Primary care has become a hot market as U.S. retailers place big bets on healthcare and payers and startups like Oak Street Health see a sector that's ripe for disruption.
The primary care market is estimated to be worth around $260 billion.
Online retail giant Amazon is now going all in with its $3.9 billion deal to buy One Medical.
Bringing new care and reimbursement models to the market along with a bigger focus on virtual care, these nontraditional players are gaining traction and have the potential to grab as much as a third of the U.S. primary care market by 2030, according to a new report from Bain and Company.
Primary care today continues to be dominated by traditional providers in fee-for-service arrangements. But rising costs, demographic shifts, digital disruption and other factors will continue to alter the primary care landscape which opens up opportunities for new players with different approaches, Bain consultants say in the report.
"As the industry continues to shift toward value-based reimbursement, there has been an increase of nontraditional players and models in primary care," Dr. Erin Ney, an expert associate partner at Bain and Company, said in a press release. "As we look ahead, rising costs, physician shortages, consumerism and digital disruption will continue putting pressure on traditional healthcare models, paving the way for additional growth of models that promote more efficient care, improved outcomes and reduced total cost."
The global consultancy points to advance primary care disruptors like Oak Street Health, new retailer partnerships like the one between Walgreens Boots Alliance and VillageMD and the launch of UnitedHealth Group’s OptumCare as evidence that the primary care market is shifting and becoming more competitive for the traditional providers.
As the shift from fee-for-service to fee-for-value reimbursement models accelerates, both independent and payer-owned advanced primary care providers will play a major role here, the report says.
"Although advanced primary care disrupters make up just a fraction of the total market, they are following the profit pools and spearheading population-specific models that aim to operate in full capitation. What’s more, they are already demonstrating better clinical outcomes, lower total cost of care and higher upside potential," the report authors wrote.
The transition to value-based care (VBC) has been tougher for traditional providers, which grapple with financial, operational
and administrative hurdles. While some traditional providers have started to engage in VBC, true population-based reimbursement—such as partial- and full-capitation payment models and integrated payer-provider models—represents only around 7% of total healthcare spending today.
This opens up opportunities for companies such as Agilon Health
and Privia Health to support traditional independent providers to move to VBC. These companies can arm traditional providers with population health analytics, data integration and care coordination tools. Aledade also has made strides in this area as it uses data analytics to help independent doctors’ offices transition to value-based care models.
The way healthcare services are delivered also is changing. New care models with a heightened focus on specific populations, broader adoption of multidisciplinary care teams and growth of alternative sites and channels of care will increasingly redefine the primary care space.
The pending physician shortage will be one major driving force for change in care models. The U.S. is expected to be short 45,000 physicians by 2030. Today, more than 70% of physicians don’t work alongside other specialists, and more than 45% don’t work alongside advanced practice providers (APPs).
That won’t be sustainable by 2030, the report authors wrote, and primary care providers will need to function in multidisciplinary care teams with an integrated approach to medical, behavioral and social determinants of health. To effectively deliver care amid the physician shortage, organizations will have to rely more on APPs, especially in alternative sites and channels, such as retail health or virtual care. APPs will likely continue to focus on routine and urgent care while physicians take the lead on care for the most complex cases.
At the same time, healthcare services are shifting from clinics to patients' homes as well as retail locations and digital platforms. Retail giants like CVS, Walgreens, and Walmart have recently forayed into
comprehensive primary care, with high ambitions for future expansion.
Expect to see retailers continuing to carve out market share with full-scope primary care. Retail behemoths could account for 5% to 10% of total primary care by 2030, Bain predicts. "They will likely outperform traditional primary care providers on the patient experience, attracting customers through increased access and convenience, particularly in geographically underserved areas," the report authors wrote.
During the pandemic, 18% of primary care visits were virtual—soaring from a mere 1% in 2018. The share of virtual primary care has settled around 12% at the end of 2021, much higher than pre-pandemic, according to the report.
Young healthy patients will continue to embrace digital and virtual healthcare services. Bain predicts that virtual health could climb to 20% of market penetration by 2030.
There will continue to be a need for in-person medical care. Going forward, primary care providers with an omnichannel presence will excel over pure-play virtual providers, the report said.
"That bodes well for many retailers, as they look to build comprehensive, omnichannel primary care," the authors wrote.
Bain & Co. also expects health plans to continue to grow their market share over the next decade. Entering primary care in 2011, payers and payer-owned services companies already hold around 5% of the market, care for approximately 13 million lives, and employ around 12,000 physicians.
"Payers will increasingly acquire well-coordinated, high-functioning practices, as well as the technological and digital capabilities required to scale risk-bearing models. Private equity will also claim a larger share of the primary care space as investor interest holds steady," the report authors wrote.
Payers and payer-owned services companies will become one of the largest models, Bain & Co. predicts. With expected continued vertical integration over the next decade, these models could capture up to 15% of the primary care market.
On this note, expect to see increased consolidation of private equity- and venture capital-backed market disrupters throughout the next decade, according to the consultancy.
The report also flags other major competitive dynamics to watch for as the primary care market evolves. Risk-bearing, population-specific models will scale as fully capitated advanced primary care providers, led by disrupters and payers, will grow nationally. "They will add value by mitigating administrative complexity for clinicians and improving patient outcomes through tailored offerings and enhanced care coordination," the report authors wrote.
Expect to see alternative models squeezing traditional models. Traditional fee-for-service will still be the largest model in 2030, but it stands to lose 15% to 20% of market share as alternative models often provide enhanced patient experiences, better physician experiences and more collaborative team-based care, according to the report.