How to avoid HMO gatekeeper problems in medical homes

There’s a great deal of planning and testing of new models of care and delivery to respond to healthcare’s ever increasing costs. We’ve all heard about Accountable Care Organizations (ACO) and medical homes. The common concern is that they become a repeat of HMOs with the accompanying misaligned incentives undermining 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). The results from PCMH pilots generally 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, Part II” concern to three pioneers in the DPC arena — Drs Garrison Bliss, Rushika Fernandopulle, 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 companies money that he 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 CT, ER visit, MRI,  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. By removing unnecessary bureaucracy, they have generally increased their income 50% while offering a service that is so affordable roughly one-third of their members are uninsured.

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  - H.R. 3590EAS – SEC. 10104 (3). On P. 2068 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. 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.

The DPC model has also become extremely attractive to primary care physicians frustrated with the undervaluing of primary care. New DPC practices are popping up like weeds as primary care physicians take matters into their own hands and have overcome barriers to switching to an insurance-free model. One of the side benefits is there’s a freedom to operating with an extremely low overhead model. For instance, Dr. Craig Koniver has even closed his bricks and mortar clinic. He now has a clinic on wheels retrofitting an ambulance as his mobile clinic. Now, his primary overhead cost is the gas it takes to keep the clinic at a comfortable temperature. I wonder how long before he installs solar panels on the roof of his clinic? Dr. Koniver shared how he runs such a low overhead practice. He’s become two parts Marcus Welby and one part Steve Jobs and he’s loving his primary care practice.

How the high deductible wrap around policy works with a DPC program

The proponents of DPC suggest returning to the days of Marcus Welby where there was a direct relationship between a person and their doctor unencumbered by the 40% “insurance bureaucracy tax” present in standard policies. As they say, “if you don’t pull out your auto insurance card for a car tuneup, why would you do the same for healthcare?” With DPC and a high deductible wrap-around the patient is responsible for the specialists, imaging, etc until they hit the deductible (usually $5-10K). This actually aligns incentives. A Primary Care Physician in DPC can help patients spend their money wisely and the patient agrees since it is their own money. With HMOs and first dollar coverage the patient wanted everything, the plan wanted to spend little, and physician was caught in the middle essentially as an agent of the plan and then the patient resented them.

If one of the DPC patients has a wraparound insurance policy with an insurer with any size deductible, the cost of everything that happens outside of their practice is none of the DPC practice’s business. If the insurance company is silly enough to create a no deductible wraparound policy, then they have created their own monster.  The insurance companies will own that turf and the DPC practices aren’t interested, and for good reasons.

They don’t want a big payday if they keep the patient from getting needed treatment and they don’t get to split the savings with the insurance company.  They know that this is hazardous to their corporate health, because there is always someone in every large company and certainly every insurance company who feels that health care providers can be controlled by punishing them for practicing medicine the “wrong” way.

The irony is that these are the same people who have so totally botched the incentives for all of healthcare.  Right now the DPC practices are virtually the only entity in medicine that seems to be aware of the critical nature of creating the right incentive fields around providers.  Their data suggests that the cost of health care in the US might decline by 20-30 percent if every primary care physician were employed by a DPC practice.  Find me someone else who can do that, without a gatekeeper or insurance policy manual in sight?  It’s magic.

Dave Chase is CEO of, a Patient Relationship Management software company, previously founded Microsoft’s Health business and was a consultant with Accenture’s Healthcare Practice.  He can be found on Twitter @chasedave.

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  • Anonymous

    1.  During routine maintenance on my car, something gets done.  I often feel there is very little meaning in routine physical.

    2.  I don’t see how, if doctors will do more to make more money, any pay for service will be in the best interest of the patient, regardless of who makes the payment.  If we are talking about a retainer model, doesn’t this give the doctor an incentive to cut corners.  Sure the doctor doesn’t make money on that CT (unless he owns the machine) but he can make more money by insisting on more treatment where his skills are utilized.  Why do you assume only DPC are more scrupulous than non DPC providers?

    3.  The research from the TransforMed PCMH wasn’t positive.  My personal experiences were horrible.  What a PCMH really meant is that I am a chart and relationships aren’t important because anyone can look at my chart and render treatment.

    4.  I have a high deductible and I save money by avoiding medical care.  I don’t go to the doctor for advice I can find online.  If I think I need a prescription or a test, I might go in if the problem seems serious enough.  I sometimes go to the walk-in clinic because the nurses aren’t as expensive.  I  am supposed to have regular lab work that I postpone as long as possible to cut costs.  I once had a serious medical problem that didn’t get treated because I couldn’t afford to pay a large deductible-and I now live with the permanent damage.  I would guess I save 20-40% just avoiding medical care with my high deductible plan.

    5.  A high deductible saves money for the healthy, not the sick.  I find most people who think high deductible health care plans are so great are healthy and have enough disposable income to pay that few hundred dollars a year.

    6.  I certainly hope that Dr. Koniver doesn’t idle his ambulance engine.  The pollution would be so horrible and unhealthy to his patients.

    7. Where I live, an appointment with a doctor that doesn’t accept insurance costs more than those who do. The doctor I see now accepts my insurance, the clinic bills my insurance so it goes toward my deductible. He spends adequate time with me, and I don’t feel like he is trying to make a buck from my misfortune.  What incentive do I have for seeing a direct pay doctor?  Not only will I pay more, I will have to file my own claims and get a reduced out of network percentage.

