Will COVID-19 help move primary care physicians away from the fee-for-service model?

When Karen Smith went to Jamaica in March, she planned a working vacation.

The Hoke County primary care doctor, whose practice thrives with about 3,000 patients, was in the island country to do some medical mission work when the first cases of COVID-19 were reported there.

She’s a little unclear on the dates now, but some time around March 13, she got word that the Jamaican government was planning to close down the country.

“Anybody in this in the country would end up being in a 14-day quarantine,” she said. “I was like, ‘No way, I’m gonna get home.’”

Smith rushed back to North Carolina to find a panicked staff.

“Patients were canceling appointments, they didn’t want to come into the office,” she said. “We had PPE consisting of two N95s, one gown and one face shield and three goggles. And that was it. The sanitizer that we had been using, the bottle was half empty and we had no more.”

 Smith made a beeline to the nearest Walmart where she snapped up the last 10 pairs of goggles for protective eyewear. They got personal protective equipment donations from Cape Fear Valley Hoke Hospital, medical associations, the community, wherever she could scrounge it up.

“I mean the prices they were gouging… what was $5 was now $25 and that was price gouging from our usual vendors, which was unreal,” she said. “We had also started ordering some of the supplies from Amazon and they were simply just out of stock.”

In the midst of it all, Smith and her team pivoted from providing hands-on care to deploying telehealth for their patients. Just before Smith left for Jamaica, her staff participated in a two-day retreat where they’d practiced using computers and other screen devices for their primary care patients and for their patients on medication-assisted treatment for opioid dependence. So, her practice was ready.

“Two weeks later COVID hit,” she said, “We didn’t close.”

Smith’s team was fortunate that way. Nonetheless, she’s struggled with a steep drop-off in patients and revenue, and increased expenses since the spring.

The same story is echoed in primary care offices across the state.
How individual offices have been able to adapt in recent months offers a glimpse into a primary care ecosystem with deep vulnerabilities for the little guys in the smaller independent private practices that rely heavily on hands-on face-to-face encounters.

Some that already were preparing to offer virtual visits through telehealth models have been more nimble and able to adapt. Others are testing new financial systems that no longer count so heavily on the fee-for-service model, shifts that could offer a guide to the future as individual practices try to stave off consolidations that might offer economies of scale without bringing higher quality care.

According to a survey conducted by the North Carolina Academy of Family Physicians and the North Carolina Pediatric Society, 87 percent of practices reported being under “significant or extreme financial pressure.” For physician-owned practices, such as Smith’s, that number goes up to 92 percent.

Telehealth pivot hurts some small practices
According to the survey, practices have tried many different ways to stay afloat, from temporary closures to reducing hours. Physician practice owners reduced pay for themselves and their workers, furloughed staff. They applied for loans, sought help from the Paycheck Protection Program, tried to open new lines of credit or refinance their mortgages. Doctors did all this, even as they pivoted their practices to telehealth and comprehensively changed the way they operated.

Despite those pivots, the survey found that about one in 10 primary care physicians has considered selling the private practice or closing up shop completely.

“The rural independent practices have probably been hurt the worst,” said Greg Griggs, head of the NCAFP. He noted that those practices have a mix of payers that lean heavily on Medicare and Medicaid, government programs that reimburse for care at lower rates than commercial payers such as Blue Cross Blue Shield of North Carolina.

Tommy Newton’s practice in Sampson County had to move quickly as revenues dropped due to telehealth.

“Without PPP and a couple of other programs we’d be in dire shape. The PPP has propped us up,” said Newton, referring to the federal Paycheck Protection Program.

The practice was losing money because they weren’t doing lab work for routine health checks that were now being done over the phone or by computer. Few in-person visits. No revenue was coming in for the X-ray service for similar reasons. The urgent care volume was down too. All of those services are critical to the overall financial plan for Newton’s practice that helps pay the bills.

Both Newton and Smith were grateful that North Carolina’s Medicaid program and the federally reimbursed Medicare program began reimbursing for telehealth visits during the pandemic.

 “And private payers were sort of a mixed bag,” when it came to telehealth reimbursement, Newton said. “Some did, Blue Cross did the whole  time, the rest of them finally came on board, paying at parity, but not always.”

