The direct primary care model is gaining traction. Is it right for you?

As he was nearing the midpoint of his career in family medicine at the Mayo Clinic, David Usher, MD-like many primary care physicians-knew something was missing from his professional life, and his personal life.

He found his answer in 2010 after reading an article in Medical Economics about a direct-pay primary care practice in North Carolina.

“I was experiencing the same thing a lot of PCPs are. The system just over time ratcheting down what you get paid and forcing you to work harder and harder to get it,” Usher says, adding there was too much hassle to get paid and patients couldn’t afford the care he was recommending.

He showed the article to his wife, and that’s when his life changed.

Nearly 2 years later, he built an independent family practice in Wisconsin to about 2,000 patients that he describes as “loyal and happy.” Yet Usher says he is starting to feel some of the same old pressures. “You’re continuously looking at the bottom line and how many patients you are seeing a day and counting the dollars,” Usher says.

Squeezing as many patients as possible into a day and having to be more focused on which codes will result in the highest reimbursements isn’t the kind of practice many physicians envision. For physicians whose ideal was simply hanging a shingle out, the outlook is even worse.

The number of independent physicians dropped from 57% in 2000 to 39% in 2012, and those that are left are looking to new practice models to hold their ground, according to the Accenture Physicians Alignment Survey.

Accenture estimates that one in three remaining independent physicians-their ranks decline by 5% each year-will look to adopt subscription-based practice models to achieve higher yields, and that trend will continue to increase by 100% annually over the next 3 years.

The survey also included some of the top reasons physicians give for leaving independent practices to be employed elsewhere. The cost and expense of running a business was cited as the main reason for leaving independent practice by 87% of physicians surveyed. Another 61% cited dealing with managed care, 53% cited electronic health record (EHR) problems, another 53% cite maintaining and managing staff, and 39% cite the volume of patients they have to see to break even on overhead.

Although there are many ideas on how to save primary care in the face of an onslaught of new patients created by the Affordable Care Act (ACA), burnout and declining reimbursements, there are no clear solutions. But direct primary care-a more affordable version of concierge medicine-is gaining traction.

What is a direct primary care practice?

Direct primary care (DPC) is a retainer-based model for primary care practices, but does not come with a standard set of rules like many other models. Instead, there is a common set of goals or characteristics, and DPC practices are making their own rules as they go.

For M. Samir Qamar, MD, founder of MedLion-the first DPC practice in California-that meant starting from the ground up, then showing others how to do the same.

Qamar started training under the traditional fee-for-service model during his residency in family medicine at Lancaster General Hospital in Pennsylvania. By the end of his intern year, he knew he didn’t like where his career was heading.

“I realized I only had 10 minutes with these patients. I didn’t have the time I needed to harness their trust,” Qamar says.

At that time, concierge medicine was still relatively new, but gaining popularity. But Qamar couldn’t find any companies that would help a new graduate start a concierge practice-they only worked with existing practices. So he started his own, and incorporated his concierge practice during his third year of residency. Soon after, he and his wife-also a family physician-headed to Monterey, California. There were no concierge practices in the area, so they decided it would be a good place for Qamar to get his practice started while his wife elected to start her own, traditional model practice.

Qamar became the first concierge physician in central California and was soon named the house doctor for a series of resorts in Pebble Beach. He worked as a concierge physician for 7 years. Meanwhile, his wife had amassed a panel of more than 3,000 patients at her practice-one of the largest family practices in the area. When they started to compare the two practices, some big differences stood out.

“[We saw] all the things we read in the magazines about how frustrated primary care physicians are. She had to see 30 patients a day, and people were fighting about claims over and over,” Qamar says. “We also felt that our accounts receivable in the traditional medical office was always a bit high.”

Still, Qamar’s concierge fee of more than $1,000 per month wasn’t for everyone. There had to be care for those who couldn’t afford boutique care. Yet, Qamar says he was surprised when the economy took a nosedive in 2008 and it was his wife’s traditional practice, not his, that suffered.

“She had about a 25% decline in visits in the last quarter of 2008. We did internal checks and found that, because of the recession, people were losing their jobs and their insurance,” Qamar says. “That was sort of the waking up moment for my wife and I.”

Most patients wouldn’t afford the self-pay fee of $100, and his wife couldn’t maintain seeing 30 patients per day just to break even with overhead. Patients started to end up in the emergency room for simple medications because they refused to come in to the office and pay for a visit. When Qamar and his wife started calling those patients, they found out many were in foreclosure or financial ruin. “We wanted to help them,” he says.

