Rescuing Primary Care, Part 1

April 15, 2023

Explaining Corporate America’s Aggressive Investment In Primary Care
Health Affairs Forefront
April 5, 2023
By Paul A. Branstad & Claude R. Maechling

Not that long ago, primary care practices sold for hundreds of dollars per patient, depending on how “fat” their files were and what proportion were economically undesirable Medicare patients. …

Now, suddenly, the likes of Amazon, CVS Health, Walgreens, Walmart, UnitedHeath, and Humana are vying to acquire and build primary care practices targeted at serving the US’s seniors. …  and the competition has driven prices north of $50,000 per patient. When the US finally grasps what is going on, how this competition was triggered in the first place, and what the long-term consequences will be, none of us will like it. …

Too late will we realize we have lost our last best chance to reinvent a health care system centered around the large-scale provision of high-quality primary care—even though this is what value-based contracts started out trying to do. The problem lies not with the Centers for Medicare and Medicaid Services’ (CMS’s) intentions, but with how the game they have structured plays out. …

The root cause of the $50 billion investment frenzy is the financial opportunity created by CMS’s commitment to convert all Medicare beneficiaries to accountable care relationships with value-based payment models. … [this] is just table stakes to vie for the $1 trillion prize that McKinsey and Company estimates will be claimed by the winners among the consumer oligopolists competing for the prize. …

CMS seems to lack the foresight to anticipate how market forces will adapt and respond to its policies, so it is not able to foresee unintended consequences of its reimbursement and insurance practices. … CMS’s tortuous primary care reimbursement practices have been more than 30 years in the making and have led directly to the erosion of the central role that primary care physicians could and should play. …

Our conclusion is: CMS’s commitment to value-based contracting is simply the next stage of its long-standing, philosophical aversion to fee-for-service reimbursement. This aversion is reflected in the increasing justification and reporting requirements imposed on primary care physicians, requirements that represent an affront to their integrity and challenge their medical judgment. The resulting suppression of practice revenue and increased administrative burden have pushed many previously independent primary care physicians past their breaking point and into the arms of hospital-based health systems.

It is not mere coincidence that, over the past decade, the percentage of primary care physicians employed by a hospital-based health system or corporate entity has increased from 36 percent to 74 percent, while MA coverage of Medicare beneficiaries increased from 27 percent to nearly 50 percent.

The issue is not about who owns primary care practices but about how the proliferation of value-based contracts in Medicare is leading to a profound change in the historic physician-patient relationship. The health systems and corporations that own primary care practices often find it most efficient to organize care delivery around CMS’s process-of-care measures to maximize their reimbursement opportunity. So physicians who, heretofore, practiced patient-centered medicine that earned trust by focusing on personalized diagnostic and treatment services, are now obliged to align with these same quality protocols. They are being told how to drive from the passenger’s seat, while the patient is moved to the back.

The economic heart of value-based contracts is negotiation over capitation, in which aspiring MA plans bid to manage all care for a group of patients, according to prescribed CMS protocols, for a fixed price per patient. …

The [price] benchmark is subject to … adjustments. First, the benchmark can be increased by 5 percent, a “quality” bonus, if the MA plan earns a four on CMS’s star rating performance measurement system. The system is based on 46 measures of access, process, patient experience, and clinical quality and is indexed such that, last year, 90 percent of MA enrollees were in plans rated four stars or higher.

Second, the benchmark is adjusted in subsequent years for the risk score of the enrolled population. … [I]ntensive coding efforts translate into higher risk scores when the plan comes up for annual renewal.

[Discussion of risk selection, which lowers costs in Medicare Advantage and assures that individuals remaining in traditional Medicare – which determines payment benchmarks – will be increasingly expensive over time.]

What will be the consequences for Americans?

[C]onsolidation will raise the cost of care without any improvement in care capacity or quality….

Researchers estimate that Medicare Advantage will cost CMS $75 billion more in each of the coming years … less than 2 percent of national health expenditures … But it becomes far more significant when we think of it in terms of primary care. The US spends about $100 billion on primary care physician consultations … the money wasted on VBC overpayments could be put to very productive use remedying primary care underinvestment.

Spent correctly, this $75 billion could make a huge contribution to solving the biggest health care problem we have in this country—a lack of primary care to address the high burden of chronic disease. Reinvesting the funds could create comprehensive, relationship-based, personalized care overseen and coordinated by trusted, in-charge primary care physicians who have the time to make full use of their clinical reasoning …

Tragically, conversion to VBC plans will also undermine efforts to address the social determinants of health for disadvantaged communities. When we sacrifice higher-quality, relationship-based primary care medicine, we also sacrifice the opportunity for a physician to understand each patient’s biography, or lived experience, which arguably contributes as much to their ill-health as their biology or genetics.

Comment by: Jim Kahn

This article ably reviews how CMS’ extreme focus on value-based care undermines rather than strengthens primary care. My only addition is to highlight that ACO REACH, in traditional Medicare, is headed down the same path, as we’ve previously discussed in HJM.

Key points:

• CMS capitation rules, most visibly in Medicare Advantage, offer corporations – especially those owning primary care practices – massive profit opportunities.
• As a result the value and price of primary care practices has shot up more than 100-fold.
• Profit tactics include risk selection (finding and keeping less expensive enrollees), exaggerated diagnostic coding, and maintaining process-of-care quality scores. Corporate maneuvers to manipulate these mechanisms outflank CMS technical and political abilities to oversee them.
• A long-standing aversion to fee-for-service payment leads to onerous requirements imposed on primary care doctors, driving them to sell to and work for corporations.
• Corporate tactics to maximize profits often conflict with and displace comprehensive, high quality primary care.
• Physicians become cogs in this machine, their pursuit of quality primary care shunted aside. Patients must follow along. The physician-patient relationship is undermined.
• $75 billion dollars per year in overpayments, largely directed to profits, could save primary care.
• The opportunity to address patient-specific social determinants of health – critical to pursuing equity – is squeezed out.

Next time – a proposal for doctors and allies to join in a social movement to make primary care a publicly-financed common good.