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Direct Primary Care: Value Proposition, Scope of Practice and Pricing
This article is a section of a longer paper on Direct Primary Care (DPC) that was introduced in an earlier piece — Health Plan Rorschach Test: Direct Primary Care. The following excerpt from that article briefly explains DPC if it’s a new concept. Click through the previous link for additional context.
Despite its inclusion in Obamacare, Direct Primary Care (DPC, aka Concierge Medicine for the Masses), it’s surprising how few health insurance executives know about DPC. DPC is a model of paying for primary care outside of insurance. The individual or organization paying for healthcare pays a monthly fee (like a gym membership) for all primary care needs. Generally, DPC providers say they can address 80 or more of the top 100 most common diagnoses.
[Contact me via LinkedIn if you’d like a copy of the full seminal study on the Direct Primary Care model – excerpts will be published on Forbes]
Value Proposition, Scope of Practice and Price
The core value proposition DPC leaders describe is the gains from reducing administrative burdens while simultaneously delivering a more proactive model of care that leads to reductions in unnecessary downstream spending. Overall, primary care practices receive less than 5% of total healthcare spending. Buying into DPC results in a doubling of primary care spending. The argument is that by increasing primary care spending to about 10% of total health care costs, they can reduce downstream spending by more than this increment. That is, by helping their patients spend the rest of their healthcare dollar better, and by keeping them out of the expensive parts of the health care system — namely ERs, specialist offices, and hospitals. This isn’t done by the old gatekeeper model. Rather, patients generally have less need for the more expensive facets of healthcare or they choose not to pursue them when fully informed.
One example of how DPC can be more proactive is typically DPC practitioners develop schedules of preventive screening and regular check-ins that they manage. This is in contrast to a typical primary care practice that responds when patients present themselves. In the section entitled “DPC and the Healthcare Delivery System” the details on cost savings and health improvements are provided.
Qliance projected the cost savings to the entire healthcare system if their model was replicated would be $268 billion[i] ($864/person-yr x 310 million people). The breakdown of the monthly costs change was as follows:
- Non-primary care (specialty care, procedures, hospitalizations, etc.) reduced from $290 to $194
- Payer primary care transaction cost of $9 is eliminated
- Primary care costs increase from $31 to $64
The value proposition for the emerging DPC industry as a whole is that if it was scaled nationally, overall healthcare costs could be reduced 20-30%. That is, not just slowing healthcare inflation but reversing it. Qliance has shown they can reduce utilization 40-80% on the most expensive facets of healthcare as demonstrated in the graphic below.
Iora Health has been able to show dramatic decreases in downstream costs for patients in their practices, mainly due to reduced hospitalization, ER rates, and specialty related outpatient costs. An independent academic reviewer looked at claims data and found that patients in a direct primary care practice working with a large union trust in Atlantic City NJ had 25% lower outpatient utilization, 48% less ER visits, and 41% fewer hospital admissions than patients in a matched control group. This translated into a 12.3% net lower total cost of care, even after taking into account the higher primary care costs than in usual practices.
In addition Iora has shown that this sort of practice model can increase productivity — using a subset of the WPSI (Work productivity Short Inventory) survey, patients reported much less absenteeism (losing time from work) as well as presenteeism (being at work but not being as productive as possible) while in the DPC practice.
Saving Patients Money in Their Use of the Healthcare System
Typically, a high percentage of DPC consumers are either uninsured or have high-deductible plans. As a byproduct, they often seek guidance from DPC practitioners to keep their costs low. Often, the DPC provider knows which specialty practices have equal or better quality while offering dramatic savings off of the “retail” price. There are many examples of DPC practices that know high quality specialists such as radiologists who will gladly discount 80% or more for immediate payment and avoidance of the costs of billing and collections. For instance, Qliance immediately pays a top healthcare provider in Seattle $17 for X-ray reviews which is a huge discount over their retail price.
DPC practitioners have the benefit of more time with patients, due to smaller panel sizes, to hear their story and fully discuss the trade-offs of particular screenings, treatments, and procedures. With the smaller panel size, DPC practitioners universally advertise their “unrushed 30-minute appointments” allowing for deeper dialogue with a patient that can be pivotal. For example, many people aren’t aware of the overuse of CT scans that can lead to unnecessary exposure to radiation. One example illustrates this. A DPC physician described how in their previous practice pattern, when seeing a patient with constant migraines one would quickly order a CT scan at considerable cost. However, during the longer conversation enabled by the DPC model, the individual shared how her mother-in-law had recently moved in with her family. Long story short, the physician “prescribed” creating some boundaries, spending time meditating and going for walks as a means of taking a break. The patient followed the advice and the migraines went away. The result: a couple thousand dollars were saved and unnecessary radiation avoided.
