Health care is constantly evolving, and it’s no secret that many hospitals are bleeding money when it comes to their primary care practices. On the low end, a hospital loses $127,000 per year on a primary care physician. Anecdotally, a rural hospital in Indiana expressed that they lose nearly $500,000 per year!
Headlines are filled with stories about rural hospitals (& many others) struggling to keep their doors open without some form of corporate welfare. Most people gloss over the current business model of treating primary care as a major loss leader in order to get more lucrative labs, tests, non-primary care specialty visits, and surgeries.
This business model emphasizes revenue maximization over patient well-being. Add in a conflict of interest regarding referrals to the same hospital system, and a lack of costing and pricing transparency, and the traditional hospital-employed physician model has shown its fair share of cracks.
So how did we get here?
Facts about hospital-employed practices
According to a survey by the Medical Group Management Association (MGMA), hospital-employed practices lose money. On average, for every dollar earned by a primary care practice, there’s a 5 to 7 percent loss for hospitals, which then needs to be subsidized by the hospital. When a hospital loses money overall, taxpayers can be on the hook for this loss. The community ultimately bears the pain for the local hospitals’ reckless business practices.
So, why do hospitals continue to employ primary care physicians, even when it’s not financially sustainable? Hospital apologists will often cite a complex web of factors that involves blaming insurance companies for denying claims or trying to hide behind a false notion of charity care.
Ultimately, hospitals hope that subsidizing primary care can increase referrals to specialists and other services and make up for the losses. This creates a conflict of interest where patient care may take a backseat to the hospital’s bottom line and the hospital avoids punishment for referring a patient outside the hospital for treatment.
However, other issues arise from this current model.
Major issues with the hospital-employed phyisican model
One of the major sticking points is the lack of transparency, especially when it comes to pricing. In a nutshell, patients often have no idea what medical services cost.
Many hospital-employed physicians express feeling pressured to refer patients to the same employer, whether they need more care or not. This lack of transparency can erode trust and make patients question the motivations behind their health care decisions.
Moreover, a lack of price transparency in hospital settings can result in unexpected and exorbitant medical bills for patients. When patients are unaware of the costs associated with their care, they can be blindsided by bills that are far beyond their means. This can lead to financial hardship, medical debt, and even avoidance of necessary health care services due to fear of unaffordable costs.
When it comes to rural hospitals and communities, the difficulties abound. Rural areas often struggle to attract and retain primary care physicians. When hospitals in these areas lose money on primary care, it can jeopardize their ability to provide vital health care services to the community. This creates a health care desert where residents have limited access to care, exacerbating health disparities.
For hospitals caught in a downward financial spiral, there’s a beacon of hope – releasing primary care doctors to start their own Direct Primary Care (DPC) and accessible concierge health care clinics.
DPC: the prescription for financial health
Here’s where direct primary care enters the scene as the hero of our story. DPC practices provide an innovative solution to this conundrum. They operate on a profitable subscription-based model, where patients pay a monthly fee for comprehensive primary care services.
Why DPC works
Financial sustainability. DPC practices are financially sustainable, eliminating the losses associated with hospital-employed primary care. Physicians can focus solely on providing high-quality care to their patients without the pressure to refer for financial gain.
Transparency and trust. DPC practices are transparent about their financial model, fostering trust between patients and physicians. Patients know exactly what they’re paying for (prices are on the website), and there are no hidden agendas.
Rural health care savior. Since DPC practices only need a few hundred patients to be profitable, they are able to operate in areas that a hospital-subsidized practice cannot. DPC practices are a lifeline for rural hospitals. They can partner with these hospitals to provide primary care services, ensuring that rural communities have access to essential health care.
For any hospital looking for this solution, it can be scary because it is so different. Helping physicians partner with a DPC group helps put the hospital at the forefront of curing physician burnout, becoming an attractive destination for new physician & provider recruitment.
The hospital will essentially enhance access to high-quality physician care in smaller towns, becoming a leader in increasing access to health care in rural settings. Plus, with DPC spending more time with patients, it puts a real solution at the forefront of mobilizing primary care doctors to address the (frequently neglected) mental health needs of patients.
In the world of health care, it’s essential to reevaluate old models and embrace innovative solutions. Hospitals lose money on primary care, and a lack of price, and referral transparency in hospital settings hurts patients. But it doesn’t have to be this way.
Direct primary care offers a financial lifeline for hospitals, restores transparency and trust in patient care, and ensures that rural communities have access to the health care they deserve. It’s time to let DPC save American hospitals, one patient at a time while providing patients with clear and transparent pricing to make informed health care decisions.
Christopher Habig is co-founder and CEO, Freedom Healthworks, a company dedicated to scaling the direct primary care (DPC) practice model, putting doctors back in control of patient care. Christopher’s journey into health care innovation was sparked by the frustration of seeing family members struggle among the insurance and hospital-dominated industry. He envisioned a system where health care could be accessible, high-quality, and affordable. This vision led to the inception of Freedom Healthworks, which provides the tools, technology, and support for doctors to run successful DPC practices. Christopher dedicates his time to educating both consumers and health care providers about the benefits of the DPC model through his podcast, Healthcare Americana, leading the Indiana Free Market Medical Association, and being a contributing member of the Indiana Physicians Health Alliance. His goal is to create a future for Americans where health care is synonymous with the caring, individualized attention that was its original hallmark.