Physicians have more options than ever before when it comes to employment as more organizations move to acquire practices. Radio Advisory's Rachel Woods sat down with physician experts Eliza Dailey and Sarah Hostetter to talk about the new era of physician employment, what it means for the rest of the industry, and striking the right balance between autonomy and integration.

Read a lightly edited excerpt from the interview below and download the episode for the full conversation.

Rachel Woods: I'm almost feeling like the physician world or the landscape feels maybe especially unstable right now, right? Burnout is high, discontent is high. We know that retention is incredibly difficult, and we've got all these looming retirements on the horizon. We also know that practices are getting bigger and more corporate owned. Should we expect more of that in 2023?

Eliza Dailey: I think we should, Rae, and I think it's easy to attribute a lot of the things you just talked about, the burnout, the looming retirements, the discontent, to COVID. But I think the reality is that these things have been at play for a while, right?

The pandemic sure didn't help, but I think they stem from deep-rooted structural things about the practice of medicine, who's part of our physician workforce. So, I think we can expect these things to continue in 2023, because they've been at play for a really long time.

Sarah Hostetter: I also think you can't discredit the practice level changes that you alluded to, Rae. It's not just that the workforce has a lot of discontent and they're requiring different things from their employers, but it's also that there are a lot of options for physicians in terms of who they work for.

I feel like I beat this drum every time, but it's no longer a dichotomy between independent practice and hospital employment. There's a huge range of what employers offer and what employers are out there. So, the intersection of a workforce crisis when there are a lot of choices, enables a shift that we've been tracking for a long time, to become a reality.

Woods: And we saw a lot of big deals hit the headlines at the end of last year, but there are some new ones on the horizon or that have happened already in 2023, right?

Hostetter: Yeah. I mean, everyone obviously knows about Amazon One Medical. I feel like you can't open a briefing without something like that about Amazon One Medical, including Advisory Board's. We have been looking a lot at the VillageMD acquisition of Summit Medical Group, because Summit is a longtime, independent practice that is more recently private equity backed, and we had been asking a lot of questions around, "Okay, what is the next stop for a private equity backed practice?" It turns out VillageMD was the next stop for this one.

I think it's really fascinating because Summit brings something different to that deal. VillageMD, who is focused on population health management. Summit brings in specialty care and they bring in urgent care. So, VillageMD is predominantly primary care. So, they're rounding out a portfolio of practices in a way that actually may enable them to advance on some of their population health goals. And Summit is really advanced in terms of how they think about these things in the specialty care space.

Woods: And I don't think we can unwind VillageMD from Walgreens, right?

Hostetter: Right.

Woods: Which is the big retail partnership there. We talked about Amazon, who's obviously a big retailer. The other one is CVS.

Hostetter: Yeah. And when you said Walgreens, that's immediately where my brain went is CVS is reportedly eyeing an acquisition of Oak Street. I think what is fascinating is probably five years ago, if you had said, "Okay, what are CVS and Walgreens going to invest in?" We would've said, "Building out urgent care." That's what they're good at, and that's what they started with is building in-house urgent care. Oak Street is heavily involved in the senior care space and in the Medicare Advantage space. And so, that's a switch, that's a pivot.

It's hard to disentangle CVS from Aetna, right? So, there's obviously a plan angle here, and I know Eliza's been on the pod before talking about the payvider space, but I think what is interesting is how we think about both of these organizations that started in retail are now trying to play in value-based care with some of these acquisitions.

Woods: And by the way, one of the criticisms from five years ago was, no physician wants to work in retail medicine, right? And now we see the strategies of these organizations being the same, if not more advanced, I should say, than some of the classic strategies in healthcare, moving into population health, moving into value-based care, and so on. Remind our audience why physicians are actually choosing these partners over traditional hospital or health system partners.

Dailey: For many of them, they see it as a path to growth with a more like-minded partner. So, if we look at Summit and VillageMD, it actually makes perfect sense that they would team up together. Summit has really been looking for a way to scale their population health model, and VillageMD has really the scale and the resources to allow them to do that and really hitch their wagon to.

