My practice’s “aha moment” happened when I followed a nurse around for a day and learned she spends 40% of her time on paperwork for insurance companies.
If I had to give advice to someone fed up with the insurance-based medical system and starting their conversion to Direct Primary Care (DPC), I’d say “fasten your seatbelt and prepare to be delightfully surprised.” When we started researching DPC, we were blown away by the misconceptions people have. Our practice learned firsthand that:
Insurance payor contracts are less profitable than you think
Running a profitable DPC business is attainable
You CAN cut off your worst insurance contracts and still thrive financially
You CAN provide the care you want for your community
You CAN start this journey today
For me, the biggest realization was that DPC allows providers to feel, for the first time, as powerful as an insurance company. It set us free from all those insurance rules and restrictions. Now we can make decisions exclusively for our patients’ well-being. It feels like a dream to have complete control over all the financials, and I love to share our experience with others. For physicians considering DPC, I wrote this article to share our dream: why we chose to transition, how you can make the transition, and why we’re excited about the future.
I wish I could say doctors only made decisions based on patient care. While care is the most important aspect, we’re too often financially influenced. So I’m particularly excited that DPC will allow us to do both: save money and provide better care. And the cherry on top? We don’t have to work with insurance companies anymore.
With insurance reimbursement, it took 5,000 office visits to make $599,000 in our fourth quarter of 2017. After building our DPC model, calculations showed our practice could earn $658,000 from only 500 patient subscriptions. We expected DPC would save us money, but we were shocked to find we’d require so many fewer patients than the typical Fee-For-Service (FFS) model. And that calculation was being very, very conservative. We’ll even be providing more robust in-house services than most DPCs: we have ten providers, an onsite laboratory, digital, pharmacy, treadmill, ultrasound, and allergy. Even with all those offerings and overhead, the math makes DPC the smarter choice.
Since our practice has been so focused on quantity, it’s hard to think about life being simplistic and comfortable. It’s a dream to think a ten-provider group can survive with only 2,000 patients for a full year. Still, when I analyze DPC’s numbers, nothing about it scares me financially. Instead, I’m kicking myself that I didn’t think about it sooner. It’s the right structure at the right time, and if we serve our patients well we’re going to be very successful.
It's both enlightening and frightening how many patients we pack in under FFS to generate income. But with DPC, instead of quantity, it can be quality.
Insurance doesn’t see the benefit of investing in a technology that allows us to cure a patient quickly, so they don't want to pay for it. But, when you're on the DPC model, you want to nail the right diagnosis and treatment quickly to keep patients out of your office.
The new shingles vaccine is a perfect example of this problem. The vaccine is for patients 50 and older and makes all the sense in the world. Our practice sees a lot of visits for shingles, and these patients are in pain, especially if it’s near their face or eyes. But, I can’t even institute the vaccine because there’s no blanket response from carriers. Instead of Blue covering it at 100%, they include it in only 74% of their contracts. I can’t gamble on a hundred-something-dollar vaccine paying only 74% of the time, so we can’t operationalize. We’ve been burned too many times where we think we’re making all the right decisions for the right reasons, only to see the reimbursement and realize we’re losing our shirt. But, because we’re going DPC, we can institute care that’s best for our patients without worrying about insurance’s arbitrary classifications. We’re even implementing some new immune testing for flu and childhood illnesses so we can diagnose correctly during the patient’s first office visit.
DPC will allow us to expand our care for addiction medicine, which will have a significant impact on our community. With our demographic, it’s typically the access to care that determines whether a patient gets the support they need not to relapse. In FFS, we can help them get the medications they need, but we can’t ensure they get their refills or have the reinforcement to stick it out through detox. When we launch DPC, we’re going to be including addiction care because we believe the general population needs the ability to seek decent detox without paying a ton of money for it.
