May 16, 2016 – There is an urgent need for innovation in primary care delivery — inadequate access for patients, poor care coordination, and a broken reimbursement system are well-documented challenges facing the field. Despite promising efforts and important pilots to overcome these obstacles, wide-spread innovation and improvement has been constrained by financing structures that incent the piecemeal, volume-driven delivery of clinical services rather than promoting care redesign.
Amidst these prevailing reimbursement models, sources of funding for innovation in primary care delivery are limited. Notwithstanding recent progress, most efforts at primary care transformation have traditionally been undertaken as small-scale grant-funded pilot projects, introducing alternative payment methodologies and care redesign as additives or slight modifications to traditional systems of payment and practice. Such incrementalism has been slow to scale and is unlikely to deliver significant innovation absent major policy changes.
Health Affairs talks with DPC Journal and Others (2016): ” Abstract Direct primary care represents a new model for providers eager to spend more time with fewer patients and bypass insurance headaches.”
In recent years, a handful of primary care leaders, dissatisfied with the pace of change, have approached the structure and financing of primary care transformation through a radically different model: for-profit, venture capital-funded enterprises. And many leading investors from the traditional health care spaces of biotech and pharmaceuticals—such as F-Prime Capital Partners, Maverick Capital, Polaris Ventures, and GV—have funded primary care service enterprises. Unlike traditional funding sources, venture capital funding has the potential to stimulate innovation in primary care delivery in four key ways:
- Enabling the development of new delivery models that provide Comprehensive, Tailored Care for primary care patients;
- Designing Sensible Reimbursement models that support the delivery of comprehensive care;
- Enhancing the ability to provide services that Focus on Populations of patients, as opposed to local or regional panels; and,
- Fostering Rapid Growth, scaling, and speed-to-implementation of new models.
In 2013, health care delivery services represented only 6 percent of health care venture capital funding, dwarfed by biotechnology, medical devices, drug development, and health care technology products. More recently, however, health care delivery services have become an increased focus for venture capitalists.
To better characterize this growing trend, we used publically available information to explore how three prominent innovators—Iora Health, One Medical Group, and Qliance Medical Management—are leveraging venture funding to support primary care redesign across each of the four dimensions:
Comprehensive, Tailored Care
All three innovators have developed clinical models that focus on providing primary care patients with longer visits, additional supports, and tailored care. They integrate ancillary health care providers (health coaches, specialists, behavioral health specialists, etc.) to enhance coordination and improve care.
Iora Health focuses heavily on patient experience — each physician is typically responsible for taking care of a smaller than average number of patients (or “patient panel”) and are supported by a homegrown electronic health record built for coordination and patient experience. Qliance promises patients unlimited access to physicians and unhurried appointments; they also limit the size of physician panels to allow for longer patient visits and offer physicians a bonus for quality and patient satisfaction scores. One Medical Group also promises patients longer visits, same-day appointments, and a mobile app to ease scheduling.
Unlike expensive concierge medicine practices that are only accessible to the wealthy, these companies are trying to offer high-touch primary care to larger populations at affordable prices. These expanded service offerings help to shift the culture of primary care toward patient satisfaction and improved patient outcomes. By increasing time spent with patients, physicians are able to provide better, more tailored care, and potentially avoid expensive, unnecessary referrals.
Providing expanded services is challenging, and often infeasible, under traditional fee-for-service reimbursement models. Venture funding affords the flexibility to develop and scale novel, sensible, and sustainable reimbursement that supports delivery innovations. Iora, Qliance, and One Medical all operate under a semi-capitated model in which patients and/or purchasers (such as large employers) pay monthly or annual fees.
Qliance and Iora do not accept/bill traditional insurance, whereas OneMedical will adjust rates for patients with additional insurance. Member-based prepayment affords all three organizations with flexible capital to invest in unique service offerings, such as those outlined above. Free from the productivity demands of fee-for-service reimbursement, these providers are able to focus on developing delivery services that keep members healthy.
Outlook for Employers and DPC, 2016 & Beyond …
Focus On Populations
Venture-backed innovators are marketing their services directly to large, pre-existing populations of patients. Iora Health began by contracting directly with large employers and unions, later expanding to Medicare Advantage plans. By contracting directly with these entities, Iora is able to secure a large population of patients within a specific market — a critical mass that affords Iora the ability to develop tailored services. Whereas One Medical Group and Qliance began by marketing their services to individual patients, both now have robust enterprise offerings for large employers.
One Medical offers population-based solutions to employers like Adobe, Doximity, Uber, and NBC Universal, while Qliance has contracted with Expedia, Comcast, and the Seattle Firefighters Union. Focusing services at the population level brings high-touch primary care to all patients covered by the insurance plan, not just those able to pay steep concierge medicine prices.
The ability to scale solutions to large populations across multiple national geographies provides a strong patient base, but this growth requires significant capital financing. Without venture funding, it would be challenging for these early-stage innovators to provide these offerings. Even the most advanced payment models being deployed by federal and other payers, pre-payment remains limited.
Both Iora Health and One Medical Group have expanded nationally into new geographic markets, raising $48.5 million and $181.5 million respectively. Qliance Medical Management continues to expand regionally in the Pacific Northwest through stand-alone clinics, enterprise partnerships, and an offering on the Washington health insurance marketplace. To enable this growth, Qliance has raised $20.6 million in funds from seven different investors.
Developing successful, sustainable, and scalable delivery models remains a vexing challenge for the primary care community. By operating outside traditional delivery and financing systems, these innovators are exploring new ways to deliver high-quality care to populations across the country. With only limited reporting on results, it remains to be seen whether these new venture-backed models can successfully balance the lofty goals of primary care transformation (i.e. expanded access, affordable services, reduced disparities) with investor obligations.
For example, some observers have raised concerns that primary care financed outside of, or on top of, traditional insurance payments may increase, rather than ameliorate, disparities. At the same time, some venture-backed primary care innovators, including Iora Health, are focusing specifically on high-risk populations and pursuing funding arrangements (such as Medicare Advantage) that make such programs sustainable.
Ultimately, understanding the role that venture capital plays in supporting primary care innovation reveals insights for how public and private investments can be best deployed to leverage growth and achieve the goal of a more successful and sustainable health care system.