There have been other adaptations, too.

Newton, 65, and another partner, in his 70s, are only seeing patients who have been screened as not having COVID-19, for well-care checks that also are critical to a thriving practice. The younger partners at the practice are in the office for the riskier patient needs.

“We have two staff members right outside the front door and they screen people as they come up,” he said, if his nurses haven’t screened them over the phone first. If a patient is at risk for COVID, the PPE goes on, screenings take place in the car. If they need to be seen, the patient enters through a side door and goes straight to an exam room.

Newton said his practice has spent $25,000 on PPE since March, almost six times what was spent last year for the equipment.

Fee-for-service guts bottom line
North Carolina has about 3,000 primary care physicians, Griggs said. About 40 percent work for a large health system, another 20 percent are employed by someone else, either a community health clinic, the local public health department or a doctor-owned practice.

The rest are independent, like Smith and Newton and Mark McNeill, who has a practice in Asheville.

 McNeill already had a significant online presence for his 2,000 or so patients. He’s got a solo practice where he has “trained” his patients to use an online portal to ask simple questions rather than calling. The transition to telehealth was easy for him and his patient volume only dropped by about 25 percent before it rebounded.

McNeill worries about the future of independent practices with concern that goes beyond self-interest. Get on the phone with him for more than five minutes and he starts talking about a growing body of research showing that independent practitioners are a vital part of the health-care ecosystem because they do such a good job at saving money for the overall system.

The financial vulnerability for independent practices right now, McNeill pointed out, is tied to the fact that medicine is still reimbursed on a “fee-for-service” basis, despite the rhetoric that’s been flying around health policy circles for several decades about “paying for value.”

“We generally make our living by having butts in chairs, doing stuff like labs, and seeing people face to face,” he said. “I don’t make my living right now keeping patients out of my office, I’ve generally got to see them to get paid, so when patients stop coming to see you, your revenue drops.”

McNeill said the COVID-19 pandemic has exposed the great weaknesses in reimbursing for care this way.

“Primary-care health care, in general, has been talking about moving more toward value-based care, meaning rather than getting paid fee-for-service getting paid more consistent payments based on just the quality of care you’re doing,” he explained.

For the past few years, McNeill has been part of an accountable care organization called Aledade . The idea behind the organization is that small practices delivering high-quality care get money from insurers for keeping costs low, even as they meet quality benchmarks. This “shared savings” model provides a foundation for McNeill to build his revenue mix on top of.

“I’m not sweating as much as I would have been because I’m getting value-based payments on the work I did last year,” he said.

McNeill argued he’s better able to provide value to his patients and his payers and there’s more evidence to back that up of late. Just this month, the journal Health Affairs published a review of physician practices and larger hospital-based practices and found that the small guys delivered more bang for the buck.

“Independent physician practices were … more likely to screen patients for clinical conditions or social needs,” the authors wrote. “Recent research from the patient’s perspective [found]  that larger medical practices and hospital-owned groups do not provide more coordinated care.”

The assumption was always that the bigger systems could achieve “economies of scale” and adopt reforms more easily. Instead, the evidence seems to point to smaller, “more nimble organizations” being better for patient, physician and payer, with evidence that small practices delivered better quality care.

The study’s lead author Elliott Fisher published an op-ed in The Hill, where he pointed to data showing that when physician practices consolidate, when hospital systems grow larger, those providers are able to drive a harder bargain with insurers, demanding more for their services.

“A majority of all hospitals and nearly half of all physicians are now in financially integrated delivery systems,” the article stated. “The evidence is clear that consolidation often leads to decreased competition and higher prices, one of the major reasons that US health care costs exceed those elsewhere.”

The small fry, such as McNeill, offers a different way forward by keeping prices low in exchange for getting something back from the insurance payers. Everybody wins, he argued. Insurers pay less and get more quality, doctors provide more value and get more money in their pockets, and patients get better care.

Now more insurers are warming to the idea. McNeill mentioned a new program rolled out by Blue Cross Blue Shield of North Carolina in recent weeks called “Accelerate to Value.” The program is designed to bring on more primary care physicians like McNeill.

For him, that’s the glimmer of hope amid the pandemic.