Rae Woods: From Advisory Board, we are bringing you a Radio Advisory. My name is Rachel Woods. You can call me Rae. Since we've launched this podcast, I've actually spent a lot of time talking about the physician landscape and for good reason. Today I wanted to bring two physician experts on to break down a new way of thinking about physicians, one that hopefully is a lot more helpful for listeners like you. Let me caveat that this one is going to get a little bit in the weeds. We've added a really important link to our show notes that breaks down this new you framework in a visual way. I highly recommend you scroll down on your phone or on your laptop and open up that link now. It will help you understand the conversation that we're about to have. With that, let me take you to my conversation with Sarah Hostetter and Prianca Pai. Hey, Prianca. Hey, Sarah. Prianca Pai: Hey. Sarah Hostetter: Hello. Rae Woods: Back to talk about my favorite subject, which is physicians, it feels like there is never not a good time to talk about doctors in healthcare. Prianca Pai: Definitely agree. Sarah Hostetter: Yeah. Especially after the last year, it's only more important than ever. Rae Woods: So we're going to be having a little bit of a different conversation. Sarah, you've been on this podcast a couple of times talking about the state of the physician landscape. So not individual physicians, but what does the landscape look like more broadly. And that's the conversation that we're going to be having again today. My first question is when did the two of you realize that the market actually needs a different way of defining the physician landscape? Sarah Hostetter: Yeah. It started with some internal conversations actually around the fact that for so long we've... And we've talked about this, Rae? Defaulted to this binary definition of doctors, either you're employed by a health system or you're not. And I found myself saying all the time, "I work with non-hospital employed physicians," but that's not actually helpful, right? We're defining this group of doctors by what they're not, which is not particularly helpful and we are starting to realize that internally we need a new language. Rae Woods: And this isn't just nitpicking here. This is the old way of thinking about physicians isn't just flawed, but maybe actually has some negative ramifications for the industry. Prianca Pai: Agreed. And I think that non-hospital employed physician group is incredibly, incredibly diverse. And so for people who are working with these physician groups, including Advisory Board, we desperately needed a way to identify and name these groups to be a better partner to them. And I also think for those groups themselves, they want to understand where they fit into the market, how do they compare? Where should they go next? And employed or not employed by a hospital is not going to help you answer those questions. Rae Woods: And to be fair, there are a lot of, let's call them old school ways of breaking down the physician landscape. Sarah, you even mentioned that we at Advisory Board divided up the world into hospital and non-hospital employed physicians. I think we've toyed around with a couple of other ways of breaking down the physician landscape. But in general, I'm hearing you say that a lot of what we've talked about is actually completely outdated at this point. Sarah Hostetter: Yeah. And we work with independent physician practices at Advisory Board, right? I've been doing that for years. And it started when we needed to figure out a different and better way to segment the groups that we were already working with, the changes that we were seeing within those groups, right? We were recognizing trends and recognizing changes in the types of groups we were working with, or the types of groups that were courting the types of groups we were working with. And we didn't have a great way to understand those changes even for ourselves, which made us think, "Hey, I bet other folks don't have a great way of understanding these groups either." Rae Woods: Especially other folks who let's be honest are trying to work with and sell products to and partner with physicians, which is exactly what we are doing. Sarah Hostetter: Absolutely. Yeah. Rae Woods: So should we just get rid of the old way of thinking about physicians, right? You even just said, "I work with independent physician groups." Should we not be using that term anymore? Should we not be using non-hospital or hospital employed physicians anymore? Sarah Hostetter: I mean, I think the reality is we don't have a better overarching word right now than independent. I still refer to them as independent with the caveat that that looks really diverse. I think about it more as the independent physician landscape, which includes a lot of groups, including independent groups, but also a bunch of other archetypes that we're starting to name. Rae Woods: So we know we need a different way of defining within this broad brushstroke of the independent physician landscape. Sometimes I think it's helpful to start with what you didn't pick. Are there frameworks or ways of breaking down the landscape that you don't want others to follow? Prianca Pai: Yes. I think Sarah and I tried a lot of frameworks here, so we tried existing healthcare industry frameworks. So we tried funders. We tried dividing it by specialty. We tried whether groups are physician led or not, and that didn't work because it told us what services these groups were offering to patients, but it didn't tell us what these groups wanted from their partners. And so we tried then out of industry frameworks like market size valuation, but those labels were too static to work for this market. Rae Woods: I'm a little bit surprised to hearing you say that funder didn't work. Because when I have conversations about the physician landscape, everybody