EP335: Why Is Private Equity Willing to Pay $55,000 per Patient to Primary Care Start-ups? With Brian Klepper, PhD

Relentless Health Value™

In this healthcare podcast, I’m talking with Brian Klepper. If you haven’t heard of him, Brian’s a longtime healthcare analyst and former CEO of the National Business Coalition on Health.

This interview takes off like a shot, as most of my conversations with Brian Klepper do. We’re talking about primary care and its various iterations. We start out with Exhibit A—the HMO version of primary care from the ’90s. This is a great comparator to really get a handle on what’s going on today. During the heyday of HMOs (back in the ’90s), primary care was basically a glorified gatekeeper kind of doing two things. On one hand, they were restricting access. It wasn’t an accident that it was really hard to get an appointment with a PCP.

On the other hand, it also wasn’t an accident that, once you got there, the PCP only had 7 minutes to spend with you, which basically meant that you left with an appointment to see a specialist at, of course, the health system that probably had just bought that PCP practice. Everybody’s happy then, right?

Specialist volume goes up, they make a ton of money for the health system, plans make a ton of money because they make a percentage of total healthcare spend … Oh right, everybody’s happy except the patient who can’t get care and the PCP who can’t do their job.

By the way, for more information on why the ’90s version of the HMO industry crashed and burned, listen to my conversation with Alex Jung on this exact topic. A big part of the “why” really actually took me by surprise.

But back to primary care … Today, in broad strokes, we have three kinds of PCPs. And when I say three kinds of PCPs, we’re not really counting urgent cares or what amounts to urgent cares in that mix—meaning, not counting a lot of the retail clinics because they don’t really manage patient care like you’d hope a PCP would manage care. Last I checked, none of them were managing much more than an episodic visit. You can’t manage a chronic condition in 15 minutes.

So, like I said, there’s three kinds of PCPs that are around today; and let’s call the first kind the OPCP, the original PCP. This version of the PCP office is primarily fee for service (FFS). Maybe they have a couple of capitated contracts. But the distinguishing factor isn’t really what their payer mix is. It’s that they’re not taking on much risk or any risk of real consequence.

Second, we have direct primary care doctors. This group tends to cut out insurers and work directly with either employers or patients themselves. They take a monthly fee, and, in general, a patient can see them however much they need to. Again, no risk or little risk is assumed here beyond the primary care services themselves that are rendered.

Third, we have what Brian calls industrialized primary care—or some people call it advanced primary care, or APC—but I’d probably call it something different. I’d call it “taking risk for the full continuum of care” primary care. Maybe I wouldn’t even call it primary care at all because this third category really is starting to color outside of the lines of primary care.

This third iteration requires many things to accomplish. It requires an unimpeachable relationship with the patient; you cannot be successful with this otherwise. It requires great virtual/digital capabilities. It also requires data—data to help ensure that care gaps are filled but also to make sure that patients are referred to high-quality, high-value specialists downstream who will actually create outcomes. It also includes optimizing specialty pharmaceutical usage, for example. Brian gets into this and how a state employee health plan is on track to save $1.3 billion in this fashion.

Brian believes that this third iteration of primary care—this APC industrialized primary care—is the third leg of a three-legged stool that is needed to transform healthcare. If you must know, the second leg is identification and the use of high-performing specialty services; and the third is value-based reimbursement environment.

Most of the second half of this conversation with Brian is about why there’s just a flurry of investment into various forms of these advanced or just maybe even regular primary care models and how they might evolve moving forward. I ask Brian about Carbon Health and their recent claim that they can do primary care with about 25% to 30% EBITA, even at Medicare FFS rates. So, there’s that.

One last thing: Next week, we’ll be posting an “Ask an Expert” with Brian Klepper, where he gives the backstory about how the RUC—that AMA committee—basically killed primary care. So, come back for that show after you’re done with this one. It’s a plot full of intrigue, that’s for sure.

