Going insurance-free does not, and cannot, reduce the overhead expenses of primary care practices by 60%, or even 40%.

Substantial correction made on 2/12/2-13.

About 13% of revenue (22% of overhead) according to academic research. 

I’ve back-tracked Katherine Restrepo’s and Julie Tisdale’s 2016 claim that:

By dealing directly with patients and filing no insurance billing whatsoever, DPC practices are able to eliminate 40-60 percent of their overhead expenses.

A footnote there takes you to a 2015 Katherine Restrepo article in Forbes that says:

By cutting 40 percent of overhead that is normally spent on getting paid by insurance companies, primary care providers can devote hour-long appointments to their patients and deliver care at a fraction of the cost. (Emphasis supplied.)

I will leave to Restrepo and Tisdale to explain why Restrepo-Tisdale 2016 bumps the earlier figure from Restrepo 2015 up to as high as 60.  Meanwhile, follow the link in Restrepo 2015 to an article by a free lance reporter, who wrote this: 

Jay Keese is the executive director of the Direct Primary Care Coalition, an advocacy group representing DPC physicians, residents, and medical students. 

<snip>

“What direct primary care does is takes out all the administrative costs so the cost of getting paid for primary care is gone,” Keese says. “We look at that as a 40 percent cost differential. Currently 40 percent of a practice’s expenses are spent on getting paid. Because the doctor is paid directly in direct primary care, some of that savings goes to increase payment to the physician and some of that is just savings to the system.” (Emphasis supplied.)

Keese is a long time lobbyist and political consultant. He does have B.A. in history and he does have the delusion that direct primary care will not entail any administrative costs of getting paid: no costs for soliciting and negotiating direct primary care contracts with individuals, employers, or other payers; no costs of billing or processing payments; no membership cards or annual renewals; no bounced checks, late payments or defaulting payers.

What Keese ( at 40 percent) and Restrepo-Tisdale (as much as 60 percent) do not have is any reliable evidence for these wildly inflated claims. 

Rather than rely on endlessly recycled alternative facts, look instead at this 2014 quantitatively detailed, peer reviewed academic study of “Billing and insurance-related administrative costs in United States health care“. Its evidence-based figure for billing and insurance-related costs in physician practices puts it at thirteen percent (13%) of gross revenues. This works out to a bit over 20% of the estimated 60% overhead expenses for family practice physicians.

Even if going insurance-free could eliminate all costs of getting paid (it can’t), thirteen percent (13%) of revenues is a figure that could support primary care physicians being able to increase their time with patients, while keeping their income the same, about one-third.

A third more time is significant, but hardly revolutionary. Claims that eliminating all billing and insurance-related overhead will cut patient panels by half or more and triple regular appointment times up to the hour mark, and do it all at a fraction of the cost, are far out of line. 

Deduct any reasonable amount for the costs of getting paid, some which will exist even for direct primary care clinics, and the ability of insurance-free direct primary care to work miracles of any kind is all the more questionable.  

No wonder it is so easy to explode the phony claims of savings made for such poster child examples of direct primary care as Qliance, Empower3 (formerly PHS) and Union County.

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