wants to talk about funders, everybody wants to talk about PE and health plans, et cetera. Why is it that we shouldn't be thinking about the physician landscape that way? Sarah Hostetter: It's still relevant, right? Funding is still relevant. But what we started to realize is that just knowing who funds a group doesn't tell you how that group works with physicians. So it doesn't tell you how much control a physician has. It doesn't tell you who makes decisions. Those are really important right now, right? That decision making ability, the level of autonomy, these are really important to groups. And so if you tell me that you are backed by private equity or that a certain archetype or a certain type of group is backed by private equity, I have some assumptions about what that means, right? Sarah Hostetter: You're probably focused on growth. There's probably going to be some sort of change in the five to seven-year window after that acquisition or after that investment that we're going to have to deal with. Same with if you are backed by a plan, you're probably focused on population health management, on value-based care, right? There's somethings that I know about these types of funding entities, but they don't tell me a lot about where control lives, where decisions live and what that actually means for the physician, because each of these funders can do that in a lot of different ways. Rae Woods: And by the way, you're reinforcing why we felt it was necessary to redefine the physician landscape because the old way wasn't just maybe incorrect. There aren't just two categories of doctors anymore, but it's ultimately unhelpful because it doesn't allow us to get to this more dynamic understanding of what is the level of control, what's the power dynamic, how does it work with individual doctors, et cetera. Sarah Hostetter: Yeah. And even, Rae, a few years ago when we were looking at this in the independent space and we were giving advice to independent groups, we really looked at private equity and national practice companies, but guess what? Private equity invests in national practice companies. Those two things aren't actually mutually exclusive, right? So we needed a new way to think about what are the categories that are at least a little bit more mutually exclusive, or tell us distinct things that are less overlapping. Rae Woods: And help others in the market act in a different way, work with those physicians in a different way. Got it. Sarah Hostetter: Exactly. Prianca Pai: I'm going to double down on what Sarah said there because I think that's the biggest trap with segmenting by funder, is that folks are going to equate certain funders with certain identities. They're going to think that health plans are only aggregators. They're going to think private equity only invests, which is false. Every funder is going to have a variety of ways they work with physician groups. Rae Woods: So then how should we be thinking about how to break down the physician landscape? Sarah Hostetter: Okay. So I'm going to try to describe this. I want to acknowledge, and Rae, we're going to put this in the show notes, right? We have a visual to go along with this. So we're going to do our best at describing something that you can see visually as well. So imagine two axes, on the X axis we have autonomy and integration. So as you move from left to right, you move from having the more autonomy to being more integrated. And then on the Y axis you have just scale. So you're going from local to national. So we've plotted five different archetypes on those axes. Rae Woods: I think people will intuitively understand the geography comment. We've got folks that are more regional, more local, versus national plans, but let's be clear, what exactly do you mean by autonomy? Sarah Hostetter: When we think about autonomy we were really thinking about where decision-making lives and how much physicians are involved in the group's decisions or control, right? So that's what's on the left side, is physicians are very invested. Think about your traditional independent physician practice, it's shareholder owned and shareholder governed. That's peak autonomy, right? Shifting to the other side, we're taking away some of that decision-making authority in the name of integration. So if you think about it in terms of a physician, it might go from I have complete control over my schedule to something is more mandated to me or I don't have to think about... I can decide what technology I use. I run my individual practice too. I'm going to give you a technology or I'm going to tell you this is the way we practice medicine at the extreme end of that scale. Rae Woods: Got it. And you mentioned that there are five types of groups, five archetypes that fit into these two axes. What are those five group types? Sarah Hostetter: Yeah. So at the bottom, kind of most local, most autonomous, we have your independent medical groups. I just described these. These are your shareholder owned, shareholder governed, right? They're the ones that we've talked about numerous times on the podcast before. And then at the national level you have four architects. So at the most autonomous we have service partners, we move into coalitions, aggregators. That's probably a word that most folks listening are familiar with. And then even further to the right of aggregators, more integrated are what we call national chains. Rae Woods: Okay. So most of the variation actually happens at the national level. And I think you're right, Sarah, that there are some of these terms that folks will be familiar with and some that they won't. I mean, I consider myself a physician researcher and there are some terms you said that I'm not sure what actually mean. So let's start with the first group that you mentioned, the national groups that have the most autonomy, which are the service