Ian Morrison

Every month we edge closer to the future. One of these scenarios will play out: We are getting closer to full-blown implementation of Obamacare by a battered re-elected president and a divided Congress, or we will have Obamacare repealed by Mitt Romney (ironic), or we will be starting over with a clean sheet of paper, step by step, with authentic American solutions (What are these exactly?), perhaps Texas-style. It is going to be fun to watch, regardless.

Meanwhile, hospitals and doctors (particularly primary care and cardiologists) are running toward each other at an astonishing rate, preparing to huddle together for warmth in whatever future we end up in.

As a result, the price of primary care practices is rising rapidly with bidding wars for sophisticated groups leading to valuations approaching 10 times EBITDA (earning before interest and taxes, depreciation and amortization). Bidders include large hospital systems, large health plans and other large medical groups in many markets across the country.

The economic premium currently being enjoyed by primary care practices (larger groups in particular) is well deserved but a relatively recent phenomenon.

It is clear that in the last two decades we did not honor our primary care physicians. This was brought home to me personally in March, when I conducted a strategic retreat for all the CEOs of the provincial medical associations from all the Canadian provinces. (Like most Canadian professional meetings held in March, the meeting was not held in Canada, but in Palm Springs.) I was astonished to learn that primary care doctors in most Canadian provinces earn 50 percent to 100 percent more in net income before taxes than their American counterparts. The same is true in the United Kingdom.

Health Reform and the Surge

Most people believe that whatever happens with the crazy people in Washington, the health care system of the future will have to place a greater emphasis on primary care. Primary care will be even more crucially important if coverage is expanded as PPACA requires.

If health reform and the massive expansion in coverage go ahead as planned we now have some inkling of the challenge. A recent study of the Oregon Medicaid lottery provided a researcher’s dream: a double-blind randomized trial where half of the people in the trial eligible for the expansion in adult Medicaid won the lottery and got the Medicaid card and the other half did not. An exquisite, careful study of the impact of this lottery, conducted by Oregon, MIT and Harvard researchers, showed that insurance coverage indeed matters: Patients with coverage access care more frequently (including preventive care), their financial burden drops and their health status improves. In particular:

“Using a randomized controlled design, the study finds that for uninsured low-income adults, enrollment in Medicaid has the following effects in increasing access to and use of health care after about one year:

• Insurance increases the likelihood of using outpatient care by 35 percent, using prescription drugs by 15 percent and being admitted to a hospital by 30 percent, but does not seem to have an effect on use of emergency departments.
• Insurance increases the use of recommended preventive care such as mammograms by 60 percent and cholesterol monitoring by 20 percent.
• Insurance increases the probability [that] individuals [report having] a regular office or clinic for their primary care by 70 percent and the likelihood that they report having a particular doctor that they usually see by 55 percent.
• Overall the increased health care use from enrollment in Medicaid [leads to] about a 25 percent increase in annual health care expenditures.”

Similarly, the experience of Massachusetts health reform has been analyzed carefully in the last year and shows strong and continued public support for the program, improved access to care (albeit with some waits for appointments), increased utilization of primary care, and rising total costs that are more attributable to the rising costs of the delivery system than to solely the expansion of coverage.

In California, a recent survey of Californians earning below 200 percent of the federal poverty level conducted by the Blue Shield of California Foundation documented the care experience and expectations of those most affected by proposed health care coverage expansion. In particular, more than half of those low-income Californians were less than “well satisfied” with their current care arrangements, most wanted their own primary caregiver, a majority were expecting improvement from reform and 58 percent were “very or somewhat interested” in changing providers. Now, whether the providers that these lower income folks were planning to go visit will actually take them is a whole other issue. Nevertheless, this was an important research contribution that highlights the potential impact health care reform will have on increasing demand and changing the location of care in the primary care marketplace.

Solving the Primary Care Problem

So where are we with solving the primary care problem? First, we need to define what the problem is. There are three main views of the problem.

The primary care shortage view: There is a mainstream view that we will be short some 40,000 to 60,000 primary care doctors over the next decade, a deficit that could be even higher under health reform. Folks worry that as all the aging internists and PCPs retire in the next decade, we will be unable to reverse the lack of interest in new medical graduates becoming primary care doctors. (If you have the marks, why not go for the big bucks as a specialist?) Suggested remedies include providing subsidies for training; encouraging primary care physicians to stay in rural areas, or treat Medicaid patients, through differential payment; increasing primary care payment rates more broadly; expanding community clinics (such as Federally Qualified Health Centers); providing safe harbors for malpractice; and so forth. I am down with all of this, but the remedies miss the point that even if you do all this you really don’t dramatically alter the total number of physicians in the time frame of health care reform and you do nothing about the productivity of each physician. As an old physician colleague of mine once said to me: “There is only so much doctoring you can do in a day.”

