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Explore direct primary care, concierge medicine, and other successful direct care models.
Direct primary care (DPC) is growing in popularity, particularly as healthcare costs for patients continue to increase. The DPC model is relatively simple – patients pay a monthly membership fee and receive basic primary care services from the DPC physician for that fee. There are no additional visit charges and some DPC practices offer discounted fees for laboratory services and prescription medications. However, DPC patients are not eligible for Health Savings Accounts (HSAs), according to current IRS regulations. That policy may be changing.
The Primary Care Enhancement Act (HR 3708), introduced in July 2019, would allow patients to participate in HSAs and to use those funds to pay their monthly DPC membership fees. Currently, DPC membership fees are considered to be health insurance premiums, so DPC patients are not allowed to use their HSAs to pay those fees without incurring a tax penalty. HR 3708, designed to amend the IRS Code of 1986, was approved by the House Ways and Means Committee in October 2019.
Although widely supported by a range of organizations, including AAFP and the HSA Council of the American Bankers Association (ABA), there is some language in the bill that has been met with concern, particularly by the Association of American Physicians and Surgeons (AAPS).
Indicating that HR 3708 “fails to expressly define DPC arrangements as a qualified medical expense under IRC 213(d),” “unclear language may impede patient access to prescription drugs at near-wholesale pricing,” and that the proposed aggregate cap of $150 “constrains any flexibility the bill might have for allowing agreements with non-primary care specialties,” the AAPS submitted a letter on October 22, 2019, outlining “a number of concerning areas of this bill that we believe improperly limit the design of DPC arrangements eligible for HSA use.”
Previously introduced in 2017, the bill was not acted upon and was cleared from the books. HR 3708 was forwarded to the full House for consideration and approval in October 2019.
Krystle Thornton November 1, 2019Read
The simplicity of the direct primary care (DPC) practice structure is such that overhead, including the need for staffing, is reduced significantly. DPC physicians do not bill insurance companies and patients do not pay a fee for each visit or service provided to them. Billing and accounts receivable are much less complicated than in a traditional independent physician’s office. The front office in a DPC, though, does have a major role for the patient and for the practice.
One of the main responsibilities of the front office is to communicate with patients and potential patients. The front desk gives the DPC patient the critical first impression of the practice. In some practices, the physician may actually come out to greet patients and escort them to the exam rooms; however, the first point of contact is the person in the front office.
Patient engagement is top priority for the DPC front office. Patients may have questions about the membership fee, what is included, how it is paid, and when it is due. The front office staff at a DPC practice should understand the concept of the DPC model to the point where it can be explained thoroughly to potential patients and clarified for current patients. Many DPCs also offer discounted fees on lab services or prescriptions and the front office will be responsible for handling those transactions.
Given the efficiency of the DPC practice, it is up to the front office to maintain an organized healthcare environment for both patients and the physician. Membership fees are the sole income for the practice, so a well-run office is critical for the financial success of the practice, which still must be run as a business. With fewer staff members, patients have only a few contact points in the office, so the front office becomes a critical piece of their visit as well.
The good news is that a DPC patient panel is typically much smaller than a traditional practice’s and the front office staff has a perfect opportunity to get to know each patient better, providing a higher quality healthcare experience for every patient.
Gabby Marquez September 20, 2019Read
Independent physicians searching for alternatives to the traditional care model or who feel the need for assistance in keeping up with compliance regulations, administrative contracts, and other overhead issues may be investigating several options. Two possibilities for independent physicians include transitioning to the direct primary care (DPC) model and joining an independent physician association (IPA).
Direct care is a medical practice model where providers contract directly with patients. For almost all of America’s history, Americans paid their provider directly for care. It was only in the 20th century that health insurance outpaced out-of-pocket pay as the primary revenue source for medical practices. But since the turn of the 21st century, direct care has made a resurgence.
Patients enjoy the direct care model as it enables them to plan for their medical expenses and to enjoy cost savings as well as quality healthcare. Direct care physicians see fewer patients, with typical patient panels of between 350 and 500. The provider is able to spend more time with each patient and has less overhead and administrative burden, when the practice does not have to deal with insurance companies and wait for financial reimbursements.
