Tried to find a new primary care physician lately? Insurers must provide you with a list of doctors, but you quickly discover that few are taking new patients. When you do find one, your first appointment is scheduled for two months out.
When the day finally arrives, the doctor seems nice, knowledgeable, but more than a bit frazzled. She spends most of the 13-minute visit entering data into a computer as you answer the same questions that were on the paper forms you filled out in the waiting room. You assure her you’ve been vaccinated for COVID-19 at a local pharmacy, but she has no record of it. You walk out without a referral for a long-overdue colonoscopy.
Dr. Sarah Mullins once ran a practice with similar flaws in Wilmington, Delaware. “Care was disjointed, unorganized, and there was a lack of communication,” she told me. But today, her practice, which employs four primary care physicians and five nurse practitioners for more than 10,000 patients, has been radically transformed.
Its doctors spend a half hour with every patient. The nurse practitioners leave part of their days unscheduled so the practice can offer same-day appointments to patients with pressing needs. They also act as care managers—reaching out to schedule wellness visits, vaccinations, and other preventive services. Patients’ electronic medical records incorporate data from hospitals, specialist referrals, urgent care clinics, and pharmacies, enabled by a comprehensive state health information network that didn’t exist a decade ago—and still doesn’t exist in many parts of the country.
“I spend less time searching for vital data,” Mullins said. “My staff is reaching out to schedule wellness visits while I have dedicated time to preventing illness and suffering. It’s a shift that’s changed our practice into one that helps people more and in a more organized fashion.”
It’s also far from the norm. In most of the U.S., primary care is in deep crisis. Family physicians are reporting high levels of stress and burnout, thanks to a reimbursement treadmill that requires many of them to see four patients every hour in order to make a living. Older physicians are retiring prematurely. Heavily indebted medical students are shying away from family medicine and pediatrics, which pay less than half the $500,000-plus salaries offered to surgeons, cardiologists, and other specialists. When surveyed, few newly minted doctors express interest in joining community-based practices, preferring the set salaries that come through employment with large institutions.
The deteriorating state of primary care is undermining every effort to rein in America’s bloated health care budget. Family physicians, who are both the most trusted and lowest-paid doctors in the United States, provide routine and preventive care to patients with common but complex chronic conditions, like high blood pressure, diabetes, substance abuse, and mental health disorders. As primary care has gotten worse, many patients with these illnesses have found themselves growing sicker and in need of expensive medical interventions. This has driven up health care spending while driving down outcomes. Between 2014 and 2019, the share of U.S. GDP spent on health care rose even as life expectancies fell. (Life expectancies have fallen further since 2019, but later data is skewed by COVID-19.)
But as the transformation of Mullins’s Delaware practice shows, it doesn’t have to be this way. New models for reinvigorating primary care are emerging from both the public and private sectors. They have the potential to dramatically lower costs while improving the overall health of the American people. Yet expanding these isolated experiments into system-wide change will take major reforms of the federal policies that govern how we pay for care, and who we put in charge of our health.
Since the early 1970s, U.S. spending on health care has increased faster than both inflation and wages. We now devote nearly 18 percent of the economy to health—40 percent more than any other country—yet our population trails peer nations on every measure of public health, from longevity to infant mortality to incidence of chronic disease. The expensiveness and poor outcomes are causally connected. Growing health care costs have depressed wages, as employers redirect would-be raises into insurance plans. They have forced individuals to fork over growing shares of what income remains to insurers and providers. This has left a greater share of the population suffering from inadequate housing, food insecurity, and substance abuse, which in turn increases demand for the most costly health care services.
The only way to break this downward spiral is to invest more in primary care–led prevention and social services, which have declined from 7 percent to just 5 percent of total health care spending over the past several decades. But the obstacles to doing so are formidable. Right now, the physician reimbursement system is effectively determined by the American Medical Association, which is dominated by specialists and systematically undervalues the time spent listening to patients, evaluating their needs, and recommending preventative measures. The AMA instead places the highest values on surgical interventions, or delivering complex treatment and chemotherapy regimens. While critics have forced the organization to narrow the reimbursement gap in recent years, the wide gulf between the salaries paid to primary care physicians and specialists remains.
Insurers and employers have exacerbated the imbalance by increasing the number of workers and their families in high-deductible plans. Requiring people, especially those in the bottom half of the income distribution, to pay up front for care incentivizes them to skip primary care and preventive services. Paying rent and keeping food on the table come first. And when people wait to show up for care until their bodies are breaking down, they quickly wind up in the hands of specialists, who cost far more. The poorer Americans who do go in for regular checkups often fail to fill prescriptions for the drugs that manage chronic conditions, which can lead to expensive hospitalizations.
