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The Business Case For Direct Primary Care

Many members of the PCP community recently attended the Direct Primary Care Summit in Arlington, VA. We'll be sharing their perspectives here over the coming weeks. Today a family medicine resident with a background in business makes "cents" of the model. 

By Sahil Jain, M.D.

“What is the value of the service I am providing you?” Dr. Brown used this question in a story that he told at the Direct Primary Care Summit in Washington, D.C., this June, about a $1,200 bill for a plumbing job that saved him a night’s sleep. It highlighted an important aspect of direct primary care that I have often been attracted to — creating value and capturing value.  Based on my knowledge from business school, it makes the most sense to me as a practice model in the outpatient medicine world.

The value created in health care is financial, therapeutic and comfort value. For example, I regularly see in my clinic that a chest X-ray and basic labs can help catch early pneumonia, which responds well to outpatient antibiotics. The value created here is saving a few thousand dollars in hospital and emergency costs, the therapeutic benefits of being seen in a relaxed clinic setting and having detailed and thorough discussions with a physician during multiple encounters, and the comfort of being able to work, see your kids, and sleep and eat at home. Value creation is often hindered by incremental costs, such as financial and extra efforts.
Capturing value is how the benefits of the created value are split among the involved parties. The more reasonable and just the split, the happier the involved parties, and the higher the incentive for creating more value in the future. I see the therapeutic and comfort value in the scenario above captured mostly by the patient. The financial value (or savings) may be captured mostly by the payer (insurance company) in the traditional fee-for-service or capitated models. In the long run, the insurance company also captures the value of decreased health costs as this visit and future encounters add up. What is interesting is if we measure captured value against incremental costs for various stakeholders. In the example, the insurance company captures all of the financial value created by the physician and patient, without incurring any of the incremental costs. The provider, however, incurs the cost of an increased responsibility to complete the care plan and ensure a healthy outcome. There is not much incentive for the provider or the patient to continue, except for the therapeutic and comfort values that benefit the patient.
This is where direct primary care excels. Direct primary care is simply an arrangement between a provider and patient to provide basic health services at a fixed, transparent cost. Rather than co-pays and deductibles, the patient pays a fixed monthly and/or per-visit fee for medical services. Allocating funds differently presents the opportunity to more fairly split the pie of created value in outpatient care.  For example, a common direct primary care arrangement is that the patient chooses an insurance plan with an assigned number of dollars set aside for a health savings account, which in turn he or she uses to subscribe to a direct primary care practice and pay a monthly fee. In another example, the patient can choose a cheaper insurance plan with a higher deductible, and use the savings in his pocket for direct primary care. In both cases, the patient has direct responsibility for part of the money, which he or she would have otherwise paid to the insurance company. Providers in turn get direct reimbursement for their services, have a reliable cash flow, and avoid the overhead and complexity of dealing with insurance, coding, and the extra staff they require. A monthly subscription model also incentivizes providers to keep patients as healthy as possible for as long as possible. Giving patients the lead role, aligning incentives and rewarding both the patient and provider directly, direct primary care promotes a healthy, long-lasting relationship between providers and patients through early intervention, more outpatient care and regular follow-up.
Direct primary care is like the maintenance plan for your car that you now have a chance to buy locally and separately from your car insurance. You don’t wait until something breaks — you take responsibility for preventive checks. You have a mechanic who will repair it for you for a fixed and fair price, and you don't have to worry whether your insurance will pay for it or what forms to send in to get reimbursed. Your insurance is there to cover any catastrophes or serious breakdowns.
Simply put, direct primary care as a practice model makes more sense to me than the traditional models out there because it creates value that is captured directly by the patient and the provider, incentivizing them appropriately to practice good preventive medicine.

Sahil Jain, M.D., is a second-year family medicine resident at Wellspan York Hospital in York, PA. He has a background in biomedical engineering and health care consulting and is interested in the business and entrepreneurial aspects of family medicine. He has an M.D. from Boston University, an MBA from the Kellogg School of Management at Northwestern University, and an MS in biomedical engineering from Boston University

Want to read more about direct primary care?
Posted by Sonya Collins on Jul 29, 2014 10:17 AM America/New_York
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