Scope of Practice
The table below includes a list of services included in the scope of DPC practices. As there isn’t a financial incentive to rapidly refer care to specialists, the scope of care can be broader than a typical primary care practice (e.g., some DPC practices provide x-rays and EKGs that would generally be referred outside of an insurance-based primary care practice). Similar to Patient-centered Medical Homes, coordination of care distinguishes DPC from most primary care practices. Some of those items may be outside of the scope of the membership fee, however they are generally offered at a modest cost. Following each item listed is whether the service is typically offered in some, most, or all of the dozen plus DPC interviewed for this paper.
|Consultations and personalized coaching for weight loss, smoking cessation, and stress management.||Most|
|Chronic Disease Management for hypertension, diabetes, hyperlipidemia, heart disease, asthma, arthritis, osteoporosis and many other chronic conditions with referrals out to specialists when necessary||All|
|Specialist Care Coordination||All|
|Urgent Care: Same or next-day care for urgent medical issues including x-rays, sprains, strains, fractures, cuts requiring stitches, acute illnesses and more.||Most|
|Hospital Care Coordination||Most|
|Laboratory Tests including Blood glucose (Fingerstick), Hemoglobin/Hemotocrit, HIV Screening test, INR (blood coagulation measurement), Mononucleosis Test, Pregnancy Test, Stool Blood Test (FOBT), Strep Throat Test, Urinalysis||Most|
|Ankle Braces, Forearm Splint, Finger Splint, Thumb Spica Splint, Cast Boot/Surgical Shoe, Walker Boot (short and long), Wrist Brace||Most|
|Skin tag & wart removal||Most|
|Peak Flow Meter||Some|
|Primary care level of treatment and counseling for the following: Infertility, Marital and family counseling, Mental health care, Sexual dysfunction||Some|
|Ultrasound (more complex referred elsewhere)||Some|
Note: Onsite and near-site clinics could be a topic for an entire paper, however near site clinics are addressed because some DPC practices such as Paladina Health also provide near-site clinics.
Onsite workplace clinics have proven to be attractive for some larger employers. The benefits of greater access to primary care and the time savings and convenience for employees have been irresistible. However, one must have a critical mass of employees in one location for it to make economic sense. Consequently, a related phenomenon has been a hybrid of DPC and onsite clinics. Clinics are located near a set of organizations, but not at a worksite — thus, the term “near site clinic.” Iora Health, based in Boston, is one of the pioneers of this model. They have had particular success with unions, such as UNITEHere, which represents casino workers in Atlantic City and Las Vegas, and the Freelancer’s Union that represents freelancers in Brooklyn. Like DPC, near-site clinics avoid the complexity and overhead of insurance.
Near-site clinics also require a critical mass of employees or union members to pencil out. Relative to insurance-based primary care, the economics can be extremely attractive (see Iora Health profile for further detail). Nonetheless, if the employer/union isn’t funding the build out, startup costs easily can run well into six figures. In these cases, DPC can be a more attractive option as the union, for instance, is only paying for those employees who are signed up; they pay on a per member, per month basis rather than being responsible for the full cost of the near -site clinic.
Pricing for Direct Primary Care
Based on our study of DPC practices, typical pricing ranges from $20 with higher per-visit fees to the upper threshold of $100, which typically includes a broader array of services. An employer, union or individual paying the monthly membership fee views the investment in primary care coverage rather than a “fee for service” transaction between patient and provider as prudent.
There is a wide array of pricing and a great deal of experimentation taking place in DPC, as one would expect in an evolving market. The variety of pricing models also reflects the regulatory environment under which DPC practices operate. For example, where there is DPC legislation (Oregon, Utah, Washington), the DPC organization doesn’t have to do gyrations to avoid looking like insurance. For example, some practices charge a nominal per visit fee and bill after the end of the month as a means of avoiding the appearance of being classified as insurance and the accompanying reserve requirements and insurance regulations.
The following are the pricing themes common to all DPC practices studied:
- No insurance thus no deductibles.
- Discounts for an entire family. Commonly, the total family rate is equivalent to twice the rate for an individual.
- Transparent and low prices for any services not covered in the monthly membership.
DPC practices typically recommend that members also obtain a high deductible wraparound policy to cover emergencies and catastrophic events. To date, patients have simply acquired regular high deductible policies not specifically designed to be paired with DPC. In addition, many have arrangements for services the DPC plan doesn’t cover at a substantial discount (e.g., $400 for an MRI where the advertised rate or “rack rate” for that same facility is $4000).
Note: Subsequent to the publication of this paper, a major development for DPC is the availability of a high-deductible wraparound policy which addresses the top obstacle to DPC scaling nationally in the past. I learned of this recently and expect a public pronouncement this Summer. Some DPC providers are creating networks to broaden the scope of their reach.