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Op/Ed: Direct Primary Care – A Future ‘Injection’ of Free Market Forces

Steve Ambrose

Written by Steve Ambrose, Strategy & Engagement Maverick

Best-selling Author Og Mandino once said: “Always seek out the seed of triumph     in every adversity.”  

Published on August 10, 2016 It appears that a small, yet growing number of America’s front line health providers are doing just that. Instead of going gentle into the ‘not-so good night’ of taking on increased risk, greater healthcare bureaucracy and more administration headaches, these medical mavericks have drawn a philosophical line in the sand.

hot-topic-3RELATED STORY
My Answer to Direct Primary Care ‘Evangelists’ ~B. Doherty, ACP,  … The ACP’s Bob Doherty details why the ACP has not endorsed DPCs.

I’m speaking of Direct Primary Care (DPC).  For the uninitiated, DPC is an emerging model where general practitioners elect to disassociate from, and no longer bill services to health payers – including Medicare.  DPC practices average between 600-800 total patients (vs. the national 2,300 patient base average for traditional PCP patient panels).

This return to front line doctoring – ‘sans insurance’ – translates into a cost reduction of up to 40% in staffing and reduced administrative complexity.  EHR software finds itself replaced with lighter applications to track, schedule and bill patients. Practices may also choose to utilize mhealth/telehealth technology to monitor/connect with patients.

Patients in these practices are often those in low to middle incomes, with high deductible health plans (HDHPs).  For this reason, DPC doctors develop network relationships with other local medical specialists and services. The result is patients gaining access to discounted medications, imaging and labs, plus lower service fees from local specialists – all on a cash basis.

And Presto!  We have a true two-party care relationship, where doctors focus purely on patients, instead of blending in payers as their second healthcare customer.

The median monthly DPC fee for an adult is about $70; and fees for kids priced between $10 to $20 per child.  Many DPC practices also cap monthly family fees.  Pricing is independent of pre-existing conditions and current health status, and allows for more face-to-face time, as often as needed.

These practices report reducing urgent care and ER visits, plus less hospital admits and re-admits.  Quality and outcome data has apparently started reaching malpractice insurers, now quoting lower rates for direct vs traditional primary care practices.

Here is where it gets sticky.  DPC is rightly considered a ‘health service’, both by the Affordable Care Act (ACA) and 16 states.  However, under section 223(c) of the U.S. tax code, the I.R.S. wrongly considers it a ‘gap’ or secondary health plan. Therefore, DPC is not a qualified medical expense – and fees paid by patients are not reimbursable by Health Savings Accounts (HSAs).

Changes are in the works, per the introduction of Senate Bill 1989 – The Primary Care Enhancement Act of 2015, which would make DPC fees a part of HSAs. The bill, with strong support from the American Academy of Family Physicians, also seeks to require the Center for Medicare and Medicaid Innovation (CMMI) to create a new payment pathway for DPC as an alternative payment model (APM) in Medicare and with Dual Eligibles.

The plan is for DPC to show Medicare its mettle – and eventually receive a modest flat fee payment for primary care services offered by a DPC medical home. The legislation includes allowing qualified physicians who have opted out of Medicare to participate in the program.  It also serves as a partnering catalyst with Medicare Advantage, in an ACO-like structure.

DPC is a disruptive ‘hot knife’ model, whose entry is well-timed to cut through the cold stick of butter called high health costs. 

Today, PCP co-pays have gone up to $45 and deductibles are sky high.  Many consumers have no idea that at or around the same per visit patient fee, DPC exists as an option.  Employers are just beginning, on a larger scale, to integrate DPC with other options such as HDHPs and self-insured health coverage. Utilizing this new model with self-insured companies makes sense, to hedge risk, lower health costs, improve outcomes, and improve quality of care.

One county in North Carolina, who employed a DPC option, saved nearly $1.5 million on yearly medical expenses – on just 800 covered lives!  It may surprise you that, apart from HSA standing, there are already early employer adopters who have chosen to pay the monthly DPC fees for employees themselves.

A British Medical Journal study showed patients of Washington state DPC provider Qliance coming in with 35% fewer hospitalizations, 65% fewer emergency department visits, 66% fewer specialist visits, and 82% fewer surgeries.  DPC benefits appear to not only reduce primary care costs, but in lessening the healthcare costs and utilization outside of their practices.

