Practice Model Design

All DPC practices charge a periodic membership fee, usually monthly. According to an AAFP data brief, most DPC practices charged $50 to $75 a month for individual adults and $75 to $175 for families, as of December 2017.6 Many practices have some form of tiered pricing by age. According to the data brief, 13% of offices also bill a per-visit charge. When establishing pricing, consider the income you need to generate, the number of available appointments, and the number of patients within each pricing tier that you will be able to see. In our experience, patients average between three and four contacts per year. Higher prices reduce the number of visits and panel size needed to break even, but they also result in slower growth in new patients. Particularly in areas with lower population density, membership price is the single biggest determinant of growth.

You will need to determine which services you will include with the membership fee. Some practices include unlimited office visits rather than charging a per-visit fee. Some DPC physicians give patients their cell phone number and allow unlimited texts, phone calls, and video visits. Some include routine labs, immunizations, and nutrition services. The slate of included services is up to you. Generally, it is best to start with fewer services and gradually add more. This prevents patient dissatisfaction and allows room to shape the practice. You can also consider offering some procedures and services to members at an additional cost that is still lower than market rates.

You also need to decide how you will interact with government payers such as Medicare and Medicaid. The ability to see and treat Medicaid patients in a DPC format varies by state (for more information, see https://www.dpcfrontier.com/medicaid). Most DPC doctors have opted out of Medicare so they can instead see Medicare patients under direct contracts, which reduces the risk of running afoul of Medicare regulations. However, Medicare only allows doctors to opt out as individuals, not as a practice, and those who opt out will have some limitations in where they are able to work during the two-year opt-out period if they decide to return to insurance-based settings. Other DPC doctors may choose to not see any Medicare patients, or to stay in Medicare but charge only for non-covered services. In this last scenario, if a practice bills a Medicare patient for a covered service, the provider is at risk for civil and criminal penalties for Medicare fraud.7

Next, you need to develop a contract for patients to become members. Your contract should clearly describe what is covered and what is not covered by their membership, and clearly explain that their membership is not health insurance. Most DPC practices have their contracts on their websites. DPCFrontier.com is an excellent resource for state-specific legal concerns that your contract should address, but it is still important to have a lawyer review your contract before you use it.

Practical Considerations

Once you have the broad strokes of your practice designed, you will be able to get into more granular decisions.

Staffing. Your budget, panel size, and suite of services should drive how much support staff you hire. Some start their practice with one staff member: a nurse. Duties would include answering calls, rooming patients, drawing blood, dealing with incoming test results or other information, and scheduling patients. Other positions could be a practice manager with duties including managing business relations, communicating with patients, strategic planning, and dealing with the details of day-to-day operations. Consider looking for untapped resources within your own personal network to find people who can support your transition and help you stay on mission.

Dispensing medications. According to the AAFP data brief, 61% of DPC practices dispense medications to patients.6 These practices purchase generic medications, stock them either in bulk or pre-counted, and manage relevant regulatory obligations. Most states allow physicians to dispense medications on the basis of their medical license, but some do not (see https://www.dpcfrontier.com/dispensing-medications). When dispensing, practices need to educate patients about the medication and consider malpractice coverage implications. Consider your panel, the savings that could be provided to patients vs. programs such as GoodRx and if there are pharmacies that are close and convenient for your patients. But, depending on the practice, offering discounted medications to members could be an attractive draw.

Panel characteristics. Suburban settings with large numbers of potential patients who have high disposable incomes are the easiest places to establish a DPC practice. But there are many practices thriving in rural areas, small towns, and urban settings as well.3 My practice serves a medically underserved, blue-collar, and working class population, but we do not see many patients who are on Medicaid or who have extremely limited income. Instead, we work with our local community health center to make sure that those patients have care, because the health center is reimbursed extremely well for treating those groups. We have, however, found that we generally provide less expensive care than the community health center for underinsured working patients, even if they qualify for sliding scale charges.

DPC vs. Capitation

Direct Primary Care patients pay a set fee per month. This can be thought of as the physician receiving a set payment per member per month (“PMPM”) — a term often associated with capitation. Capitation gained popularity with the rise of HMOs in the 1990s as a payment model which would, theoretically, help curb healthcare costs. With capitation, insurance companies pay physicians a set amount per patient per month. The more care the patient receives, the less money remains for the physician at the end of the month. While DPC and capitation share a set amount of money per patient per month, the payer and underlying psychology set the two models widely apart.

