Corporate investors in primary health care

Corporations are increasingly investing in primary health care. For example, last year Amazon announced plans to acquire One Medical—a primary care organization with nearly 200 locations serving more than 700,000 patients. The price: $3.9 billion. Those 700,000 patients are a revenue stream. As an article in The New England Journal of Medicine notes, “Primary care practices can generate substantial profits by growing their population of patients covered by Medicare Advantage.”

This trend toward corporate investment in primary care is driven by a model called “value-based payment," in which Medicare and commercial players hold providers financially accountable for the cost and quality of the care they deliver. Instead of fee-for-service reimbursements, a physician or group of physicians receives a “risk-adjusted” amount of money for each person under their care regardless of the volume of services that person uses. This payment arrangement is called “capitation” and uses risk adjustment to predict a the cost of each person's health care services. The risk adjustment score considers each person’s demographic, such as age, and disease factors, such as whether the person has diabetes, HIV, or heart disease. The score determines the amount of money the medical practice receives for each person—the higher the score, the more money the practice receives.

The purpose of value-based payments is to reward providers financially for delivering better, more cost-effective care. The problem is that the providers can increase profits by maximizing the “budget” for each patient’s care. They maximize the budget by increasing a patient’s risk score. They increase the risk score by “upcoding” his or her diagnoses. (Codes are alpha-numeric designations for each disease diagnosis. For example, HCC34 is the code for chronic pancreatitis.) The diagnosis of a patient with a cough and a fever could be upcoded to a diagnosis of pneumonia. 

Studies have shown that between 2006 and 2011 risk scores for Medicare Advantage beneficiaries were 6 to 16% higher than they would have been under traditional fee-for-service Medicare. You can count on Amazon to know how to make a buck.

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