Joseph Sheppard, DO (left), who opened a direct primary care practice in Missouri last year, treats a patient, Kevin Parvin.
Go your own way

Direct primary care: A way out of the labyrinth?

Advocates say this practice model is the next big thing, but a health policy analyst cites drawbacks for patients and the health care system.

Wistful for that bygone era when physicians could simply hang out shingles and launch thriving general practices, some osteopathic physicians are adopting, or at least considering, a relatively new payment model that slashes overhead costs and paperwork—direct primary care.

Pure direct primary care practices do not accept any form of health insurance, including Medicare, so they need fewer employees. Patients become members of these practices, paying a monthly fee for care. These fees vary widely, from $30 to $500 per month, according to Philip Eskew, JD, DO, MBA, who conducted a not-yet-published study of 100 direct primary care practices. The median monthly fee is about $70, he says.

The payment setup in direct primary care is designed to provide physicians steady cash flow while allowing patients to easily budget for their basic medical expenses. This practice structure also fosters the delivery of more personalized care, its proponents contend.

“When someone pays you directly and you cut out insurance, you get back to the heart of the physician-patient relationship,” says Chris Larson, DO, who started a solo direct primary care practice last year.

Organized medicine is starting to pay more attention to direct primary care, which is permitted under the Affordable Care Act and complements low-premium, high-deductible health insurance plans. The American Academy of Family Physicians (AAFP) has hosted webinars on the practice model and will co-sponsor a direct primary care summit this summer with the American College of Osteopathic Family Physicians. The Student Osteopathic Medical Association included direct primary care on the agenda of its March meeting in Washington, D.C.

Want to know more about direct primary care? DOs who have embraced this practice model share their marketing and management strategies, the challenges they’ve faced and how they’ve fared financially. On the flip side, a health policy analyst cautions that the model has drawbacks for patients and the U.S. health system.

How it works

Most working Americans can afford to pay for their primary care themselves, insists Joseph Sheppard, DO, who opened a direct primary care practice in Neosho, Missouri, in July 2014, a week after finishing his family medicine residency.

“It’s this whole machine that we’ve built in the U.S.—in which physicians must bill multiple third-party payers for reimbursement—that has made primary care so expensive,” says Dr. Sheppard.

He charges patients $60 a month per adult and $25 per child. “That covers all of their office visits and access to me by phone at night and on weekends,” he says, noting that he returns calls promptly no matter what he is doing but is looking for a practice partner with whom he’ll be able to share call.

Patients must pay extra for any medications and special supplies needed during an appointment, such as the lidocaine and cannula used in a joint injection, and for laboratory tests, which Dr. Sheppard says he offers at wholesale cost.

Dr. Sheppard refers patients with complex issues or advanced disease to specialists. He has developed a referral list of physicians who offer affordable cash rates, he says.

Affordability is crucial for Dr. Sheppard’s patients because many of them have low incomes, do not receive insurance through their employers and make too much to qualify for Medicaid, he says.

Unlike concierge medicine practices, which sometimes accept insurance and are typically targeted to more affluent healthcare consumers, direct primary care practices prioritize making care more affordable, Dr. Sheppard says.

To minimize expenses, he operates his office as efficiently as he can. He has just one employee, a registered nurse who doubles as a receptionist and phlebotomist.

“My RN sits at the front desk, where we have a draw station,” he says. “And we both take phone calls. So if she is tied up with something, I can answer the phone or greet a patient who comes in.”

With such low overhead, Dr. Sheppard needed 150 patients to break even. “We went into the black about three months after opening,” he says. “I’ve been paying myself a salary ever since, though it’s not as much as I would like.”

Dr. Sheppard will need 600 patients before he can reach his target income of $240,000 a year. He has approximately half that many now, he says. To support his family in the meantime, he moonlights in a hospital emergency department.

Medications at a steep discount

Here's what patients can expect to pay for medications at NeuCare, a direct primary care practice, compared with market prices.

W. Ryan Neuhofel, DO, MPH, runs NeuCare in Lawrence, Kansas.

Sources: NeuCare.net, HealthcareBluebook.com

Similarly, Dr. Larson must work part time in an urgent care clinic—12 shifts a month—while he builds his direct primary care business. But he is confident that his practice will eventually provide a decent income.

Dr. Larson, whose staff consists of one medical assistant, charges new patients a $79 setup fee plus a monthly $39-to-$89 fee based on age. Like Dr. Sheppard, he asks patients to pay wholesale costs for labs and certain office-based procedures.

“This makes so much sense to me,” says Dr. Larson, who has written about direct primary care for KevinMD.com. “It’s so simple. You pay me a set price per month that’s, for the most part, all you’re going to pay me to take care of you.”

