Designing a Statewide Primary Care System
“Simply spending more money on the existing fragmented system will, at best, produce a larger, more expensive fragmented system. … States will need to develop comprehensive plans that define what a high-functioning primary care group looks like, how to help existing groups evolve toward that model, and how to build enough of these organizations to meet their residents’ primary care needs.” Rethinking Primary Care Investment Strategy
The purpose of Key Lever 5 is to design a statewide network of high-functioning primary care organizations (PCOs) that meet the needs of the state population (see Key Lever 2), provide them with a complete spectrum of care and governance principles that protect them from potentially conflicting objectives of the organizations that provide the necessary network of services, whether specialty and acute care, administrative and technical services or financial support.
Introduction
Primary care in most states is underfunded, and the symptoms are visible. The number of practicing primary care physicians is declining, hospitals are acquiring independent practices at a steady pace, and residents increasingly cannot book appointments or secure a regular source of care. Addressing this requires strengthening existing primary care organizations (PCOs) and, in many cases, building new ones, particularly in rural and underserved urban areas where none currently operate. Even a complete network of PCOs cannot alone form a comprehensive primary care delivery system. Outside partners, some already active within the state, will be needed to fill remaining gaps in clinical coverage, infrastructure, and financial support. Selecting those partners well is one of the most consequential decisions a state will make.
In this article, “statewide primary care network” means the statewide configuration of state-qualified PCOs and their necessary clinical, technical, and financial partners, does not mean common ownership or central control.
To make it easier to visualize the proposed solutions and the skills required to deliver them, some readers may wish to substitute the term “Taskforce” for “Key Lever”. Each taskforce will require a mix of disciplines, perspectives, and experience to carry out its mission, and staffing of Key Levers may overlap.
Key Lever 5’s work is to answer where the state needs primary care capability, how much of it, what organizations should be built or strengthened to deliver it, and what relationships those organizations should have with outside parties. This article assumes the reader already understands the existing regulatory and organizational landscape.
High-functioning Primary Care Organizations
High-functioning primary care organizations are the building blocks of the statewide primary care system. The National Academies of Sciences, Engineering, and Medicine define high-quality primary care as “the provision of whole-person, integrated, accessible, and equitable health care by interprofessional teams who are accountable for addressing the majority of an individual’s health and wellness needs across settings and through sustained relationships with patients, families, and communities.” Any of the following organizational forms can qualify under this definition, provided it meets the conditions described below: primary care only practices, multispecialty group practices, federally qualified health centers (FQHCs), accountable care organizations (ACOs), and hospital-based integrated systems.
To participate in the state’s primary care system, a primary care organization must satisfy two conditions, both of which must be met to be designated as a state qualified PCO.
- It must be operational as a full-spectrum primary care organization, meaning it can provide or arrange the full range of primary care services for its patient population, either directly within its own walls or through formal arrangements with outside partners. Provide-or-arrange is the standard drawn from the health-maintenance and community health center traditions, and it does not require the PCO to deliver every service in-house. It requires that a patient’s needs across the primary care spectrum can be routed and met through the PCO’s existing arrangements.
- It must be able to manage financial risk under value-based payment arrangements, either directly or through a sponsor. A sponsor may be a parent organization that owns or corporately controls the PCO (a hospital system, an FQHC network, or a larger multi-specialty group) or a contractual sponsor through which the PCO participates in a risk arrangement (an ACO, a network platform organization, or a payer-direct arrangement). Both routes to risk-bearing are legitimate; small and independent PCOs will typically rely on contractual sponsors rather than build the risk infrastructure themselves.
- It must meet minimum quality of care standards as required to meet the state’s healthcare goals and objectives in addition to any existing state, federal and payer standards.
Existing PCOs should be categorized against these minimum requirements, gaps are identified, and the buildout plan specifies which condition needs to be closed in each area.