The broken insurance reimbursement system has left many independent primary care practices looking for a way out. Many become willing sellers to larger health care companies. Between 2010 and 2016, the share of the nation’s 200,000-plus primary care physicians working for hospital chains surged from 28 to 44 percent, while the share of physicians working in primary care fell by two percentage points to 30 percent of all doctors between 2010 and 2018. Many other doctors’ groups have been gobbled up by private equity–backed corporate entities and insurers. It’s part of the broader consolidation movement within the medical industrial complex.
That consolidation has had grave consequences. When primary care doctors wind up working for a hospital instead of for themselves, they can come under pressure to put the hospital’s needs ahead of their patients’, including by not making referrals to competing hospitals that offer better-quality care. Similarly, when these physicians wind up working for health care plans, most of which still pay a fixed fee for each appointment, they can find themselves pressured not to recommend expensive treatments or spend much time with each patient.
The pandemic accelerated primary care consolidation. In June of last year, for example, with hospitalizations and deaths from COVID mounting and routine demand for health services in free fall, Fairfax Family Practice and its 38 primary care physicians sold itself to Inova Health, the five-hospital system that dominates the northern Virginia market. Dr. Robert Phillips, a Fairfax physician, is well positioned to understand the pitfalls that practices face when they get acquired. He directs the Center for Professionalism and Value in Health Care at the American Board of Family Medicine Foundation and served as cochair for a recent National Academies of Sciences, Engineering, and Medicine report on primary care.
He told me that the practice’s decision to join forces with a hospital system beat its prior arrangement. Over the previous five years, the still-independent Fairfax and its 500 employees had been managed by Privia Health, which went public earlier this year after achieving profitability. Its major investors include Goldman Sachs and Anthem, one of the nation’s largest insurers. Privia, according to a spokesperson, takes 12 percent of practice revenue in exchange for providing electronic medical records, practice management, and billing software. But it did little to cushion Fairfax Family Practice when office visits declined during the 2020 COVID shutdown, causing revenue to collapse.
I asked Phillips why he thought joining Inova might achieve better results. He cited the hospital system management, which brought in a new CEO in 2018 and has professed a commitment to “patient-centered care.” “They had been going in the direction of tertiary, quaternary care. That’s not what a community hospital should do,” Phillips said. “Part of our deciding to join was faith in the new leadership [and] their realization that the community was their main mission.”
But there’s reason to suspect that Inova will still prioritize expensive specialty medicine. While well-heeled acquirers of physicians’ practices, like Inova, pay lip service to the value of primary care, acquired practices have structural conflicts of interest that inhibit family physicians from providing the consultation, care coordination, and social support services that could dramatically improve outcomes and lower overall costs. Hospital revenue depends on putting heads in beds, as industry jargon puts it, and controlling the physicians who make the referrals is a way to achieve that goal.
Insurers also have incentives that lead them to degrade primary care. To lower their immediate spending and increase short-term profits, many have started excluding higher-priced but higher-quality hospitals from their networks and exerting heavy-handed oversight of physician referral patterns. Controlling family physicians’ practices enables both tactics.
The focus on short-term profits becomes even more acute once investors get involved. Most of the Wall Street–oriented financiers in primary care have a three- to five-year exit strategy for getting a hefty return on their investments, either by flipping the practices to another firm or through an initial public offering. That leads many to pursue cost-cutting and revenue-enhancing tactics, like eliminating support staff or stepping up offices’ appointment pace. This, again, increases short-term profitability at the expense of overall patient health.
“They will double down on whatever business strategy raises their margins the fastest,” said Phillips. “It has no heart. It has no population health mission.”
Writing in 2007, the late Dr. Arnold Relman, the former editor of The New England Journal of Medicine, laid out his vision for the future of medical practice in the U.S. Relman, a single-payer advocate, recognized that controlling costs would also require transformation of the health care delivery system. He wanted to pay nonprofit, multi-specialty practices made up of salaried physicians a monthly, per capita fee for every person in their charge. This system is called “capitation.”
Capitation, Relman wrote, would put those practices on a budget and give their physician-leaders the freedom to allocate resources to hire support staff like nurse practitioners, dieticians, and social workers. It would likely increase the relative compensation of primary care doctors themselves. And by organizing preventive care and promoting better health habits, these reorganized practices would reduce the number of patients needing hospital and specialty services, the most expensive parts of the system.
