/2019/12/06/10-healthcare-predictions-2020/.
- Landi, H. (Dec. 4, 2019). “UnitedHealth’s Witty describes Optum’s ambitions for ‘seamless’ consumer health experience.” FierceHealthcare. https://www.fiercehealthcare.com/payer/unitedhealth-president-andrew-witty-optum-to-roll-out-seamless-healthcare-city-by-city.
- Mercer and National Association of Worksite Health Centers (NAWHC),.(2018). “Worksite medical clinics survey.” https://www.mercer.us/content/dam/mercer/attachments/private/nurture-cycle/us-2018-worksite-medical-clinics-survey-report.pdf.
