A blueprint for high-volume, high-quality lung cancer screening that is detecting cancer earlier—and helping to save lives
John Woolley, an investor with executive experience at Oak Street Health, took over as president and CEO of the Hatfield Medical Group in Phoenix in July 2019. Woolley says value-based care requires scale, so he has an ambitious plan to increase the number of Hatfield clinics from five to 50 over the next five years.
This transcript has been edited for clarity and length.
You are president and CEO of Hatfield Medical Group. Is this a private equity group that purchased the organization? What’s going on in terms of the business arrangement? You’re also a partner in Woolley Capital Partners.
We are backed only by private individuals, so we don’t have any institutional capital. I met David Hatfield, and I saw what was going on at Hatfield Medical Group—which was incredible patient outcomes—and I said we have got to scale this up, starting in the Phoenix market, focused on adults with Medicare. So, we’ve raised money, again, all from private individuals.
Currently we have five clinics, and we want to get to 50 clinics within five years.
That requires a lot of capital. Can you talk about how much capital is required to scale up like that?
Part of the beauty of Hatfield Medical Group is that they live in a value-based world and are performing very, very well in their contracts. In fact, they are really outperforming almost all of their contracts. So, that’s really what’s going to help.
In addition to the capital that we’ve raised, that’s really what’s going to help fund the growth that we are looking to build. And the beauty of it is, as we grow, every new patient that we find is contribution-positive and will help fund future growth for additional patients.
Meaning that they contribute to covering the overhead of the whole practice. So as we add, for instance, a new patient who is enrolled in Medicare Advantage—or even traditional Medicare—there’s profitability with each one of those patients.
I see you have Oak Street in your background. Is Hatfield doing things similar to Oak Street? What are the contrasts between what Hatfield is doing and Oak Street?
I did work at Oak Street. I have a tremendous respect for Oak Street and had a marvelous experience there. I left there to go work briefly in the aviation world before meeting David Hatfield and getting back into health care. In terms of what we do, we’re both aligned with trying to get incredible patient outcomes. We want to drive incredible patient outcomes, create a win–win with patients, payers, and providers, and recoup some of the savings that we generate, just like Oak Street Health.
The differences are, one, we are actively looking to acquire other practices. At least when I was at Oak Street, it was purely organic growth, which has its benefits and costs. Two, unlike Oak Street Health, we actually believe that Medicaid is going to be important going forward. We’re really focused on Medicare and Medicare Advantage, but we’re going to continue to see Medicaid patients, and we think that’s actually, in the long run, going to be an important part of what we do. There’s a huge need in that population for better health care, particularly in the Phoenix market.
Are you going to stick to Arizona, or are you working throughout the Southwest?
Currently, Phoenix is the fifth largest MSA in the country. There’s lots of room for growth. We think there’s potential for 50 clinics just in the Phoenix MSA. I think we would look first at concentric circles around Phoenix as we think about other metropolitan markets in the Southwest and the West, and from there, we’d like to expand nationwide.
Are you hemmed in by Banner in Phoenix?
They certainly are the main player in Phoenix. We don’t necessarily look at them as competition but as a partner. We partner with them on the hospital side; we actually partner with them on the insurance side.
What’s unique about Phoenix is that there’s still quite a lot of independent primary care. You haven’t seen this dynamic where hospital systems have purchased primary care practices over the last 10 years. So Banner has a Banner Medical Group, and I think they look at us and we look at them as, hey, let’s be partners in driving better outcomes for patients.
My reading is that in the large group market, Blue Cross Blue Shield of Arizona is a dominant player, but in the small group market, United Health is, and in the individual market, Centene has about 50% of the market. I assume those figures are close to accurate. Does that present problems? It seems like, depending on what part of the market you’re in, you’re going to have multiple contracts and many different players that you’ll be working with.
One unique thing about Hatfield Medical Group is the fact that we are totally payer agnostic. We take almost every health plan in the state—on the individual side, the group side, the government-product side. And part of the secret sauce we’ve developed is that we’ve decided that if we’re going to be value-based, we have to be value-based for everybody. We can’t do something different for a Humana Medicare Advantage patient than we do for a UnitedHealthcare patient or a Medicaid patient. We have to treat people the same. Otherwise, it’s just too difficult to manage. And that’s really going to be our construct going forward: Let’s get every one of our contracts to a value-based status, and we’re well on the way to doing that. That way, we can just work with everybody and try to provide great health care to as many people in the market that we can.
What percentage of your revenue now is in value-based contracts?
It’s well north of 50%.
Are you growing because there’s a dynamic that to do value-based care, you need scale?
Absolutely. I mentioned that we’re looking at acquiring practices, and we’ve had a tremendous amount of interest from providers that want to do value-based care. They get it. They just don’t have the resources and the scale to be able to do it. So, right now, we’re at a scale where, yes, we can do what we’re doing and provide great patient outcomes and strong MLR [medical-loss ratio], and really good metrics, and an incredible patient experience. As we get bigger, it just increases our ability to do that.
