It’s time for the evolution — and revolution — of private practice

J. C. Kryder, M.D., MBA

Medical Economics Journal, Medical Economics May 2021, Volume 98, Issue 5

The rapid uptake of telemedicine and remote monitoring has begun to upend the traditional fee-for-service (FFS) business models.

The past several issues of Medical Economics® have included many thoughtful articles about the impact of COVID-19 upon delivery of care, reimbursement and the opportunity for independent practices to work together. The post-COVID-19 moment for physicians has arrived and will remain with us for a while.

The disruption to health care was immediate and gigantic in the second quarter of 2020. The economic and medical aftereffects will likely shape the payment and delivery system for decades. The contracting implications for independent practice associations (IPAs), clinically integrated networks (CINs) and multispecialty group practices are many and just around the corner. And for the first time, much better technology is available to benefit these large and likely growing groups of doctors and their patients.

Tech-enabled health care is the collective term used for telecare, telehealth, telemedicine, digital health and e-health services. Technology, if done well, helps some patients manage their care and medications and alerts health care professionals in case of a material change in condition. But most of us don’t have many patients who fit this profile; real digital health uptake is probably a decade away.

However, doctors and their teams need tech-enablement now in order to improve the patient- doctor interaction and to assist physician workflow, which, for most, has been crippled by electronic health records (EHRs).

The rapid uptake of telemedicine and remote monitoring has begun to upend the traditional fee-for-service (FFS) business models. Also shifting are the contracting strategies that have allowed the duopoly of hospital systems and insurers to increasingly dominate the delivery of care for the past 50 years.

The cost-plus reimbursement model guaranteed that health care costs would inexorably rise, and they have, from $353 per capita in 1970 to $11,582 per capita in 2019. Some physicians, notably proceduralists, have benefited mightily. Most of the money, however, has flowed to hospital systems, insurers and consultants (more on this below).

But then the second quarter of 2020 happened. Telemedicine connectivity — voice, text, video — provided improved access for an enormous range of patients. We who deliver their care — usually quite happily — had a big “aha!” moment when we realized office overhead was suddenly greatly reduced. Likewise, patients appreciated the service. What’s not to love?

Paying for telemedicine

Prior to March 2020, hospital systems were receiving nearly $100 billion monthly in fee-for-service payments. When the pandemic struck, beds were not filled except by a relatively small number of chronically ill patients with acute compromise due to COVID-19, and payments from insurers fell by 75% to 90%. Nevertheless, insurers quietly held onto taxpayer, employer and individual premiums, even as only minimal payouts occurred. COVID-19 relief money poured in to fill the gap for hospitals.

But something big happened: reimbursement for telemedicine. This left many in the health care industry wondering what would happen if doctors returned to the old model of private practice, thereby only using the hospital as a workshop? Telemedicine had opened a very wide and new set of possibilities for medical groups to provide: (1) nearly all cognitive care remotely, (2) more timely and more frequent engagement for patients with chronic disease and (3) more primary care physician (PCP)/specialist collaboration on care plans to avoid duplicative in-person visits.

Let’s contemplate that for a moment. We have all been taught that “it’s all in the patient’s history.” Therefore, adding other tools can only mean that history taking will get better. We have learned in the past year that a majority of primary care decisions can be made during 10- to 15-minute calls or Zoom sessions. Our surgical colleagues are telling us that they have learned to use telemedicine tools for a significant percentage of office visits.

We have also learned how to deploy remote devices to monitor weight, blood pressure, heart rate and single-lead ECG. Because many patients carry a camera (on their smartphone) with them all the time, add the smart glucometer and a few other cool tools and then provide the same tool set for our nurse-practitioner and behavioral colleagues. You get the idea. Many of you have lived this in the past year.

We transformed the delivery of care, mostly for chronic care but also for acute self-limited care. We accomplished this mostly from our home offices. We never imagined saying, “Take a picture of your swollen finger” or “Reverse the camera on your phone, focus on your face, as you press in on your lower left belly and then let go really fast.”

FFS reimbursement models push approximately $900 billion annually to doctors, and doctors use approximately 75% of that for rent, personnel and other overhead costs. Those costs sometimes include purchase and maintenance of EHRs. For those in private practice, overhead includes a lot of money for consultants who help with coding and explanations of MIPS, APMs, PCMHs, PQRS, HEDIS, HCCs, etc.

Generational opportunity

But in this new era of remote delivery, independent physicians have a once-in-a-generation opportunity to come together. Physicians need to recognize that they drive, directly or indirectly, $4 trillion of spending. Private equity companies are now buying controlling interests in large medical groups.

What’s happening on the payer side? There is a newfound interest in providing capitated contracts to organized groups. There is a resulting immediate need for medical practices to find strength in numbers and form tight multispecialty CINs. Multispecialty groups organized as IPAs can take on risk contracts with monthly prepayments as much as 88% of the total premium.

Many of tech-oriented physicians have been forced to live with recurring technology failures over the past 20 years. The energy-sapping EHRs are the best example, but too many middleware systems — mostly decision support for care management — also have cluttered the patient-doctor relationship.

