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On June 12, 2018, we discussed the direct primary care (DPC) delivery and payment model on “The Business of Health Care,” on Sirius XM Business Radio powered by the Wharton School, channel 111. My guests were: Dr. John S. Cullen: president-elect of the American Academy of Family Physicians (AAFP); Mason Reiner W99: CEO of R-Health; Dr. John Blanchard: CEO of Premier Private Physicians.
Direct primary care operates outside the traditional care delivery system, as physicians and patients do not file insurance claims for payment. The contract for care is directly between the patient and provider. The DPC model is also different than “concierge” medicine in that it does not involve insurers. It also obviates the requirement to practice medicine in the way that payers dictate.
There are approximately 465,000 physicians in the U.S. who practice primary care (internists, family physicians, pediatric, and OB/GYN). Of these primary care physicians, approximately 20,000 physicians (mainly internal and family medicine) practice some sort of DPC. This constitutes approximately 4.5 percent of the entire primary care workforce. The number of physicians practicing DPC has grown at a fairly rapid pace over the past five years or so.
The AAFP fully supports this model of care as an alternative to “fee for service” (FFS) medicine, and those who are practicing in it have stated it provides both more time with their patients and improved physician satisfaction (mainly in being able to focus more on the practice of medicine). Additionally, in our radio discussion, it was noted that administrative resources are significantly less with DPC (approximately 1.5 administrators/1 physician) versus FFS medicine (4.5 administrators/1 physician), mainly due to less paperwork in filling out insurance claim forms.
Further, patient panels (numbers of patients in a DPC) are considerably less than in FFS (approximately 800-1,000 versus 2,500). This allows more time with patients and may prevent or reduce referrals to more expensive specialists, since earlier diagnoses and attention to prevention within DPCs may minimize the necessity of referrals. In turn, costs for care may ultimately be reduced.
At an average price of $70 per patient per month, physicians practicing in DPCs realize approximately $675,000 – $840,000 per year in revenues. Considering admin costs are lower, there appear to be opportunities to make this a viable business model.
Much of the business that DPCs attract and contract with comes from employer-funded healthcare, as companies are seeking ways to decrease their overall costs of care for their employees. Thus, marketing initiatives for DPC are directed at employers, and not individuals.
A couple of major initiatives are brewing which could drive this market. The first is federal legislation–i.e., the Primary Care Enhancement Act, which would allow patients to pay for DPC with their health savings accounts. These bills appear to have bipartisan support. Another is the consideration of Medicare to enter this market. Medicare recently published comments on DPC from a request for information it made back in November 2017. It received over 1,000 comments on direct primary care. The “Business of Health Care” panel felt it was likely that Medicare would undertake a demonstration project on this in the near future. If both of these initiatives come to positive conclusions, DPC will likely take off.
