Hospitals used to be fragmented, however they are now consolidating to protect pricing. The consolidation of hospitals drives up costs 25-50% because hospitals have the power to charge higher prices from payers. More than half of all physicians are now employed by large hospitals even though there is significant evidence that indicates provider productivity declines after they become employees of hospitals. Doctors are entrepreneurial by nature, but starting 20 years ago doctors began to lose leverage and the ability to own their own business. The group that lost the most leverage was Primary care which only receives 2% of the overall healthcare dollar. In 2009 when the HITECH Act was passed many doctors found that they could not afford expensive electronic health records and were forced to sell their practices to hospital organizations. The small practices that survived will now have to compete with the hospital run ACO’s as payer models are increasingly moving from fee for service to pay for performance. Practices will have to invest even more money in IT for analytics software that accurately gauge performance measures required by Medicare and other large payers.
Farzad Mostashari left his post at the ONC to start Aledade, a company that gives physicians the option to start their own ACOs by offering to manage technology work flow redesign, compliance and quality reporting. Bill Sullivan from Brighton Health Partners and Jeff Butler form Privia Health also want to stop the acquisition of small to medium size practices by hospitals. They attended the Digital Health Innovation Summit Nov. 4th in Boston to discuss their alternative for smaller practices. Privia’s largest backer is Goldman Sachs, typically focused on private equity in Healthcare has reoriented its focus on healthcare subsectors stimulated by the Affordable Care Act. Goldman Sachs representative, Jeff Bernstein said they are “commited to seeing provider thesis through”. The goal of Privia is organize physicians, help manage their practice, provide doctors with information, and help them get access to IT, but ultimately give them autonomy and allow them to make their own decisions. Providers who join Privia will receive equity in the group and become a partner within Privia. Privia will manage billing and analytics using clould-based EHR athenahealth. Brighton Health teamed up with Privia to help manage the monetary risks related to the patients that are served in the ACO, leveraging its experience in high performance risk-management.
Most small practices will not be able to survive today’s healthcare environment and will have to either join a hospital or a provider run ACO stay competitive. Privia wants to give providers an opportunity to be a part of something bigger, but have their independence.