partners. What can you tell me about those? Prianca Pai: Yeah. I think service partners is a great one to start with. They have existed forever and I would think of them as MSOs and other types of service agreement type models in this category. And I often would think that what's unique about this framework is that most people might not include them on this map, but they work so closely with independent groups that I think it's important that they are part of this landscape when we have this conversation. Rae Woods: You also mentioned another term that maybe folks are familiar with, which is the aggregator. What can you tell me about those groups? Sarah Hostetter: So aggregators are also extremely common. They're also extremely varied. So these groups acquire practices. If you think about an organization that buys physician practices, they most likely fit in this archetype. Health systems can act as aggregators when they go in and buy independent groups. Rae Woods: That's right. Sarah Hostetter: So can plans, so can PE back national practice companies. So anyone who's acquiring practices, we put in this bucket. Rae Woods: So we've talked about the classic independent medical group. We've talked about the service partners and we've talked about the aggregators and those are terms that our audience is going to be the most familiar with, but there are two from your original five that we haven't talked about yet. And I think that's for a good reason. Tell me about what the heck a coalition means. Prianca Pai: Sarah can take this one. Sarah Hostetter: So this is probably newest territory for your listeners because it's the newest type of archetype on this map. So there are fewer of them, not everyone knows they exist. So I'll bring this map to folks and I'll show it to them and they're like, "Wait, what's a coalition? I've never heard of this." And I'm like, "Oh, I've been working with them for years. Let me tell you more about them." Right? But they're just not as frequent. So the idea behind a coalition is that it's a group that brings independent groups together in a loose affiliation. So they may do things like shared data, they may buy a technology together, but all of these groups are independent groups still, yet they also are part of a coalition. Rae Woods: It sounds to me like you're describing an ACO. Sarah Hostetter: Yeah. I think of an ACO as a type of coalition or another one is an IPA, an independent position association. Those have existed forever. We just didn't have a good name or category for these types of groups where you exist as yourself and as part of the bigger entity. Prianca Pai: And I think one of the reasons it's one of the least common archetypes we're seeing, is because it's the hardest, right? It's easy to either provide autonomy or integrate. So either be that service partner or that aggregator, but successfully offering positions, both autonomy and integration, that's the challenge. But we are seeing some success I think in oncology, radiology and in the specialty groups. Rae Woods: But at the end of the day, we're talking about looser affiliations when we talk about coalitions and when we talk about service partners? Prianca Pai: Agreed. Sarah Hostetter: Yeah. And I think that's why these can be really challenging, Rae, because when I see these types of models not work it's because they can't actually get the level of benefits that they want from scale that they're falling apart, right? So if my value prop is retaining independence while still getting some access to scale, and I can't truly get those benefits, why would I stay in this type of group? I'm just going to go back to being independent. Rae Woods: Let's talk about those national chains. What do we know about these types of physicians? Sarah Hostetter: So national chains, these are groups like your One Medical, your ChenMed, all of these national companies that are taking a model and scaling it across multiple practices. Some folks refer to these as disruptors. We've re-named them in this map. Prianca Pai: And I think I personally like to think of them as franchises. For example, One Medical is opening a clinic down the street in my suburban Maryland neighborhood. They're as I think accessible, identifiable as CVS. They're basically copying and pasting this model across the country like a franchise. Rae Woods: I have not heard anyone use the word franchise, frankly in healthcare. I mean, we're not talking about opening chains of subway sandwich shops, are we? Sarah Hostetter: No, I think that's an important point, Rae. The difference in why we didn't actually use franchise in this map is that when you think of a subway franchise, they're local owners, so someone is owning a branch of a subway restaurant and making the profits. That's not happening in these cases. I just think it's a helpful model because when you think about franchise restaurants, you think of a national model that is then given to a local group to replicate and we are replicating over and over again. So that's more the point that we want to make when we say a word like franchise. Rae Woods: And why not use the word disruptor? You said the market often calls these folks disruptors. Prianca Pai: I think the disruptor term is very insane. I think it's like calling Amazon and Uber disruptors. Yeah, they once were disruptors, but they aren't anymore. They are the main players. They are the established players. And I think you're naive to call them disruptors at this point. Sarah Hostetter: And I think what's interesting is that now our disruptors have disruptors, right? So yeah, One Medical, ChenMed, those were disruptors when they entered the scene, but we're seeing new and kind startups that are coming in, especially in women's health and the telehealth spaces that are even more disruptive and different than these models, which are now I would