While running a wellness program in the Washington D.C. area, Jeff Butler repeatedly heard doctors question their ability to keep their private practice afloat in the midst of health care reform. “They were saying hospitals want to buy us, we don’t want to be employees, but we know with reform I have to be part of something larger,” says Butler, founder and CEO of Privia Health, a physician practice management company.
The shift from fee for service to payment based on keeping patients healthy and out of the hospital demands a level of technological and financial sophistication that eludes many small practices. As a result, more than half of physicians are now employed by hospitals, which are looking to bolster their network of doctors as they form accountable care organizations (ACOs) to coordinate patient care and comply with new payment models.
To provide doctors with an alternative that gives them greater control over decision-making, companies such as Privia and Aledade have emerged. They are forming physician-led ACOs, stitched from practices as small as one doctor. “They need capital, I can get capital; they need IT, I can get IT,” says Farzad Mostashari, founder and chief executive of Aledade, which launched this past June with funding from Venrock. Few are better placed than Mostashari, an internist who formerly oversaw the implementation of electronic health records while in government.
Doctors are motivated to remain autonomous. Out of 360 Medicare ACOs, more than half are led by physicians, and some have already reported stunning results. Still, they tend to be smaller than hospital ACOs.
Since its launch a year and a half ago, more than 200 health care providers composed mainly of primary care physicians have joined the Arlington, Va.-based Privia Medical Group, and its ACO Privia Quality Network. They get a piece of equity in the group, but turn over billing to Privia which also levies a management fee.
The group’s success hinges on managing the health of its patients while lowering costs below a benchmark to capture savings. Privia shares those savings with Medicare, and commercial health plans. It is striking partnerships with hospitals, pharmacies and labs to coordinate care, or make sure a patient has picked up a prescription. It also plans to wade into riskier arrangements where it stands to lose money if it underestimates the cost of managing its patient population, or fails to improve outcomes. “That’s why being the most capitalized was important for us,” says Butler who raised $400 million in September from a group of investors led by a Goldman Sachs affiliate. “You cannot get into these relationships with health plans without having a serious balance sheet behind you.” While revenue now comes predominantly from fee for service, Butler expects that to change by 2017, as Privia expands outside the mid-Atlantic area to New York, Florida, Texas, and Atlanta.
To meet quality measures set by Medicare, Privia deploys cloud-based electronic health records from athenahealth across all of its practices, and uses a combination of that vendor’s analytics and its own. Butler says the data is encouraging. For example, Privia scores higher than the norm on the percentage of diabetes patient taking the hemoglobin A1C test on a regular basis to see how well they’re managing blood sugar levels. Hospitalization is 20% lower than the average in its area.