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To DPC, or Not to DPC? Challenges, Opportunities, and Questions Ahead

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Post By Naveen Rao

October 20, 2016

InCrowd has teamed up with Naveen Rao, the editor of Tincture, a website covering healthcare and humanity, for a 3-part series on perceptions of Direct Primary Care. This is the second article of the series. 

As with any disruptive business model, Direct Primary Care (DPC) faces its share of challenges.

To recap what it is: DPC does away with the vast complexity of insurance reimbursement and the accompanying regulations and paperwork. Instead, physicians working in DPC practices simply collect monthly subscription fees directly from patients.

In October, Iora Health, a DPC-stylized primary care startup working with public and private payer groups, reported “triple digit growth” on the wings of their latest funding round.  So it’s a growing trend that needs discussion, and better understanding of the questions and critiques surrounding this emerging model.

Favors the Wealthy

One criticism of DPC is that it is geared towards more affluent patients, who can afford out of pocket cash payments every month. The physicians polled by InCrowd seem to echo this concern. One doctor wrote that she thought patients “[will be] frustrated with out of pocket costs.” Another commented that “My only concern is that there is an added cost to the patient….that would [limit access for] some patients who financially cannot afford the difference [sic].”

Some critics have passed DPC off as a new form of “concierge care” that cherry-picks smaller panels of wealthier, healthier patients, who typically pay cash in exchange for high touch, round the clock access to their physician. DPC’s proponents are quick to distinguish this new model from concierge medicine, citing more affordable prices and pointing to partnerships with employers in their communities. Several physicians commented that they thought many patients would jump at the chance to remove the insurance middleman from the relationship.

Can DPC Work Well with Others?

Realistically, at this early juncture it remains an open question whether DPC practices will be able to stay in business over the long term without figuring out how to work with health plans in some form or fashion. Those who figure it out will be positioned for success amidst the transition that’s occurring in healthcare reimbursement.

Competition from Payer-Led Models

DPC practices in some markets may also face competition from payers themselves. Payer-led DPC-like models like Harken Health in Chicago purport to offer retail-level convenience and access to patients, along with the benefit of using pre-paid or discounted coverage. To be sure,  these models face their own challenges, particularly on the individual market. If they are able to expand, they may prove a competitive threat in urban markets, given the deep pockets and DTC marketing experience that health plans bring to the table.

All this leads to an important question: Will DPC simply introduce further fragmentation into the marketplace? The availability of more options could easily wind up backfiring by making things more complex for both systems and individuals to navigate. On the one hand, the growing chorus from the movement’s advocates insists that the vast majority of primary care– annual physicals, lab tests, coughs and colds, bumps and bruises – simply might not require health insurance, or a high end electronic medical record system, or access to an extensive network of specialists and hospitals.

On the other: For acute injuries or serious illnesses, DPC will still require a functioning channel of specialists to refer into; patients will still require insurance to cover the costs of expensive surgeries, treatments, and medications. Moreover, today’s population health management systems rely heavily on insurance companies’ claims data, which typically originate at the primary care level. If DPC becomes a major piece of the picture, it could remove this source of upstream data, also impacting risk calculation, cost estimates, and other operational aspects of the broader health care system in the process.

Dr. Farzad Mostashari, the former head of the government’s healthIT incentive program, recently faced backlash over likening DPC to a “retreat” from the challenges of re-structuring payment, measurement, and delivery. The apprehension underlying Dr. Mostashari’s comments is a simple one: If enough doctors and patients shrug off the hassles of health insurance altogether, the impacts in the marketplace could further challenge the success of ACOs and other models of payment reform.

Of course, that’s a big if, – especially given the numbers at this stage: Today, there are about 1400 physicians involved in DPC, working at between 350 and 400 DPC clinics in 45 states, according to the Direct Primary Care Coalition, a trade group. This is up from 300 in 39 states a little bit over a year ago, but it still represents a mere fraction of the some 200,000 practicing primary care physicians in the US.

The discussion around DPC is an important signal of the shift occurring in the practice of medicine. Over the last few years, many physicians felt that the government-driven reforms under the Affordable Care Act, the Electronic Health Records stimulus program, and other initiatives were poorly designed for clinicians. Andy Slavitt, the acting administrator of the Center for Medicare and Medicaid Services, has stated he is trying to “win back the hearts and minds of physicians” through the latest payment reform, known as MACRA, which has been structured to give physicians flexibility in selecting a preferred model of reimbursement for demonstrating quality and cost savings.

Yet this will certainly fail to persuade everyone. As one physician noted in the survey comments:

Beyond highlighting the limited appeal of further government-driven mandates, this suggests another underlying reason for DPC growth might be the worsening issue of physician burnout. Burnout has steadily been on the rise over the last few years as doctors are asked to do more with less in the name of efficiency. For some of these doctors, more time with fewer patients and less paperwork is an enticing proposition.

For most practicing physicians, the transition to setting up their own DPC practice, or even joining an established group poses too high a risk. For these doctors, at this stage dropping insurance is like throwing the baby out with the bathwater. But given the shifting sands of employer coverage, consumer demand, and the emergence of a wave of younger, more entrepreneurial doctors, we’ll see the emergence of hybrid models, more technology platforms, and more firms offering services/support.
In the third and final part of this series, we will examine some of the different approaches that DPC companies are using to establish traction in the early stages of the primary care revolution. 

Interested in joining the Crowd and sharing your medical expertise? Learn More.

Thank you to our partners in this series, Tincture.

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