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Corporate Giants are snapping up primary care practices at a rapid pace




It’s no surprise that the shortage of primary care physicians — who are critically important to the health of Americans — is getting worse.

They practice in one of medicine’s lowest paying, least glamorous fields. Most are overworked, seeing as many as 30 people a day; figuring out when a sore throat is a strep infection, or managing a patient’s chronic diabetes.

So why are multibillion-dollar corporations, especially giant health insurance companies, gobbling up primary care? CVS Health, with its sprawling pharmacy business and ownership of major insurer Aetna, paid about $1[ads1]1 billion to buy Oak Street Health, a fast-growing chain of primary care centers that employs doctors in 21 states. And Amazon’s bold purchase of One Medical, another major medical group, for nearly $4 billion is another such move.

The appeal is simple: Despite their low status, primary care physicians oversee large numbers of patients, bringing business and profits to a hospital system, health insurance company or pharmacy outfit looking to expand.

And there’s an added lure: The growing privatization of Medicare, the federal health insurance program for older Americans, means that more than half of its 60 million beneficiaries have signed up for insurance with private insurers under the Medicare Advantage program. The federal government now pays these insurance companies $400 billion a year.

“It’s the big pot of money everyone’s aiming for,” said Erin C. Fuse Brown, director of the Center for Law, Health & Society at Georgia State University, and author of a New England Journal of Medicine article on corporate investment in primary care. “It’s a one-stop shop for all your health care dollars,” she said.

Many doctors say they just become employees. “We’ve seen this loss of autonomy,” said Dr. Dan Moore, who recently decided to start his own practice in Henrico, Va., to have more say in the care of his patients. “You don’t become a doctor to spend an average of seven minutes with a patient,” he said.

The absorption of physician practices is part of a huge, accelerating consolidation of medical care, leaving patients in the hands of a shrinking number of giant corporations or hospital groups. Many were already the patients’ insurers and controlled the distribution of medicines through ownership of pharmacy chains or pharmacy managers. But now nearly seven out of ten doctors are either employed by a hospital or a company, according to a recent analysis by the Physicians Advocacy Institute.

The companies say these new arrangements will provide better, more coordinated care for patients, but some experts warn the consolidation will lead to higher prices and systems driven by the quest for profits, not patient welfare.

The insurers say their purchase of medical practices is a step toward what’s called value-based care, with the insurer and doctor paid a flat fee to care for an individual patient. The fixed payment acts as a financial incentive to keep patients healthy, provide more access to early treatment and reduce hospitalizations and expensive specialist visits.

The companies say they favor the flat fees over the existing system that pays doctors and hospitals for each test and treatment, encouraging doctors to order too many procedures.

Under Medicare Advantage, doctors often share profits with insurance companies if the doctors take on the financial risk of a patient’s care, and earn more if they can save on treatment. Instead of receiving a few hundred dollars for an office visit, primary care physicians can be paid as much as $14,000 a year to handle a single patient.

But experts warn that these large acquisitions threaten the personal nature of the doctor-patient relationship, especially if the parent company has the authority to dictate limits on services from initial office visits to extended hospital stays. Once enrolled, these new customers can be steered toward chains of related businesses, such as a CVS pharmacy or Amazon’s online pharmacy.

UnitedHealth Group is a sprawling example of consolidated services. It owns the major insurer that has nearly 50 million customers in the US and oversees its ever-growing subsidiary Optum, which has acquired networks of doctors and medical websites. Optum can send patients from one of its approximately 70,000 doctors to one of its emergency departments or surgery centers.

Senator Elizabeth Warren, Democrat of Massachusetts, is urging the Federal Trade Commission to take a closer look at some of these large deals, which regulators have so far not blocked on antitrust grounds. “I fear that the acquisition of thousands of independent providers by a few massive health care megaconglomerates could reduce competition on a local or national basis, harm patients and increase health care costs,” she wrote to regulators in March.

This consolidation of medical care may also run afoul of state laws that prohibit so-called corporate medicine. Such statutes prevent a business that employs doctors from interfering with patient care.

And experts warn of potential harm to patients as corporate management tries to control costs through byzantine systems that require prior authorization to receive care.

For example, Kaiser Permanente, the giant nonprofit health plan that also owns physician groups, settled a malpractice suit for nearly $2.9 million last year with the family of Ken Flach, a former tennis player who contracted pneumonia and died of blood poisoning after a Kaiser nurse and doctor not send him for a personal visit or to the emergency room, despite his wife’s requests. Kaiser said medical decisions are made by providers in consultation with their patients and said its “deepest sympathies remain with the Flach family.”

