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The coronavirus pandemic is placing US primary care practices on unstable financial footing: In May, nearly half of independent physician practices said they only had enough cash to last them one month, and 68% of respondents eyeing partnerships with larger systems said financial support was their top reason, according to a McKinsey survey.
We think this financial strain will make it difficult for independent practices to invest in the digital tools needed to sate consumers increasingly turning to digital health options: Only 22% of physicians at small practices said their practice has increased digital care options like telehealth since the beginning of the pandemic.
Primary care firms’ inability to invest in and scale digital options will likely amplify their financial woes as customers jump ship to nimbler competitors that can meet their demands. As of late June, 32% of US adults had tried telehealth — marking meteoric growth in uptake from the 8% who had tried it just six months prior, according to CivicScience’s tracking.
And as of late June, an additional 21% said they planned to use telehealth. Now that coronavirus outbreaks are surging across many US regions, we expect patients to keep turning to the tech at high rates — meaning primary care firms will need to boost the infrastructure needed to connect with their patients virtually.
But this presents somewhat of a catch-22: Cash-strapped providers will need to be able to connect with patients remotely to maintain financial stability, but dwindling revenue from falling in-person visit volume means they likely don’t have the up-front cash needed to deploy an effective digital strategy. So, many will likely wave goodbye to patients who can find practices — or telemedicine providers — that better meet their digital needs.
Pre-pandemic, we thought primary care entrants would have a hard time poaching customers from traditional firms — but those with tech-focused approaches and repositories of funding are in a good position to thrive right now. Newcomers diving into the entrenched, $262 billion primary care market — like One Medical, Carbon Health, and Parsley Health — are facing off against traditional primary care physicians touting established customer bases.
And with the popularization of more convenient options like urgent care, trips to primary care practices have been plummeting in recent years, likely making it even more difficult for lesser-known startups to attract new patients: Visits to primary care providers made by adults under age 65 fell nearly 25% from 2008-2016, per research cited by NPR.
However, the pandemic is inciting a tidal change as nimble startups less encumbered by large patient bases — and pumped full of VC funding — are in a prime position to more quickly meet their customers’ tech demands. For instance, Carbon Health put a cash infusion from May toward expanding its virtual care services across the US, and Medicare-focused Oak Street Health — which announced IPO plans this month — made a pivot to offer its patients telephone visits in April when it was clear that that was its senior patients’ preferred mode of receiving remote care.
We expect traditional primary care businesses to continue to struggle to stay afloat, and that startups will not only be left unscathed, but also reap success amid the pandemic.
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