say much more status quo like Prianca's example of there's a One Medical coming to the suburbs. These started at urban centers, or they started in just populations with high levels of Medicare patients. That's not the case anymore. They are truly entering lots of markets. So they're much more status quo than I think people give them credit for. Rae Woods: Let me reveal to the both of you a little bit of my discomfort. I do not disagree that we need a new way to break down the independent physician landscape. I mean, Sarah, the amount of times that you and I have had to caveat what the heck we mean when describing physicians tells me we needed a new framework, but I always, always, always get nervous when anybody talks about archetypes because the tendency is to default to something that is static. Tell me how might these five archetypes, these five buckets change over time. Sarah Hostetter: Yeah. And I want to start by saying we expect these to change. And for those that are familiar with the Advisory Board, we tend to put these frameworks out there, right? And we say, "This is the answer." This is a framework that I want to break again year after year because the market is changing so frequently, right? So I fully expect this framework to change. I don't want to get too far down into this because it requires a lot of visualization, but if you look at the blog that we've attached, you'll see that we're actually currently tracking trends and changes that are happening within this market already. Rae Woods: Like what? Prianca Pai: I think we've seen service partners become coalitions, but I think the thing that I really would love to see is if aggregators can become national change, can you actually do both the buy and the build strategy successfully and at scale? Rae Woods: Both of the examples you just gave were of national groups. Moving away from autonomy, more towards integration, is that in general the path that you see some of these archetypes moving towards? Prianca Pai: Yeah. I think the other thing that would be interesting to watch is whether we can see national chains become aggregators. So moving from integration back to autonomy or some level of autonomy. Sarah Hostetter: If you look at the recent One Medical, Iora merger acquisition, right? That's two very distinct models coming together. I'm going to be interested to watch how distinct those stay versus how integrated those become, right? So are we seeing multiple archetypes within one or multiple service models within one, or are we truly seeing one new integrated group that has both? Rae Woods: Iora and One Medical both being national chains, but one, Iora being very focused on high-risk complex patients and One Medical, frankly being focused on people like you and me who are healthy, have some expendable income and are willing to pay for access. Two different national chains coming together. Sarah Hostetter: Yeah. And I think what's interesting with those two groups and why it might be a bellwether for us is we've long said that the things you need to take care of seniors and the things you need to take care of young, healthy folks, there's a lot of overlap, right? You need lots of opportunities for communication. I think if we can get seniors to really lean into virtual like we did that last year, that's a lot of overlap. So how much do they then say, "This is the new model of care that works seniors and young and healthy"? Or do they say, "Rae, we've talked about this for... We're actually one big company with a segmented care strategy." Rae Woods: That's right. But at a high level, is the expectation over time that we want to see physician groups move left to right on this visual, move from autonomous towards more integration? Prianca, you mentioned that we might see some move in the opposite direction, but we haven't actually seen that yet. Is it possible for groups to succeed as any one of these five archetypes or do we need to see movement in one specific direction, like towards being a national chain? Prianca Pai: I think that's the big question, Rae. Do you need to move further to the right or move left or is your end state one of these archetypes? I think the other big question out there is whether you actually have to go national. Is regional plates actually better for success and sustainability? Rae Woods: Well, let me ask that question back to you. Is it possible to be successful in any one of these five archetypes? Prianca Pai: I think so. I think we've seen really strong players who are in the coalition space and I don't think they need to become aggregators. They're doing it well. I think same with national chains. I think it's sometimes going to be a question around, is that going to be enough? Do you then have to diversify your services more than moving around in terms of the archetypes that you are? Rae Woods: And is that true even for the classic local independent group? Sarah Hostetter: Yeah. So we've seen some movement with independent groups. Even when I look at the independent groups that I work with, I actually classify some of them as aggregators now. We've also seen independent groups that have stood up MSOs and becoming service partners. Independent groups also often form coalitions themselves versus joining existing coalitions, right? It's a couple of independent groups coming together and saying, "Let's get some access to scale." I think we will continue to see diversity in terms of offerings. I think to bring us back to that conversation on funders, we are already seeing funders diversify how they are operating in this market. So they are aggregating and they're also being a service partner, things like that. Rae Woods: Sarah, you mentioned that you actually want to break this model in the future. What are you watching for that might change the way that we look at the physician landscape? Sarah Hostetter: