Physician practice consolidation creates the need for new distribution models

By | April 18, 2017

There have been many changes in recent years that have created uncertainty in the healthcare environment. These have included a shift to pay for value, a greater focus on outcomes, meaningful use, and most recently a complete overhaul of the physician payment model for Medicare beneficiaries. We have seen increased physician employment by health systems and consolidation in other parts of the healthcare ecosystem, both horizontally and vertically. The data is no different as it pertains to physician practices. Consolidation is occurring in this space as well for all the same reasons and due to the fact that the physician workforce correctly desires a greater work/life balance.

There are definite advantages to larger size: stability, shared infrastructure, process improvement at greater scale, cost containment, etc. However, there are also downsides to physician consolidation. There is the obvious one that the Federal Trade Commission worries about, which is increased cost of healthcare due to negotiation ability of larger groups. This has played out in all sectors of the healthcare industry, so this fear is real. There is also another problem of physician, and thus, healthcare distribution. As consolidation occurs, the underserved and those living in rural areas will see a decrease in access. As larger groups focus on their bottom line, services will likely decrease for certain areas and patient types.

As we manage the fact that both the benefits of consolidation and smaller distributive delivery models need to exist, we have to think about how to optimize both situations. This optimization requires focus on making sure smaller practices can play on the same field to solve for distribution issues. It is a major focus of our policy makers and can be seen in many new regulations. There is a distinct concern about smaller practices and rural care, which needs more focus. If consolidation is going to continue, which it will, we need to shift our focus to the distribution issue. If you look to our north, Canada has created strong telehealth networks most of its population resides in rural areas. Another solution is to empower individuals with the education needed to do better self-diagnosis and deliver self-care.

We have the ability to solve this distribution issue, but it will take technology, education, legislative changes, and added incentives to provide care where it is needed. The answer is not that we need more physicians because in a consolidation model, new physicians will likely just join the power houses, and not go to where the care is needed. As with most complex questions, there are multiple answers that are dependent on each other and solutions that might seem incongruent. If we truly want to deliver value to all those we serve, both near and a far, we need to design not only better care models, but also better distribution models.