September 21, 2020 – COVID-19 seems like the final nail in the coffin for independent practices. Devastating financial losses from the start of the pandemic, stagnating patient volumes, and a new appetite for virtual care is making it more difficult for independent practices, to put it frankly, remain independent.
“The jury is out, but COVID is probably going to exacerbate larger systems buying up independent practices because a lot of folks just aren’t going to be able to weather the storm long enough,” says Ryan Schmid, MBA, president and CEO of Vera Whole Health.
It is, however, important to note that by independent practices Schmid is talking about the traditional physician practice built on fee-for-service.
Vera Whole Health is not one of those traditional practices. Instead, the organization leverages value-based contracts to implement an advanced primary care model, and because of this business model, it did not experience the same revenue losses as traditional practices at the start of the pandemic.
“We have not seen any kind of financial disruption because our contracts are value-based, which means that literally overnight, we were able to shift to mostly virtual care,” Schmid explains. “And we’ve been able to continue to perform against those requirements because we’ve been able to keep engaging members.”
The company actually gained more capacity to do the activities it specializes in, like care coordination, closing care gaps, and member outreach.
“It [COVID-19] shone a light on the differences between the traditional, hospital-owned, fee-for-service primary care and advanced primary care with respect to one’s ability to actually provide comprehensive services,” Schmid states.
Advanced primary care is well-positioned to pivot during a crisis like a global pandemic. Since advanced primary care providers do not rely on volumes to keep the doors open, they are able to respond to new patient demands and preferences even when payers are not yet reimbursing for the services. They also already offer a more robust portfolio of services, such as mental and behavioral health, which are in high demand during the pandemic.
“I see demand for it increasing, absolutely,” Schmid says regarding the demand for behavioral health services during and after the pandemic. “Traditional offices are going to at least want to try to address it,” the healthcare CEO states.
Adding a service line may be too heavy of an investment for most practices though, especially for services that have been historically under-reimbursed by payers, like behavioral health and telehealth.
Value-based contracts like those used by Vera Whole Health, however, can help practices integrate a new service line and start generating value from it immediately.
That is because of the economics of the model, Schmid explains.
At-risk payment models, like capitation, give providers the flexibility to deliver the care their patients need without being tied to the actual volume of services rendered.
Initial research has shown that providers in these models have actually fared better during the pandemic, leveraging the alternative reimbursement model to deliver services like triage call centers and remote patient monitoring sooner than their peers in fee-for-service arrangements.
These alternative payment models may be key to keeping practices independent in the future.
A study conducted by Harvard Medical School and American Board of Family Medicine early during the pandemic found that primary care practices are on track to lose a significant amount of revenue (an average of $325,000 per typical five-person practice) from fee-for-service payments, even under the relatively optimistic assumption that practices quickly pivoted to virtual care to recoup revenue from lost in-person visits.
And revenue losses could be greater if payers revert to pre-pandemic reimbursement rates for telehealth services, researchers found.
They said their findings “ultimately highlight vulnerability of primary care practices to financial demise due to fee-for-service and visit-based payment policies, indicating that capitation-based payment reforms may be key to ensuring robustness of primary care into the future.”
Even before the pandemic, however, practices were risk-averse and implementation of alternative payment models had stalled. Practices have largely been concerned about the “possibility of absorbing an income reduction,” the American Medical Association and RAND Corporation said in a 2018 study on the effects of payment models on physician practice.
Practices are now experiencing historic income reductions because of COVID-19, but for those who are still unsure of the effects alternative payment models will have on their practice, there is another way.
“There are outfits out there that can support them in that,” Schmid says. “Maybe they can get the payers to help chip in and put them on a platform or maybe they can do it themselves, but that’s probably the hardest. I mean they know how to practice great medicine. That’s the best part about independents. It’s really the back office that makes it difficult for them.”
Accountable care organizations, independent practice associations, and other group-based models can also help practices with the back-office investment needed for alternative payment models. Fortunately, many of these types of collaborations already exist in most markets.
And depending on the market, independent practices could switch to direct primary care to overcome the financial and operational challenges of COVID-19.
“In some markets, direct primary care is more prevalent than others so if they happen to be in a market where they can essentially sell memberships to individual consumers, look for ways to do that,” Schmid advises.
But payers are interested in keeping independent practices independent, Schmid says, so if practices can pull together, they can “create some bargaining power to go to the payers to get better value-based contracts.”
Practices jumping into value-based contracts should consider how patients will be assigned to them under the arrangement. Schmid recommends that practices think of how they will control downstream spend and influence patient behavior to ensure optimal care delivery whenever possible.
In addition, practices need a strategy for documenting care delivery to ensure potential gaps in care are identified and to prove providers delivered the most appropriate care for that patient.
There are a lot of pieces and considerations with value-based contracting, Schmid emphasizes.
“But, having said that, I really think it’s the future,” Schmid concludes. “It’s what we need to do to really have a viable healthcare system.”