Researchers: For-Profits Have Destabilized the Primary Care Market
In a just-published op-ed in Health Affairs, three healthcare policy experts, all of them members of the National Academies of Sciences, Engineering and Medicine Standing Committee on Primary Care, argue that the stumbles of the for-profit entrepreneurial corporations that have entered the primary care area, speak to the inability of the capitalist market to advance the optimization of primary care delivery and organization in U.S. healthcare.
Writing in the Forefront section of Health Affairs online on Sep. 5, Kevin Grumbach, M.D., Deborah J. Cohen, Ph.D., and Yalda Jabbarpour, M.D., assert in “The Failing Experiment Of Primary Care As a For-Profit Enterprise,” that the for-profit companies that have flooded into the primary care arena cannot be relied on to improve primary care delivery nationwide.
As the authors note, “Despite what might appear to be the unattractive business model of primary care, recent years have seen a slew of acquisitions of primary care practices by large, investor-owned corporations. Private equity, which once shunned primary care in preference for more lucrative specialty practices, is also now accelerating the purchase of primary care practices.”
And they note the rush a few years ago into the primary care space on the part of private equity-funded for-profit ventures: “Walgreen’s acquisition of VillageMD in 2021 marked a watershed for corporate investment in primary care. A flurry of multibillion dollar acquisitions soon followed, with Walgreens next acquiring Summit Health, Amazon purchasing One Medical (which had previously acquired Iora Health), and CVS purchasing Oak Street Health and Carbon Health. Walmart launched its own venture into operating primary care clinics, while United Health’s Optum subsidiary steadily took a controlling interest in a growing number of primary care practices.”
The article’s authors note that “One interpretation of this phenomenon was that these corporations saw what other business interests failed to perceive—that despite current payment models disadvantaging primary care, the long game for creating high-value health care requires strong primary care. Investments in primary care would eventually pay off as the foundation of corporate-run integrated health care systems. That the early wave of acquisitions included many practices celebrated as innovators only added to this notion. One Medical was highly regarded for its patient-centered and accessible care. Oak Street and Iora were admired for comprehensive, coordinated care for high-need Medicare beneficiaries. Carbon exemplified a virtual-first model of primary care emphasizing telehealth.”
Significantly, they note, “None of these innovative organizations appeared to be breaking even on the basis of clinical revenues. All relied on angel investors or other sources for start-up capital; some, like Oak Street and One Medical, had gone public. Perhaps the new corporate owners understood the need for ongoing investment to achieve high-performing primary care, or had the business acumen to operate efficient, high-quality primary care. Sponsorship of primary care clinics by giant retailers such as Walmart and the pharmacy behemoths was also viewed as potentially a virtuous direction for primary care, collocating services in convenient locations close to where people live and shop.”
At the same time, the authors note that “The alternative view was suspicious of the growing capture of health care delivery by investor-owned corporations and private equity. Adherents of this view pointed to evidence that such capture was driving up health care costs without improving quality (see here as well)—and in the case of private equity, in some instances it was harming quality.” Those who see for-profit ventures as exploiters “suggested they were interested in opportunities for primary care to serve short-term, extractive capitalist interests.” For example, “One way for an insurance plan to evade [medical-loss ratio boundaries placed on Medicare Advantage plans] is to generously pay one of its subsidiaries delivering patient care—let’s say for example, a primary care practice—and count this toward the medical loss expense. Profits from the subsidiary ultimately roll up to the parent corporate entity and its investors.”
In any case, the authors note that “The spring of 2024 brought a burst of headlines about corporations scaling back their primary care endeavors. Walgreen’s will shut more than 160 primary care clinics after posting a multi-billion dollar loss; Amazon is laying off One Medical employees; CVS, which bought Oak Street, is expanding primary care for seniors, but closing some of its minute clinics; and Walmart is closing all 51 of its health care centers across five states.”
Importantly, the article’s authors write that “When Walmart, the corporation ranked number one on the Fortune 500 list, cannot achieve a successful business model for primary care, it reveals the root problems of thoroughly inadequate payment for primary care and underestimation of the work of primary care.” And they bring down the hammer on the whole phenomenon, writing that “Corporate and private equity investors—seeking extractive short-term financial returns and not committed to long-term investment—destabilize an already fragile primary care sector.”
As a result, they conclude that “Recent events make us pessimistic that for-profit corporate and private equity actors in the US can play a constructive role in advancing primary care as a common good. Much more assertive public policy is required to move the nation on a collective path to primary care for all.”