Dr. Eskew, a third-year family medicine resident in Lancaster, Pennsylvania, has been researching direct primary care for several years and planned to adopt this practice model since before starting med school. He will be opening his own practice in Wyoming in July.

“You need to have the right contractual legal setup from the get-go,” says Dr. Eskew. “But beyond that, you can basically think of this as Marcus Welby, MD, with an iPhone. This practice model gets everything out of their way so doctors can take care of patients.”

Putting patients first

Physicians who practice direct primary care say they can spend more time with patients and offer better service than they could in a traditional fee-for-service practice.

Dr. Sheppard guarantees same-day and on-time appointments, and patients can call him at any time. In addition, he books an hour for initial visits and a half-hour for return visits.

“My patients are paying for as much time as they need,” Dr. Sheppard says. “Outside of a system like this, doctors have a hard time treating their patients right. In most offices, the machine is so big and has to pump so many people through to keep it going that what we call ‘customer service’ is not there.”

Dr. Larson notes that his patients have access to him 24/7, though his regular office hours are 9 a.m. to 5 p.m., Monday through Friday. “I’m always available by phone,” he says. “I check my phone when I’m working in the urgent care. And if I need to take a break to call one of my patients, I do so.”

One patient with worsening cold symptoms sent Dr. Larson a text message recently, expressing concern that he wasn’t getting better and might have a sinus infection.

“We traded a few texts,” Dr. Larson says. “I thought it would be easier to talk on the phone, so I called him.” Dr. Larson instructed the man to change his treatment regimen and called him back in a couple of days to follow up. The patient, as it turned out, had an upper respiratory infection that could be treated solely with over-the-counter medications.

Dr. Larson believes the phone calls kept that patient from going to an urgent care clinic. This is how direct primary care can save patients and the U.S. health care system money, he contends.

Potential pitfalls

When used in conjunction with high-deductible catastrophic health insurance, direct primary care may give patients better access to preventive medicine than they would have if they simply paid out-of-pocket for visits with a traditional fee-for-service physician, acknowledges Carolyn Long Engelhard, MPA, who directs the health policy program at the University of Virginia School of Medicine in Charlottesville.

“Better access to their primary care physician can give patients peace of mind, it can be therapeutic, and it can lead to a relationship of greater trust,” she says.

Nevertheless, Engelhard sees some problems with direct primary care. First, she worries about patients being misled. Low-income patients without employer-provided health insurance may gravitate toward direct primary care because the monthly fee is cheaper than a health insurance premium, and they may not realize that they also need catastrophic health care coverage, she says.

“Direct primary care can create a false sense of security,” Engelhard says. “Many uninsured patients don’t have a lot of education, and they don’t understand insurance. A patient may say, ‘This is great. I only have to pay $50 a month, and I can get in to see my doctor whenever I want.’ But what these patients may not understand is that if they get cancer or if they are in an automobile accident, the direct primary care product won’t help them at all.”

Physicians who operate direct primary care practices are ethically obligated not to accept patients who don’t have at least catastrophic health care coverage, she says.

But many catastrophic and high-deductible health insurance plans do not cover any services until the beneficiary has spent thousands of dollars. Such plans will not cover specialist care or emergency department visits, for example, until that threshold is reached. The monthly membership fees paid in direct primary care don’t necessarily count toward out-of-network insurance plan deductibles if patients try to file the claims themselves.

In addition, notes Dr. Larson, Americans with high-deductible plans can’t use their health savings accounts to pay direct primary care fees. An advocacy group, the Direct Primary Care Coalition, is lobbying for changes to the U.S. tax code to expand the scope of HSAs.

Engelhard is also concerned about care coordination and physician accountability under direct primary care. She argues that physicians who opt out of the fee-for-service system become isolated from their peers and cannot participate in government initiatives designed to improve health care quality and efficiency, such as the patient-centered medical home.

“Direct primary care increases health care fragmentation,” Engelhard contends. Though the individual physician may reduce his or her overhead, the model does not reduce health system costs, she says.

Business challenges

While they believe their practice model will improve health care overall, physicians in direct primary care admit they have hurdles to overcome.

Because it is a foreign concept to most people, physicians who adopt this model need to aggressively promote their practices and explain how the arrangement works.

Dr. Sheppard started forging relationships and marketing his future practice in the last several months of his residency. “I had about 50 patients enrolled before we opened up, which was a nice boost,” he says. He advertises his practice on the radio and has begun to do some local TV advertising featuring patient testimonials.

Dr. Sheppard quickly drew patients to his practice, but the growth rate has been uneven. “Some months haven’t been as hot as others,” he says. “My cash flow has been better than the projections I gave to the bank but not as good as my wildest dreams.”

But Dr. Sheppard didn’t expect one major challenge: collections. “I did not anticipate how many patients we’d have payment issues with,” he says.