Payer transparency is a significantly important strategy to the future growth and integration of DPC

We talk about the importance of transparency in hospital pricing to patients. Also for drug companies to reveal their true R&D costs.  But have you ever stopped to consider the importance of transparency in how payers calculate and price plan premiums for each covered member?  Just how much of the premium payment can be carved out as estimated primary care services to be received?

More than ever, healthcare consumer groups and fully insured employers should push health payers for transparency.  Because I’LL BET what payers have estimated for per person primary care usage and costs, adding in the associated patient responsibility portions (co-pays, and any applicable deductible or co-insurance fees) will be MUCH MORE than a $840 yearly DPC payment, or $70 per month.

But wait…there’s more.  Don’t forget to have payers deduct an additional…let’s be conservative…1/3 of the Qliance savings percentages for the estimated care cost savings relating to carved out estimated care outside of primary services .

Next, look at Medicare and do the same thing.  But…instead of the wallets of health plan members, think federal budgets, taxpayers, subsidies, growing liabilities, and the potential to hold off future tax increases.

Then look at Medicaid for the same reasons, remembering that DPC would certainly create a greater improvement of care quality than Medicaid care providers and facilities.  Remembering the Triple Aim – cost, outcomes, quality, and let’s not forget doctors who are happier to be where they are at.

DPC – Injecting Disruption and Greater Consumerism into Healthcare

Something interesting happened along the way to transforming our healthcare system.  The ACA fell far short of its goals, and America’s care delivery and coverage became even less affordable for millions of employers and individual consumers.

We should know by now, that improving quality and pricing for all will not come from laws.  Specifically, those that force people into lower quality Medicaid coverage, and insurance plan exchange options with punishing deductibles.  In essence, giving them a broken Christmas toy with a pretty bow on it – and pretending they will enjoy it.

No matter how you dress it up, and much money you throw at it – healthcare coverage is not the same as affordable healthcare.

We’ve traded off yesterday’s great leaders who made the tough calls, for today’s mouthpieces and spin champions.  Those who are often more interested in the immediacy of propping up share prices, building their personal wealth pile, and living to enjoy the reading, hearing and seeing of others praise their greatness.  That builds egos – not the deep-felt thanks received from future generations.

These types of moments are why I love our country.  Because in the heart of even the toughest situations, there are those innately driven people who make bold, fresh choices and take stands.  Efforts that put principles we know to be just and right, before gaining financially on the backs of others’ misery.  My hope resides in what Lincoln called ‘the better angels of our nature’.

DPC offers a free market ‘injection’ into healthcare’s regulated pricing model.  If Senate Bill 1989 or a similar law passes, it will provide individuals and companies a better chance to gain better quality, more affordable care.  Unlike some DPC ‘purists’, I see a future inflow of Medicare dollars to non-enrolled DPC qualified providers, as stimulating a transformation where coordinated care begins from outside of the umbrella of big medicine ownership.

Like the plunging penguins who emulate the courageous actions of others, I believe many primary care physicians are looking for the right time to enter a DPC model. Whether that happens individually, through groups, or by strategic partnerships, is up to industry forces.  It’s the beauty of filling consumer demand.

Making healthcare services, drugs and coverage affordable to consumers appears completely disconnected from the industry’s mission to improve care quality and outcomes, and lowering health ‘costs’.

Free market forces are what bring down consumer prices in most every market.  Their introduction into U.S. healthcare will likely cause short-term fallout and financial pain within healthcare industries, but it would leave us, and future generations, with a more sustainable, stronger system.  We’ve gotten to the point where reducing healthcare bloat and mass unaffordability will require sacrifice from all involved.

By allowing consumer-friendly models like DPC to enter the regulated world of healthcare, perhaps slowly through the back door, we will see transformation come from within.  History has repeatedly shown us that better business models hitting squarely upon by pent-up consumer demand rise to the top.

 

Steve Ambrose is a strategy and business development maverick, with a 20-plus year career in several different healthcare and technology areas.  A well-connected team leader, his business interests and writings span across healthcare A.I., patient engagement, population health, telehealth, care delivery efficiency, chronic disease management and end-of-life care. 

His focus is on searching for, and selecting his next biz dev & strategy role for the right HC or HC Tech organization.  Email Steve at: steveambroseucla@gmail.com – and follow him on Twitter: @polymathsteve.

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