The IPA is designed for independent physicians who want the advantages of a larger group but who also want to retain their independence. As the AAFP defines it, “An independent physician association (IPA) is a business entity organized and owned by a network of independent physician practices for the purpose of reducing overhead or pursuing business ventures such as contracts with employers, accountable care organizations (ACO) and/or managed care organizations (MCOs).”
Further, AAFP lists the advantages for the independent physician participating in an IPA:
The independent physician has options for improving the practice, providing more personalized healthcare, and optimizing the practice’s efficiencies. The direct primary care model and an independent physician association are two potentially positive alternatives.
Krystle Thornton August 29, 2019Read
The direct primary care (DPC) model is, on the surface, relatively simple. Patients pay a monthly membership fee for basic primary care services. The DPC physician does not accept nor bill insurance for any of the services provided. Patients are encouraged to secure “catastrophic” insurance for hospitalizations or emergencies that may not be covered by their basic DPC membership fee, but that insurance is not managed or billed by the primary care physician.
Many primary care physicians who have transitioned to a DPC model say that the administrative burden of practice overhead is significantly reduced in their new practice. Office management is slightly easier, as there is no insurance billing, no forms to complete for reimbursement, and no phone calls to make to establish approval for services.
Risheet Patel, MD, as reported by Revcycle Intelligence, transitioned his family practice to a DPC model out of frustration over having to focus on the burden of fee-for-service billing, among other things. He says that the fee-for-service model was actually increasing his costs because of the office management requirements. He had to hire billers and coders and worry about insurance reimbursement, instead of focusing on his patients’ needs.
Though the office management structure of a DPC practice is simpler, given the membership fee model, the practice is still a small business. Patel adds that “You have to handle all of the day-to-day business processes that any small business owner has to worry about. So, accounting, payroll, marketing, insurance and those types of things.”
The DPC model generally allows for “Less administrative burden, generally allowing for longer interactions,” as described in a recent research article published by MGMA. The article also points out that an advantage of the DPC practice is that it can result in “Better health outcomes through better access to physicians.”
Dr. Patel found this to be the case as well, which is one of the major reasons he transitioned to the DPC model. He is able to spend more time with each patient but realizes that office management is still necessary. “That’s probably the biggest thing to think about as you transition away from an employed position to a DPC position. You, the physician, are now also the business owner, and you have to start making business decisions.”
Gabriella Marquez July 31, 2019Read
Direct primary care (DPC) physicians who see elderly patients may choose to participate in Medicare or may decide to opt out. The decision to accept Medicare for their basic primary care services has typically meant dealing with Medicare regulations that have precluded DPC practices from charging a membership fee for anything except “non-covered services.” As DPC Frontier explains, that requires carefully ensuring that each charge is “for a service that does not appear anywhere on Medicare’s schedule of services.”
A new initiative from the Center for Medicare and Medicaid Innovation (CMMI) may change the way DPC physicians are able to attend to and receive payment for their Medicare patients, a change that may make it more enticing to participate in Medicare. The Centers for Medicare and Medicaid Services (CMS) Primary Cares Initiative, scheduled to launch in January 2020, is designed to pay providers for outcomes rather than services.
The Primary Care First (PCF) models are focused on improving healthcare outcomes, reducing hospitalizations, and reducing the total cost of care. As CMS explains, PCF is “a set of voluntary five-year payment model options that reward value and quality by offering innovative payment model structures to support delivery of advanced primary care.”
Physicians participating in the PCF model may assume some financial risk but might also see additional revenue as a result. With the move away from payment for services, DPC physicians will be able to focus on their primary mission: improving the health of their patients as well as improving the doctor-patient relationship.
Under the Primary Cares Initiative, PCF providers “will be incentivized to deliver patient-centered care that reduces acute hospital utilization. Primary Care First is oriented around comprehensive primary care functions: (1) access and continuity; (2) care management; (3) comprehensiveness and coordination; (4) patient and caregiver engagement; and (5) planned care and population health.”