It's interesting, because a lot of the physician practices that I work with often talk about this range of suitors is the lesser of two or three evils. So, right, as they're working with health systems, private equity, maybe it's a health plan, another aggregator, there's going to be trade-offs across all of them.

I think they feel like they have to make the most trade-offs when they're working with the health system, but I think they're starting to realize that there's no perfect suitor out there, so they're looking for more attractive ones, which tend to be these large retailers or aggregators who are really committed to similar care models that they've begun to stand up themselves.

Hostetter: But I think in addition, when you talk about the lesser of two evils or three evils, the thing that I hear often from the suitors themselves is, "We are going to maintain autonomy." And whoever says, "We'll maintain clinical autonomy." That's the shtick.

And I think we are realizing, and physicians themselves are realizing that all of these suitors require some sort of trade off in autonomy. So, how do you find one that best aligned with your interests? Again, another theme that we have talked about is that dichotomy between autonomy versus stability. That dichotomy's out the window with this range of practices.

Woods: I want to ask a blunt question. There's obviously more competition around the physician space than we've ever seen. Should everyone respond by jumping on the bandwagon and trying to buy up and employee doctors?

Dailey: The short answer is no. I think when you look at the headlines, it's easy to think that this is a buying spree and that everyone's just trying to build up their physician assets as quickly as possible. But when you dig into the deals, some of which we just talked about, they really do make strategic sense.

It makes sense that Amazon would buy One Medical — really consumer focused, hybrid healthcare platform. We've talked about Village and Summit being a really good partnership. Some of Optum's acquisitions of Kelsey-Seybold and Atrius, those are so in line with their ambition to build a hospital-less IDN.

So, I think it's easy to look at all those deals and feel the pressure to acquire more physician assets yourself, but you should only be doing that if they're the right organization for you and if owning physician care delivery assets makes sense for your strategy.

Hostetter: And you say assets, Eliza, and I think that's an important word to underscore, because when you think about a CVS, a Walgreens, an Amazon, a UnitedHealth Group, they are big for-profit businesses and they think in terms of asset acquisition.

So, I think sometimes we just see language that is different from how we traditionally refer to physicians, in terms of acquiring a physician asset. And so, it's easy to say, "Oh, it's just one more thing that we're globbing on." And that's not to say that some acquisitions aren't out of FOMO or aren't the right decision, but I think especially these big headline deals, when we dig into them, we see principled reasons and principled alignment for where they want the company to go.

Dailey: And a lot of these companies who are doing these acquisitions are actually out of industry, and these are very successful businesses and corporations, so they have really robust due diligence departments. They know a good deal when they see one. And so, I think we're also dealing with a different type of M&A than we've seen before.

Hostetter: The other thing that our colleague, John League, likes to say is that when you talk about an Amazon for example, they are used to trying things and they have the money to throw at trying a new solution, and if it doesn't work, they offload the solution and try something else.

And so, that is a very different mindset than what we are used to in practice acquisition, where it is a lifetime marriage versus going out on a series of dates and figuring out if it works out, and if it doesn't — not proposing. Is that a terrible analogy?

Woods: No, I want to continue the marriage analogy, because I actually think it makes sense. You're talking about how acquisition or aggregation isn't the end of the journey. When you are at the altar, that's not the end of your journey, it's the beginning — it's the beginning to a larger strategy.

Aggregating physicians is not a default strategy, it is the means to something that is larger. And Eliza did such a good job of articulating very specific and a very strong purpose that these third-parties are holding sacred. As you're researching everything that's happening in the physician aggregation space, I wonder if you can put a finer point on what success actually looks like?

Hostetter: Yeah. As we've started to dig into some of the acquisitions and the archetypes within some of these larger organizations that are multifaceted and have multiple types of entities within them, we think the key thing or the determining factor is going to be how well they integrate these pieces together.

And that's not a new question, right, Rae? You and I started studying physicians how long ago? And we were talking about integration and helping employed medical groups integrate their physicians better, and it has always been the secret sauce is, can you integrate or not? It's just gotten a lot harder.