Capitation, in its original form, is rarely seen at this point due to people exploiting the model. Since the payer was insurance, the physician had no fiscal responsibility to the patient and as such only needed to play the “game” according to the rules set by the insurance company. The rules of the game allowed maximization of income by minimization of patient interaction. Patients found themselves shut out by physicians, having an increasingly hard time making appointments or noticing the quality of the physician’s office declining significantly.

DPC fundamentally changes the rules by making the payer the patient rather than a third party. The financial risks and benefits now tie directly to patient care. Should the patient find the physician not to meet their needs, they will go elsewhere, and the physician has no guarantee that another patient will fill their spot. In addition, incentives are aligned in keeping the patient healthy and out of the office.

The capitation model lends itself to abuse. DPC gives little room, if any, for abuse, because the interests of patient and physician are aligned.

While capitation and DPC can be made to sound the same, the fundamental difference, the core of DPC, is the direct relationship, medical and financial, between the patient and physician.

DPC vs. Concierge

Direct Primary Care (DPC) and Concierge Medicine are often confused. Both models accept payments directly from their patients, both have smaller panel sizes (allowing for improved relationships with patients), and both tend to advocate for advanced communication between the doctor and patient (via text, email, after-hours calls, virtual visits, etc.).  To make matters even more confusing, some practices that follow a DPC model will advertise as “concierge” for brand recognition. So how, then, is one to know the difference?

If you look closely at the standard DPC setup and compare it to the standard Concierge set up, there are a few key differences:

The “Membership Fee”. In concierge practices, the membership fee is traditionally an annual fee; In DPC, your membership fee is traditionally a fee charged monthly, quarterly, or annually.
Average Membership Cost. Concierge doctors often charge more in annual fees than the average DPC doctor. Although the average fee is around $1,800 a year, some concierge practices charge as much as $25,000 annually! DPC fees typically range from $600 to $1,500 per year.
Insurance. Generally, concierge doctors also accept insurance; in addition to the annual fee, they bill insurance for each patient encounter.  This means that patients may get “surprise bills” several months later after insurance pays their portion (of an amount typically not revealed to you until you get your bill). With DPC, insurance is not billed.
Copays. With concierge, because they accept and bill insurance, they are required to collect copays at each visit.  DPC clinics do not bill insurance, so there are no required copays for each visit. (That said, there are some exceptions to this rule as some practices charge a “per visit” fee.)
Patient panel size. Both concierge and DPC traditionally maintain a patient panel of 600 patients or less. This enables both provider types to have longer, more in-depth appointments with their patients, and a deeper, more satisfying relationship between doctor and patient.
Insurance Regulation. Because concierge doctors typically bill insurance, they are held to several insurance regulations including MACRA/MIPS and other documentation requirements. Since DPC does not bill insurance, they are not required to follow these regulations, enabling the physician to document more efficiently and not waste their time with checkbox documentation.
Office overhead costs. Concierge physicians typically have higher overhead costs, owed in large part to their acceptance of insurance which is required to negotiate insurance contracts, bill insurance, process insurance payments, and then resubmit bills when the insurance fails to pay in a timely fashion (which happens all the time). Since DPC physicians do not bill insurance, they do not require staffing and overhead to manage these revenue cycles, resulting in lower overhead.
Culture: Concierge practices often market services like “advanced testing” or more customer experience services like special parking spaces to justify their memberships. DPC practices focus more on care navigation and price transparency.

DPC and Insurance

DPC exists to take care of primary care services which do not make sense to finance through insurance. People do not use their car insurance for oil changes or filling up gas. In healthcare, people shouldn’t use health insurance for chronic disease or basic urgent care. Although Direct Primary Care physicians do not accept or bill insurance, patients can still opt to use insurance for ancillary services. Most insurance products will still recognize and accept an order from out-of-network physicians (ie DPC physicians). Exceptions include:

Medicare Advantage Plans
HMO’s
Medicaid (state-dependent)

This means that if a patient chooses to, they can utilize their insurance for:

Imaging
Medications
Lab work
Specialist or ancillary services referrals

Conventional Insurance:

Many insurances require per-certification or prior authorization for certain imaging or medications. Suggestion: when ordering what may be an expensive test/medication, give the patient an order/prescription and ask them to check with their insurance if/how this will be covered. You may need to give billing or CPT codes for some insurances (which drags you back to your system days once in a while and makes you appreciate the daily simplicity of your DPC life!).

