Direct Primary Care, A Market Effort Improving Healthcare, Reducing Cost

Direct Primary Care, A Market Effort Improving Healthcare, Reducing Cost

D. Kip Denning

Healthcare professionals earn the gratitude and respect of society by using their advanced training to help us recover when we are sick, heal when we are hurt, and literally save and improve life. Such profound service can hardly be adequately appreciated with words alone.

This wonderful service has become plagued by significant challenges that are making it harder to deliver services and are also hurting both the people being served and those doing the serving.

Healthcare costs are skyrocketing

Healthcare costs continue to take an increasing portion of the economy[1], but without the improvements and efficiencies to justify such prices. Increases are outpacing wages, and for many employers is the second largest outlay after payroll. This healthcare inflation is straining companies, families, individuals, and the whole economy.

Such increases are not sustainable. At some point the laws of physics will change the upward path of prices. Our national healthcare expenditure was estimated to be hitting $4 Trillion in 2020, and even worse, by 2027 it is projected to be at $6 Trillion, or 20% of the combined value of all the goods and services produced by everyone in our nation (Gross Domestic Product, or GDP)[2]. The increase is not from adding that much additional value to the economy, it is eating away from other needs.

What does this mean for you? More business revenues must be taken away from paychecks, raises, bonuses and other investments; job positions that could otherwise be hired have to be split up among other employees in order to take what would be salaries for new openings to pay for the higher costs. At the same time, employee portions of healthcare costs are constantly going up each year. So, workers are getting hit from 3 sides: slower wage growth, bigger workloads, and higher employee premiums and out-of-pocket costs.

The domino effect continues as this situation adds more strains on family budgets for housing, food, clothing, etc. Access to healthcare becomes more difficult as does meeting other needs for children such as music lessons, sports, and other activities parents find helpful in raising healthy functioning children.

History has shown that markets can make corrections somewhat gently, or as we saw with the mortgage market in 2008, those adjustments can be very rough and negatively impact the whole economy, hurting many people in the process. While this correction process has yet to fully play out in healthcare the financial pain is severe and continues to grow[3].

The already tremendous market pressure is continuing to increase and is being felt in political and regulatory circles as well[4]. Meanwhile, innovators in private industry are working to rein in costs with efforts such as the growing trend of the Direct Primary Care (DPC) delivery model of medical services.

A Key Cause of Rising Costs

There are many reasons for the high costs of healthcare. One significant factor is the insurance industry has been moved into trying to cover most or all medical services instead of what insurance is really meant to do, to insure against loss. It is not to provide maintenance services.

For example, if you used auto insurance to pay for an oil change for your car, or new tires, or any other maintenance, how much more expensive would those services be? If the healthcare industry is a guide, perhaps up to 10 times more than what they currently cost. Also, we don’t use homeowner’s insurance to pay for lawn mowing, tree trimming, or other maintenance issues, additions or remodels, or even small repairs.

With insurance companies paying the medical providers, this means they, and not the patient, are the primary customers. The dynamic of splitting the customer role separate from the recipient of services creates several conditions. The insurance company is put in a position to strongly influence and even dictate what services are performed[5]. They are also able to tell patients what service providers to use, with significant penalties for using ‘out-of-network’ services (see footnote 3).

Patients, or their families, are the end customers in that it is the working individual or family member who is paying the employee side of the insurance premium and producing the value for the employer to pay the employer-portion of the premium. Of course, it is also the family or individual who is paying the deductibles, co-pays, etc. 

However, because the payments are diffused and rerouted through employers, insurance companies, and so forth, the patient has lost most of the strength and leverage inherent in being a customer. Even with most people being kind and well meaning, can we credibly expect anything different under the current setup?

Losing fundamental customer strength and thinking there would be no loss or negative impact to the client would be a violation of natural law, akin to ‘breaking’ the laws of physics. When an airplane stops obeying the physical laws of flight it falls out of the sky. Similarly, when an entire industry structure breaks the natural laws that allow it to function successfully, because of misaligned incentives and other issues, it too begins to cause hurt, despite best intentions.

Such a convoluted model removes much of the direct incentive of patients to know costs up front and comparison shop. It also makes it more difficult for a provider to display costs upfront. Another issue is a significant overhead cost imposed on providers by the bureaucratic nature of an entire industry. Part of the extra expense is complicated medical billing coding and needing personnel dedicated exclusively to collecting from insurance companies. In larger medical providers entire departments of personnel are dedicated to getting insurance payments. Other cost drivers also include long drawn out payment cycles.

