Direct primary care model: Cutting out the insurer

A provision in the health reform law might provide a big boost to a little-known type of primary care.

By — Posted Aug. 1, 2011

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A small but enthusiastic minority of primary care physicians believe they have found a practice model that can save money, improve patients' long-term health and drastically reduce administrative hassles: direct primary care.

Direct primary care practices are an offshoot of the retainer care model, which provides unlimited or less-restricted access to physicians for a set fee. Under direct primary care, patients pay a monthly fee -- sometimes less than $100 -- for unlimited access to a range of primary care services, possibly as complex as minor surgeries and x-rays. Patients at these practices are encouraged to have basic health insurance to pay for specialist and hospital care, otherwise uninsured patients pay out of pocket for care outside the practice.

Physicians running direct primary care practices say there's no reason for health insurers to be involved in primary care. Most people's needs for such care are predictable. The monthly fees mean doctors can maintain much smaller patient populations, spend less time billing payers and more time providing care, and communicate with patients more by phone and email.

"What you have is a patient and a doctor and nobody in the middle," said John Muney, MD, president of AMG Medical Group in New York, a direct primary care practice that charges between $79 and $129 a month per patient.

Direct primary care practices remain a small niche in the private health care market. Between 50,000 and 100,000 people are in such practices, according to an estimate by the Direct Primary Care Coalition, an informal industry association in Washington state.

But the model could become more popular in a few years. Under a provision in the health system reform law, direct primary care practices will be able to participate in health insurance exchanges that will launch by 2014. Those marketplaces are expected to provide coverage choices for tens of millions of uninsured people, as well as for many others who get their coverage from other sources now.

To qualify to offer their products on exchanges, direct primary care practices must provide medical homes and be packaged with wrap-around health plans for noncovered services. Lower-income individuals who choose such combination plans will be eligible for federal subsidies to help cover the cost.

The direct primary care model is attractive to doctors who are frustrated with the amount of time they spend on administrative work relative to patient care, said internist Garrison Bliss, MD, co-founder and chief medical officer for Qliance Medical Management, a chain of three practices in Seattle with plans to open clinics around the country. "The expansion of coverage to over 30 million Americans means that it is more critical than ever to find ways to re-attract clinicians into primary care. Direct primary care practices do just that," he said.

The practices still face significant obstacles to expanding. For example, many employers offer only traditional health insurance, which makes employees reluctant to pay more out of pocket for primary care, especially if they're healthy.

"People don't like the idea of paying for something that they haven't received," said Jared M. Hendler, MD, a family physician with a direct primary care practice in Bainbridge Island, Wash., near Seattle.

But employers increasingly are looking for other options to deal with rising health insurance premiums. Direct primary care practices hope to become one such attractive alternative.

Back to the future

Although many people today might not have heard of the concept of direct primary care, employers for decades relied on very similar practices. "It's basically how health care was paid for before health insurance companies came in and changed the model," said Lester Baskin, MD, an internist who operates a direct primary care practice in Portland, Ore.

Dr. Baskin's grandfather, also a physician, worked at the Western Clinic in Tacoma, Wash., several decades ago. It was the nation's first retainer care practice, offering basic health care to lumber mill employees for 50 cents a month.

Today, retainer care practices vary in terms of services offered and costs to patients. Higher-end boutique practices can charge $10,000 a year or more for consumers to be part of patient panels as small as 50 people and for additional perks such as monogrammed bathrobes. Direct primary care practices charge much less but still might have panels that are a third the size or smaller of the typical 2,000-person panel.

Perhaps fewer than 1,000 physicians worked in direct primary care practices nationwide at the end of 2009. But that would be several times as many as in the late 1990s, according to an October 2010 report by the National Opinion Research Council at the University of Chicago.

"I'd be hard-pressed to call it a large evolving trend," said Roland Goertz, MD, president of the American Academy of Family Physicians. Still, he knows of family physicians who have switched to direct primary care and report that they are happy with the decision.

Trouble severing the insurance cord

Some direct primary care practices continue to accept patients with traditional health insurance. These physicians concede that such a hybrid practice is not ideal, but their economic situations require compromise.

Urgent care specialist and geriatrician Vic Wood, DO, runs two clinics in West Virginia and one in Ohio that provide a range of primary care services for monthly fees of $83 per person or $125 for families. About 500 people were signed up for his services as of late June.

But Dr. Wood also averages more than 14,000 annual visits from non-direct primary care patients at his clinics, most with private insurance. He's hoping more of them will switch to the direct primary care side. If they do, his administrative work would decrease and he could spend even more time on chronic disease management.

Dr. Muney, a general surgeon in New York, also sees more privately insured patients than not, but only from one major insurer with whom he has a good relationship. "I'm quite sure by the end of this year or next year that balance will change" in favor of direct primary care, he said.

Dr. Baskin said direct primary care practices are most efficient when they rely exclusively on retainer care pay. "Hybrids provide none of the benefits and all of the disadvantages of the direct model."