So the Qamars took the existing traditional practice and decreased the fees to an economically sustainable level so that their patients could afford to come in for treatment. For a $49 per month membership fee, Qamar says he doesn’t think there was enough perceived value. When the fee was raised to $59 per month, the practice found its “sweet spot.”

They defined a list of services for patients and implemented a $10 fee for each physician visit, in addition to the membership fee. “It’s not cost-prohibitive for patients to do that, but it doesn’t lend toward overutilization of service,” Qamar says.

He then found discounted drug plans and ways to save his patients money on lab testing and other diagnostics like imaging. Soon, the practice started to grow and was saving 30% on business overhead just from eliminating insurance billing and started seeing patients coming from out-of-town.

“We felt patients were happier because we were not incentivized by making them come in anymore,” he says, adding the practice did more telemedicine than under the traditional model.

Running a direct-pay practice

The most common element of DPC practices is the offering of a full range of primary care services for a recurring, regular fee, usually billed to patients monthly. Some practices add an enrollment fee, while others keep membership fees low with per-visit fees. Others even use fee-for-service billing, but as direct-pay, without the involvement of insurance companies or government programs like Medicare. Membership fees in DPC models have lower retainer fees than concierge medicine.

The American Academy of Family Physicians (AAFP) estimates that typical DPC membership fees run from about $50 to $150 per month, while the Accenture survey places the range at $60 to $30,000 per year. This payment ensures DPC physicians are paid adequately for the services they provide. In contrast, under traditional, fee-for-service models, AAFP says nearly half of a physician’s workday is spent outside of patient visits and therefore uncompensated.

Direct care practices vary based on the level of coverage their retainer fee provides and the structure of those fees. Some practices have membership fees that cover all primary care services, including off-site diagnostic services. Others are more limited and may still even continue participating in fee-for-service contracts with insurance carriers and use the subscription-based patients to supplement their contracts.

One of the biggest benefits cited by DPC physicians is the ease of the payment system, says the AAFP. DPC practices don’t need staff dedicated to organizing, reviewing, filing, and managing third-party payment claims. When dealing with private insurers, most DPC practices can be more proactive when it comes to contract service rates and participate only in contracts that are mutually beneficial for both the patient and the physician.

Aside from the financial benefits of a DPC practice, many physicians running subscription-based practices cite their job satisfaction and ability to spend more time with their patients as an immeasurable benefit.

Making the transition

For existing practices looking to transition to a subscription-based model, the change will likely benefit most patients in terms of cost and satisfaction-but not all of them. While most traditional model practices have patient panels of between 2,000 and 3,000 patients, DPC practices typically limit that number to between 600 and 800 patients.

Some patients may elect not to stay on with a practice following a transition to a DPC model, but physicians may also have to take a more active role in limiting their contract patients. Those patients who do elect to remain  with the practice have reported improved experiences of care, better clinical outcomes and increased engagements, says AAFP.

Physicians considering a transition to a DPC model must determine whether to forego insurance contracts or maintain a limited number. Immediately ending insurance contracts means the practice will automatically become out-of-network and may negatively affect any patients that continue to receive insurance coverage. Those patients may therefore end up paying more out-of-pocket for primary care.

To help decide whether to discontinue insurance contracts or continue accepting some, the AAFP recommends the following considerations:

What is the concentration of patients across contract insurance carriers?

Are there favorable contract payment rates for primary care services?

Is the plan timely when it comes to its ability to process and pay out on  existing claims?

Are there any value-added support services provided by the insurer that would be beneficial to the DPC practice?

If a DPC practice continues to participate in insurance contracts, it needs to make it clear to patients which services are covered by the insurance contract and which are covered by the DPC retainer fee, the AAFP says. Medicare patients are another special consideration. DPC practices can keep seeing Medicare patients, notes the AAFP, as long as the membership fee doesn’t cover services already covered under Medicare.

Transition aid available

For those seriously considering transitioning to a DCP, there is help available. Qamar turned his success with the model into a business, helping others transition their traditional practices or start new DCP practices.

In 2009, there weren’t many others doing DCP, Qamar says. The nearest practice was in Washington state, but it was financed by a venture capital group.

“That immediately validated our model and what we were doing with our patients,” Qamar says.

As they continued to grow their practice, they soon had interest from others. Remembering how little help he had in starting his own concierge practice years before, Qamar decided that the more than 2,000 family medicine residents who graduate each year might have interest in his model, and might not have help starting a DCP practice. Instead, they are courted by hospitals and insurers.

“The whole idea of the shingle being  hung outside your office is being lost very quickly,” Qamar says. “We want to help the underinsured and the uninsured, but also to resuscitate primary care private practice.”

