Medical Homes Risk Becoming "HMO, the Sequel"

There’s a great deal of planning and testing of new models of care and delivery to respond to healthcare’s hyperinflation. The two primary models areMedical Homes (focused on primary care) and Accountable Care Organizations (ACOs focus on health systems and larger groups). The common concern is that they become the sequel to HMOs where misaligned incentives undermine their effectiveness. An exciting new Medical Home model is rapidly expanding that avoids the dreaded “gatekeeper” that was the undoing of HMOs.

While ACOs are still in the planning stages, Medical Home models have been put into practice. The majority of these are referred to as Patient Centered Medical Homes (PCMH). Generally, the results from PCMH pilots have been positive. However, the model that has had the most dramatic results are referred to as Direct Primary Care Medical Homes (D-PCMH or DPC for short). For example, Qliance has shared that their DPC model has shown that not only can they reduce premiums by 20-40% when combining DPC with a high deductible wrap around policy, they can have a huge positive effect on downstream costs. With a panel of patients that is representative of the population as a whole, they’ve shown they can decrease the most expensive facets of healthcare 40-80%.

Despite the success of PCMH and D-PCMH models, there’s a valid concern that these models will simply be a repeat of the failures of HMO models of the past. Further, there’s the concern that simply layering additional payments for primary care coordination on top of a deeply flawed reimbursement model won’t have the desired effect. As one of the DPC pioneers stated to me, “they are putting wings on cars and calling them airplanes.” By removing the encumbrance of the 40% “insurance bureaucracy tax” DPC models have shown to dramatically bend the healthcare cost curve. The proponents of DPC models ask the simple question, “if you don’t pull out your auto insurance card for a car tune-up, why would you do the equivalent for healthcare unless you like Explanation of Benefits forms and paying a 40% premium?”

Since DPC models are showing significantly better results than PCMH models (which still should receive credit for their positive results over status quo), I put this “HMO, the Sequel” concern to three pioneers in the DPC arena — Drs Rushika Fernandopulle, Garrison Bliss and Brian Forrest. The responses below are a composite of their answers.

Gatekeeper problems

In the old capitated HMO model the physician was on the hook for any of the insurance company’s money that was spent.  Sort of like the more modern version ACOs with shared savings which is where you have to worry about the gatekeeper problem. In a DPC model, the primary care physician will not get one dime more or one dime less based on any wrap around utilization. However, they will be financially rewarded and incented directly by DPC practices for meeting certain quality benchmarks such as the percentage of patients with controlled blood pressure.  There will be no incentive or disincentive for primary care docs to refer or not refer for services- they will just do what they think is appropriate for the patient- but it will not affect their bottom line like it did with HMO capitation back in the 80s.

The most critical element is that the DPC practitioner does not work for the insurance company.  They can be partners in providing great healthcare, but can’t be owned by them (nothing personal as they say).  The DPC practitioner is employed by the patient – regardless of who pays that patient’s bill (personally, insurance company, employer, government, uncle Jack, etc).  Patient agreements are signed by the patient and are portable if the individual loses their job or insurance.  The problem with the HMO design was that the primary care physician was a tool of the insurance company, even so far as to be designated as a “gatekeeper” (meaning protector of the money, not protector of the patient).  This was a conflict of interest that for all intents and purposes brought down the HMO as an acceptable care vehicle for people who could afford to do anything else.

The DPC practices have no interest in being, in their words, the puppets of an insurance industry, or a government or a business.  However, they offer a unique service that aligns powerfully with the interests of anyone who is actually paying the medical care costs (read self-insured employer, health insurance company, union, government, etc).  Although data suggests that DPC models drastically reduce unnecessary utilization of the most expensive parts of health care, this is not because we have policies in place that limit our providers from using those services.  They don’t have ANY such rules or guidelines.  As appropriate, providers can refer any patient for an MRI, CT, ER visit, specialist visit, hospitalization or surgery.  The way DPC practitioners describe is that the difference between a DPC practice and everyone else on the medical horizon is that they have created a world in which they CAN’T increase or decrease their income by doing so.  They have removed the existing American health care incentive field from their providers – and the results are, well, scary great both in terms of patient satisfaction and cost of care.

As DPC leaders often state, “we are a million miles away from the HMO gatekeepers.” They go on to describe how providers are free to do whatever benefits the patients and is medically reasonable.  Bonuses as they evolve will be only for improved patient satisfaction and for quality as measured in their systems.  But I hear the skeptics saying: “What about the patients who want the most expensive care and drive up utilization because their doctors are afraid to say no to them?”  The experience from DPC pioneers has been clear.  If your doctor has the time to tell you the pros and cons of scanning, newly minted high cost drugs, expensive new surgeries and specialists with a basket of invasive procedures – a lot fewer of the patients will choose these options.  The way they describe it is as follows: “patients are herded into these corrals by providers with all kinds of adverse incentives to do so (most primary care providers are now loss leaders in big specialty clinics and hospitals).  Our ability to tell the truth and spend the time with our patients is solely a function of being employed by our patients, not their insurance company, a big hospital or a large multispecialty clinic.  We market our integrity with each membership.  Our patients (and our providers) know that we work for them and only for them – and we have the time to do the job right.  Every one of our physicians would rather spend a few more minutes than dump a patient off to a specialist when no specialist is required.”

Clause in Health Reform Driving Spike in DPC Interest Amongst Smart Health Plans

One of the least noticed part of the federal health reform is Senate Language  – Section 1301 (a)(3) of the Affordable Care Act –  Treatment of Qualified Direct Primary Care Medical Home Plans. It allows the DPC models (though they are non-insurance) to be coupled with a high deductible wrap around policy in the Insurance Exchanges.

Having written extensively about DPC models, it has been striking to see a huge uptick in the last two months from health plans and entrepreneurs positioning for the sea change they expect. This is a great example of The Rise of Nimble Medicine where disruptive innovation is alive and well in healthcare. Plans have come to realization that one of the ways they can compete in the exchanges is on price. Since a DPC model combined with a high deductible policy can save 20-40% off of premiums, they’ll have a clear advantage over a traditional health plan.

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