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February 23, 2022

Redefining the physician landscape

Daily Briefing

    The physician landscape has changed a lot, especially over the past couple of years. Radio Advisory's Rachel Woods sits down with Advisory Board's Sarah Hostetter and Prianca Pai to get a look at what the physician landscape looks like right now and offer a new way to view physicians.

    Slide deck: The physician landscape, redefined

    Read an excerpt from the interview below and download the episode for the full conversation.

    Rachel Woods: So we know we need a different way of defining within this broad brushstroke of the independent physician landscape. Sometimes I think it's helpful to start with what you didn't pick. Are there frameworks or ways of breaking down the landscape that you don't want others to follow?

    Prianca Pai: Yes. I think Sarah and I tried a lot of frameworks here, so we tried existing health care industry frameworks. So we tried funders, we tried dividing it by specialty, we tried whether groups are physician led or not, and that didn't work because it told us what services these groups were offering to patients, but it didn't tell us what these groups wanted from their partners. And so we tried then out of industry frameworks like market size valuation, but those labels were too static to work for this market.

    Woods: I'm a little bit surprised to hearing you say that funder didn't work. Because when I have conversations about the physician landscape, everybody wants to talk about funders, everybody wants to talk about PE and health plans, etc. Why is it that we shouldn't be thinking about the physician landscape that way?

    Sarah Hostetter: It's still relevant, right? Funding is still relevant. But what we started to realize is that just knowing who funds a group doesn't tell you how that group works with physicians. So it doesn't tell you how much control a physician has. It doesn't tell you who makes decisions. Those are really important right now, right? That decision-making ability, the level of autonomy, these are really important to groups. And so if you tell me that you are backed by private equity or that a certain archetype or a certain type of group is backed by private equity, I have some assumptions about what that means, right?

    You're probably focused on growth. There's probably going to be some sort of change in the five- to seven-year window after that acquisition or after that investment that we're going to have to deal with. Same with if you are backed by a plan, you're probably focused on population health management, on value-based care, right?

    There's somethings that I know about these types of funding entities, but they don't tell me a lot about where control lives, where decisions live and what that actually means for the physician, because each of these funders can do that in a lot of different ways.

    Woods: And by the way, you're reinforcing why we felt it was necessary to redefine the physician landscape because the old way wasn't just maybe incorrect. There aren't just two categories of doctors anymore, but it's ultimately unhelpful because it doesn't allow us to get to this more dynamic understanding of what is the level of control, what's the power dynamic, how does it work with individual doctors, etc.

    Hostetter: Yeah. And even a few years ago when we were looking at this in the independent space and we were giving advice to independent groups, we really looked at private equity and national practice companies, but guess what? Private equity invests in national practice companies. Those two things aren't actually mutually exclusive, right? So we needed a new way to think about what are the categories that are at least a little bit more mutually exclusive, or tell us distinct things that are less overlapping.

    Woods: And help others in the market act in a different way, work with those physicians in a different way. Got it.

    Pai: I'm going to double down on what Sarah said there because I think that's the biggest trap with segmenting by funder, is that folks are going to equate certain funders with certain identities. They're going to think that health plans are only aggregators. They're going to think private equity only invests, which is false. Every funder is going to have a variety of ways they work with physician groups.

    Woods: So then how should we be thinking about how to break down the physician landscape?

    Hostetter: So I'm going to try to describe this. I want to acknowledge we have a visual to go along with this. So we're going to do our best at describing something that you can see visually as well.

    So imagine two axes, on the X-axis we have autonomy and integration. So as you move from left to right, you move from having the more autonomy to being more integrated. And then on the Y-axis you have just scale. So you're going from local to national. So we've plotted five different archetypes on those axes.

    Woods: I think people will intuitively understand the geography comment. We've got folks that are more regional, more local, versus national plans, but let's be clear, what exactly do you mean by autonomy?

    Hostetter: When we think about autonomy we were really thinking about where decision-making lives and how much physicians are involved in the group's decisions or control, right? So that's what's on the left side, is physicians are very invested.

    Think about your traditional independent physician practice, it's shareholder owned and shareholder governed. That's peak autonomy, right? Shifting to the other side, we're taking away some of that decision-making authority in the name of integration.

    So if you think about it in terms of a physician, it might go from I have complete control over my schedule to something is more mandated to me or I don't have to think about, I can decide what technology I use. I run my individual practice too. I'm going to give you a technology or I'm going to tell you this is the way we practice medicine at the extreme end of that scale.

    Woods: Got it. And you mentioned that there are five types of groups, five archetypes that fit into these two axes. What are those five group types?

    Hostetter: So at the bottom, kind of most local, most autonomous, we have your independent medical groups. I just described these. These are your shareholder owned, shareholder governed, right? They're the ones that we've talked about numerous times on the podcast before. And then at the national level you have four architects.

    So at the most autonomous we have service partners, we move into coalitions, aggregators. That's probably a word that most folks listening are familiar with. And then even further to the right of aggregators, more integrated are what we call national chains.

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