You can learn more by emailing Brian at [e-mail].

Brian Klepper, PhD, is a healthcare analyst, commentator, and entrepreneur. He is a Principal of Healthcare Performance Inc, a healthcare strategy and business development practice, and CEO/Principal of Worksite Health Advisors, a benefits consultancy focused on linking high-performance/high-impact healthcare organizations with purchasers. He founded and moderates a popular professional healthcare Listserv, Healthcare Hackers, which is a discussion forum on healthcare high performance and value and which has about 850 participating benefits managers, benefits advisors, and innovative vendors.

An active author and speaker, Dr. Klepper has provided healthcare commentary to CBS Evening News, the Wall Street Journal, the New York Times, and the Washington Post. He has published widely in healthcare trade and academic publications and in newspapers nationally.

Brian is a regular contributor to Employee Benefit News, the Health Affairs Blog, The Health Care Blog, The Doctor Weighs In, Kevin MD, and other expert healthcare blogs. He is a reviewer for Health Affairs and The Journal of Ambulatory Care Management.

He is an advisor to the Lundberg Institute and to several for-profit healthcare organizations.

In his spare time, Brian is an offshore sailor.

05:10 Is the HMO model of primary care a good model? 07:48 “Industrialized medicine is exciting.” 08:59 What does primary care have the opportunity to do? 09:21 “The problem that goes along with that is that now immense amounts of money are being infused into primary care organizations.” 10:15 Where does direct primary care and advanced primary care fit into this model? 13:35 “At the end of the day, what primary care really needs to be about is … the management of life issues as well.” 14:05 EP295 with Rebecca Etz, PhD.14:19 “Better relationships quantifiably translate to better care.” 21:48 “Almost nobody in healthcare wants any of this to happen.” 23:58 Why the huge amounts of money being invested into primary care is actually a big problem. 28:11 “We should be able to get wildly better health outcomes for about 40% to 45% of the money that we’re currently spending.”

You can learn more by emailing Brian at [e-mail].

@bklepper1 discusses #primarycare on our #healthcarepodcast. #healthcare #podcast #digitalhealth #pcp

Is the HMO model of primary care a good model? @bklepper1 discusses #primarycare on our #healthcarepodcast. #healthcare #podcast #digitalhealth #pcp

“Industrialized medicine is exciting.” @bklepper1 discusses #primarycare on our #healthcarepodcast. #healthcare #podcast #digitalhealth #pcp

What does primary care have the opportunity to do? @bklepper1 discusses #primarycare on our #healthcarepodcast. #healthcare #podcast #digitalhealth #pcp

“The problem that goes along with that is that now immense amounts of money are being infused into primary care organizations.” @bklepper1 discusses #primarycare on our #healthcarepodcast. #healthcare #podcast #digitalhealth #pcp

Where does direct primary care and advanced primary care fit into this model? @bklepper1 discusses #primarycare on our #healthcarepodcast. #healthcare #podcast #digitalhealth #pcp

“At the end of the day, what primary care really needs to be about is … the management of life issues as well.” @bklepper1 discusses #primarycare on our #healthcarepodcast. #healthcare #podcast #digitalhealth #pcp

“Better relationships quantifiably translate to better care.” @bklepper1 discusses #primarycare on our #healthcarepodcast. #healthcare #podcast #digitalhealth #pcp

“Almost nobody in healthcare wants any of this to happen.” @bklepper1 discusses #primarycare on our #healthcarepodcast. #healthcare #podcast #digitalhealth #pcp

Why the huge amounts of money being invested into primary care is actually a big problem. @bklepper1 discusses #primarycare on our #healthcarepodcast. #healthcare #podcast #digitalhealth #pcp

“We should be able to get wildly better health outcomes for about 40% to 45% of the money that we’re currently spending.” @bklepper1 discusses #primarycare on our #healthcarepodcast. #healthcare #podcast #digitalhealth #pcp

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