Looking ahead

Despite the obstacles, those passionate about direct primary care believe the time is ripe for this practice configuration.

“This is the revolution that we need in primary care,” says Dr. Larson, “for reducing healthcare expenditures, for having happier and healthier patients and, honestly, for having happier primary care physicians.”

Dr. Eskew predicts interest in direct primary care will surge in the coming decade.

“This is the way primary care should be,” he says.

    12 comments

    1. The Public Health Policy “expert” needs to be educated a little bit about Direct Primary Care prior to criticizing it.

      Primary care is more than “peace of mind, therapy, and increased trust.” Primary care is actual medical care — about 85% of it. Doctors trained in the primary care specialty of family medicine deliver babies, handle emergencies, perform physicals, and diagnose, manage, and treat acute and chronic medical conditions. A strong foundation of primary care is required for every healthcare system.

      Regarding patients being “misled”, nothing could be further from the truth. Direct Primary Care (DPC) specializes in primary care, plain and simple. Guidelines created by national DPC organizations, physician groups, and even several state laws request DPC providers to specify which services are covered, and which services aren’t. Is it misleading if a high-deductible insurance beneficiary doesn’t get their primary care covered?

      Recommending that DPC physicians are “ethically obligated” to refuse patients who don’t have catastrophic coverage is also unsound advice. Just as Emergency Room physicians are ethically obligated to treat all patients who come in regardless of payment status, DPC physicians are ethically obligated to treat all patients for primary care, regardless of non-primary care coverage.

      The fee-for-service system is not just flawed, it is broken. Physicians leaving the broken system are not “isolated” any more than they would be if they were in private practice for insurance. Accountability for quality of medical care does not fall under the insurance jurisdiction, but rather the medical boards. To suggest otherwise is nonsensical.

      Systems like Medicaid and Medicare are simply government-run third party payers that have actually suffered under the existed fee-for-service system. Perhaps unknown to the critic is that DPC providers are actually working with Medicaid and Medicare in several areas of the country. “Government initiatives” have to date not demonstrated any groundbreaking increase in health care quality, including the patient-centered medical home model. Contrary to the expert’s opinion, however, DPC studies have begun to emerge demonstrating lower healthcare costs when used effectively (http://stateofreform.com/news/industry/healthcare-providers/2015/01/qliance-study-shows-monthly-fee-primary-care-model-saves-20-percent-claims/).

      Perhaps not perfect, but Direct Primary Care gives hope to our country’s ailing healthcare system by strengthening primary care. It is a shame to realize that some in public health policy for our nation can’t even recognize when a good healthcare model emerges.

      1. I was going to reply but you said it all.

        What makes a policy wonk who is not in a dpc practice an expert on dpc?

        Nothing!

      2. Amen! You took the words right out of my mouth! I am currently transitioning my practice in New Jersey to DPC- a bit scared- but hopeful to return to a more joyful way to practice. If we want young compassionate primary care physicians to come into the profession, we have to work to fix this current state which is burning out good physicians and worsening the shortage.

    2. Can’t you use a picture of someone doing cardiac auscultation correctly? Listening to the heart through a shirt and an undershirt would cause me to fail my student. Correct examination requires stethoscope to skin. I don’t care how good your hearing is, you will miss important subtle sounds if listening throughout the shirt. This is the dumbing of our profession.

    3. Miss Engelhard apparently doesn’t realize the current poor state of overburdened primary care accounts for a huge amount of unnecessary downstream costs to the system. PCMH and pay-for-performance efforts sound nice to policy wonks but have failed to produce any demonstratable results despite millions of dollars being spent on them. This is not a surprise to me as they only add more paperwork to a overly complex system.

      Her recommendation for me to refuse uninsured patients is, well . . . unethical and absurd. Over half of my patients have no insurance coverage, but not by their own choice. I provide them their only option for routine care — and better primary care than they could get WITH insurance. How would denying them management of their diabetes help anyone? I do encourage all of my patients to carry insurance for unexpected expensive events, but for variety of reasons that’s not always possible.

      While DPC cannot yet demonstrate cost savings to the “system” at its current small scale, I can guarantee you it provides better primary care on all fronts — and that is the only reform that will make any dent in the problem.

    4. I found Mrs. Engelhard’s contention that DPC, or DPC doctors by proxy, would mislead unsuspecting patients offensive. I spend time daily helping patients navigate the healthcare minefield so that they can save money. To think that I would set up a practice to make a few bucks off of an uneducated patient only to sell the rest of their healthcare down the river is simply ridiculous.

      I had hoped that Mrs. Engelhard had been misquoted about misleading patients, and then I read her suggestion that I am ethically obligated to leave uninsured patients to their own devices. I’ve waited a day to respond in hopes that I can be diplomatic about this.