Doctors also resent supervision that does not benefit patients. “They’re trying to run it like a business, but it’s not a business,” said Dr. Beth Kozak, an internal medicine physician in Grand Rapids, Mich.

Her medical group has teamed up with Agilon Health, an investor-owned company, to work with Medicare Advantage plans. Dr. Kozak said she has to work longer hours not to provide better care, but to provide additional diagnoses for patients, which increases federal reimbursements under the Medicare Advantage program. “It’s not because I provide better patient care,” she said. “It’s all related to the invoicing.”

Corporate spending on medical care continues to grow. Walgreens Boots Alliance, one of the largest U.S. drugstores, spent $5 billion for a majority stake in VillageMD, a primary care group, and teamed up with Cigna to buy another medical group for nearly $9 billion. And with the exception of an outright purchase, UnitedHealth partners with Walmart to offer care to elderly patients.

In pitching the benefits of buying Oak Street clinics to investors, Karen S. Lynch, CEO of CVS Health, said primary care physicians reduce medical costs. “Primary care drives patient engagement and positive clinical outcomes,” she said.

Many of these companies build chains of clinics. On a recent tour of an Oak Street clinic in Bushwick, one of 16 centers opened since October 2020 in New York City, patients were typically seen from 8 a.m. to 5 p.m., with a nurse available after hours to field questions.

Ann Greiner, executive director of the Primary Care Collaborative, a nonprofit group, defended the recent efforts by private companies in this field of health care, saying they infuse practices with much-needed funds and can improve access to care for people in underserved areas.

“The wages of the people in these schemes are higher,” she said. “They provide more comprehensive care in many of these arrangements. They provide more technology and more team-based care. Those are all investments.”

But these agreements also risk shifting the balance from quality care to profit, she said.

In recent years, some have invoked the laws banning corporate medicine to challenge these large private businesses. Envision Healthcare, a private equity-backed company that employs emergency room doctors, is being sued in California by an entity of the American Academy of Emergency Medicine, a professional group that supports independent practice, accusing it of violating state regulations.

“Envision exercises deep and pervasive direct and indirect control and/or influence over physicians’ practice of medicine,” according to the lawsuit. The case maintains that Envision controls the doctors’ billing and establishes medical protocols.

While Envision would not comment on the lawsuit, it said it “follows an operating structure common in the healthcare industry and widely used by nonprofits, privately held and public groups as well as hospitals and insurance companies.”

The large insurance companies find medical groups particularly attractive, although many have reported significant losses. The acquisition of Oak Street, which has lost more than $1 billion over the past three years, could help CVS’s Medicare Advantage plans improve their quality or “star” ratings and increase payments for one of the plans.

Even a small number of patients can lead to significant income. One Medical, the company Amazon owns, is best known for elegant clinics. The company acquired a practice that specializes in Medicare Advantage. Only about 5 percent of One Medical’s 836,000 members are enrolled in the federal program, but about half of its revenue comes from that small portion of patients, according to its 2022 financial statements.

Regulators are already flagging questionable methods used by some practices. In November 2021, Oak Street revealed that the Department of Justice was investigating sales gimmicks such as free trips to the clinics and paying insurance agents for referrals. A doctor at one center described recruiting patients with “gift cards, swag and goodie bags,” according to a shareholder lawsuit against Oak Street.

The lawsuit detailed concerns that doctors were inflating payments from the federal government by exaggerating how sick their patients were.

Oak Street says it has not been accused of any wrongdoing by the Justice Department and says the lawsuit is “without merit.”

These private Medicare Advantage plans have been heavily criticized for making huge profits by raising costs and exaggerating patients’ illnesses to burden the government more than they should.

Under new rules, the Biden administration would eliminate some of the most problematic, overused diagnoses, and doctors and insurers could earn less.

But other routes to profit also explain why companies covet these deals. Unlike the caps on insurer earnings, where a Medicare Advantage insurer must spend at least 85 cents of every dollar on patient care, there are no limits on how much profit these physician practices and chain pharmacies can make.

It may be too early to determine whether consolidated care will improve patients’ health. “So far, when you look across the industry, the record of these acquisitions has been mixed,” said Dr. Sachin H. Jain, CEO of SCAN Group, a nonprofit organization based in Long Beach, Calif., that offers Medicare Advantage plans .

And the investments may not stop the rapid disappearance of the doctor still sought by so many people for routine care, including a recent report showing that fewer medical school graduates are entering the field.

“We’re dealing with incredible levels of burnout in the profession,” said Dr. Max Cohen, who practices near Portland, Ore. Since the pandemic, his low-income patients have gotten much sicker, he said, with the level of illness. “through the roof.”



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