The Unbundling of Primary Care, Concierge Medicine and future of Consumer Healthcare

January 25, 2018

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We’re increasingly seeing people enter the health system in new ways, and not just through traditional visits to a primary care physician or an emergency department. There are avenues and tools available directly to consumers, and provide more options for people depending on severity of sickness, ability to pay, and schedule.


Home Diagnostics and Monitoring


Before we get care, we need to know that we’re sick. With access to monitoring and diagnostic tools, consumers can proactively monitor their health and visit a medical setting when something appears wrong. Patient-generated data can come from diagnostics tests, wearables, direct-to-consumer medical devices, and genetics, among other sources, and can provide insight into an individual’s health to help transform personal medical treatment. With more data coming directly from the consumer, healthcare professionals hope to be able to better assess the risk of patients.


But not all data is created equal, as seen with the difficulties Fitbit and Scanadu have had in the diagnostics and monitoring space. Fitbit has seen its stock slump with the company not meeting the consumer need for actionable health data, while Scanadu couldn’t match the claims it was making to participants in a conducted study.


If clinical grade data — or data usable in a medical setting — is key, these companies are going to have to go through regulated channels like the FDA. This can provide a stamp of approval for the datasets these companies are producing so providers can feel confident in using them. In tandem, we’re starting to see regulations expand and opportunities open up to accommodate many of these new devices and diagnostics that patients are using.


One seemingly small but far reaching piece of legislation that recently passed was the “Over-The-Counter Hearing Aid Act of 2017.” This allows hearing aid makers to skip the physician and sell directly to consumers without a prescription.


The FDA is creating a fast track for approving these lower risk wearables and tools that create clinical grade data, allowing them to be sold directly to consumers.


On the diagnostics front, 23andMe effectively helped create the category of direct-to-consumer genetic testing, with lots of startups now raising money in the direct-to-consumer testing and carrier screening markets. These companies are blurring the lines between diagnostic and predictive and also creating relationships directly with consumers.



Now we have new genetic information, data from medical grade wearables, and FDA-approved diagnostics like Kinsa and Cue to detect temperature and hormonal changes for things like the flu, fertility, etc. All of these tools are enabling predictive medicine, and are allowing for patients and providers to use personalized data to impact healthcare decisions.


This is the first step to moving towards proactive health and away from reactive health. Software can alert providers to anomalies in the data, and then they can reach out to a patient to confirm something’s unusual or wrong. This is very different from today where patients often wait until they feel sick to see the doctor.


 Retail Clinics


We’ve slowly seen retail clinics expand from distributing health goods to offering health services. Services include STD testing, vaccinations, the ability to develop certain microbial cultures, and other preventive health tests. They’re also much faster than a primary care visit since most people know the specific reason they’re there, or the test they need. Retail clinics purposefully pick tests that are faster to conduct, which reduces the exam time significantly.


We’re seeing more and more in-house clinics like CVS MinuteClinic being built across Walgreens, Krogers, Walmart etc. stores and is also one way for these retailers to Amazon-proof themselves by giving them a reason to come into the store. 


More companies see these retail clinics as new distribution avenues and are finding ways to extend the types of care you can get at your local pharmacy. This includes introducing kiosks for telemedicine, more diagnostic tools to check temperature, weight, and biomarkers, among other services. But it’s also an area that’s tough to crack due to the expensive real estate they take up, the cost to maintain them, and the business model of proving to pharmacies that they get people in the door. We’ve seen some well-funded shutdowns like healthspot, but also notable partnerships with Pursuant Health rolling out in different Walmarts, and higi enter into a similar partnership with Rite Aid. 


The CVS-Aetna acquisition for $69B has put the spotlight on how retail clinics can be used in population health. CVS has talked about its desire to use digital tools to help its customers improve their health via a mobile app, medication adherence tools, and more. With this acquisition, it has the financial incentive to do so by being their insurer as well.


This could force other retail pharmacies to respond. Several of them are already active investors in private markets, but this could spur them to make bigger and more ambitious plays. CVS itself has mostly looked to private markets to consolidate its core pharmacy business, but could look towards more tools telemedicine, health analytics, and medicine delivery tools to help manage the health of its population.


Urgent Care


Urgent care has taken off by finding a sweet spot between the long wait times of a traditional primary care clinic and the expense of the emergency department (ED). Urgent care clinics can treat acute, but non-life threatening conditions that often don’t require an expensive ED visit. In many cases, patients can see doctors more immediately than in a hospital setting. While smaller in nature than EDs, urgent care clinics don’t need to invest in the expensive machinery overhead, staff, etc. and can also turn away patients if they’re uninsured (unlike the ED).


The number of urgent care clinics is creeping up, a combination of increased patient demand due to their convenience and also an active effort by payors to keep people away from emergency departments unless they truly need ED services. As more of these clinics pop-up, they’re forced to compete with each other on price, convenience, and customer experience.


Urgent care companies have been an area particularly attractive target for private equity investors, which see opportunities in streamlining operations, bundling different clinic chains, and standardizing processes and tools to make them more efficient. Warburg Pincus recently acquired CityMD at a $600M valuation.


Direct Primary Care and Concierge Medicine


Direct Primary Care (DPC) and Concierge medicine charge patients a retainer fee (on a monthly or yearly basis) for access to a specific doctor or clinic. Both rely on the concept of retainer fees and smaller patient panels compared to a regular family practice. Concierge medicine usually charges both the patient and insurance (making it subject to insurance and Medicare regulations) while Direct Primary Care only relies on the retainer fee (and can avoid insurance and associated regulations altogether).


Both DPC and concierge are locking patients in with this retainer fee, which is a recurring and predictable form of revenue for the clinic. These clinics allow patients more time during visits and  provide more access to the doctors by scheduling appointments either outside of typical hours or just by creating more available appointments. In many cases, the retainer fee includes the cost of the tests, but some clinics charge patients the cost of the test that they bought it for (wholesale price) without a usual mark up.


These new clinics are trying to build as much as possible from the ground up, with most realizing that relying on third parties for services like patient records, billing, patient management, etc. can be large detractors of the consumer experience, which is what they’re selling. Companies like One Medical and Forward have built their own EMRs, apps, have lab testing in house, and also build tools for their physicians to better manage their patients.


They’re also using employers for distribution, pitching a subscription to their clinics as a perk to employers for retention purposes.


The direct primary care and concierge models are dependent on small patient panels to be able to provide consistent, high-quality, and high touch care, making them difficult to scale. We’ve seen well-funded shut downs including Qliance, while other more popular clinics like One Medical are still private after more than 10 years. 


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