When it comes to care, those new additions are the big ones, but there’s so much more. With DPC we’re adding the bonus ability for our patients to be able to get in touch with one of our physicians 24/7. A lot of people are doing telemedicine now, but they’re often doctors who don’t know the patients. I’m worried that anonymous telemed doctors will cause problems because they don’t know their patient. But, since we know the patient, their family, and their employer, we can answer questions while also taking patient experience and history into account.
When a patient has chest pain, Blue Cross Blue Shield’s finicky coverage policy forces us to stop heart attack treatment to ask about money. We’re an urgent care center for Blue, and our practice can do a CKMB, which is a test indicative of a heart attack. However, Blue won’t pay for CKMBs (while all the other major insurers do) so we have to pause treatment to ask if the patient is willing to pay out-of-pocket.
These weird insurance specifications grind my gears because they disrupt patient treatment. If you’re worried about a heart attack, your doctor shouldn’t have to stop treatment to ask if you’d rather pay $52 or take a $10,000 trip to the emergency room for the same five-minute test. And it’s not like Blue is unique in this annoyance: every major insurer is different, so we regularly find ourselves juggling different memories about trimming care to fit the patient’s carrier.
When we analyzed our FFS practice, we pulled a subset of 100 patients and followed them for a year, only to realize how much the expectations on our providers is around providing service and information to an insurance carrier instead of the patient.
It starts with the first phone conversation: Do we take that insurance or not? What does it mean if we don’t?
Then, at the desk, we talk deductibles and rules of engagement because each carrier has different rules on what we’re permitted to do in our clinical area.
Even though we’re not a party in the insurance company’s contract with individual patients, we become the mediator because we want our patients to understand the outcome and cost of their care before it happens. We constantly field questions about what’s covered under a deductible and what’s not, or what’s “wellness” and what’s not.
Care becomes even more difficult when insurance treatment changes mid-visit. If a patient comes in for a wellness visit (covered 100% under wellness) but has hypertension requiring a chest x-ray, they could now fall under their copay. In the middle of their appointment, we have to tell the patient, “Circumstances have changed, so despite what we said earlier, you are going to have to make your copay.”
Insurance makes us muddle through prior approvals and denials, and we’re never sure what medication or diagnostic tests they’ll let us order for the patient.
The whole process finally ends with the follow-through chart reviews that insurance companies send us gross quantities of per month. We print out the records, check the boxes, and pack them up to upload on the insurance company’s website, for which we don’t get any feedback and most of the time we don’t get paid for that work.
It’s mind-blowing how much insurance has progressed over the years to worm its way into every level of patient care. When we analyzed every step of our process, we approximated the amount of time that everyone spent on insurance-related work and found the results astounding:
Front desk: 60%
Admin: 25%
Nursing: 23%
Physicians: 18% (Explaining insurance coverage, denials, prior authorizations, peer-to-peer reviews, formulary, care coordination)
Check-out: 70%
Referral coordinator: 60%
We’re ecstatic that, with DPC, we’ll be able to use that time to serve our patients instead of insurance companies.
Now we can even focus our pricing to be patient-centric, unlike how everything in FFS is an insurance game. For radiology, we developed two simple charges: for a three-view or fewer, it’s one price; for more than three views, it’s another price. We’re going to publish all our costs and simply charge DPC patients some percentage above cost. It’s clear and concise, and patients pay precisely what they expect: essentially the opposite of insurance payer reimbursement.
And that’s just on the medical side! We haven’t even talked about claims management and bad debt, which take up so much of our time and even more of our mind. Many of those disappear when you lose insurables, so DPC is clean and patients don’t get mad at you. They know what care costs ahead of time, they're fully informed, and they're given complete options. Everyone wins, except for the insurance company.
Now that I can see the light at the end of the tunnel, I’ve developed a term for this feeling: Post-Insurance Stress Syndrome. In a word, I'm PISSed! In the FFS model, providers are so beat down by insurance we can’t think outside of the insurance realm. We’re not allowed to ask “what care is best for the patient?” because we’re financially beaten for making a decision without thinking of insurance before patients. But now, for the first time in our practice, DPC will give us the freedom to focus on care.
