Investors are banking on primary care providers moving to value-based care

Independent Health pays providers for patient outcomes, not by how many people primary care clinicians get to walk through their front door.

In the four years since the insurer implemented its primary care capitated payment program, the Buffalo, New York-based health plan has moved 630 clinicians to accept a 10% up-and-downside adjustment for effectively managing 20,000 patients’ health. Providers like the program because it allows them to tailor their practice offerings and stay financially afloat when patients skip visits during the COVID-19 pandemic. Independent Health benefits from clinicians’ increased focus on preventative care, which decreases members’ hospital and emergency department stays and lowers overall costs, CEO Dr. Michael Cropp said.

“This enables physicians to actually do a better job of aligning the team around the needs of the population in their practice,” Cropp said. “More and more plans are moving in this direction.”

As more primary care providers move to value-based payments, investors are increasingly throwing their cash behind digital health startups that help physicians navigate the transition from fee-for-service payments. The cash will hopefully inspire more clinicians to stick with independent practices more narrowly focused on care for individual populations, Dan O’Neill, a healthcare consultant and chief commercial officer of Pine Park Health, which provides clinical staff to senior services communities.

“Over the next 10 years, we’ll see more and more primary care transitioning to these models, which ultimately means more money in their pockets that allows them to invest in more intensive care delivery models,” O’Neill said. “Hopefully, as the models become proven, we’ll see the creativity to tune it for specific markets and specific populations.”

In April, Agilon Health saw its share prices soar 38% during its IPO, with investors valuing the Long Beach, Calif.-based physician enablement startup at $1.07 billion. In May, Privia Health generated nearly 51% more in cash than investors initially expected during its public debut, bringing the Arlington, Va.-based company’s valuation to $1.87 billion. And this week, Brad Smith, who headed the Center of Medicaid & Medicare Innovation, launched Main Street Health. Smith also headed and eventually sold home care company Aspire Health to Anthem for $440 million.

Main Street Health aims to use tech tools and partnerships to transform independent rural providers, pharmacies and urgent care centers from fee-for-service to value-based contracts with private insurers and Medicare. The startup will also embed community health workers in locations to coordinate and manage care for the sickest, costliest patients. Unlike its newly-public competitors, Main Street will focus on working with providers in rural areas. The Nashville, Tenn.-based company launched with $26.6 million in venture funding.

“I think what people are excited about is, this is an enormous market,” O’Neill said. “There’s evidence of momentum and there’s evidence of results that, as these businesses scale, they are showing pretty solid margin improvement. That all looks very promising.”

Insurers are increasingly making front-end tech and training investments for independent practices, said Ceci Connolly, head of the Alliance of Community Health Plans. By using data to help providers identify high-risk population needs, and care interventions, she said insurers aim to add some predictability to their annual budgets and more collaboratively care for their populations. The COVID-19 pandemic has accelerated provider interest in ditching fee-for-service payments, but the mix between value-based and fee-for-service means the move to total capitation will take time.

“So many doctors and clinical teams right now have one foot on the dock and one foot in the boat, and it’s really hard to succeed in two very different models,” Connolly said. “To make a leap over to the value-based boat requires a lot of those early investments. It’s a real cultural shift for doctors and nurses to practice medicine differently, and there are big data challenges.”

While primary care providers have long experimented with different payment models, growth in Medicare Advantage and increasing concern over the declining number of independent physicians practices has added an urgency to Main Street Health’s aim, said Tom Cassels, president of Rock Health digital health consultancy.

A recent report found that nearly 70% of physicians are now employed by hospitals, private equity firms or health insurers, with the COVID-19 pandemic helping to drive 48,000 physicians out of private practices since January 2019. At the same time, clinician acceptance of value-based care is increasing, with 75% of clinicians polled in March 2021 saying that they do not believe fee-for-service contracts should account for the majority of primary care payment. CMS has also been encouraging providers to accept risk, with its recent introduction of Primary Care First, Direct Contracting and Community Health Access and Rural Transformation payment models.

“Rural America does not have the healthcare system that urban and suburban America does and that, fundamentally, is the backdrop for Main Street Health,” Cassels said. “This is simply looking to put a technology backbone and community health workers into a new model and to do it at scale, rather than through local or regional groups of rural healthcare providers.”


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