Whole-Person Care and Social Determinants of Health: The National Academies definition of high-quality primary care explicitly encompasses whole-person care, which includes screening for and responding to social determinants of health such as housing instability, food insecurity, and transportation barriers, as well as integrating behavioral health services into the primary care setting. Whether and to what extent a state chooses to include these services will depend on available funding and state-specific goals. What is important to recognize at the design stage is that each additional capability has concrete implications: co-located behavioral health and SDOH services require additional staffing, dedicated physical space, compatible information systems, and a larger operating budget. A PCO designed to deliver whole-person care in the fullest sense will be a larger and more expensive organization than one focused on traditional primary care services alone. Key Lever 5 should account for range when specifying system requirements.
Primary Care Physician Productivity
Primary care physicians practicing under fee-for-service arrangements spend, by some estimates, as much time on administrative work as they spend in direct patient care. This is a system design problem that requires system design solutions.
Team-based Care: Physicians operating with adequate support staff – medical assistants, care coordinators, behavioral health specialists, and clinical pharmacists – can concentrate on the work that requires their specific training, i.e. practice at the top of their licenses.
Payment model reform can reinforce these gains. A capitated monthly payment eliminates the billing transaction costs embedded in fee-for-service: the coding, the claim submission, the denial management, the appeals.
Administrative Burden: Massachusetts has identified a set of administrative changes that would directly improve physician productivity: simplifying billing structures, reducing prior authorization requirements, centralizing credentialing, limiting quality measure reporting to high-value measures, and automating other administrative processes.
AI tools can meaningfully reduce the clerical burden on physicians and support staff: recording and documenting clinical encounters, managing administrative functions such as prescription processing, appointment scheduling, and referrals, and providing clinical decision support at the point of care. AI can reduce the administrative load substantially, and clinical decision support can improve the quality and efficiency of encounters, but the extent of AI-attributable productivity gains remains to be seen.
Possible State Support: Because FQHCs and other community-based PCOs operate on thin margins that contribute to chronic staffing shortages, they may not be able to finance the most complete and up-to-date version of modern IT infrastructure. The productivity gains described above may therefore not be accessible to them without outside support. State support of a state-approved information system might solve two problems at once: physician productivity and care coordination.
Partnerships
Unless it is a fully integrated health system, no PCO operates alone, and even integrated systems are likely to rely on outside organizations for IT and certain other services. Clinical and infrastructure partners enable the PCO to meet the first condition described under Conditions of Participation, the operational condition: specialty consultation, behavioral health integration, pharmacy support, complex care management, hospital and post-acute coordination, and the data, analytics, contracting, and referral-management infrastructure that most small practices cannot supply alone. Parent organizations, owners and sponsors may enable stand-alone PCOs to meet the second condition, the ability to manage financial risk under value-based payment arrangements.
Outside partners bring their own institutional priorities. Hospitals tend to optimize admissions and facility revenue. Network platform organizations optimize for participating-practice retention and growth of assets under management. EHR and technology vendors optimize contract renewal and platform lock-in. Federal programs optimize for the goals of the program sponsor, which are not always identical to the goals of a state building a primary care system. None of these priorities are necessarily illegitimate nor the same as the primary care mission. And absent explicit safeguards, mission drift may cause PCOs’ and their partners’ goals to become misaligned over time.
To guard against misalignment, the PCO must have formal agreements, integrated data flows, and accountability mechanisms that keep the primary care physician at the center of the patient’s care regardless of where that care is delivered. Contractual terms must protect the PCO’s patient data. Governance rights must be structured to prevent the outside partner from acquiring, over time, effective control over the PCO’s clinical decisions and commitments to its defined community.
