Understanding Direct Careby Zak Holdsworth
February 16, 2015
Where We Are NowBraving a New FrontierThere’s no denying that we’re braving a new frontier in healthcare -- 15 million new people are now insured under the Affordable Care Act (ACA), annual premiums for the average family are higher than they have ever been, hospitals are struggling to keep their doors open, and providers are grappling with how they will be reimbursed for services provided.
There's Not Enough Time in a DayToday, providers are challenged to figure out how to provide better care to more patients. Many providers say they want to provide the type of intensive, preventative care that patients are seeking, but feel that the odds are stacked against them.
According to a 2012 article in the Annals of Family Medicine Doctors, the average primary-care physician has over 2,300 patients in his or her care. The result of these enormous patient panels is doctors who say they’re only able to spend between 11 to 22 minutes with each patient. Some doctors have told us that the number is closer to 5 minutes. What’s more, the current fee-for-service model, where doctors get paid per office visit, test, or procedure, is said to incentivize treatment versus preventative care.
Facing a Doctor ShortageIt doesn’t look like it will get better before it gets worse, with predictions of a doctor shortage and a growing population of Baby Boomers in need of care. The Association of American Medical Colleges predicts there will be 45,000 fewer primary care physicians by 2020, while the population over the age of 62 will increase from 46 million to roughly 83 million by the year 2030, according to the US Census.
For patients, the current system has them paying more and getting less. Merritt Hawkins, a national healthcare search and consulting firm, found that the average wait time to see a family physician in the 15 markets they surveyed was 19.5 days. According to the Kaiser Family Foundation/Health Research & Educational Trust (HRET), health insurance premiums have increased 80 percent since 2003, which is almost 3 times the increase in wages (31 percent).
Getting Back to Patient-Centric CareThe current business model of rapid-fire visits and reams of paperwork to get paid for their care and expertise isn’t working, not for doctors, and not for the patients they’re trying to help.
Born of the fatigue with the current state of healthcare there has been an upsurge in innovative healthcare models. The goals of these models are two-fold: 1. Provide patients with high-quality, patient-centric healthcare, and 2. Enable doctors to run financially sustainable businesses while offering their patients more personalized care.
A New Model for HealthcareUnderstanding the Direct Care Landscape
Direct Care, sometimes called Direct Primary Care or retainer-based medicine, is growing at a rapid clip, quickly becoming one of the more well-known healthcare models.
Direct Care: What It IsThere are two main criteria that define Direct Care practices. The first, is that Direct Care providers charge their patients a recurring membership fee to be part of their practice. In exchange for that fee, patients receive access to a pre-defined set of primary care services, which typically includes better access to the provider through same or next day appointments, remote access including text and cell phone access, longer and more in depth visits, and home visits. In many Direct Care practices, basic labs and procedures are also offered. Not only do Direct Care providers deliver these additional improved services, they typically do them with no additional cost or copay. Dr. Phil Eskew, a leading expert in the Direct Care industry, says there are some cases when providers will charge a fee to cover basic services. According to Eskew, this doesn’t prohibit them from calling themselves a Direct Care practice, provided the fee is less than the monthly membership fee. For example a practice which charges $50 per month for a membership and $10 for office visits would still be considered a Direct Care practice.
The second criteria for qualifying as Direct Care is based on the provider’s relationship to insurance. Direct Care providers operate completely outside of the traditional fee-for-service based insurance or third-party payer system, meaning that they do not accept insurance nor attempt to get reimbursed for the services they provide. This does not mean that providers don’t charge for certain services, as mentioned above. It just means that these payments are made outside of the fee-for-service (FFS) insurance system.
Although Direct Care providers do not accept typical FFS insurance, there are numerous examples of providers who contract with employers and payers on a fixed per-member-per-month contract to provide the same level of high-quality healthcare to their patients. Good examples of providers who do this are Nextera Healthcare and Palmetto Health, both of whom provide care directly to consumers and sponsored employees.
Not All Membership Medicine is Direct CareThere are numerous examples of practices that charge patients a membership fee in exchange for same-day or next-day appointments and labs, while still continuing to accept and bill insurance for services provided. While this type of practice is growing in popularity and scale, this is not Direct Care. True Direct Care does not bill insurance for services provided. A classic example of this is One Medical, who charges an annual membership, while continuing to charge insurance on a fee-for-service basis.
Is Concierge Medicine Direct Care?Many wonder whether Concierge Medicine, a model that began in the 1990s, is considered Direct Care. The answer is, it depends. In its early days, Concierge Medicine offered those who could afford it a way to receive personal, high-quality care. Because it was thought to cater to the wealthy, charging patients upwards of $20,000 a year, some termed it the “country club” of medical care. Today, some continue to cite price and exclusivity as the defining differences between Concierge and other types of membership models, although there are many Concierge Medicine practices that charge significantly less for membership.