So if I were to put a classification structure on an already complicated classification structure- Rae Woods: Classic Advisory Board, yes. Sarah Hostetter: Right? Yeah. I break this model in half. So you are either going to the market and saying, "My value prop is autonomy," or you're going to the market and saying, "My value prop is integration." So service partners and coalition are hanging their hats on autonomy. That's their number one value prop. The aggregators in national chains are going to the market with integration. So I have two questions there, one, do we actually just see one archetype form that is the archetype for autonomy and a separate archetype form that is the archetype for integration? Sarah Hostetter: And then do we actually see anyone cross that barrier or that artificial barrier that's there right now? So so far we've had this really distinct divide where coalitions don't actually want to become aggregators. They want to preserve autonomy. If I'm an aggregator, I'm taking away my value prop, right? But is that going to change? Are we going to find a group that either does both or are we going to see one of these groups become the other and substitute the value prop? Rae Woods: We've talked about a ton when it comes to independent physicians in the market today, but I want to reground us on why we are having this conversation in the first place. And that's the reality that virtually every single player in healthcare is going to need to work with these groups in a different way, based on where they fall on this framework that you all have developed. So before we wrap up, I want to get your take on how various parts of the industry should actually work with these docs. Let's start with the one everybody wants to talk about. What is your takeaway for funders. Sarah Hostetter: Prianca knows this, but this is one of my biggest pet peeves. So when we were trying to do this classification, you go onto a funder's website and they say that they do everything. They're like, "We're going to give you autonomy and we're going to give you integration, and everything is perfect and roses." That's not true. We know no one can do everything. So I really want funders to think about what their value proposition is and what the pitch is that makes them distinct. So as opposed to saying, "I'm going to be everything for every physician and no matter what you want, we've got it," pick one and do a really good job at that. Set yourself apart from the other groups who are offering autonomy and from the other groups who are offering integration as opposed to saying, "You're going to get it all if you come to us," because it's too much of a bait and switch. You're never going to get it all. Rae Woods: And what about other parts of the industry? What about the vendors, the consulting firms, the partners, the folks who aren't funders, but still need to work with these doctors? Prianca Pai: I think the biggest question I get from those groups is who has the decision-making power? Because they want to know who do I go to, to sell my services. And I think the answer's pretty simple. So if you look at that map, if you're going from right to left, so from national chain to service partner, decision-making power is going to get more diffuse. So national change- Rae Woods: Because it's becoming more autonomous. Prianca Pai: Yes. Yes. So national chains or aggregators are going to be making more top-down decisions. So you're going to see decision-making power sit more at a national or even regional level. But in contrast when you're working with coalitions or service partners, decision-making power is going to be bifurcated. It's going to exist both at that national level and at that practice level. So partners therefore have to work with a lot more stakeholders to get buy-in. Rae Woods: And what about the independent groups themselves? Sarah Hostetter: So I ask independent groups right now what is your ambition? Do you want to grow or do you want to just survive? And I think when you hear just survive, that can have a negative connotation. It doesn't have to. Those are both viable options, but they require really different strategies. So if you want to grow at some point you may need to partner with one of these groups or become one of these groups yourselves. So figure that out now, which of these is the most compelling argument and value prop for you, which are the suitors that are going to be the most compelling when they do knock on your door. Because if they haven't, they will. Sarah Hostetter: We've talked about this resurgence of folks approaching, partners approaching independent groups right now. If you haven't had someone knock on your door, they will. So you should know your answer before they get there. Talk to your docs, find out what autonomy means to them, find out what they value so that when you get these types of propositions and it's time for you to make that decision on grow or not grow, you have the answer. Rae Woods: Well, Sarah, Prianca, thank you for walking us through the ultra complicated world of independent physicians. Sarah Hostetter: Thanks for having us, Rae. Prianca Pai: Anytime. Rae Woods: The topic of the physician landscape keeps coming up in part because we know that the industry, including sometimes us has defaulted to an outdated and ultimately unhelpful way of breaking down the physician landscape. This came up at the beginning of the pandemic when we heard sweeping assumptions about practices going extinct, and it came up again when others predicted massive shifts in power dynamics, especially between health systems and the rest of the industry. We're not just talking about language here, redefining the physician landscape will ultimately help everyone understand how to work with this ultimately very complex part of our industry. And remember as always, we're here to help.