Not all outside partners are equally aligned with the community purpose a state is trying to protect. Key Lever 5 recommends a preference hierarchy when evaluating candidates, weighing mission alignment, ownership structure, and existing relationships against capability and cost. In-state nonprofit organizations already operating within the state, organized as nonprofits, and demonstrably serving the primary care mission represent the lowest governance risk and the strongest community accountability; existing relationships that are working satisfactorily should be preserved and built upon before seeking outside alternatives. Out-of-state nonprofits and public benefit corporations are the next tier, with the qualification that public benefit corporation status carries a legal obligation to balance financial and public interest objectives but does not eliminate profit motivation and should not be treated as equivalent to nonprofit status. Privately held and publicly traded for-profit organizations without public benefit restrictions warrant the most scrutiny, the most explicit contractual protections for data ownership and organizational autonomy, and the clearest exit provisions; their inclusion should be treated as a practical concession rather than a preference.
Statewide Primary Care System Design
The state’s role differs by circumstance. In well-served markets, organizations already exist, and the state’s role is primarily to set standards and guardrails for what exists. In rural communities, urban shortage areas, and places in between, the state faces a different challenge: it must underwrite the creation of organizations the market will not build on its own. When the state is the underwriter, it must specify what it is building and for whom.
Key Lever 5 has two related mandates. In communities where a viable PCO already exists but its capacity or performance falls short of community need, the mandate is to strengthen and expand. A five-physician practice serving a community that needs ten must be staffed up, and often housed, financed, and re-equipped along the way. In communities where no viable PCO exists, the mandate is to build one where none currently stands. Site, staff, capital, and infrastructure must all be assembled. These are different jobs, calling for different tools and different partners, and the state’s role in each is correspondingly different.
The concrete output of Key Lever 5 is a statewide capacity analysis, done area by area, that quantifies the primary care services needed in each area to reach both a maintenance level of service (sufficient to hold ground against population growth and demographic change) and an aspirational level (sufficient to meet the more demanding healthcare needs defined by Key Lever 1). The designation of service areas is a public health function; the state’s public health experts know the geography and the population better than any outside taskforce could. Key Lever 5 provides the methodology and the categories of service to be quantified; the state operationalizes it. The resulting analysis is best expressed as an interactive visualization that surfaces interrelationships between adjacent areas that a spreadsheet would obscure. Adjacent areas often share needs that lend themselves to hub-and-spoke or shared-service arrangements, and a visualization surfaces those opportunities.
Renting appropriate space and financing leasehold improvements will in most cases be faster and more cost-effective than new construction and preserve the flexibility to adjust as community needs evolve. Working capital needs, both for expanding existing PCOs and for standing up new ones, will exceed what leasehold financing alone can support.
PCO Governance
A PCO should feature a governing body that consists of primary care physicians and members of the community it serves in roughly equal numbers together with safeguards that protect each PCO from mission drift and conflicting objectives from non-primary care partners and sponsors. The state oversight organization should also be represented. For consolidated or multi-site PCOs, community representation should reflect the full range of communities served, with formal accountability mechanisms that include rights to local performance review, input on access and service mix, and written response to concerns about major service changes.
The state’s primary care system depends on PCOs whose internal governance is oriented toward the primary care mission rather than toward the priorities of any single owner, investor, or sponsor. Physician-led and independent groups have consistently produced better outcomes at lower cost than hospital-owned or investor-owned practices with comparable patient populations. [i] [ii]
Where a PCO has a parent, the parent’s authority must be balanced by explicit protections for the primary care physicians’ voice in decisions affecting patient care, panel size, staffing, and referral patterns. Where a PCO is contractually sponsored, the same protections apply through contractual rather than corporate mechanisms.
The state’s role is to establish minimum governance standards that make either structure workable, without prescribing a single ownership model, and to ensure that changes in ownership, management, or control that would transfer decision-making authority away from primary care are surfaced and evaluated against the qualification standard. Material changes in ownership, governance, or organizational control should trigger formal review and, where warranted, requalification against the standards that apply to new applicants.