A few years after Relman published his proposal, Congress passed the Affordable Care Act. The architects of the law also understood the need for delivery system reform, and the ACA included multiple pilot projects designed to incentivize less costly and more effective primary care. But none included full capitation, and they have had little success at controlling private health care costs.
Given the ACA’s limited gains in promoting delivery system reform, some employers began looking for ways to bypass our foundering primary care structure by establishing on-site health clinics, a strategy now employed by a third of all organizations with more than 5,000 workers. Hospital systems and insurers countered by cutting deals with major pharmacy chains like CVS and Walgreens as well as large retailers like Walmart and Target to operate “minute clinics” inside their stores. There are now more than 3,000 across the U.S. But these initiatives have also been duds. A 2016 Rand study found that nearly 60 percent of visits to retail clinics added to total health care costs by failing to replace traditional office visits or trips to the emergency room.
Yet there are primary care practices springing up across the country that are replicating Relman’s ideal for some of the most challenging patients in America: people with disabilities and seniors on Medicare who have multiple chronic conditions. Ironically, a small corner of the private equity world helped launch the movement, and insurer-run Medicare Advantage plans are funding it.
These start-up firms operate with the recognition that in a typical group health plan, about 5 percent of patients will account for half of all health care spending. The start-ups take on full financial risk via capitated payments for these hard-to-treat patients. But instead of waiting for patients to come to them, they encourage people to come in for as many visits as necessary. This enables the primary care physician to identify not only medical conditions but also the patient’s mental health and substance abuse issues, housing and nutrition status, and family and social circumstances. The practices then pull together internal care teams that can include community outreach workers, care coordinators, social workers, nutritionists, pharmacists, and behavioral health specialists to deal with problems that, if left unaddressed, can drive patients into the ER—sometimes multiple times a year.
Just prior to the pandemic’s onset, I visited one such practice, run by Chicago-based Oak Street Health. Founded in 2012, Oak Street Health recently sold stock to the public and now serves nearly 110,000 patients at more than a hundred centers across 15 states. Its care teams focus on prevention and helping patients meet their housing, food, and transportation needs. They offer emotional support to people who are under the constant stress of living in isolation or poverty. Its clinics sometimes double as drop-in social spaces where clients can play bingo, attend cooking classes, or simply grab a cup of coffee.
For the entities that pay for health care—be they independent insurers, the government, or companies—the business proposition can be compelling. In the short term, it makes financial sense for payers to skimp on preventive care, and many insurance companies do. But take only a slightly longer view, and the incentive becomes the opposite. The average ER visit costs $2,200. A single three-day hospitalization averages about $30,000. Preventing a single hospitalization ultimately more than pays for the primary care physician time and care team deployments. This is especially true in markets where there is little competition between insurers. In that case, if a plan spends money today to prevent a patient from developing a condition that would require hospitalization in the future, the insurer realizes a financial return because the patient will likely still be on the same plan.
“This is a really, really big economic opportunity because if you do this well, it will pay for itself,” Dr. Griffin Myers, the chief medical officer and cofounder of Oak Street Health, told me.
There are now about a dozen firms offering variations on the intensive primary care model to nearly a million people, almost all of them enrolled in Medicare Advantage and Medicaid managed care plans. The firms have grown so quickly and made so much money that they’ve even attracted investment from a few Wall Street financiers. JPMorgan Chase, for example, recently bought a stake in Vera Health, one of the start-ups pursuing a “primary care first” strategy. The bank hired Dan Mendelson, a former Clinton administration health care official and founder of the Avalere consulting group, to run its health care program. Mendelson has made sure that it’s more than just an external investment. He found Vera’s model so compelling that he plans to offer the company’s services to the bank’s quarter-million employees, beginning with one major market starting next year.
“That intensive work-up where you bring the patient in, you figure out if they have high cholesterol or diabetes, or if there are mental health issues in their family; that is the value we want to drive,” he said. “We’re paying the highest rates. Why aren’t we getting that kind of care for our employees?”
