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Happy Tuesday Hospitalogists!

Today we’re talking about what keeps providers from taking downside risk, the era of physician practice consolidation, and a masterclass from Martin Ventures on healthcare entrepreneurship, gritty operations, and investment strategy.

One more thing on my radar: 25m Health’s hands-on, virtual AI workshop on 3/18. I consider this a can't-miss event on agentic AI in healthcare, with facilitators walking through live AI prompts and exercises to start testing and building AI into critical workflows.

Here’s the registration link

Now let’s dive into today’s edition!

ASK HOSPITALOGY

What do you think keeps providers from taking downside risk?

THE CAPITAL TAKE

Jayesh Srivastava, Chief of Staff

“Many reasons, but here are 3 that come to mind:

1. Requires meaningful practice transformation to shift clinical operations from volume-optimized to value-optimized model
2. #1 requires $$$
3. #1 and #2 also require dedicated focus, which often means needing a partner (i..e, a VBC enabler / aggregator).”

THE POTENTIAL ERRORS TAKE

Anonymous

“I think capital constraints, lack of care management resources, and a fear of losing their shirts on actuarial error.”

THE BLIND RISK TAKE

Anonymous

“I don't think it's fear of risk. It's fear of BLIND risk.

Providers aren’t avoiding downside risk because they don’t believe in value-based care. They avoid it because most downside arrangements ask them to take accountability without giving them control.

A few things consistently hold them back:

• They don’t trust the data. Risk contracts are still settled with lagging, disputed, and often opaque data. If you can’t see performance in near-real time—or reconcile it confidently—downside risk feels like a gamble, not a strategy.
• They don’t control the levers. Providers are asked to manage total cost of care while payors control benefit design, prior auth rules, networks, and drug pricing. You can call it shared risk, but it's really asymmetric risk.
• The infrastructure isn’t there. Most organizations still run VBC on top of fee-for-service workflows. Without actuarial-grade analytics, contract intelligence, and operational alignment, downside risk just magnifies existing dysfunction.
• Past experiences burned them. Many early VBC deals promised upside and delivered surprise losses due to attribution changes, coding shifts, or utilization spikes providers couldn’t influence.

Providers will take downside risk when it stops being a trust exercise and starts being an operational one. When they have timely data, clear accountability, and real control over outcomes, not just responsibility, that’s when downside risk becomes scalable instead of scary.”

Hospitalogy members can join this discussion here. Not a member yet? Apply to join here.

PHYSICIAN PRACTICE MANAGEMENT TRENDS

A recent McGuireWoods podcast episode featuring guest Ezra Simons, a co-founder and partner at Physician Growth Partners, and host Geoff Cockrell, a McGuireWoods partner, offered an interesting perspective on how consolidation dynamics are reshaping physician practice management. 

Some key takeaways:

• The next decade is about “mergers of equals,” not infinite roll-ups. Rising rates broke the old playbook of “buy EBITDA, lever it, repeat.” Platforms without a real organic growth engine (recruiting, service-line expansion, payer strategy) are running out of road, especially when exits to public markets are unattractive.
• Philosophical alignment is now a prerequisite for a successful transaction. Investors are increasingly prioritizing partnerships with entrepreneurial physicians (”builders”) and cultures that already operate around engagement, shared upside, and growth, not just high-producers (”workers”).
• There is a move away from simple production-based compensation toward creative economic incentives that reward physicians for growth, clinic stabilization, and mentoring new providers.
• Some investors are pivoting to sectors where the doctors do not control the flow of business (e.g., SNFs or Med Spas) to de-risk the complexities of provider alignment and retention.

PODCAST HIGHLIGHT

I had an incredible conversation with Charlie Martin and Devin Carty from Martin Ventures on my Claims Denied podcast recently.

Charlie is legitimately one of the godfathers of the for-profit hospital industry (General Care, HCA, HealthTrust, OrNda, Vanguard) and now he's deploying his own capital into 30+ healthcare companies alongside Devin, who served under Charlie at Vanguard and now runs the show as CEO of Martin Ventures.

We got into:

• The real history of Nashville's hospital empire
• Why Martin Ventures bets on VBC + AI
• What the Wellvana-Mercy deal actually looks like under the hood
• Charlie's bold claim that he was profitable on Medicaid in every system he ever ran.

This one's a masterclass in healthcare entrepreneurship, gritty operations, and investment from someone who's been doing it since the 1960s.

Listen to the episode (Apple | Spotify) and learn why Charlie calls himself “The Wartime General” of Healthcare (but I like to think of him as the Bill Parcells).

ON YOUR RADAR

• Event: Healthcare finance is entering a new phase of margin pressure, policy shifts, and unprecedented pricing transparency. Join me, Herd Midkiff, and Kyle Kirkpatrick for an executive briefing breaking down the trends reshaping hospital financial performance, and what leaders should be watching next. 3/27 at 12 PM CT. Register here.
• Resource: In a recent episode of the McKinsey on Healthcare podcast, Kevin Mahoney, CEO of University of Pennsylvania Health System, discussed the vital role academic medical centers play in communities and how they can further improve care and physician experiences. The full podcast episode and an article can be found here.
• Breakdown: Profitability is a key driver of hospital valuation multiples, and data dispersion complicates median-based conclusions. Weaver shares how valuation pros correctly interpret today's FMV data.*

*This read is brought to you by one of my brand partners who help make this newsletter possible!

I would love to know your thoughts!

– Blake

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