Antidote for Lowering Costs

The Direct Primary Care (DPC) model is a powerful antidote to help treat many of the symptoms and causes of inflated healthcare prices. The Direct Primary Care model is not insurance. There are many variations, but typically it includes some form of payment, or prepayment, directly to medical service providers for defined limited services, bypassing insurance.

Primary medical care is usually general, non-emergency medical services. Primary care is practiced by family physicians, pediatricians, and some other types of doctors. When using a DPC arrangement, because it does not usually include many of the big-ticket medical procedures, or other items, there is still a need for health insurance, and it is wise to maintain appropriate coverage to ensure there are no gaps. To be sure, there are some providers of secondary and tertiary care services that do offer direct care pricing (see footnote 7).

Two very important dynamics exist in the Direct Primary Care model that offer economic relief to companies and families. Bypassing insurance for basic services relieves a heavy burden and expense imposed, as noted above, on medical service providers which can be passed on in cost savings[6].

The other factor is that the Direct Primary Care model brings a market driven process much closer to the patient, even if an employer is paying for the monthly membership for the employee, or with an on-site employer sponsored clinic.

One of the supporting outcomes of the Direct Primary Care model is improved price transparency. Several medical services providers who use a form of DPC openly post costs of various procedures for patients to see prior to using services[7].

Both factors, the removing of insurance-imposed burdens along with bringing a market driven process closer to the patient, empowers better individual decision making and can significantly strengthen the quality of care given by medical service providers. Doctors are also huge beneficiaries of this model in that it can help prevent burnout with overburdened medical service providers[8].

The potential for cost savings and improvements in care create an urgency to expand the Direct Primary Care model for the health and financial wellbeing of families, employees, employers, and the whole economy. Those who switch to a model, such as DPC, that incentivizes better healthcare at lower cost are helping make the economic correction to be gentler for themselves, their companies, and for the economy in general.

A doctor’s job is mostly paperwork, little time left to see patients

Doctors on average spend about 27% of their time with patients. For every hour of clinical face time with patients, nearly 2 hours are spent on paperwork (cumbersome and error-prone electronic health records (EHR) and other desk work) [9].

Average face time with a doctor is reported to be around 12 to 15 minutes, or less, and only about half that time is spent talking with or examining the patient. The other half? Doing paperwork and other things. These arbitrary time limits have their roots, in part, from what Medicare and insurance companies reimburse using Relative Value Units (RVUs) [10]. What this means is the physician is not paid to see you for more than 15 minutes, and maybe for less than that.

While much of this was institutional responses to cost pressures and other things, the arbitrary de facto limit of 15 minutes, in many cases, cannot be enough patient face time for proper diagnosis, preventative counseling, and other measures that would contribute to the best health outcomes.

Lack of appropriate preventative care can mean more disease, higher probability of overlooking other medical problems, and mistakes, creating future treatment problems and leading to higher healthcare costs. With the domino effect, all of these can have long lasting repercussions to quality of life, financial setbacks, and even life expectancy.

It seems the length of your next visit to the doctor should not be dictated by one-size-fits-all insurance or government bureaucracy mandates. This is not to say anything bad about our friends at the insurance companies or in government who were responding to issues. It is simply not reasonable for the rest of us to put such unrealistic expectations on those third parties to control costs and think it does not negatively impact our healthcare, and hence our welfare. 

These administrative tasks and work hours are also causing widespread physician burnout, further worsening the shortage of doctors[11].

Direct Primary Care facilitates good preventative care

Is preventative care not so important? Seems when it is neglected that stark reminders tell us otherwise. The Wall Street Journal reported that cardiovascular health issues such as heart attacks in younger people, women, and nonsmokers is making a deadly comeback[12]. These are happening to people in their 20s, 30s, and 40s and appear to be due to lifestyle, diabetes, and obesity[13].

A Direct Primary Care model can remove much of the expense imposed, and then because the doctor can spend adequate time with the patient the potential opportunities for improved healthcare and cost savings begin immediately. Such possibilities in the Direct Primary Care model means you can make a real difference for you and others.