So, value-based care requires scale. As you know, there’s a critique that consolidation is ultimately bad for the health care system because consolidation means price increases. Should people in Phoenix be worried about you growing because consolidation can mean bigger provider groups, that you’ll be in a stronger negotiation position, and prices will go up?
I think in a value-based context, provider consolidation, as long as the providers are aligned, is a good thing for consumers. It provides the scale, it provides more resources, and ultimately, provides the ability to lower cost for payers, because as you get bigger so does your ability to drive down your medical-loss ratio, to do the multitude of things that are necessary to help patients take control of their own health care, [and to implement] the data and information systems that are necessary for that. Bigger providers means better ability to save money. And ultimately, that’s in the patients’ interest.
You’ve talked about each patient being a contributor, that you’re able to realize margin. Paint a picture of a couple concrete examples of what you’re doing that achieve these good outcomes. And I guess you’re also reducing spending?
A great example of this was we invested in purchasing diabetic retinal cameras. We didn’t get a grant for that; the payers didn’t pay for it. We went out and purchased those, knowing that we were not going to get reimbursed early on for that. Well, today, we’re at five stars in terms of our diabetic retina screening HEDIS metric. That means that in a number of our contracts, we get paid for hitting five stars. The health plans, they want to hit five stars because it means a lot in terms of their reimbursement from the federal government. They care a lot about it, so they pass that on to us because we’re providing great screening care.
Another really good example is mammograms. October was National Breast Cancer Awareness month. We did a huge push to our patients. We did a number of events with a mobile mammogram at our offices. And during just that month alone, we were able to help provide 566 mammograms. That doesn’t seem like a lot, but every single one of those was a lot of effort to get somebody there, get them the right care. And again, we go back to our contract and we get paid for our performance on the mammogram quality metric.
A final one is about access to care. One of the challenges that we see throughout the country is overutilization of emergency rooms, and how do we deal with the fact that people could be treated in a better environment—for them and for the system? We strongly believe the answer to that is access to care. So, what do we do to improve access to care? We provide transportation for patients who need it. We don’t double-book appointments, and we guarantee same day or next-day appointments. So if you’re sick and you are our patient, we’re going to get you in.
For patients who have multiple chronic conditions, we’re proactively reaching out to them, at least on a monthly basis, but many times more frequently. So, if they get sick, they have a care manager who is part of our care team, who is not working for the payer. Payer care managers are great, but this is someone who is talking every day with their provider, so [patients]can call and say, “Hey, I’m not feeling well, can you get me in?” Yes, we’re going to get you in.
All of those things have the impact of reducing our admissions per thousand and our ED visits per thousand, which then translates into lower cost, which, in several of our contracts, we share in some of the savings that we then create through that.
Do you have any line of SDOH [social determinants of health] efforts going? Transportation is kind of SDOH. Is there anything else in that realm?
Right now, our focus has been transportation and chronic care management. We will soon be adding behavioral health coordinators as well, because we know that’s a big way to drive outcomes in all of our patient populations, especially in Medicare and Medicaid. We leverage the payers’ tools; again, we like payers. Unlike the traditional adversarial physician–payer relationship, we view payers as our partners—let’s work together to create great care. So, if they have a specific home assessment, we will work to do that. We do telephonic outreach to patients. You talked about scale.
One of the things that we’d like to add as we scale is in-home visits, because we believe ... you’re increasing access to care, essentially.
We partner with a number of community-based organizations: Meals on Wheels, social service agencies—we proactively connect patients with all of those things because, to your point, social determinants of health is a huge part of driving better outcomes, better costs.
Medicaid is a fraught issue in Arizona. How do you see the Medicaid situation in Arizona and how do you view work requirements and time-limited coverage?
I’m not going to comment on the politics of that. I think it’s important that we provide great health care to all people.
One way or another, people will need health care, and someone is going to pay for it, whether it’s taxpayers, or companies, or a combination.
I think it kind of goes back to our idea of being payer agnostic. If the voters in Arizona decide to put in work-related rules, then we’re going to have to continue pushing on our value-based care with group insurance.
I think there are some tailwinds in Medicaid, in addition to headwinds, in that Medicaid is also really pushing value-based contracts. And, you know, in our current Medicaid value-based contract—we’re performing. And we know it’s possible. It’s different than Medicare Advantage because it’s just a different population. But we know we can perform, so as Medicaid in Arizona moves toward value-based care, we think we’re well positioned to take advantage of that and provide value to Medicaid and to patients.
You’re not an MD, but you’re running this medical group. Have you had a problem being perceived as “the business guy” who is messing around with health care, and that you don’t know what you’re doing and you’re just profit-driven?
What’s great about Hatfield Medical Group is we have a culture that’s very focused on patient outcomes. And then, patient outcomes align with our business model. I haven’t seen any problem with that. Part of the beauty of what we’re doing is we’re actually creating a better system for providers and for care teams. It is really important to create a sustainable organization that can drive value over the long haul. And, by the way, that’s part of the reason to date we’ve only taken private individual money, is because we’re not thinking about this as, “Hey, let’s grow this and sell it.” We’re thinking about this as, “Let’s create the best primary care practice in the entire country.”
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