The scope of practice/substitution view: A common view is that the primary care problem can be solved by changes in scope of practice, and the creation of a whole new cadre of nurse practitioners and physician’s assistants. These new professionals take over the bread and butter tasks of primary care physicians, get paid well, and go home at 5:00 p.m. Many organizations, including the integrated system giants like Kaiser, are realizing that simple substitution by physician’s assistants or nurse practitioners is not really that much more cost-effective from a total wage and productivity point of view. And the big issue is that organized medicine ferociously defends against scope-of-practice creep. Awkward! Again, scope of practice changes, and substitution of other professionals is not a quick fix, or a cheap one.

The primary care redesign view: The third view held dear by true believers in delivery system reform (myself included) is that we have to change the way we do what we do if we are going to improve throughput and performance. There are two flavors of this view: 1) the patient-centered medical home (PCMH) and 2) rapid and continuous delivery system innovation. The PCMH folks have their believers, their conferences, their champions and their stars. It is all good stuff and clearly directionally correct. The PCMH believers argue that everyone should have a PCMH and be treated the same way. I don’t think that is feasible or even desirable. We must focus the model on the sub-populations that need the PCMH such as routine diabetic patients, and develop other more appropriate models for other segments such as the ambulatory ICU that was developed for the multiply co-morbid population with high risk of readmission.

As a consequence, I am more persuaded by the writings and teachings of primary care redesign gurus such as Dr. Tom Bodenheimer and colleagues at the University of California San Francisco, Dr. Richard Boemer and colleagues at Harvard Business School, and Dr. Arnie Milstein and colleagues at Stanford University (the creator of the ambulatory ICU concept). They argue for more comprehensive and deep-rooted managerial, systems engineering, reimbursement and policy innovation that will get doctors engaged in developing skills and capacities to manage ever large panels of patients, through multi-disciplinary teams of IT-enabled caregivers (with great system skills and a passion for continuous performance improvement). Big sentence, big task, big work.

This rapid and continuous innovation needs to be encouraged wherever we find it, from integrated care nonprofits to for-profit chains of retail clinics and care centers. We should be agnostic about model designs; instead, we should focus on results in terms of quality and outcomes, costs and patient experience.

What’s a Health System to Do?

My advice for all of you out there running large, ever-growing health systems (especially those systems that are rapidly integrating with their doctors), is as follows:

• Do the math. You better figure out the latent primary care demand that will be released in the surge of 2014 in your local market. As the Oregon trial shows, when people have a card, they turn up. When they have a new shiny card, provided by Medicaid or the exchanges, and they can now come to you rather than the lower-end guys down the street, they just may.
• Owning doctors doesn’t make them more productive. Just because you now own the primary care doctors doesn’t increase the number of them in total, and employment doesn’t automatically imply massive improvements in productivity—maybe the reverse.
• Watch ER utilization closely. In Oregon, the lottery expansion of Medicaid did not seem to change ER utilization either positively or negatively. That was a better than expected outcome from my perspective. I worry a lot that this experience will not be replicated in states like California, Texas or Florida where I would expect massive numbers seeking primary care at your ER because they have nowhere else to go; because mainstream primary care providers just won’t take the patients’ insurance card; and because of the high deductibles, the pathetic reimbursement, or both.
• Build primary care capacity with a purpose. In this feeding frenzy of primary care integration, especially the integration of primary care physicians with hospitals, you really have to ask yourself the tough questions: Why am I doing this? Do I know how to manage this? And what is the end game here? If the answers to these three questions are, respectively, “So the other guys don’t do it first,” “I have no clue” and “Beats the hell out of me,” you have a wee bit of a strategic problem in the making.
• Learn from the PCMH movement but don’t become a stuck zealot. I would encourage all capable delivery systems to experiment and learn from the PCMH movement, but I worry that this is a new inflexible dogma in the making. Get up to speed and move on, ever faster.
• Get smart on the primary care redesign research. There is a growing body of ideas, research, pilots and experts focusing on the redesign research field. I urge you to get up to speed and incorporate the insights into your planning.
• Create continuous innovation capacity. The key resource for the future will be the ability to adapt and innovate for higher performance no matter what the environment. The future could go many different ways: regulated pricing, capitation, brutal public sector reimbursement cuts, very skinny commercial networks. Or all of the above, simultaneously. You need to build the capacity to innovate around any obstacle.
• Make, buy or ally. The innovation capacity may not all be in-house; you may have to buy it or partner with it. A good example is Froedtert Healthcare’s initiatives to build shared services partnerships with like-minded systems to fulfill a wide range of shared service goals including delivery system innovation.
• Trust but verify. Don’t believe everything you see on PowerPoint. Just because it made it onto the slide doesn’t mean it works. Measure and manage actual results and innovate accordingly.

I believe that we have to redesign primary care, no matter what happens in Washington. The need is urgent. Let’s get going here—the clock is ticking.