Primary Care Growth Strategy

The Problem:

In order to be ahead of the ACA, we need to grow our primary care base.  Currently we have 5% of the Northern California market share for Primary Care.  In the last four years, we have lost 5% to a combination of attrition to competition and change in work/life balance of providers going the hospitalist route.  We have been unsuccessful in recruiting de novo providers and have a defensive IPA that is precluding us from an acquisition strategy.

Market Snapshot:

Three major players in our area; two HMOs and us, a medical foundation.  All are employment models.  Competitors A and B contain roughly 50% of the primary care market share.  We have roughly 5% and the residual 45% is independent.  Our current medical foundation make-up is 90% Specialty and 10% Primary Care.

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Supporting Information: 

• Nationwide PCP deficit. Literature supports a primary care deficit for the State of California to be somewhere near 5,000 providers.
• De Novo growth. Our competition has responded with $150,000-$250,000 sign-on bonuses or loan forgiveness programs amortized over 5 to 7-years. We are unable to come up with a financial model to respond.  Furthermore, even with these large outlays, our competition has been unsuccessful in recruiting primary care to service our communities.
• Acquisition strategy. In our Northern California markets there are 45% independent PCPs that are or will be looking for employment.  We have had several of these independent groups express interest in becoming employed by us, however, the largest IPA in the area is precluding an acquisition strategy by preventing a rather large discretionary bonus to any physician that joins our medical foundation.  These amounts vary between providers but range on average from $100,000-$250,000 for quality and risk-adjusted factors.   Therefore, when approaching these groups, none are willing to risk the bonus (a considerable part of their compensation). This has prevented any successful acquisition.  The IPA has almost 80% market penetration and is the predominant IPA in the area.  Furthermore, I have been unable to negotiate with the IPA.   The relationship is further complicated by just how significant the IPA is to us.  They represent nearly 20% of our book of business for both primary care and specialties. We believe this is a defense strategy for if we acquired enough primary care providers, our belief is that they would see us as a direct competitor that could potentially start our own IPA.
• Allied Health (PA and NP) remains sticky at best. Several of our payers including the IPA above, restricts allied health professionals into an “incident to” billing model thereby restricting new patients from access to allied health professionals.
• We have a family medicine residency program through our largest hospital which on average produces 10 residents a year. In the last three years, only one resident has remained in the community (she went to one of the independent provider groups).

I am looking for outside the box ideas or strategies on how to attract primary care providers to our markets.  Given the above, perhaps a model of a shorter work week may be a competitive advantage for us.  Currently, all primary care providers work 5-day work weeks without call obligations.