Overcoming barriers to building a direct primary care practice

The federal health reform bill included a little-noticed clause allowing for Direct Primary Care (DPC) models to be a part of the state health exchanges. I believe this will fundamentally alter the health insurance market and is leading to what I call a “Do it Yourself Health Reform” movement. That little-noticed clause (item #3 in 1301(a) of HR 3590) should have the effect of massively spreading the DPC model throughout the country.

Despite the fact that half of primary care doctors say they’d leave medicine if they had an alternative and the New York Times reports on a family physician who can’t give away his practice, primary care physicians are understandably concerned about making the move to a different practice model. As Dr. Samir Qamar of MedLion stated, “Many doctors today are wondering how DPC practices work, how they are profitable, and most of all, how they could do it. After AMG in New York and Vic Wood’s practice in West Virginia were slapped by their states’ insurance commissions, many are afraid to move forward – and doctors are already risk-averse.”

As an entrepreneur, I have had to become a buyer of healthcare. From my years in patient accounting, I knew there was at least a 40% “insurance bureaucracy tax” on day-to-day medicine so I was excited to learn about the DPC model so I could cut out the middleman and use health insurance for the purpose intended (i.e., catastrophic coverage). However, I was frustrated that such a model didn’t exist where I lived. Having spent a lot of time with physicians operating in DPC models (special thanks to physicians such as Samir Qamar, Brian Forrest, and Garrison Bliss who have been generous with their time), I better understand that while the DPC model is very appealing to me, there’s a number of considerations to making the switch from a physician’s perspective. Fortunately, now that the issues have been worked out on how to transition to a DPC practice, I expect that they’ll grow dramatically in popularity so there’ll be options where I live.

Before listing the items to navigate, it’s worth noting the benefits to a physician of moving to a DPC model that make the switch worthy of consideration such as the following:

  • Less time (zero if fully transitioned away from insurance-centric primary care) spent dealing with insurance headaches. This is the top frustration cited for why primary care physicians state they want to leave medicine. This also lowers administrative overhead costs. Some DPC practices have less than one administrative FTE per physician in comparison to a 5:1 ratio common in many practices.
  • More time spent with patients delivering what DPC-based physicians believe is better care. The average patient load is 3000 patients per PCP whereas DPC-based practices typically have 800-1500. As an example of quality, Dr. Forrest shared that 91% of his patients have reached their target blood pressure within 6 months and that he’s been named one of only four Cardiovascular Centers of Excellence in his state.
  • Lower malpractice costs. Dr. Forrest has shared that his malpractice premiums have been cut in half. It’s logical given that he’s able to spend much more time with patients.
  • Increased income. In MedLion’s model, physicians take home pay is at parity with specialists which is often double an average PCP.

There are 7 significant items to navigate:

  1. Legal concerns. Because paying a monthly fee in return for health benefits can be construed as health insurance or a health plan, doctors converting should have a sound legal team that is comprised of experts in health care, managed care, Medicare, corporate law, and even intellectual property. The legal team not only should help the practice start, but needs to stay with the practice providing constant legal support due to the ever-changing rules in this still relatively unregulated industry. Medicare-accepting physicians face unique challenges that must be negotiated in order to avoid getting in hot water with the government. Patients not wishing to convert must also be taken care of, or else allegations of abandonment can arise. MedLion shared that they spent over 150K in the first year alone on “getting it right.” As a practice based in California, there’s a thicket of regulation that they needed to navigate.
  2. Practice structure. Even though there are a low number of DPC practices in existence, efforts have to be made to determine the membership pricing structure, the number of patients per provider, whether or not to use mid-level providers, type and number of staff, whether to start a pure DPC vs. DPC/insurance (hybrid practice), and the physical location. Each of these variables could independently sink a start-up DPC practice if not thought out in advance. For instance, one misconception of inexpensive care is that it is “cheap” or low in quality. This myth is averted by ensuring high-quality staff, decor, and service. When I asked MedLion’s Dr. Qamar about how he arrived at his price, he stated “We changed the price point five times before arriving at a system that worked  and we continuously research the best cost for services for implementation.”
  3. Low-cost medical services. All of the DPC practices I have spoken with have gone the extra mile to negotiate cash-based charges for non primary care services. For instance, Tanya Griffin helps PCPs convert to a DPC model and has also helped negotiate steep discounts. For example, the best local imaging center charges her clients’ patients $350 for an MRI in contrast to the $2800-3500 charge that is common in her area. Medications have to be continuously researched to locate where the lowest-priced ones are, from retail pharmacies, online pharmacies, to establishing relationships with pharmaceutical companies. Qliance offers a free first-fill formulary that covers most common prescriptions. Because DPC practices don’t include specialist care, efforts must regularly be made to locate quality specialists who will offer discounted care without breaking Medicare rules.
  4. Major medical coverage. To effectively attract patients, efforts are made to locate the most beneficial insurance plans that will cover hospital and advanced specialist care. Plans change every year, and the practice should always be informed on the latest to inform its patients.
  5. Marketing. Once the practice is started, it doesn’t survive unless patients enroll. Because DPC is a new way of practicing, many consumers don’t understand it right away. Depending on the practice’s financial resources, effective PR, marketing, and advertising must continuously be on-going to make the practice financially sustainable and even profitable. Depending on the demographics of the practice location, efforts have to be made to capture patients from hospitals, the community, and companies. MedLion, for instance, has an outside marketing firm, as well as inside representatives to help each location reach capacity. They do a demographic analysis of the practice and the geographic region to ensure success.
  6. Health IT. To keep overhead low and prevent over-utilization of services (now that care is more affordable), selecting an effective software/hardware system is crucial to the practice’s long-term success. Most EMR systems today are insurance-centric, and not designed to be used with DPC practices. Qliance evaluated over 200 U.S.-based EMRs before going abroad to find their system and then have done their own software development. An effective Health IT system will enhance patient experience, reduce physician workload, decrease unnecessary patient visits, and decrease physician overhead.
  7. Billing. The beauty of DPC is the absence of insurance dependency. How do you bill? Automated or invoice? Do you accept credit cards? Check? What about patients who wish to pay cash only? Though overhead from insurance-billing is absent, there is billing overhead to manage. Because profit margins are low, it is essential to collect every penny. Dr. Qamar stated “Our billing was changed 9 times to get it perfect.”

As simple as the DPC concept is (membership fee for low-cost services akin to the Marcus Welby model), there is an extraordinary amount of research and work that must be done behind the scenes, before implementation, during transition, and after launching the practice. MedLion and DirectPayHealth have built businesses around assisting physicians making a smooth transition to a DPC practice (MedLion also supports a hybrid insurance/DPC model). Their approach has been to do the trial-and-error themselves to minimize to issues that could hurt the practice and lose patient confidence.

While the economy and federal health reform have created an unprecedented level of uncertainty, it has also created opportunity. As Dr. Qamar stated, “It’s been both gratifying and exciting to help my colleagues through the transition to a practice model that is sustainable for me while being a breath of fresh air for our patients. I can’t think of a more interesting time to be a physician.”

Dave Chase is CEO of Avado.com, 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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