Pricing considerations for direct primary care practices

As an independent physician, the idea of moving to a direct primary care (DPC) model can be intriguing. The model involves patient payments that are made through membership fees rather than per-visit charges. Typically, the patient panel size is also smaller for DPC providers. Many DPC providers do not accept insurance or bill insurance only as a convenience to patients. In the DPC model, administrative tasks involved in practice management are reduced and time spent with each patient is increased.

When a primary care provider decides to operate under a DPC model, however, decisions also have to be made about the pricing structure for the practice. Since there are no co-pays or visit fees, the practice’s membership fees are the primary income and so must be considered with care.

The American Academy of Family Physicians (AAFP) states that “nearly 50% of a family physician’s workday is spent outside of face-to-face visits, often in conducting vital follow-up or helping to coordinate care for patients as they communicate with other clinical providers.” In a DPC model, those additional costs can be covered with the appropriate membership fee.

Elation Health has created a Direct Care Playbook, specifically to help independent physicians with DPC considerations such as pricing. The Playbook provides the following guidance on how to handle pricing for a new DPC practice:

Setting per-patient pricing is a key final step in setting up your practice. 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:

  • Sum all expenses (salaries, office space, and all other operating expenses)
  • Divide by anticipated size of the patient panel

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.