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.
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.
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.
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.
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.