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September 22, 2014 - Kim Moore [see other posts]

Legacy Providers

Legacy Providers

I was introduced to a new term in health care last week at the Governance Institute (conference for hospital executive staff and trustees): Legacy Providers. Ken Kaufman of Kaufman Hall consultants describes existing physician practices and hospitals with this term compared to the new competitors in health care such as Walgreens, CVS, and Walmart. Many of us are familiar with what Ken is discussing, although these and similar big businesses have not significantly developed health clinics in our mid-sized and smaller Kansas communities, to my personal knowledge. They are coming! They are in most urban areas, including Wichita.

CVS Health has 900 mini-clinics now and aims to have 1,500 by 2017. Walmart intends to roll out a $40 patient visit ($4 for those on the Walmart employee health plan). The Wichita Eagle on Sunday, Sept. 21, 2014 (p. 5B) reported that "CVS doled out more than 5 million [flu shots], or double its total from a few years ago. And Walmart...offers flu shots at more than 4,200 of its US stores that have pharmacies." The offerings at these mini-clinics are referred to as "low intensity," meaning they can be delivered by mid-level providers such as ARNPs, require limited equipment and utilize referral for any truly specialized care.

Kaufman and other speakers at the Governance Institute claim this is the headwind for a new consumer service approach to health care provision. Moving from the traditional (legacy) view of customers as "patients," which has several disempowering connotations (like being patient and waiting for long periods), big business and savvy providers will start working on customer service with concepts such as accessibility, affordability and convenience. One example cited was $49 sports physicals provided on a walk-in basis versus scheduling with a pediatrician days out and costing $129. The mom who just learns her son needs a physical in three days will gratefully drive two miles, pay $49 and get the needed document at the neighborhood Walgreens within 30 minutes of her arrival. The results of this new competition are sure to challenge legacy providers to break out of their provider-centric models or dramatically shrink their business footprints.

Although it is hard to fault the new competitors from a consumer view, this is really another example of "cherry-picking" which has been problematic for legacy providers among themselves and other competitors for years. Certain services receive better payment than others -- more margin (assuming a provider actually knew its cost for providing the service) -- and business-minded providers inside and outside traditional health care migrate rapidly into those. Physician groups open ambulatory surgery centers and MRI/CAT scan facilities. For-profits enter hospice care for customers who can pay. Specialty hospitals carve out high-volume hospital business from community hospitals. Meanwhile, the fixed base providers -- traditional hospitals, primarily -- (saddled with high facility costs that come with being prepared for the infrequent specialized or acute need) experience shrinking volumes and more problems with positive bottom lines. These mini-clinics are going to challenge physician groups and public health departments, among other legacy providers.

I personally don't expect loyalty to keep consumers with legacy providers over the long term. Legacy providers will need to adopt new approaches to compete: price transparency and lower cost structures, convenient platforms for the customer, and on-going connectivity with their customers through social media. I also would be surprised if claims of the danger of low quality, which will be made against the new providers, will get much public traction or occur frequently. What will be especially problematic will be the lack of coordination and care management which may occur; this drives care in exactly the opposite direction the system has been heading with patient-centered medical homes, health homes and accountable care organizations. All of these structural changes involving legacy providers have attempted to move provider-centric practices into the consumer world with prevention, health promotion and care management conveniently added to the treatment menu delivered at a one-stop show. Now, it appears competition may force the consumer convenience and cost changes without the overall health of the consumer being at the forefront.