CMS states that PCF will provide “payment to practices through a simple payment structure, including:
Krystle Thornton July 24, 2019Read
An independent physician operating a direct care practice is running a business, in addition to caring for patients. Operating a business requires that the provider maintain financial records, hire and manage staff, and conform to legal regulations for the business entity. Part of the consideration for a direct care practice is whether to operate as a limited liability company (LLC) or a professional limited liability company (PLLC).
An LLC protects the owner of a business from liability in regard to financial debts. When a business owner forms an LLC, the owner is not personally liable for the company’s debts and so the owner’s personal assets are protected. The LLC itself is, legally, the responsible party and the company’s assets are subject to any potential litigation. The business owner must keep up with any state filing requirements as well as annual reporting to ensure the LLC continues its legal protection.
A PLLC is designed for professionals, typically those that require licensing, such as lawyers, realtors, dentists, and physicians. In fact, many states require that healthcare providers form PLLCs rather than LLCs. The direct care physician should check with the state’s business licensing department to determine that particular state’s legal requirements.
While both the LLC and PLLC protect the direct care physician’s personal assets, neither will protect against a malpractice charge. That requires separate insurance protection. However, Attorney Lee R. Phillips, writing in MD Magazine, states that “the fact is that most of the lawsuits and liability issues will involve issues other than professional malpractice. An employee will sue over an HR problem. A patient will slip and fall in the parking lot. Your ‘partner’ or bookkeeper will embezzle money.” For these situations, the PLLC will offer protection for the direct care physician.
Like most medical businesses, direct care practices have legal needs outside of the scope of a physician’s training. Taking advantage of legal help and resources can play a large role in helping your practice comply with laws and employ legal protections.
Gabby Marquez July 8, 2019Read
When an independent physician converts the practice to the direct primary care (DPC) model, the provider knows that some patients will not follow. That is actually ideal for the DPC’s patient panel size. The DPC provider typically decides to pursue the model for the practice because the patient panel is smaller and the provider can give each patient more time and more attention. The patient load sweet spot for DPC physicians varies but is always much lower than that for the independent physician in a traditional practice.
Ideal patient panel sizes for traditional practices can fall in the 2000-2500 range. Though there is various research as to the validity of such a patient load and the benefits to the patient and the provider who is charged with caring for these patients, physicians in traditional practices do see more patients than DPC physicians.
According to a survey conducted by the AAFP in the spring of 2018, involving both DPC practices and non-DPC practices, “the average DPC panel size is 345 patients. The average target panel size is 596 patients.” Those providers who have started a DPC practice from scratch, 54 percent of those participating in the survey, are challenged with building up their patient panel, while those converting an existing practice, 34 percent of those responding to the survey, may be challenged with losing patients from their traditional practice.
Given the time it takes to build up a practice, particularly one as innovative and unique as a DPC practice, many of those responding to the survey have not yet reached their target panel size. In fact, the survey found that “Only 17 percent of DPC practices have achieved their ideal panel size. Of those that have achieved their ideal panel size, the average time to achieving a full panel was 20 months.”
The patient load sweet spot for any DPC physician is that which supports the practice financially and that still enables the provider to give each patient the personalized attention that characterizes the DPC practice model.
Krystle Thornton June 21, 2019Read
Direct care physicians are often able to provide their patients with discount options for services that are not covered in their monthly membership fees, such as laboratory services and prescription drugs. A number of direct care physicians, however, have opted to provide in-house dispensing of medications as part of their services within the practice.
Ron Lamberts, MD, an Elation Health client, writes in Physicians Practice about his experiences, at first doubting the need for in-office dispensing and then deciding that it is a benefit for both his patients and his practice. Dr. Lamberts did not think that in-office dispensing was necessary initially, since his patients were happy with the existing services he provided them and his practice was growing. He changed his mind on the urging of colleagues and began dispensing medication in his office in late 2017.
As Dr. Lamberts describes it, “I underestimated the impact it has had on my practice. It has become one of the biggest areas of patient satisfaction, as well as a very powerful marketing tool to both draw in new patients and retain my current ones.” He cautions that there are some factors to consider for the direct care physician who is weighing the option of in-office dispensing.
