What If Children’s Hospitals Leaned In—Not Out—of Primary Care? Third part in this series...

Part 1: Who will lead?

Part 2: Private Equity

A Relationship Once Strong—Now Fractured

Thirty years ago, children’s hospitals and pediatricians were natural partners. Pediatricians rounded in hospitals, trained residents, and worked closely with specialists. Residents were immersed in primary care, seeing firsthand its critical role in children’s health. The relationships were organic, the collaboration seamless.

Today, that connection has frayed. Many children’s hospitals have shifted their focus, expanding urgent care centers, freestanding ERs, and direct-to-consumer telehealth services—often unintentionally competing with the very pediatricians who once formed the backbone of the system.

At the same time, independent primary care practices are struggling—facing rising costs, stagnant reimbursement, and an exodus of residents who no longer see primary care as a sustainable career path. While hospitals have grown financially, primary care has been left behind.

Now, another force is emerging: private equity (PE). Seeing an opportunity in struggling pediatric practices, PE firms are stepping in—buying up clinics, cutting costs, and reshaping care models around short-term financial gain.

The Question: Will Children’s Hospitals Step Up or Stand By?

Hospitals have a choice:

1. Continue on their current path—expanding urgent care, ERs, and telehealth while leaving independent primary care to struggle.

2. Watch as private equity takes over, reshaping pediatric care with profit-driven models.

3. Or lean in—rebuild the partnership with primary care and strengthen the foundation of children’s healthcare.

This isn’t just about competition. It’s about whether we create a fragmented, high-cost, reactive system or a coordinated, sustainable, prevention-focused model.

Understanding the Divide: Why Primary Care Is Struggling

Financial Realities: The Hospital Advantage

Children’s hospitals and independent pediatricians operate on vastly different financial landscapes. Hospitals have access to revenue streams that private practices do not, including:

• Facility fees that make hospital-based outpatient care significantly more expensive than independent pediatric offices.

• The 340B drug pricing program, which allows hospitals to purchase medications at reduced prices, sometimes generating substantial margins.

• Disproportionate Share Hospital (DSH) payments, which support hospitals serving Medicaid and uninsured patients, while primary care offices that see the same populations receive little additional financial help.

• Subsidized physician employment, allowing hospitals to sustain primary care at a loss while making up for it in specialty and inpatient services.

• Recruitment advantages, including loan repayment and signing bonuses, making it harder for independent practices to compete for new pediatricians.

Meanwhile, independent primary care offices face shrinking reimbursement, rising administrative costs, and increasing pressure to compete with hospital-affiliated services.

The Unintended Competition: Urgent Care, ERs, and Telehealth

Hospitals have expanded urgent care centers, freestanding ERs, and telehealth services, often with the intent of improving access. But these expansions, while convenient, have also:

• Diverted patients from pediatricians, reducing continuity of care.

• Increased healthcare costs, as urgent care and ER visits are significantly more expensive than primary care visits.

• Created a training gap, as residents spend more time in hospitals and urgent care settings than in primary care offices.

These changes weren’t necessarily intentional efforts to weaken primary care, but their impact is clear: fewer pediatricians are choosing primary care, and independent practices are finding it harder to stay afloat.

Private Equity’s Growing Role in Primary Care

As primary care struggles, private equity has entered the space, acquiring pediatric practices and restructuring them for profit. PE-backed groups often:

• Prioritize volume-driven care models over relationship-based medicine.

• Implement cost-cutting measures that reduce time spent with patients.

• Flip practices within three to five years, often leaving instability in their wake.

While some PE-backed groups may introduce operational efficiencies, the shift away from pediatrician-owned, relationship-based care raises concerns about the long-term impact on quality and continuity.

The key question is: Will children’s hospitals step in to support primary care, or will they let private equity reshape it?

A Better Path: How Hospitals Can Lean In

Rather than allowing primary care to collapse—or watching PE take over—children’s hospitals have an opportunity to rebuild their partnership with pediatricians.

Strengthen the Primary Care Training Pipeline

• Integrate primary care into hospital training programs, giving residents more exposure.

• Create mentorship opportunities between hospital-based specialists and community pediatricians.

• Offer loan repayment and financial incentives for residents who choose primary care.

Rebuild Collaborative Models Instead of Competing

• Partner with independent practices to coordinate referrals instead of replacing them.

• Co-locate primary care offices within hospital systems to foster collaboration.

• Develop shared telehealth models where pediatricians—not just hospitals—can participate.

Use Hospital Resources to Support, Not Undermine, Primary Care

• Redirect a portion of facility fees, 340B savings, or DSH funds toward strengthening primary care.

• Advocate for better reimbursement models that make primary care financially viable.

• Support team-based care, integrating behavioral health, social work, and specialty services into pediatric offices.

Exploring Clinically Integrated Networks (CINs) as a Path Forward

One way hospitals could support primary care without direct ownership is through Clinically Integrated Networks (CINs). These networks allow hospitals and independent pediatricians to collaborate, share resources, and align care goals while maintaining physician autonomy. Rather than competing with private practices or leaving them vulnerable to PE buyouts, hospitals could explore CINs as a way to strengthen primary care while ensuring long-term financial sustainability.

This isn’t just about helping primary care survive—it’s about creating a more sustainable, effective healthcare system for children.

A Call to Action: Time to Lean In

For decades, children’s hospitals and pediatricians worked side by side to care for children. Over time, that collaboration has weakened—not out of malice, but out of shifting priorities, financial pressures, and system-wide changes.

But now, with private equity entering the picture, hospitals must decide:

• Continue expanding urgent care, telehealth, and ERs while leaving primary care vulnerable.

• Let private equity reshape primary care around profit-driven models.

• Or lean in—invest in primary care, rebuild partnerships, and strengthen the foundation of children’s healthcare.

Hospitals don’t have to choose between financial sustainability and supporting primary care. By reinvesting in primary care, they can help create a system that is both economically viable and patient-centered.

Children’s hospitals have the resources, the influence, and the responsibility to step up. Now is the time to do it.