To accurately determine whether a Concierge practice is providing Direct Care, it’s actually not about price, but about the practice’s relationship with insurance companies. If the practice’s membership model does not double dip by charging insurance for non-covered services, and they do not charge a per-visit fee that is more than their monthly membership, then they are a Direct Care provider. If the practice charges a membership fee and continues to bill insurance, then it is not Direct Care. Good examples of providers who consider themselves concierge medicine, who could also be considered Direct Care are Dr. Radley Griffin, and Priority Physicians.
The Different Flavors of Direct CareWithin Direct Care, there are a wide range of delivery models emerging. The first of those models are the solo practices, practices like Dr. Rob Lamberts, and The Doc Shoppe. These practices are formed around one provider and one location. With solo practices, the patient base is mostly retail, meaning that patients are individuals and families who contract directly with the doctor and their office.
In the multi-location models of Peakmed, Iora Health, and Paladina Health, the practice operates multiple sites and contracts directly with employers to meet their employee healthcare needs. In some cases, the provider actually sets up shop within an employer’s headquarters to offer onsite medical care.
The third model, the Affiliate Network Model, or hybrid model, found in Nextera Healthcare, Access Healthcare Direct, and R-Health, also caters to the health needs of individuals and employers, but does so through a network of Direct Care providers and doctors who accept insurance. The way that this model works is that providers who are interested in converting some or all of their fee-for-service practice to the membership model can do so by becoming an affiliate.
In the case of Nextera Healthcare of Colorado, providers who join as affiliates receive support with marketing, operations, and legal, allowing them to spend the bulk of their time serving patients. For Nextera Healthcare, a larger pool of affiliate providers means greater leverage when talking to employers about meeting the healthcare needs of their employees. More providers also offers the scale that is often needed to negotiate more favorable rates with ancillary service providers like laboratory and imaging companies.
What It Costs and What It OffersThe cost of Direct Care medicine can vary greatly depending on the model. In some Concierge practices, patients can pay tens of thousands of dollars annually to be part of a doctor’s practice. In other Concierge and DPC practices, patients pay less than six hundred dollars annually.
According to a study by Concierge Medicine Today of Direct Care Practices, which includes both Concierge and Direct Care models, 61 percent of Direct Care practices across the US charge patients less than $135 per month. And, of those same practices, more than 40 percent charge less than $100 per month.
In a Concierge practice, the monthly fee, sometimes paid annually, may or may not cover office visits and services. What the fee does include is enhanced and more convenient access to the provider with same day or next day appointments.
In a Direct Care practice, the monthly fee, sometimes as low as $39 per month, also offers greater access to the provider and longer appointments and includes office visits. In some practices, basic labs and routine primary and urgent care issues are included.
With Direct Care, the price a patient pays is often determined in one of two ways. In the first type of practice, the price the patient pays is determined by the tier they select. In this model, a patient pays more per month for more services. The second type of practice, the more common approach, is one in which the price a patient pays is determined by the age of the patient. In this model younger patients pay the lowest membership fee and older patients, who are more likely to have more complex health issues and require more routine care, pay a higher monthly fee.
How Doctors Benefit“Being able to offer this level of service and attention to my patients has been truly gratifying as a clinician.” -Dr. Thuc
For providers, Direct Care provides a meaningful alternative to fee-for-service billing. While a 2,300 to 3,000 patient panel isn’t uncommon for a provider in the traditional fee-for-service model, Direct Care providers are able to maintain practices that are a quarter to half that size. Eliminating the financial burden of third-party payers from a practice (estimated to be 40% of the cost of primary care) enables providers to maintain these smaller patient loads.
Additionally, eliminating the administrative burden of completing insurance claim forms, dealing with complex coding requirements, and negotiating reimbursement rates, gives providers more time to spend with patients. Time that can be spent listening, diagnosing, and providing quality care.
Another benefit for providers is the opportunity to build a valuable practice that they can one-day sell. With a traditional practice, the value of the practice is determined by adding the practice assets and accounts receivable, the latter which have been set by hospitals. The Direct Care practice breaks this model by giving providers a recurring source of revenue at a price point that they determine.
Where We Are HeadedThe Direct Care model is set to see enormous growth as doctors recognize that the model can offer a better, more efficient way to deliver more patient-centric healthcare.
There is work to be done inside and outside the industry to better define Direct Care. This clarity is necessary to help providers and consumers understand the benefits -- both the financial savings they offer and the increased quality of available care.
State and federal policymakers can do much to remove the barriers that make it difficult for doctors to launch and patients to participate in Direct Care practices. Twenty four states have already passed legislation to ensure that Direct Care services are not treated as insurance products by state regulators, which removes significant red tape for providers and patients. That said, there are still twenty six states that have yet to clarify how Direct Care services are classified, making it a difficult business model to adopt for providers in those states.
Also, according to Jay Keese, the Executive Director of the DPC Coalition, “the IRS is considering changes in guidance that would make payments to DPC practices tax-preferred qualified medical expenses”, or in other words, would allow patients to use their Health Savings Accounts (HSA’s) to pay for their Direct Care membership fees which will enable more patients to participate in this model.
More education and tools, plus more collaboration and sharing among providers, will enable those who are navigating the Direct Care approach to make informed decisions about how to launch, manage, and grow their Direct Care practice.
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