First, regulations differ by state as to whether medications can be dispensed from within a direct care practice. In fact, in Texas, Minnesota, and Wyoming, in-office dispensing is not allowed at all. In other states, there are specific requirements that must be met before the direct care physician can dispense medications. Dr. Lamberts practices in Georgia, which has “some of the most lenient dispensing laws for physicians and does not require extra licensure within the practice to dispense.”
Other considerations include choosing medication vendors, deciding on pricing, and integrating the prescription drug services with the practice’s existing technology. Dr. Lamberts uses Elation Health’s electronic health record (EHR) system, which assists his direct care practice with inventory and billing. “Our solution allows us to enter prescription in the EHR, go to the dispensing software and print the label, and send it to our billing system. If the prescription brings the inventory down to a set level, it notifies us that we need to order more. It’s quite simple to use and lets us manage an inventory of over 100 drugs.”
Gabby Marquez May 30, 2019Read
The direct care model is based on patient memberships. Rather than pay the practice for each visit, the patient pays a monthly fee that covers the basics of primary care as well as some laboratory and diagnostic procedures, depending on the practice. The direct care physician’s financial stability depends on those monthly membership fees. In turn, the practice can be more efficient with less overhead and a reduced administrative burden, since there are no insurance reimbursements to file.
Other specialty practices are starting to follow this same model, recognizing its benefits for the members as well as the provider. Some are following a slightly different model, still based on membership fees but more directly related to the concierge model. A concierge provider offers patients more personalized services for a higher monthly membership fee than that found in direct care practices.
A recent article in Physicians Practice refers to the “membership model of the future” as hybrid concierge. In a hybrid model, patients within a traditional practice can opt to join the concierge plan and pay a monthly membership fee rather than per-visit fees. The hybrid concierge model “works very well for specialists like cardiologists, endocrinologists and gastroenterologists who see a healthy cross section of patients on an ongoing basis.”
Robbie Kellman Baxter, a subscription and membership business model consultant, writing in the Harvard Business Review, advises businesses that are investigating the potential of the membership model to consider what model leaders typically do:
Baxter further suggests that the membership model will not be successful if the goal is to simply produce a recurring revenue stream. Most primary care and specialty providers are focused on the benefits of such a model for their practice as well as for their patients, including more personalized healthcare, cost savings, and higher quality outcomes.
Gabby Marquez May 22, 2019Read
When launching a direct care practice, there are a number of decisions that have to be made, including where to locate the practice and how many staff members will be required for the practice to run smoothly. Two very important decisions focus on price and services.
Direct care practices operate on membership fees. Those fees must be structured such that the practice will operate efficiently and successfully, retaining and growing the patient panel. The membership fees must also be viewed by patients as affordable and as offering appropriate value. Direct care practices do not accept insurance payments so the membership fees will fund the operations in total.
Elation Health’s Direct Care Playbook offers guidance on setting membership fees that make sense for the practice and the patient. Membership fees range widely and can vary on an individual and family basis. Accounting for age, geography, and local patient demographics are all key inputs to effective pricing strategy.
Direct care physicians also need to decide how much they need to make to keep their practice afloat, and how much they would like to make in an ideal situation. This calculation can be accomplished taking:
Assume a baseline of 300-500 patients per physician as an average panel size. This calculation will give a practice a break-even price point, and the physician can then consider desired take home pay as a final input in setting pricing for their practice. When choosing a fee schedule, consider the overhead of managing more complex pricing or if staff will have technology to support your chosen pricing schedule.
As to which services to offer, most direct care practices offer basic primary care services as well as treatment for minor injury or illness. Some even include diagnostic and laboratory services in the basic membership fees. Most direct care physicians will also offer “enhanced services” such as “real time access via advanced communication technology to their personal physician, extended visits, in some cases home-based medical visits, and highly personalized, coordinated, and comprehensive care administration.”
The decisions as to which services to offer and the level of membership fees to charge are dependent on each other. The direct care physician must be able to support the practice with the membership fee revenue, providing services that patients need and want in a cost-efficient manner.
Gabby Marquez May 22, 2019Read