Many physician-informaticists now realize that the foundational problem with medical information systems is that the core platform has always been wrong; it was designed around insurance claims and billing. As a consequence, attempts at clinically friendly workflow have been layered into a beast of a machine. Technology innovation over the past 5 to 10 years has been limited to “tuck-in” solutions designed to fit into outdated, transaction-driven (billing and claims-centric) EHR systems.

An enormous number of physicians, who formerly thrived on the autonomy that private practice provided, became worn out by the top-down rules. Capital-constrained, the easiest route to relative freedom was to sell the practice, usually to the all-too-willing hospitals. That hasn’t worked out very well for either doctors or their patients. The enormous fee-for-service revenue decline in second quarter 2020 is now driving some physicians back to private practice, just as prepaid care is increasingly recognized as desirable, providing a focus on ambulatory management of chronic disease, as well as steady cash flow.

The awful U.S. health care experience of 2020 revealed the fundamental inadequacies of both FFS payment models and hospital-dominated systems of care. Hospital executives have long struggled with the concept of managing financial risk because they have never managed acute care services as cost centers in which an empty bed is a profitable bed.

Insurers likewise have had little incentive to reduce costs, especially as they are typically paid for administrative costs on a percentage of premium and/or volumetric basis. Under pressure from government payers and employers, insurers have typically sold value-based contracts with minimal associated risk as a small compromise to their cost-plus business models.

COVID-19 has provided the opportunity to think differently. Telemedicine engagement of patients, remote monitoring for chronic illness and, most importantly, the virtues of prepaid contracting have opened the floodgates for positive change for medical groups. Dramatically different business models are rolling out, offering partnerships with doctors in order to successfully manage fully delegated risk contracts.

Many of the new, growing firms, such as Bright HealthCare, Devoted Health, Aledade and Iora Health, tend to focus on Medicare Advantage Plans for IPAs. A Brooklyn, New York-based startup, Cityblock, recently raised $160 million and will focus on prepaid care for Medicaid. These are great places to start.

Meanwhile, the federal government is pushing direct contracting entities for individual primary care practices to assume risk contracts, and Medicaid accountable care organizations are proliferating. However, nearly all these new business arrangements continue to depend upon FFS payments. The concept of global capitation for IPAs for all lines of business should be on the negotiating table for all large medical groups.

Many new companies believe that independence, better patient care, lower financial risk and higher financial returns will be tied to the transition from FFS to fully prepaid models where doctors and doctor groups get paid in advance monthly, across all lines of insured business.

The opportunity before us

The pandemic and economic calamity have threatened assumptions about chronic disease prevention and stable cash flow. Simultaneously, 2020 provided the opportunity for fast rollout of innovative technologies that had previously barely threatened FFS business models. But then telemedicine, remote patient monitoring and even acute-care-at-home services were happily embraced by patients, doctors and care teams. These unprecedented events have accelerated an environment poised for massive structural change away from FFS and toward global-risk contracts.

Engineers are building software designed to solve for successful global risk contracting and modern clinical engagement and workflow. Initial products have been completed and a full suite of software will be available by the end of 2021. There is no need for a new EHR, but there is a great need for a thin layer of patient-driven workflow (non-claims-based care) that uses Fast Healthcare Interoperability Resources-based apps to pull requisite pieces of data — such as lab reports and prescription drug lists — from the physician’s existing EHR.

Some of us believe that doctors do not want to continue doing the data entry that has been forced upon them in order to fulfill coding and billing demands. The core innovation is to gradually replace the EHR with a “skinny” medical record system that captures the patient’s medical story and is easily accessed by doctors and their support teams. Many of us in the health information technology world expect that nearly full transformation of an IPA from fee-for-service volume to risk-based value will take five years.

With prepaid care, the imperatives for the contracted doctors are to prevent and preempt bad outcomes, coordinate care and eliminate low-value procedures and many unnecessary referrals and hospitalizations. With hospital beds in oversupply, IPAs assuming global risk will have enormous leverage to negotiate prices with hospitals.

Emerging technology platforms will allow physician groups to deliver care that is tech-enabled, consumer friendly, higher quality, less expensive and safer (mostly at-home).

Emerging software solutions must provide the following:

Patient relationship management with simple front-end portals that embrace telemedicine; drive processes and communications between patients, doctors and teams; and automate most interactions between patients, doctors and payers.

Easy-to-use workflow that eliminates data entry by doctors, aligns incentives among primary care and specialists to optimize health and removes systems friction that exists when patients are referred back and forth between PCPs and specialists.

Analytics that inform doctors and their teams where clinical risk is emerging and increase focus on delivery of great outcomes for patients, employers, state governments and Centers for Medicare & Medicaid Services.

Business software that provides multispecialty physician groups with the tools necessary to understand and manage the simultaneous assumption of clinical and financial risk.

Full risk + remote monitoring + telehealth + analytics, combined with 2020’s reveal of FFS shortcomings, has created a once-in-a-generation path for building and growing an alternative technology-enabled health care business model and delivery system. It’s time for a revolution in the delivery of medical care that can dramatically improve access and outcomes and reduce costs.

Physician groups can successfully deliver where hospital systems and insurers have failed. It is time for private practice to grow again.

John Christian Kryder, M.D., MBA, is a primary care physician and Boston-based health care information technology entrepreneur. He is the founder and CEO of New Era Medical Operations. Contact: info@docNEMO.com

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