Over the last 2 years, Qamar has left concierge medicine and started helping other practices like his wife’s convert to the DCP model. So far, his company MedLion has or is now in talks to license practices in Arizona, California, Colorado, Florida, Indiana, Kansas, Maryland, Nevada, Pennsylvania and Washington. His family moved to Las Vegas last fall to better position the company for growth.

But even with all his experience in transitioning practices to the DCP model, Qamar is cautious. The transition can be expensive, particularly when it comes to legal fees to keep you off the radar of government institutions seeking to label the practice as an insurance company, he says.

“It’s a thin line between selling an insurance product and being in direct primary care,” Qamar says. In fact, he spent about $1 million to get his company’s model just right.

A Difficult sell

“For doctors doing it on their own, it’s not easy,” Qamar says. First, it’s difficult to sell a new concept, Qamar says. And not just to patients, but to companies that could send their employees to your practice. It took Qamar about 3 years of trial and error to find the best way to grow the DCP practices, he says.

Practices in large cities have faster growth, but it also depends on the number of uninsured and employers willing to send their employees to the practice. Qamar says his sales and marketing team now goes into new areas to get at least 300 to 400 new patients signed up by contracting with employers before even opening a new practice.

Also, at MedLion, physicians opt out of Medicare because of the prohibition on  charging rates lower than Medicare rates to non-Medicare patients. And physicians looking to transform shouldn’t be nearing retirement so the practice can have longevity, Qamar says.

“You can’t think fee-for-service anymore,” he says of life as a DCP practice. “It’s okay to not check your watch during the patient visits. It’s okay to settle in and prepare for a nice half-hour long visit. These things just don’t happen any more.”

As far as his company’s expansion, Qamar says he would like to add 1,000 DCP practices in 10 years. He’s even working on a loan repayment program to help attract new graduates to the model, adding that DCP physicians earn two to three times more than physicians in traditional model practices without a lot of the headaches.

Challenges remain

Usher, who was “run down by the rat race,” says he is happy with the new model, but admits that he still faces challenges. It’s easier to count the dollars at the end of the day because he accepts only cash, credit cards, or checks, and sees no Medicare or Medicaid patients. But he still has a bottom line to consider, and without a retainer system in place, all Usher can do to predict his income is look to the prior month’s collections and keep his fingers crossed.

Still, the more Usher learns about subscription-based models, the more he sees it as a viable alternative to strict direct pay for the long-term.

Many of his patients still carry high-deductible insurance for catastrophic events, and he supplies them with coded receipts if they want to try and seek reimbursement for any of his services, although that doesn’t happen often since he’s not in anyone’s network.

And although he likes that his practice has a low overhead with no billing or collections staff, he says it is a risk. For example, when he started this venture only about 5% of his patients came with him from his old practice.

“It was a big investment,” Usher recalls. “We lived on savings for quite a while. If you’re in your own practice and you can transition your own practice, that might be simpler, because you don’t have to move.”

Fortunately, finding  patients isn’t difficult for Usher, who sees four or five new patients each day. Though he started by placing local cable and newspaper advertisements and literally pounding the pavement, word of mouth is the biggest driver of new patients to his practice these days.

Nevertheless he isn’t quite clearing enough in income to bring on more help, and doesn’t envision having a practice that had to turn people away.

“I’ve always thought I would get busy, but didn’t want to get too busy to get people in,” he says. “I don’t want to turn people away based on access.”

Even if he had the money for more help-Usher now employs some part-time physicians at his practice- few in his area want to take a chance on a direct pay model.

The upside of his practice, Usher says, is that he can keep his prices and overhead low and spend more time with patients. “We don’t have to mill them through,” he says. But he believes a retainer-based model, rather than strictly direct pay, may help him develop a more steady stream of income for his practice.

Usher admits he isn’t yet making what he did at the Mayo Clinic, but hopes that will change in a few years, as his noncompete agreement expires and he eyes a move back to a bigger city. But even without making the same or more than when he was employed by the hospital system, Usher says he has no regrets.

“Even if it was a break-even deal, just the job satisfaction would make it so worth it,” Usher says.  “I didn’t realize how burned out I was until I stepped out of that system.”

Although newer models and reforms like the move to Patient-Centered Medical Homes (PCMH) aim to improve the practice of primary care, Usher says he still believes there is too much overhead in the current system for PCPs to ever get to a point where they can practice satisfactorily and be happy with where they are for the long term.

 “For me, the time to change was now because I knew things were all going to be changing anyway. I would never go back to the insurance billing world,” Usher says. “I think ultimately some blend of a direct pay/a-la-carte model with the membership fee may be desirable because that positions you to grow in a marketplace where people can come and test you out without having to throw out a whole year’s worth of membership fees.”