Key Lever 3 establishes the statewide governance framework within which all PCOs operate. The governance considerations addressed here are specific to the design and qualification of individual PCOs and to the consolidation proposals that will inevitably arise as the system develops. Consolidation of many kinds should be encouraged. Integrated service organizations can deliver more coordinated, cost-effective care than fragmented independent practices. The caution is that consolidation, whether among PCOs or between a PCO and a larger organization, should preserve an appropriate level of autonomy for primary care physicians and the communities they serve. States should establish a review process that evaluates any proposed consolidation against both the statewide governance framework of Key Lever 3 and the specific qualification standards that each participating PCO is required to meet.
Horizontal Consolidation
When two or more PCOs combine, the resulting organization should demonstrate that it continues to meet the governance conditions under which each original PCO qualified. Consolidation can concentrate control in ways that nominally satisfy governance requirements while undermining them in practice, particularly when constituent practices differ significantly in size, resources, or geography. The following questions should guide the state’s review of any proposed horizontal consolidation:
- Who owns the combined PCO, and are there ownership interests that could conflict with its primary care mission?
- Do primary care clinicians retain effective control of the governing board?
- Is community representation sufficient, and are constituent practices fairly represented regardless of size or geography?
- Can larger practices or practice groups dominate geographically dispersed PCOs in board composition or resource allocation?
- Is resource allocation governed by the needs of the population served and the state’s identified primary care needs, rather than by the relative size or influence of constituent practices?
- Can changes in ownership, board composition, voting rights, or organizational structure undermine the governance requirements under which the PCO originally qualified?
State reviewers should satisfy themselves that these criteria are met in substance as well as form.
Vertical Consolidation
When a PCO becomes part of a larger organization, the state should not assume that size or integration is the problem. Larger organizations may provide capital, infrastructure, contracting capacity, data systems, and support services that primary care organizations need. The governance question is whether the PCO retains enough protected authority to practice according to the standards of high-functioning primary care. State review should therefore focus on clinical governance, primary care physician authority, funds flow, performance reporting, community accountability, and safeguards against subordination to broader enterprise objectives.
- Does primary care have a distinct organizational home within the larger entity, with its own governing body and fiduciary responsibility to the primary care mission?
- Who controls the primary care budget, and can funds intended for primary care be redirected to the priorities of the parent organization?
- Who sets primary care operating priorities, including decisions on access, team staffing, care management, behavioral health integration, and continuous quality improvement?
- How are primary care physicians and teams compensated, and do those incentives reward access, continuity, prevention, and chronic care management, or do they reward visit volume and generate downstream utilization?
- Does the structure preserve clinical coordination with outside services without creating corporate subordination of the primary care mission?
State reviewers should satisfy themselves that these criteria are met in substance and not merely in form.
Key Lever 5 in Perspective
Key Lever 5 is the design hub of the statewide primary care development effort. It translates the goals and objectives of Key Lever 1, the needs assessment of Key Lever 2, the governance principles of Key Lever 3, and the workforce capacity of Key Lever 4 into a concrete, area-by-area specification of what the statewide primary care system or network will look like and what it will take to build it.
Key Lever 5’s output informs the four Key Levers that follow. Key Lever 6 draws on the work of all preceding Key Levers, including any data infrastructure requirements that Key Lever 8 identifies, to develop an infrastructure plan and the capital strategy to support it. Key Lever 7 works in parallel with Key Lever 5, designing a payment architecture broad enough to accommodate the full spectrum of PCO types, and uses Key Lever 5’s statewide primary care system design to verify that its models work for the specific mix of organizations, geographies, and populations the system will serve. Key Lever 8 develops the data and reporting architecture in coordination with Key Lever 5, so that measurement systems and delivery systems are compatible and mutually reinforcing. Key Lever 9 closes the loop, translating performance data into continuous quality improvement at the practice level.
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[i] Value-Based Payment and Vanishing Small Independent Practices, JAMA, September 2024
[ii] Private Equity and Competition in Physician Practice Markets, American Antitrust Institute, 2023