Unlike health insurers, some direct primary care practices have found that they actually fare better financially when they attract sicker patients. These patients require more office time but often prove more willing to pay for enhanced access over the long term, physicians said.

The lure of enhanced access

Dr. Baskin worked for Kaiser Permanente in Portland, Ore., for six years before starting his own direct primary care practice in 2005. "The aspects of medicine that I really liked I couldn't sustain in a conventional model."

Dr. Baskin charges adults $150 a month, and spouses or partners are an additional $100. Employees at the same business pay $79 a month if at least five sign up. Children's care is about $40 a month.

Patients say they love being able to communicate with Dr. Baskin by email and phone. "That almost sells the practice by itself," he said. Sometimes they email or text him photos that can help identify medical problems. He personally sees about 12 patients a day, half the number of a typical physician with privately insured patients, and his practice is at its limit of 300 patients.

Other direct primary care physicians have had more difficulty building their patient bases. Dr. Hendler, the solo family physician on Bainbridge Island, is losing money despite being only a 30-minute ferry ride from Seattle. That's mostly because he has just 80 patients, each of whom pay monthly fees that range from $90 for children to $225 for people 70 and older. Twenty-five more enrollees and he would break even. He said he would close his patient panel at 200 people.

The biggest obstacle to growth is the high rate of privately insured people in the area who are satisfied with their coverage, Dr. Hendler said. "All I can say is that it's not working yet, but we are making progress."

Hopes for more regulatory backing

Dr. Wood and Dr. Hendler said they ran afoul of their state insurance commissioners not long after starting their direct primary care practices. Regulators ruled that they were offering health insurance and would have to be regulated as such.

So physicians in these states lobbied their legislatures, which adopted measures allowing direct primary care practices with certain requirements, including that they explain the limits of the coverage. The laws and other actions by state regulators helped blaze a path for the practices. U.S. Sen. Maria Cantwell (D, Wash.) and other members of the Washington state delegation helped insert the direct primary care provision into the health system reform law.

Direct primary care champions such as Dr. Bliss, of Qliance, are eagerly awaiting HHS regulations defining exactly how the practices will merge with wraparound coverage and be sold in exchanges.

The first HHS proposed rule on the exchanges, released July 11, indicated the department would prefer a single payment for the direct primary care and the wraparound coverage.

Dr. Bliss said this fee should simply pass through health insurers to the direct primary care practices, otherwise health plans could have some control over the practices' finances.

Not everyone is sold on the idea yet.

Direct primary care might not be viable on a large scale, said Robert Berenson, MD, a senior fellow at the Urban Institute and a member of the Medicare Payment Advisory Commission. For example, some people still will need to see specialists and go to hospitals, increasing the chances that there will be gaps in care unless the wraparound plans are very well integrated with the primary care.

Dr. Baskin acknowledged that the jury is still out on whether spending more on primary care actually saves money in the long run. Also unclear is how much the combination plans will cost consumers.

But Dr. Bliss said experience shows that the math might prove relatively simple. "You don't have to load down all the doctors with huge panels in order to make this work economically."

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What to consider before making the leap

The American Academy of Family Physicians advises doctors who are considering converting to a direct primary care or other type of retainer practice to ask themselves a number of questions, including:

  • Do I have a plan to transition my patients who won't pay the fee?
  • Am I willing to be on call 24 hours a day, every day?
  • What services do I plan to offer?
  • If I still accept health insurance, with which health plans will I continue to participate?
  • Is it mandatory to have patients sign a waiver informing them of their financial responsibilities?
  • If transitioning to a full retainer practice, what type of advanced notice is contractually required by health plans and Medicare?
  • How many members do I need at the set fee to meet my overhead?
  • During the transition, what financial outlay will be required to stay solvent?

Source: "Retainer Fee Discussion Paper," American Academy of Family Physicians, 2006 (link)

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States with laws on retainer practice

Some of the measures were in response to rulings by insurance commissioners that retainer care had to be regulated as insurance.

West Virginia, 2006: Allowed physicians to provide primary and preventive health care for a prepaid fee through a three-year pilot project that began in 2007. The pilot was extended for one year and expired on June 30, but the three existing retainer practices were allowed to continue.

Washington, 2007: Permitted retainer practices but specified that these practices cannot submit claims or discontinue care to patients based solely on health status. Practices can turn away patients if they reach capacity and can accept payment from some third parties, such as employers.

Oregon, 2011: Exempted retainer practices from meeting insurance code regulations if the practices are certified by the state. Certification in part requires that the practice cannot have been licensed as an insurer, must provide only primary care, and must disclose to patients that the practice is not insurance.

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External links

Direct Primary Care Coalition (link)

"Direct Patient Provider Primary Care Practices: Annual Report to the Legislature," Washington State Office of the Insurance Commissioner, Dec. 1, 2010 (link)

"Retainer-Based Physicians: Characteristics, Impact and Policy Considerations," National Opinion Research Center at the University of Chicago and Georgetown University, October 2010 (link)

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