It took my admin team less than eight weeks to perform a practice-wide deep dive, uncovering our entire financial situation before converting to DPC. We pulled 12 months worth of invoices, separating individual departments and combing through all our employee costs. We learned that a successful DPC practice requires only two things: patients and a clear financial understanding.
If you want to do the simple math for your practice without going into daunting details, you can start with these questions:
What is your revenue for each department?
What are your total costs for each department?
How much of that is overhead?
With those answers, you can express revenue for each department as a percentage of cost, which shows you which lines of service are profitable. Then, to see the difference between DPC and FFS, all you have to factor in is your current contract reimbursements.
For example, if you’re 20% below Medicare in your lab, it doesn’t net you very much. If you choose to charge DPC at 20% above cost, you’re ultimately making 40% more from DPC than what the insurance company is paying for those labs.
Personally, when it comes to numbers, I like to analyze them every which way. I wanted a bit more detail, so I found a few additional calculations useful (but they’re far from necessary to know whether switching to DPC makes sense). I wanted to find out:
In light of opening a whole new marketplace, what do I consider bringing on for DPC?
What programs do I sunset?
How much do I make per line of service?
So, for each line of service, I asked:
Again, I liked doing this deep dive will all the specifics, but it wasn’t strictly necessary. I’m a bit of a slice-and-dice queen when it comes to numbers, but even just the basic outline of the numbers by each department would get close enough to the right answers.
Once I had run all the numbers, it was easy to convince our team. First, I went over the financials with my boss, who’s the practice’s sole owner, to set him straight on our actual reimbursement numbers. The payment doctors expect can be vastly different from what they actually get, with insurance even paying 80% less in some circumstances. And these financials aren’t even touching on the myriad lifestyle benefits that physicians feel from becoming DPC doctors. While it was probably easier to convince my boss than it would be for most physicians, the numbers are strong enough to do the convincing themselves.
Since patients are the most important part of any medical practice, we dove deep into what they wanted and how best to serve them. From interviewing patients, we were pleasantly surprised. It turns out patients are incredibly willing to pay a subscription, and recruiting employers and patients to join was easier than we expected.
Patients were willing to pay us much more money in their subscriptions than we expected, to the tune of 30%! When I interviewed people of different ages and demographics to find comfortable price points, I thought patients would lowball, being unwilling to pay more than $40 per month. But, across the board, they uniformly said “Are you kidding? Do you know what we pay now?”
From our interviews, we created a pricing model. We spent a fair amount of time identifying our target markets and ultimately chose to price by age. For us, 0 to 24 years old is $69 a month, 25 to 29 is $89, 30 to 39 is $129, 40 to 49 is $159, 50+ is $174. Of course, pricing is location-dependent, and I’m in Naples, which is a wealthy community so our demographics might be different. However, even when I pulled in a group of 23 to 29-year-olds, they had no issue with what we were proposing for prices.
After interviewing patients, we narrowed our focus to young people who can't afford regular insurance or are losing their parents’ insurance, as well as small employers in our community who want to provide cost-effective benefits.
Acquiring patients is a process of beating the streets. We’ve been doing that for about six months, compiling a master list of patients to target first. We’re mining a lot of our occupational clients, such as the small trucking companies that we do Department of Transportation physicals for because we know they’re not medically insured.
Most employers hate health care, so the ones I’ve spoken with have appreciated a personalized solution from us. I presented them two spreadsheets, side-by-side, showing the cost to employers and employees both under their current plan and under DPC.
I developed a three-step process to create these spreadsheets:
This way, when I meet with employers, they can compare side-by-side costs and choose how to best set up their plan.
I find this process helps add structure to my meetings, but it’s important to keep in mind employers are far from one-size-fits-all. Each conversation and relationship is different, so I approach each individually to find the best plan for each client. I learn about an employer before performing these calculations so I can offer a solution that’s affordable and better than what they have now. Am I being compared to a Blue Cross Blue Shield plan that costs $420 per employee per month or talking to a group of servers at an upscale restaurant that earns about $600 in tips a night, but needs to spend their dollars well and doesn’t currently have insurance?
