Written by a former healthcare investment banker, who raised over $2 billion for voluntary hospitals, HMOs and related organizations, and the author of Rethinking Primary Care Investment Strategy and Nine Key Levers: A Framework for Implementing States’ Primary Care Investment Strategies.

Any state that wants to invest in primary care should consider establishing a Primary Care Investment Fund as a dedicated capital vehicle that converts a defined share of the state’s growing primary care payment stream, together with public and private financing funds already used elsewhere in health care, into durable primary care infrastructure. This is a theoretical proposition, not an implementation proposition. Its logic rests on the clearest available precedent: the financing architecture hospitals have used for decades to build their capital stock.

Introduction: Primary Care Needs Capital

States and the healthcare community have adopted the convention of referring to increased primary care spending as primary care investment. But most of what is called investment is simply increased reimbursement. Reimbursement alone does not finance the facilities, equipment, information systems, organizational capacity, and shared infrastructure needed to expand and modernize primary care. Hospitals have long financed those capital needs through tax-exempt borrowing, public credit support, and reimbursement that recognizes capital costs. Primary care has no comparable financing architecture. The resulting imbalance is striking.  More than 108 million people live in designated primary care shortage areas[i], while hospitals receive most tax-exempt health care bond financing.

The proposed Fund would combine proven public financing tools to meet two distinct infrastructure requirements of a high-functioning statewide primary care system: practice-level assets and shared statewide infrastructure. No state appears to have assembled financing for both within a single primary care capital structure, although the underlying tools are already in use. The policy choice is not whether to invent a new financing method, but whether to adapt proven methods to build the assets and institutions that reimbursement alone cannot create.

Rationale: The Hospital Playbook

States like to call increased primary care spending an “investment” in primary care. But true investment involves spending to build or acquire capital assets, often referred to as “infrastructure”. However, to the best of our knowledge not one of the states that has announced plans to increase primary care spending has included a provision for capital expenditures.  Businesses, especially start-ups, need capital to grow.  The same is true of primary care Primary Care Organizations (PCOs).

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