Opening a direct care practice: calculating patient volume and fee structure

One of the biggest benefits of the direct care model is its economic simplicity.

One of the biggest benefits of the direct care model is its economic simplicity. In fact, there are only three variables involved in generating practice revenue: the number of patients in the practice, monthly membership fee (or estimated per-visit fee), and overhead expense. Direct care practice income can be calculated by the following formula:

Practice revenue = (Number of patients x monthly membership fee) - overhead expense

The simplest way to begin planning your practice is by considering the income that you need or want to earn, followed by estimating a realistic overhead budget. Plugging those numbers into the calculation now turns your focus to the final two variables: patient volume and fee structure. These factors can be highly nuanced and require careful consideration before opening your direct care practice.

Considering practice panel size

According to studies, most primary care physicians in traditional practice carry a patient panel of 1200-1900 patients, while direct care physicians rarely enroll more than 1,000 patients, with most practices limiting volume to 200-600 patients. The reason for such variability in practice panel size is partly because direct care allows physicians much more flexibility in personalizing their practices, but also because many factors impact how ‘full’ a particular practice will feel. For example, physicians who wish to work part-time or choose to run a micro-practice without office assistance will feel full at a much lower volume than those who choose to work more hours with help. Practices that attract patients with more psychosocial challenges (a particular issue for women doctors), serve medically needy areas, or offer time-intensive services like osteopathic manipulation treatment or integrative care may need to limit their total volume to accommodate these patients.

A good starting point to estimate panel size is to consider how many patients can be accommodated based on the physician’s desired work schedule and support staff. Physician and staff availability is critically important because direct practices advertise enhanced physician access and minimal wait times. On this note, physicians must very carefully consider how they wish to promote access to their practice, especially in the initial stages of building a patient following. Avoid promising ‘24/7/365’ access to patients, which is unrealistic and will learn to physician burnout. Instead, doctors should create practice policies that ensure reasonable access to patients while establishing boundaries to ensure physician work-life balance.

Onboarding new patients

It is important to keep in mind that practices tend to feel the busiest during the growth phase, which can become overwhelming at times. New patients require longer and more frequent visits to establish their medical history and review old records. They may be seeking care for a multitude of long-delayed medical conditions and are overdue for physical examinations and screening tests. Patients with health conditions may suffer from anxiety or other mental health conditions, which can take time to stabilize. In addition, some patients who seek direct care practices carry baggage from previous negative interactions with the healthcare system or have previously unsolved (and potentially unsolvable) medical symptoms, requiring more emotional investment to build a therapeutic physician-patient relationship.

To manage workload, physicians will freeze new patients or keep a waiting list to limit the number of new patients per day. Another technique is to avoid doing ‘everything’ on the first visit with a new patient. Instead, schedule more frequent but shorter appointments, no more than 30-minutes, until you have addressed all of the patient’s needs. I will often schedule new patients to return weekly until I sense that they are developing confidence in the treatment plan. Then I space visits out gradually until I find the ‘sweet spot’ that keeps them on track and avoids ‘urgent’ unanticipated phone calls or visits.

Once a practice has reached a steady state with most chronic diseases under control and patients on a routine visit schedule, direct care physicians report interacting with an average of about 1-2% of their patient panel per day. This may include office visits or communications via email or text. For example, a practice with five hundred patients is likely to see or communicate with 5-10 patients per day (or 25-50 interactions per week). Use this 1-2% rule to consider what an average day/week would look like at varying panel sizes. If fifty patient interactions per week seem too time-intensive for the lifestyle you desire, then you may wish to cap your panel at a lower volume or hire a staff member to help triage and communicate with patients. There is no right or wrong patient volume—your practice represents the way you wish to practice medicine.

Establishing a fee structure

Once you have an idea of how many patients you can accommodate, it’s time to determine a price structure. Direct primary care practices charge a monthly membership fee, often based on patient age. Direct specialist practices may charge a monthly or a per-visit fee. Specialists who manage chronic disease, like rheumatologists and endocrinologists, often require that patients pre-pay for a certain number of visits per year based on an appropriate disease management schedule to ensure that patients do not miss out on necessary care. Using this model also helps to keep a stable and predictable practice revenue.

Returning to your calculation model:

Practice revenue = (Number of patients x monthly membership fee) - overhead expense

Plug in the numbers you have estimated for your necessary income, overhead expenses, and maximum patient volume, to find the monthly fee you will need to charge.

To compare your calculated number to national averages, consider that the average direct primary care practice charges $77 per month, generally charging less for children (although pediatric practices may charge higher rates for newborns and infants who require more physician labor) and more for seniors. The idea for this price tiering is that older patients are more likely to have chronic health conditions and require more frequent visits, but this is not always the case. For example, I offered a reduced price for college students, expecting low utilization in this population. Instead, these patients turned out to require frequent visits for minor illnesses as well as health issues like anxiety and attention deficit disorder. For this reason, it may be reasonable to charge a flat monthly fee for all patients, regardless of age.

It is important to consider your price point in terms of your local demographics and competition. Consider what other practices near you are charging. As advocates for pricing transparency, most direct care practices post their fee structure on their websites. Take a look to see whether your charges are in a similar range. If you are charging much more than those around you, what additional value are you offering to patients for that price?

If you are practicing in a low-income area or an area with many other practices, you may need to adjust your pricing to realistically attract patients. On the other hand, physicians practicing in more affluent areas or with limited health resources may find that patients are willing to pay higher prices for access. Keep in mind that psychology also comes into play when it comes to price point. If your fees are set too low, patients may perceive that the service isn’t of high quality and may choose to enroll in a more expensive practice. The ‘velvet rope’ phenomenon, or desire to have exclusive access to a limited resource, can also increase patient demand for your practice. Some doctors use this to help lower-income patients, charging more to the general population but then employing a ‘Robin Hood’ approach of using the extra revenue to offer scholarships or discount memberships.

Seasoned direct care physicians often advise newer practices to err on the slightly higher side of price point, considering unexpected expenses that may arise and the awkwardness of raising prices on established patients. It is best to try to maintain stable pricing with minimal increases, as affordable, transparent pricing is a major selling point of the direct care model, especially during times of financial uncertainty.

In my next article, I’ll get into more about the selling points of direct care, as we launch into a discussion of marketing your direct care practice.

Rebekah Bernard MD is a family physician in Fort Myers, FL, and the author of How to Be a Rock Star Doctor and Physician Wellness: The Rock Star Doctor’s Guide.