What health systems can gain from shifting sites of service?
Health systems need to differentiate from new players offering easier access and lower costs. Office-based procedures could be the key.
Healthcare in the United States has been in an ongoing era of consolidation since the late 1970s with the early growth of conglomerated health systems and accelerating in the mid-1990s with the launch of the “payvider” model, where large scale payers began acquiring health systems, creating a closed loop. The trend continued in the early 2000s with high barriers to entry to shared savings models shutting out smaller scale practices, community clinics, and even some hospitals, necessitating their acquisition to continue to operate. The consolidation then “hockey-sticked” through COVID, as revenue dropped, and smaller groups were either acquired or shuttered en masse. While individual healthcare spending has returned to more normal levels, the consolidation trend hasn’t slowed. One of its major driving forces is the attention to healthcare, particularly provider markets, by healthcare private equity firms.
In 2023, there isn’t a single aspect of business in the United States that doesn’t have PE investment. Companies sell products or services, but they are, in and of themselves, products to an entire subset of the economy. Healthcare is no different. However, in practical terms, healthcare is utterly unique, in both its revenue potential and its impact on its consumers.
For PE firms, healthcare is particularly attractive because the demand is fixed. It’s goods and services can’t be ignored by consumers until a competitor with a better option or better price comes around, because doing so results in literal death and dismemberment. As a result, if they so choose, and gain enough control of a provider organization, PE firms could cut costs impacting quality of care and work-life for its clinical staff, strong arm competition (or even clients), effectively anything within the explicit letter of the law to extract revenue on a timeline of their choosing, while also making a product look profitable enough on paper to be worth acquiring by another healthcare private equity firm.
There are, without a doubt, ethical private equity firms that are the equivalent of any well-intentioned business: they invest in an organization that has great potential to succeed, help them grow, trust their leadership, and reap benefits through any ongoing payout model and/or when it’s time for their exit, at which point another PE firm that specializes in scaling at that new tier of market size steps in and does the same.
With the dilemma above created by the uniqueness of healthcare and its existence as a market rather than public service, if a PE firm enters healthcare, are they then, in turn, bound by its ethics? The opinion of The Scope and its partner practices is an unequivocal “yes.” It is the opinion of The Scope that it goes as far as being bound by the quintuple aim.
In no uncertain terms, to be a part of healthcare in any capacity, from pushing gurneys to investing in entire hospital networks, is to be dedicated to enhancing patient experience, improving population health, reducing costs, improving the work life of clinicians, and addressing health inequity. Additionally, this obligation scales with capacity. The more influence a person or organization can have, the greater the onus to live up to the quintuple aim.
The bound nature of the demand for healthcare as a product or service means that failure in a level marketplace is virtually impossible. At a fundamental level, the more the participants of the healthcare system strive to meet the challenges leveled by CMS via the quintuple aim. Unfortunately, the marketplace is not level.
Even with the launch of programs like ACO REACH, the successor to Direct Contracting to allow smaller organizations to finally gain access to shared savings agreements with CMS, and in turn the highest volume of federal revenue, the larger a group is, the better it’s able to survive market tumult or catastrophe (like a pandemic). Unfortunately, policy change is slow, and growth is the only solution, now more than ever.
To do so ethically, within the bounds of the quintuple aim, is to live every day as a promise to the patients, partners, your team, competitors, and the general public as a whole, that every business decision is a step towards improving quality of life and care. This doesn’t mean there’s a lack of shrewd negotiations, it simply means avoiding a race to the bottom. Costs should be cut, but to the benefit of an organization’s ability to provide better care and reduce the burden on patients, not seem more attractive on the next investment round. Clinicians should work hard, but not because they’re a commodity from which an organization should extract revenue, but because the act of rendering care is difficult, and never to the point of burnout.
There is no magic solution, but the pressure we put on ourselves and our colleagues, competition, and investors to be active participants in healthcare, which is, in and of itself, an act of compassion and aid that generates revenue as an inevitable byproduct of an economic system in which it exists. The Scope and its partner practices (and any investors they may partner with) are proud to say, publicly without caveat, that we are dedicated to these principles.
Health systems need to differentiate from new players offering easier access and lower costs. Office-based procedures could be the key.
The model of hospital-centric care is giving way to specialists and ambulatory settings. The US currently has 9200 ambulatory surgery centers, surgical offices, and surgical clinics, with more breaking ground every single week. These facilities, often hospital affiliated, aren’t just ready, they’re custom built to provide surgical care to patients that do not require the full freight of a hospital, doing so with the same record on outcomes in less time at a lower cost. They also free up hospital resources by allowing for more focus on sicker patients.
Veterans of the business, practice, and policy of healthcare will all tell you the same thing. Contrary to the best efforts of the AHA, ambulatory surgery is finally being allowed to meet the needs of a population that is both growing and aging in ways that hospitals, increasingly falling into the category of acute care,...
Healthcare in the United States has been in an ongoing era of consolidation since the late 1970s with the early growth of conglomerated health systems and accelerating in the mid-1990s with the launch of the “payvider” model, where large scale payers began acquiring health systems, creating a closed loop. The trend continued in the early...