On that score alone, the AEG/WP report is off by $750,000,000.
In “Healthcare Innovations in Georgia:Two Recommendations”, the report prepared by the Anderson Economic Group and Wilson Partners (AEG/WP) for the Georgia Public Policy Foundation, the authors clearly explained their computations and made clear the assumptions underlying their report. One of the assumptions was that the fixed monthly fee for direct primary care would be $70 a month.
The report itself did not identify the source of the $70 figure. AEG/WP responded by email to an inquiry by stating only that the number was based on a study by Wilson Partners, apparently unpublished, of 16 direct primary care practices.
The experience of now-bankrupt Qliance, discussed elsewhere, further suggests that $70 fees cannot sustain a direct primary care experience that delivers effective cost reduction.
Why did AEG/WP ignore an academic study on point?
But why rely on a tiny unpublished study, when there is a published quantitative study of far greater scope in The Journal of the American Board of Family Medicine, with data directly on point, and a complete description of the methodology used. And might such a study be given special attention when the lead author of that academic journal article is one of the leaders of the direct primary care movement — Dr. Philip Eskew, a member of the advisory board of the Direct Primary Care Alliance and its general counsel.
In their piece prepared in 2014, Direct Primary Care: Practice Distribution and Cost Across the Nation, Dr. Eskew and his colleague reported that 116 practices they had identified as direct primary care practices had an average monthly cost of $93.26
Did AEG/WP ignore Georgia’s largest DPC group?
HIPnation has 40 direct primary care doctors in Georgia, one of seven states in which it operates. HIPnation would likely be a principal beneficiary if the AEG/WP recommendation were implemented. Dr. Hal Scherz, one of HIPnation’s founders, has deeply involved in Georgia Public Policy Foundation advocacy on health care in general and direct primary care in particular. In fact, Scherz’s advocacy is all but certainly part of the story of how AEG/WP came to prepare a report about direct primary care for GPPF.
Dr Scherz’s HIPnation has monthly fixed direct primary care fee of $100 a month. If a monthly fixed fee of $100 is substituted for $70 in AEG/WP’s computation, over half of the calculated savings for the individual market evaporates, along with every penny of savings in the large group and small group markets.
The monthly fees at direct primary care clinics that the Georgia Public Policy Foundation has featured in its own commentary can run $125 or more.
Unlike those Qliance, the doors are still open at the Union County employees’ direct practice clinic, an operation lauded by the Georgia Public Policy Foundation in a copyrighted article. The monthly fee paid by Union County for an employee who elects the DPC clinic run for the county by Paladina Health Services is $125. If a monthly fixed fee of $125 had been used in the calculations of the AEP/WP there would have been no net savings to report in the individual, small group, or large group markets.
In another copyrighted article, then-GPPF-president Kelley McCutcheon praised the PHS/Encounter3 direct primary care clinic in Altoona, Pennsylvania. That clinic offered free or discounted plans to persons with limited incomes. For an enrolled individual with incomes at the national median, however, the monthly fixed direct primary care fee was $130.
Consider, too, the DPC industry’s reaction to provisions addressing direct primary care in the Primary Care Enhancement Act of 2019, HR3708. That legislation would allow DPC fixed fees up to $150 a month (indexed for inflation) to become countable expenses under Health Savings Accounts. The Direct Primary Care Alliance’s Board of Directors opposes that $150 limitation.
Why did AEG/WP draw its assumption about monthly fees from a different set of clinics than those from which it drew its assumption about effective performance?
To assess what fixed monthly charge actually makes sense, we should look at a few examples of direct primary care clinics that at least claim to have demonstrated their cost-effectiveness. Critique of such claims by AEG/WP and others, I leave for another post. For the moment, though, let us take AEG/WP’s claims of cost-effectiveness at face value.
While AEG/WP did not identify, in the report, the research and case studies on which based their assumptions, AEG/WP responded to an email seeking more information by identifying three clinics as sources for its cost-effectiveness conclusion. It seems abundantly reasonable to assign special significance to the monthly fixed fees at these same institutions in assessing the reasonableness of the $70 fixed fee. The sauce for the cost-effectiveness assumption goose is sauce for the fee assumption gander.
For two of the three AEG/AP hand-selected clinics, the basic monthly fixed fee can be determined from public sources. Nebraska’s CHI Health Centers’ basic charge is $80. The monthly fixed fee at Colorado’s Nextera clinics are $99; since, however, Nextera clinics also charge a $79 one-time registration fee the effective monthly costs at Nextera exceed $99. AEG/WP’s other choice was a clinic operated by Paladina Health Care, who specialize in employer sponsored plans and who do not quote prices to the public. As noted above, however, Paladina is known to receive $125 a month for each adult enrollee in its Union County employee program.
Averaging the monthly fixed fees of CHI, Nextera, and Paladina — the very clinics AEG/WP rely on for their claims of cost-effectiveness — suggests a monthly fixed fee of $101 a month. Note that this number in early 2020 seems very much in line with Dr. Eskew’s 2014 finding of $93 adjusted by low inflation. If $101 is substituted for $70 in AEG/WP’s computation, over half of the calculated savings for the individual market evaporates, along with every penny of savings in the large group and small group markets. Five-year computed savings across all markets would be less than a quarter of the billion dollars claimed by AEG/WP..
Note: This Link will access the Google spreadsheet I used to calculate the effect on premiums of different values for the monthly fixed fee; it follows AEG/WP methodology.