Editor’s Note: Physicians operating in a direct-pay monthly membership business model can charge up to 98 percent less for their services than doctors in third-party-payer models, according to Dr. Lee Gross, president of the Docs4PatientCare Foundation and founder of Epiphany Health Direct Primary Care, which is located in North Port, Florida.
Managing Editor Michael Hamilton interviewed Gross at “Direct Primary Care: Nuts and Bolts to 2.0,” a conference hosted by the Docs4PatientCare Foundation in Irving, Texas on October 14–15.
Hamilton: Direct primary care (DPC) providers offer preventive care, tests, and other services in exchange for monthly membership fees paid directly by patients. How does billing patients directly instead of through their insurers reduce health care costs?
Gross: In many instances, people actually pay more for health care services if they pull out their insurance cards. This morning, I showed a slide of an actual hospital bill of a patient that was close to $20,000. Using Epiphany’s direct-pay contracted rates, we could have provided the same services for under $300.
Routine practice would be for the patient’s insurance company to use its negotiated network price to get that bill down to $5,000. The patient would then typically feel good about paying $5,000 for $300 worth of medical tests.
Hamilton: How do you negotiate such big discounts for your DPC patients who require non-primary care from specialists?
Gross: It’s difficult if you’re trying to negotiate with a hospital. If you’re trying to negotiate with an independent practice, it becomes much easier. It’s similar to what Priceline.com does for hotel rooms. They go to a hotel and say, “If you have a room that’s going to go unsold, and we have a customer willing to pay cash in advance, what would you sell that room for?” They name their own price.
Why can’t you go to an imaging center, and say, “If you own your CT scanner, and it’s not running 24 hours a day, what would you sell me an extra CT scan for, for a patient who’s willing to pay you for your time and service?” You don’t have to wait six months to get paid after you do the service or have payment denied by an insurance company.
Hamilton: How significant are the discounts you negotiate for your patients?
Gross: Suppose I told a lab I’m going to send them 500 patients and 500 appointments, and they have to submit each bill to a health insurer, get it applied toward each patient’s deductible, and hunt down the patient for the amount unpaid by insurance. That’s very expensive for the lab.
But suppose I tell the lab, “What if I collect the patient’s money at the time I give the patient the lab order, and you then send me one bill for 500 patients, and I pay you cash for 500 patients? What can you sell them for?” The costs are pennies on the dollar. I mean, you see 90–95 percent discounts.
Hamilton: Some of your patients have DPC memberships and others use insurance. Which model requires fewer patients to run a profitable business?
Gross: An average primary care doctor in a traditional third-party-insured practice probably has 2,500 to 3,500 active patients. A DPC-only provider often operates on a micro-practice level, where they really don’t have a whole lot of overhead or employees. They’re probably aiming to have 600 to 1,000 patients.
Our hybrid practice is membership-only for patients under the age of 65, and Medicare pay-per-service-only for patients 65 and older, without charging any membership fee to the Medicare patients. We’re running probably about 1,500 patients in all.
Hamilton: How does DPC expand access and improve quality for patients?
Gross: The nice thing about direct primary care is that we are able to get people into our office very quickly for evaluation. We’re also able to order [priority] labs and [priority] imaging, just as if they had gone to the emergency rooms. We can get results back very quickly. In fact, many times, due to the waits in the emergency rooms, we can actually see patients and get results back faster than if they went to the emergency room.
Hamilton: How can lawmakers in Florida and other states encourage the spread of DPC?
Gross: We’re seeking very simple, one-page legislation defining DPC as a direct contractual relationship between primary care physicians and their patients for medical care that is not up-charged [and] should not be regulated by insurance legislation.
We’re not saying practices like ours should not be regulated. In fact, medical practices are heavily regulated by the Department of Medicine. We are extremely regulated; we’re just not insurance claims. We’ve been trying for about five years now to get legislation passed in the State of Florida. It’s already been passed in about 17 states so far.
Michael T. Hamilton ([email protected]) is a Heartland Institute research fellow and the managing editor of Health Care News, author of the weekly Consumer Power Report, and host of the Health Care News Podcast.
Michael Hamilton, “Dr. Chad Savage: One-Stop Shop for Understanding Direct Primary Care,” Health Care News Podcast, The Heartland Institute, July 26, 2016: https://heartland.org/multimedia/podcasts/dr-chad-savage-one-stop-shop-for-understanding-direct-primary-care
Luke Ferree, “Direct Primary Care Delivers Savings for North Carolina,” Health Care News, The Heartland Institute, May 9, 2016: https://heartland.org/news-opinion/news/direct-primary-care-delivers-savings-for-north-carolina
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