[1] 1960 per capita health expenditure was $146. In 2019 it is estimated to be about $11,500. Some of the key factors in these high costs include inflated healthcare administration [think, as one of the main components of this category, health insurance and the costs it imposes on medical service providers], and drug prices. https://www.statista.com/statistics/184955/us-national-health-expenditures-per-capita-since-1960/

The Wall Street Journal has a short video titled ‘How Drug Prices Work’ which explains the convoluted and arbitrary process of pricing, middlemen, and why certain drugs get promoted. https://www.wsj.com/video/how-drug-prices-work/C9D3F950-DFE3-4E37-9120-836D411A9A66.html

[2] National health expenditure is forecast to grow from $4 Trillion in 2020 to nearly $6 Trillion in 2027, or 20% of GDP. https://www.statista.com/statistics/934283/total-us-national-health-expenditure-projection/

[3] An interesting article about several hospital systems, particularly the University of Virginia Health System (UVA), pursuing patients for almost all they are worth; over a 6 year period ending in June 2018 UVA sued 36,000 times, garnished wages, seized bank accounts, put liens on property; forcing families into bankruptcy and contributing to a wake of financial disaster, stress, insufficient care, blocked schooling from medical payment troubles, and family relationship problems such as divorce. https://www.washingtonpost.com/health/uva-has-ruined-us-health-system-sues-thousands-of-patients-seizing-paychecks-and-putting-liens-on-homes/2019/09/09/5eb23306-c807-11e9-be05-f76ac4ec618c_story.html?noredirect=on&utm_source=pocket-newtab . 

Additionally, in a radio interview during the week of September 9, 2019, on the Rod Arquette show on KNRS 105.9, Utah State Representative Jim Dunnigan stated he is working on healthcare legislation reform for the state to limit how much an out-of-network hospital can charge for services. A hospital might accept payment in full at say $60,000 for in network services but charge perhaps $200,000 for out of network for the same services. In discussions with hospitals regarding proposed legislative limits their representatives proposed 200% more than the in-network charge, but Mr. Dunnigan said that is way too much.

[4] The Federal government has proposed hospital and insurance pricing transparency rules which of course, industry groups are wanting to stop. See two articles in the Wall Street Journal: (11/15/2019) Trump Administration Releases Transparency Rule in Hospital Pricing: https://www.wsj.com/articles/trump-administration-releases-transparency-rule-in-hospital-pricing-11573825649?mod=searchresults&page=1&pos=2; and (11/20/2019) Hospitals Push Back on Price-Disclosure Rule.

[5] Defensive medicine is also an influence. This often consists of the doctor ordering a multitude of tests, some of which may only be for reference in the event of a lawsuit, and otherwise the doctor may not even think are needed, but the insurance will pay for them.

[6] In a small multi location medical service provider a doctor showed me an entire section of employees whose only job is to make sure their business gets paid from the insurance companies. It was also confirmed that it takes several months to receive payments. This is consistent with my personal experience as well as my observations managing health and welfare benefit elections. A large state medical services provider also noted they have an entire department dedicated to collecting payments from insurance companies.

[7] One example is the ST. George Surgical Center website: https://www.stgeorgesurgical.com/st-george-utah-surgical-services/. This is indicative of several other DPC service providers’ websites that also list patient pricing.

[8] The mountains of paperwork imposed on doctors is infringing on their ability to provide healthcare and causing burnout. See https://www.forbes.com/sites/brucelee/2016/09/07/doctors-wasting-over-two-thirds-of-their-time-doing-paperwork/#6621d46f5d7b

[9] Doctors do not spend much time with their patients https://annals.org/aim/article-abstract/2546704/allocation-physician-time-ambulatory-practice-time-motion-study-4-specialties. For interesting insight on issues and challenges of Electronic Health Records see an article by Kaiser Health News dated 3/18/2019 titled, Death By A Thousand Clicks: Where Electronic Health Records Went Wrong, https://www.healthleadersmedia.com/innovation/death-thousand-clicks-where-electronic-health-records-went-wrong. Other issues to be addressed are vulnerabilities to hackers and ransomware.

[10] https://www.forbes.com/sites/brucelee/2016/09/10/time-to-change-the-15-minute-limit-for-doctor-visits/#13191dfd3477. Additional research has shown some visits with new doctors as short as 8 minutes, and other physicians at some hospitals are asked to see patients every 11 minutes (https://www.usatoday.com/story/news/nation/2014/04/20/doctor-visits-time-crunch-health-care/7822161/).

[11] https://www.wsj.com/articles/physician-burnout-widespread-especially-among-those-midcareer-report-says-11579086008?mod=hp_lead_pos12

[12] https://www.wsj.com/articles/after-decades-of-progress-america-backslides-on-heart-disease-11561129106?mod=trending_now_#comments_sector

[13] https://health.clevelandclinic.org/why-are-heart-attacks-on-the-rise-in-young-people/