Is this a doctor?s office or an interior decorator?s dream?
This past Wednesday The Carlyle Group officially announced their investment of up to $350 million in One Medical, the tech-enabled concierge primary care company.
The investment plays into two notable current trends: private equity firms making large investments in healthcare delivery companies, as well as the recent spate of VC investments into large-scale primary care firms.
This particular investment has refreshed the question of One Medical?s model. Are they really just, as David Shaywitz phrased it on the Tech Tonics podcast, ?yuppie-care for the well,? or are they presenting an innovative path forward for primary care? And why does Carlyle want such a big piece of the action?
If you?re unfamiliar with One Medical, it?s most effectively described as what you wish visiting your primary care physician was like. The waiting room feels like the lobby of a swanky hotel, you don?t wait more than five minutes for your appointment to begin, you can see your preferred doctor every time, and you can stay in touch with your doctor via email between visits. There?s a modern web portal where you can view your records, fill out your health history, and schedule same-or-next-day appointments. Oh, and if you factor in the included telemedicine service, it?s open 24/7.
One Medical walks and talks like a concierge primary care practice, and it comes with a concierge fee of around $200 per year. This membership doesn?t cover visits and services, which are still charged to the patient?s health plan like a traditional fee-for-service practice.
While it started as a direct-to-consumer company, One Medical also began offering packages for employers. These are essentially the same as the standard memberships, except the employer covers the annual fee. Large enough employers can even have One Medical operate their on-site clinic.
Employers are promised an overall reduction in the cost of care when they offer One Medical to their employees. One Medical claims this is because they make it so easy for members to get care whenever they need it, utilization of more costly urgent care and emergency room care declines. Their website boasts a 4.5% reduction in overall cost of care, while CEO Amir Dan Rubin cites an even higher 8% reduction in overall cost of care.
In a sense, this is exactly what primary care is supposed to be. It should be easy to access, and should help patients manage their health on an ongoing basis to avoid grave illness and trips to the ER. It should be welcoming and consumer friendly, and should operate in such a way that patients don?t dread a trip to the doctor, especially to the point of deferring necessary care. When primary care operates this way, it?s not surprising that employers see overall cost of care reductions. It?s the desired effect.
At the same time, can One Medical really be considered innovative? Their care delivery model, while draped in an in-house tech stack and a consumer-grade web application (their CTO Kimber Lockhart was formerly the web applications guru at Box), is merely a tech-enabled version of the care model that?s been used for decades. It?s heavily centered around in-office visits with a physician in a traditional clinic setting, albeit one with plush midcentury modern furniture.
While they?re charging a concierge fee, they still participate in the classic fee-for-service revenue model. The fee enables them to have physicians spend time communicating with patients outside of visits in non-billable interactions, but their core revenue is still driven by standard billing activities.
It could be argued that One Medical?s ability to achieve savings with such minor alterations to the basic model is an indication of how bad things have actualy gotten.
It?s also worth noting that One Medical?s results were achieved by building a service that appeals predominantly to younger people in higher income brackets (Shaywitz?s healthy yuppies). These are the people for whom a tech-enabled, on-demand primary care service is appealing enough to spend the annual fee, and for whom the annual fee is a reasonable expense in relation to their income.
As Eli Adashi and his colleagues from the Warren Alpert Medical School at Brown University note in their timely opinion piece on Direct Primary Care and alternative primary care models, ?limited existing data suggest that concierge practices? are less likely than nonretainer practices to serve Medicaid, Hispanic, and African American populations, as well as people with diabetes.?
When compared with companies like Iora Health, which is reorganizing primary care into a team activity and focusing on providing value-based care to elderly patients, Sherpaa, which provides 100% remote primary care via a membership model using a variety of synchronous and asynchronous communications, and Aledade, which is using technology to enable primary care-led accountable care organizations, One Medical seems decidedly traditional in their approach. Iora, Aledade, and Sherpaa are the disruptive players exploring new frontiers in primary care, while One Medical is a sustaining innovation that improves incrementally on the existing model, but doesn?t change the core value proposition.
Why, then, is Carlyle interested enough to invest $220 million directly into the company, and then spend another $130 million buying existing shares?
Ram Jagannath, a Managing Director at Carlyle, quoted in the deal announcement: ?We are excited to partner with Amir Dan Rubin and the One Medical team to continue growing and building out the platform? We look forward to working with the company to bring the One Medical brand and experience to more patients across the country.?
There is a battle being waged over the front door to healthcare. CVS and Walgreens are building clinics and mobile apps, new entrants like K Health are offering consumer focused machine-learning powered triage for free, WebMD is bulking up through acquisitions, Walmart is talking about getting more directly into healthcare services, and Amazon is going to do? something. All of this is about controlling where the patient enters the system. This grants the winner leverage over all the downstream healthcare spending of that patient, which as we know is a lot of spending.
Extracting some insight from Jagannath?s above quote, Carlyle believes that One Medical is poised, via their strong consumer-friendly brand and workable product, to become a serious contender in this battle. It doesn?t matter if they?re inventing the future of primary care, as long as they can continue to grow their brand, and perhaps lay the groundwork for building a true healthcare platform (an Amazon for healthcare). Carlyle?s investment dollars will be put to work doubling the number of One Medical clinics throughout the country. In the event that One Medical can?t execute on their vision, there?s always the profitable plan B of flipping the whole enterprise to one of the above companies who wouldn?t mind owning a widespread upmarket chain of primary care practices.
One Medical is building a business that is improving healthcare and growing in value, but at the same time failing to attack the problems that really need solving. There is always the chance they could pivot to a more transformative model of care, but as they?re currently configured I?ll be looking elsewhere to see what the future of primary care looks like.