Turning these isolated experiments into system-wide change will require a full-court press on multiple policy fronts. It begins by changing the physician reimbursement system, which has undervalued and underpaid primary care doctors for decades. That means breaking the stranglehold the AMA has over evaluating how much insurers should pay for different treatments. The Centers for Medicare and Medicaid Services, which determines rates for America’s two main public plans, needs to ignore the AMA when it sets fee-for-service physician pay schedules. It should dramatically increase compensation for primary care—ideally by switching entirely to capitation. The CMS is already launching pilot programs that incorporate the payment system. Its Primary Care Plus initiative, started in January 2021, applies a capitation model to primary care. It has attracted participation from 822 practices in 26 regions.
The idea of moving toward capitation recently received endorsement from the prestigious National Academies’ report mentioned above, which suggested that primary care physician reimbursement should follow a hybrid model that would add a flat per capita monthly payment for every patient under a practice’s care. Simultaneously requiring every insured person to choose a primary care doctor would then guarantee that the practice receives payments. If sufficiently large, those payments could finance creation of primary practice care teams and give doctors and team members the time to fully understand a patient’s history, coordinate their care, and provide or help them obtain social services.
Capitation isn’t without hazards. The system requires physicians’ practices to take on financial risk for patients in their care, and most primary care practices do not have the monetary or technical capacity to assume that kind of exposure. To help practices and the health care system generally move in that direction, the government needs to break down all the barriers standing in the way of greater care coordination.
Chief among them is the failure of hospitals, insurance companies, and their electronic medical record vendors to share patient data across all care settings. Medical records should belong to patients, not to their providers or insurers. As things stand now, primary care physicians aren’t even notified when their patients are admitted or discharged from the hospital. Despite laws calling for full interoperability of medical records, the CMS has yet to issue regulations penalizing hospitals or insurers for failing to comply.
The government also needs to develop a pro-competition policy for the health care sector that preserves practice independence. When primary care doctors work for themselves, they are less likely to unnecessarily refer patients to specialists than when they work for companies with a financial interest in getting patients hospitalized. When referrals are necessary, independent physicians are also more likely to send their patients to quality facilities. The Federal Trade Commission has already announced that it will study doctors’ practice acquisitions by hospitals and insurers. Both claim that vertical integration promotes care coordination. But the claim will probably prove baseless. Studies show that when hospitals merge, the prices they charge almost always go up with little impact on quality or outcomes.
While the FTC completes its study, the Biden administration should rapidly change policies that encourage physician acquisitions. It can begin by immediately eliminating a strange quirk under which Medicare pays more for a routine office visit when the practice is owned by a hospital than when it is independent. It should give special grants to struggling rural and urban primary care practices so they aren’t driven into the arms of local hospitals or insurers. It could also fund technical assistance for physicians’ practices and federally funded health care clinics that want to make the transition to alternative payment models, like capitation.
The administration has enough discretionary spending to take these steps without new legislation. But if Biden can get Congress to act, he can take even more powerful measures. Phillips of Fairfax Family Practice suggested that the government pass a law requiring Medicare, Medicaid, and private insurers to set a minimum primary care investment threshold at 11 to 12 percent of overall health care spending, more than double the current level. “It’s a blunt tool,” he said, “but it’s necessary, or otherwise we’ll see investment decline.” Democratic legislators interested in making health care affordable will be natural allies for such a bill. But plenty of Republicans could also sign on. Exploding medical costs are swelling the national debt, a fact that’s helped drive the GOP to support price regulations in health care before—including last year’s legislation outlawing surprise medical bills.
Health care labor policy is also in need of an overhaul. Many states restrict the ability of nurse practitioners and physician assistants to provide routine medical services. Removing those restrictions, either through federal or state legislation, would free up primary care physicians to deal with the complex problems facing their most expensive patients. The FTC and Department of Justice also need to scrutinize the noncompete clauses in physician contracts, still allowed in many states, which prevent doctors from leaving hospital- or insurer-owned practices to start their own practices in the same community.
“If we’re going to have a market-based system, then markets have to work,” says Dr. Farzad Mostashari, a former Obama administration official at the CMS. He is now the CEO of Aledade, which provides advice and services to physicians’ practices adapting to new payment models. Mullins’s practice in Delaware was one of Mostashari’s first clients, and she now serves as a medical director for Aledade.
Health care reformers have long focused most of their attention on expanding access to the system through universal insurance coverage. They have waged spirited fights against the exorbitant prices charged by drug companies and hospitals, and they’ve lambasted the administrative waste and unnecessary restrictions imposed by insurers. This has all been necessary. But until delivery system reform is also on the table—beginning with expanding and empowering primary care—we’ll never achieve better outcomes for more people at a lower overall cost.