      I first started reading about direct primary care in 2010 when an article was written about a “Robin Hood” clinic that was taking direct payments from patients that could afford concierge care in order to subsidize patients that couldn’t. Despite the fact that my clinic’s monthly rates are lower than most people’s cell phone bill, not all can afford these rates. It’s those people that make too much to qualify for Medicaid but still can’t afford my rates that I hope to be able to subsidize at scale with the DPC model in the future. In my mind, it would be unethical to turn my back on these people.

      The financial ramifications of DPC have been referred to in a response above. The magic of DPC simply comes down to paying the most financially efficient person in our healthcare system, the primary care physician, a slightly higher pre-paid wage than she would have in a fee-for-service system. When this is done, that physician is able to spend the appropriate amount of time on their patient’s healthcare concerns and downstream costs are reduced (the downstream reductions are greater than the increase in the PCP’s pay). The doctor has an adequate amount of time to examine a painful knee or take a complete history from a patient with new onset headaches. This extra time results in fewer referrals to MRI for the painful knee and to neurology for the new onset headaches.

      The point has been made, but I will reiterate. Fee-for-service is not the best way to pay for primary care and the result has been inefficient and expensive care that has frustrated both doctors and patients. DPC certainly isn’t perfect, as the current system lacks incentives to optimize its use (i.e., can’t use HSA for monthly fees, monthly fees don’t count towards in network deductible). However, it is light years ahead of the care that patients get within the fee-for-service system and it can achieve the “quadruple aim”.

    5. Pingback: DPC, Advocates say this practice model is the next big thing, but a health policy analyst cites drawbacks for patients and the health care system. | The Direct Primary Care Journal

    6. Of course the administrators hate this. First, you cut off all there income sources. Second, you don’t have to follow all there silly monitoring schemes. Third, you have an actual relationship with your patients. It’s hard to vilify someone that the patients know on that level. Fourth, patients come to you first, not an edifice of a healthcare system. Fifth, they don’t have free access to your records, check the list of who has free access to your required EHR system. Now the bad news, Obamacare/ACA seems to make this arrangement difficult to maintain. The requirements to not be penalized seem to make DPC patients pay twice. But as an example of ACA, I have a friend who pays $400 a month for healthcare (40 y/o self employed plumber) a copay of $200 dollars a visit, and $50 for each prescription. Here is the problem, the cash cost of his vist is less than that. And the cost of his script if he paid cash would be less. I saw the bills, it makes no sense. How is this in any way patient centered? It does not address his needs, it encourages him to avoid healthcare when he may need ti seek it.

    7. Something not touched on in this article is about how the govt controls doctors through the Medicare system even when he tries to get out of accepting Medicare anymore. If you are an existing physician who has billed Medicare and you want to change to a cash practice of any design, watch out! Look up the govt regulations regarding “opting out” of Medicare. You have to have all of your patients sign a contract the govt designed that explains to the patient that they are NOT allowed to bill Medicare themselves for the services they paid you cash for. They forget that Medicare is not an entitlement for most people. They have paid and continue to pay for it along the way. But, if a patient goes to a physician who has opted out of Medicare, the govt does not allow them to get reimbursed for those services.

      It is a punishment to the physician who has chosen to opt out and a punishment and disincentive for the patient who chooses to pay for the services of a doctor who has opted out.

      Plus, and this is where the govt NEVER lets go, the physician has to renew his opt out agreement with the govt every two years under specific terms and guidelines.

      Yes, you have to sign a two year renewable contract with the govt to opt out.

      You can NEVER LEAVE their tentacles!!!

      I’ve done it. It is like being out from under the IRS’ control to not have to abide by the draconian govt regulations that accompany the Medicare contract we sign when we first get into it.

      Good luck to us all.

    8. Thank you for all the great advice and comments here. I am just a simple lay person, but when I read the article I fumed. The government is our worse enemy for healthcare. I am so disheartened as I continue to find out I am not allowed an HSA nor if I join a DPC it will count towards nothing as well. And now I am being told that I will be unable to get Medicare to pay when I become eligible! Yet I am required to pay a $280.00 a month premium for an insurance that covers next to nothing until I meet a ridiculous deductible. That is the lowest I can qualify for. Imagine you are 62, healthy, but are barely making ends meet after the IRS every year and all the taxes on property and insurances that keep going up. You need a simple prescription and a trip to the doctor ends up costing $200 after all is said and done and that is only if he does not need or want to be on the safe side and run some labs. By my age I have some dental care that needs tending to and eyewear etc…an HSA would cover these simple costs and save me 15% on the income tax they will take from the amount put in. When will we the people stand up to this insanity by our government?

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