The realities of the epidemic mean that some physician groups will need to explore new partnership opportunities to weather the storm. However, it's increasingly looking like there won't be a major shakeup in physician ownership. Instead of looking to sell, independent practices are looking to maintain autonomy while exploring new opportunities for partnership.

Listen to the episode: Are independent physicians going extinct? Not so fast.

In part one of our series on consolidation, Rachel (Rae) Woods sits down with physician practice experts, Sarah Hostetter and Julie Riley, to talk about what physician practices are—and aren't—looking for in a partner.

Read a lightly edited excerpt below, and listen to the podcast for the full conversation.

Rachel Woods: Sarah, the last time we spoke, you shared that we were expecting a buyer's market for physicians. Is that still the case?

Sarah Hostetter: The most important thing here is that independent physician groups are not going to go extinct because of Covid-19. It is true that those smaller groups that have less access to capital may not be able to weather the storm, but it's wrong to assume that this is going to be a free-for-all with everyone buying up independent groups left and right.

Julie Riley: And it's not about it just being a buyer's market. A buyer's market implies this is all about acquisition, and one thing that we've observed even pre-Covid is that practices are looking for partners, not just to sell their practice. In other words, they are looking for support, capital, and resources, but they're not looking to lose compete control of their practice.

Woods: Now, one of the things I know we've been tracking what that interest in partnership actually looks like. So I'm curious: Can you tell us, when it comes to physician practices, what types of partners are at the top and maybe at the bottom of their wish list?

Riley: It depends on the type of practice. Some practices are looking for a platform partner, these are groups that are primarily looking to latch onto a big group that has services, back office support, or, in a Covid-19 area, support in the form of access to personal protective equipment and other things. The other type of group is already a platform, and they're looking for private equity (PE) to help them acquire other practices or to bring them new groups to partner with.

Hostetter: But regardless of which type of group we're talking about, one of the biggest desires is autonomy which is, who is the partner that's going to help me continue to feel like an independent group while still giving me access to all of those things that Julie referenced?

Woods: So if autonomy is the goal with partnership, while of course getting the capital that the group needs, who is at the bottom of their wish list?

Riley: Often, that's hospitals. Especially for the groups that are independent today, because, at this point, they may have already been approached by a hospital and they've already declined.

Woods: I think something that is surprising to folks who don't work with physicians day-in and day-out is the idea that hospitals actually aren't ideal partners. Especially when, as of last year, more physicians are employed in this country than they are independent. Why are hospitals seen as the bad guy?

Riley: I think a lot of physicians don't want to be told how to run their clinical operation, frankly. They view hospital acquisitions as losing total control over all facets of their work, and so they view partners as a way to still have some autonomy but get the support they need.

Hostetter: And what has happened during Covid-19 is a great example of this: What we saw with independent groups during Covid-19 is that when they had volume declines and they needed to reduce the number of physicians and staff, they went to physicians and asked, "Are you willing to take PTO? Are you willing to voluntarily furlough?" So it was a decision that physicians were making on behalf of the groups, whereas a lot of employed groups just told the physicians, "You have to take PTO, or we're going to put you on a furlough." That subtle difference in agency and decision-making speaks volumes.

Woods: I just mentioned that hospitals are kind of seen maybe as the bad guy, and that's interesting because PE I think is increasingly looking like a new alternatives for physicians.

Julie, can you can tell us more about how PE is changing the physician landscape after Covid-19?

Riley: One of the things that we've seen change in PE is their pitch when they approach these groups and then how they work with them afterwards. So maybe a decade ago, they said, "Come to us, and we'll tell you how to do everything the right way." But now, we've heard that they're coming to groups and saying, "You're really good at managing a Medicare Advantage population, or doing this other thing, and we want to help you scale that up to other practices."

So the pitch is very much, "We're going to help you expand your model," versus, "We're going to acquire you and tell you what to do."

Woods: This is important because, at the start of the epidemic, there was this idea put out by the media that a lot of physician groups were going to be desperate for support and acquisition. But what you're saying is that the desire to partner actually goes both ways—it's not just physician looking for partnership, it's also folks like PE coming in and saying, "Hey, we can provide you with the types of services that you want."

To that end, what are some of those attractive features being offered to facilitate that kind of partnership?

Riley: Groups are looking at all the support these groups can offer as a way to mitigate burnout.

Hostetter: I'd add that a lot of the options that independent practices got as part of relief packages were loan-based, so cash is still important to these groups. Especially as groups think about how they'll approach a second wave or a second peak. Operations won't necessarily shut down, so the question is, "What is the cash that I need to remodel my clinics so that I can have more social distancing in the long term? How do I make remote options for my employees feasible long term?"

Telehealth is another great example here. Groups had to stand up telehealth really fast, which didn't always mean picking the most integrated platform to do it. So, now that we're seeing a need for telehealth persist, groups are looking at technology investments that will help them maintain telehealth in the long term, will help them better understand which patients should be coming into the clinic versus being seen virtually, help them manage and track their patients when they can't always see them in person.