    • Brian



      You raise valid concerns
      and I’ll take the liberty to address some of them.  I’m not exactly an
      expert, but am a medical student with considerable interest in the model and
      I’ve had the fortune to spend a great deal of time working with some of its pioneers.  I’ll address your points as you have listed them:


      1. Physicians working in
      the predominant, insurance-based model are dis-incentivezed to practice in a
      way that would have resulted in you getting the care that you probably would
      have considered meaningful in a routine physical.  In fact, practicing the
      kind of patient-centered model in which I’m currently being trained in the
      insurance-based environment would be a great way to go bankrupt.  I’m still
      waiting for the class where they teach me how to see 30+ patients a day, but I
      guess that comes later.


      2. For physicians in
      primary care, the vast majority of the work is cognitive.  It’s in examining, diagnosing, solving
      problems, coordinating the work of specialists, relationship-building, and
      preventing illness.  In the current
      model, this type of work has been marginalized and physicians have been forced
      to see more and more patients to cover the expenses in time and labor of dealing
      with the insurance quagmire.  In the DPC
      model, physicians aren’t incentivized to provide “unnecessary cognitive services”
      to pad their incomes; in fact, if they have a sufficiently lean operation, as
      is possible in this model, they will likely be compensated considerably more
      than their peers while having the joy of practicing the type of medicine they
      dreamed of when they decided to be a doctor. 
      Of course it’s possible that an individual could practice in this model
      and build up a huge panel with the intent of making a killing.  I think that it’s improbable that patients
      that pay for their own care would tolerate the kind of service that would


      3. Many PCMH pilots have
      had funding mechanisms that relied far too little on retainer mechanisms and
      too much on fee-for-service mechanisms that didn’t sufficiently compensate
      physicians for cognitive services.  I don’t
      have intimate knowledge of how TransformED pilots were structured so I can’t
      speak to that specifically, but any model that doesn’t (1) place the decisions
      of care solely in the hands of the patient-physician team and allow that
      relationship to flourish and (2) to adequately incentivize the cognitive work
      of doctoring and coordinating care will fail to live up to the PCMH promises.


      4. High deductible plans
      have gotten a bad rap because those who have them generally still have to seek
      care in a system designed to operate in the insurance-driven environment.  These practices simply aren’t equipped to
      provide the same high level of care as DPC practices, and certainly not at the
      low cost.  The insurance-based practices
      have large staffs to pay along with the associated expenses.  In many cases, those physicians have signed contracts
      with insurance companies that forbid them from offering discounts to patients
      that aren’t insured by them.  High
      deductible plans work when coupled with the high-quality, low-cost care
      provided by DPC practices. 


      5. Most people can
      easily afford the care provided by DPC practices. 
      The prices may vary by market, but so does the cost of living.  Many people with chronic disease and
      traditional health coverage pay enormous out-of-pocket costs as it is.  The DPC model can provide the care that
      complex patients require for much less, in general.  For those that can’t afford it, it’s not hard
      to imagine a mechanism by which Medicaid could subsidize a
      retainer/catastrophic coverage package for a heck of a lot less than what is
      spent now.


      6. He probably has an
      on-board generator to provide power while he’s stationary, but that’s just a


      7.  Again, most providers are not equipped to
      operate in any environment other than the insurance-driven environment.  They invest significant resources of money
      and time operating this way, and as I said, they may be contractually
      prohibited from offering discounts to out-of-network patients.  It’s great that you have an in-network doctor
      that gives you care you are happy with. 
      I think that you might be in the lucky minority.  But in general, people pay much more for
      their care than they realize.  The $10
      copay that many people have costs dearly in the form of decades of stagnant
      wages and premiums that have skyrocketed. 
      Virtually any physician that accepts insurance does so at great cost
      (and waste) and those costs are footed by someone, either by us the
      individually insured, us the wage-earner, or us the taxpayer.  In the context of primary medicine, this care
      can be provided much more efficiently (and at a much higher level of quality) when the patient has a direct-payment relationship with the physician.

      I’ll add one more thing:  The practices that are doing this are not just getting started.  In some cases they have been doing it for over a decade with tremendous results in quality of care.  I predict that as more physicians see the value of the DPC model that it will flourish, and that their benefits will be unavoidable by policymakers.


      Brian Lanier


      • Anonymous

        You seem to have missed the point of the dynamics of a high deductible plan.  Sure I can see that PCP for $50 or whatever but that doesn’t cover the cost of imaging, labs, specialists and so on.

        I didn’t spent the $50 because treatment would have meant a hospital stay, one that I couldn’t afford at the time.

        And I can get cheaper care right now at the walk-in clinic for those little things.Are you suggesting to expand Medicaid to middle class families?  Are you going to complain next that Medicaid doesn’t pay very well?

        • Brian

          We vastly overpay for services such as labs and imaging because the costs are completely opaque, and those that provide those services generally operate with the same ~40% administrative waste as others in the system.  DPC practices negotiate drastically lower costs for these services, including specialist visits (this is not theoretical, it is how these practices operate).  I absolutely am not suggesting to expand Medicaid to the middle class.  I am suggesting that the middle class pays too much vis-a-vis exorbitant premiums, stagnant wages, and higher taxes for wasteful care, and that the DPC model offers much better care at substantially lower cost.

          • Anonymous

            So you think I could get a 3 day hospital stay for under $1000?

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