High Deductible Plans:

It is often less expensive for the patient to pay cash for the test if they have a high deductible, which saves them money, and your time. It is worth having this discussion with your patient:

“I’d like to order an MRI of your knee. What is your insurance plan and what is your deductible? How much of your deductible have you met this year?”

Usual answer: “I don’t know my deductible, and I don’t know how much I have met”.

Empower the patient – give them some homework and a cost-saving carrot to entice them to do it.

“Well, I don’t anticipate this is going to need an expensive surgery and you are generally healthy. MRI of the knee would cost you around $400 at this location. If you go through your insurance with a high deductible that you have not met, it may cost around $3000-4000. It is your choice which way you would like to proceed.”

End result: Patient learns more about how their insurance works, they have been part of the cost-saving solution and feel empowered by that, and you have written an MRI order for a cash pay location without time wasted on precertification. WIN WIN WIN.

Medications:

You may consider the same tactic with medication dispensing.

“Your medication costs $10/months through our pharmacy and $13/month paying cash with GoodRx. Why don’t we send the first month to the pharmacy, let them run your insurance and see which option is most cost-effective.”

The more your patients understand about the cost savings and the different options that they have, the more that they become invested in the Direct Primary Care model and are likely to spread the word, marketing for you.

Managed Care/HMO:

This one gets tricky. You must be upfront with an HMO patient. You cannot write referrals for them and they need to have an In-network PCP to do that. Some DPC physicians develop relationships with local HMO network physicians who are happy to see their patients for referrals and take a backseat while collecting the monthly capitation (with less work). Others are not. Here are some options if you decide to take HMO patients.

Co-manage a patient with their in-network PCP
Patients pay cash for all their services (less expensive if the deductible is high)
Not accepting managed care patients at all

Medicaid:

Although Medicaid can be an exception, this is state-dependent. In some states, it is illegal for Medicaid patients to pay cash to see a doctor. In other states, Medicaid has an “ordering and referring provider” status that the physician can apply for which would enable Medicaid to honor their medication and imaging orders. As this is state-specific, the best advice would be the check with physicians practicing in your state or check dpcfrontier.com for state-by-state regulations.

See Federal and State Regulations here.

Medicare:

It is illegal to be a medicare provider and charge cash for services that Medicare covers (Medicare fraud). Please see Working with Medicare – The Basics, and Medicare: Opting In or Out for more details.

DPC and the Underserved

As a cost-reducing model, DPC intuitively helps those who have a hard time affording care in the current model; yet to many who are involved in healthcare policy, the idea of paying the physician directly sounds like an added cost to patients and detrimental to a group often collectively called “the poor” or “the underprivileged”.  Within this group, there are a few subgroups to identify to help show how DPC can be beneficial to “the underprivileged”.

HEAVY UTILIZERS – Patients requiring frequent visits 

Decreased need for a more costly “low deductible” plan
Decreased costs for multiple medication regimes
Longer visits at more frequent intervals
The DPC physician acts as one central advocate to help coordinate their specialist and hospital needs. 
More engagement in their treatment plan due to having a stronger physician-patient relationship
Decreased anxiety because they can easily reach their physician who knows their history
Fewer referrals compared to fee for service referral mill practices

WORKING CLASS – patients that cannot afford insurance and do not qualify for government subsidies or safety net insurance. 

These patients ignore health problems often for years because it is so expensive for them to get routine monitoring.
Chronic disease monitoring and preventive health monitoring at an affordable price tends to lead to fewer complications with better disease control and decreased ER visits
DPC allows these patients the freedom to see their doctor before small problems become complicated

GOVERNMENT INSURANCE – Medicare, Tricare, and Medicaid eligible patients 

Many physicians do not accept Medicaid patients due to poor reimbursement. These patients have coverage but may not be getting the best CARE, especially with long wait times, 5-minute visits, and only partial coverage services.
Medicare patients often join your practice for the increased access and longer visits with more detail to their care.

UNINSURED/UNDOCUMENTED

Many DPC physicians waive their fees or set up private charity funds to help care for those who cannot afford the monthly fees
Most physicians went into medicine to help people and have large philanthropic hearts. DPC allows you to do what you think is the right thing for your patients, giving you back control over how you live your life and practice medicine.
Caveat: Learn to differentiate those patients who really need your help from those who can afford it but do not respect the membership or you enough to pay a reasonable monthly fee. Set your boundaries, and stick to them.

TOPIC 2 – Direct Primary Care Models