I typically visit an employer twice. First, I find out the culture and the organization's struggles or worries. Then, on the second visit I take the information they gave me and run it against DPC to find what would be missing so we can offer a plan that fits them.
For the first six weeks, we're launching a beta with our two employer groups. They’re all tech boys, most of them are under the age of 30, so they're a perfect target market to start with. We know both employers well, so we’re sure they’ll be patient with us (partially because we’re giving them a good deal for the first year to be patient with us). For me, it’s essential that they see a difference in the quickness of care and receive a strong return on investment from us.
Our better care and outreach should take care of most of our marketing needs, but we have something special planned for converting patients from the FFS side of our hybrid practice. We’re using our waiting room to create a clear-cut visual difference, in-your-face proof that DPC can do better than insurance companies.
I want you to envision that you're a DPC client. When you arrive, why do you have to stop at the front desk? Why do you have to sit in the waiting room? Why can’t we just pop a message on your phone that says, “room 3 is available; go ahead and have a seat there.”
Our practice has a big elevator that opens onto reception, so if a DPC patient goes straight into an exam room, insurance-paying patients sitting in the waiting room will ask “why is he going right in, and I’m waiting?” I’ll tell them about DPC and hand them a brochure and let the waiting room do our marketing for us.
We’re going live soon and excited for so many reasons! Since insurance can be such a burden, deleting those contracts will account for the biggest weight off my back. But on top of that relief, we’re looking forward to being able to provide our patients better service and have more real human relationships with them instead of the cattle-car of FFS.
Because we're not going pure-DPC initially, we’re keeping the financial stability of not deleting contracts yet, although the minute I get my 200th signed DPC patient, we’ll serve 60-days-notice to an insurer that will remain nameless. Then, when we have 400 on top, we’ll drop the even-bigger fish, the one that provides 62% of my commercial payer group.
I think if we can split from these two insurers, our lives will be completely different as clinical providers. We’ll be popping champagne. Health cost is currently just a game between large hospital groups and the payers. Patients shouldn’t be purchasing insurance for anything we do in this office, just like you don’t purchase insurance to gas up your car. If they rolled insurance back to the expensive market and made direct care affordable and easy-access, the health care system wouldn’t have the problems it does right now.
I keep being surprised by just how much we’re able to bundle into our DPC model. When I told my boss I wanted to include laceration care, he was skeptical. But I have two boys, and the prospect of one of them wiping out and breaking their arm open costing me over $2,000 in the ER keeps me awake at night. My boss has employed me and provided care for my two boys for 17 years. Only once has he sewn up either of them—so how much risk is there? We’ve looked at the numbers, and they work, so we’ve included everything that might freak out a single mom if she doesn’t have insurance for her kids.
We're going to do fracture care; we're going to do lacerations, we're going to do skin tag and ear wax removal. It’s a selling point. If that selling point pulls in ten moms, I've got the lacerations covered in six months just on their memberships. Through insurance, you don't get that much money. You bill out $1,500 for these sort of procedures you're lucky if you get $400 in reimbursements. If I get five moms for four months, I've got all of them entirely covered for less than what insurance pays.
Now that our entire financial model has changed, the floodgates are open. I would love to add mental health and dietary because they’re huge drivers of health. If we can get a handle on them with DPC, we can truly upgrade to next-generation health care.
Southwest Florida has one other DPC clinic that I’m aware of, in Fort Myers. They’re complete DPC, and I haven’t visited yet, but I did see they just added a new doctor, so they must be doing well. It’s an exciting and exhilarating change for us, our patients, and the industry. We have patients, we’re making money, and we’re practicing health care. Compared to the nightmare of operating in the FFS model, DPC is a dream. Our only regret is not converting sooner.