DPC advocates talk about lemonade stands. Strangely!

When an opinion piece in JAMA suggested that direct primary care might resemble primary care capitation plans sometimes tried by insurers in raising issues of allocating resources between primary care and other medical care, Kenneth Qiu, M.D. gathered enthusiastic approval from many supporters of direct primary for the following response.

DPC looks like capitation but is not. Capitation incentivizes less visits and more referrals while DPC does the opposite. To illustrate the difference in underlying psychology and motivation between DPC and capitation, imagine I make and sell lemonade. If I set a price for the lemonade and a customer pays for my lemonade, I’m going to ensure the customer gets the best lemonade possible and will do everything in my power to ensure quality so the customer keeps coming back. This is DPC. Now, if a big company puts me in a network of lemonade sellers and says they will pay me a certain amount per customer and will assure customers come by putting my name on the in-network list, I’m likely going to create a watered down product that just barely counts as lemonade in order to maximize my payment from the big company since customers are coming anyways and, at the end of the day, its the company that pays me, not the customer. This is capitation. As it relates to primary care, better lemonade means more access and better, more comprehensive treatment, both medical and personal.

Commentary by Kenneth Qiu

I’ve sold lemonade on the streets, and I don’t get it.

Of course I made the best possible lemonade to keep my “fee-for-cup” drinkers coming back, as well as to gain new “fee-for cup” drinkers from referrals. But I don’t see why my lemonade would be any different if those fee-for-cup payments came from the Lemonade Club (LC) rather than from drinkers directly. I will be under pressure to perfect the mix of lemonade quality, lemonade dilution, and lemonade production costs that will keep my drinkers satisfied and myself in business, no matter who makes the payments.

Suppose, however, LC puts me on a capitation system that parallels primary care capitation by insurers, and continued participation requires that I provide all-you-can-drink lemonade. The quality, dilution, and production cost mix may need adjustment. I may well have to make a more dilute lemonade to make the business work. But, while the Lemonade Club can perhaps lead a drinker toward this potentially watered-down lemonade (by putting you on its “Lemonade Near You” app), it can’t make him drink and it can’t make him remain on my panel of drinkers. Because I’ll still need drinkers walking up to the stand, I will continue to make the best lemonade possible given the restraints of all-you-can-drink, fixed-fee lemonade.

Dr Qiu is simply wrong to assume that lemonade customers would keep coming simply because I am on the Lemonade Club list. By the very defintion of list, there are actually other lemonade makers on the same LC list.

How are things different for the lemonade entrepreneur outside the LC network who decides for herself to seek customers for a fixed-fee all-you-can-drink plan that parallels direct primary care?

Yes, she may not like working with “Big Lemonade” of the LC. But I might like being on the LC app that finds “nearest lemonade”. Yes, she might not like spending the time filling out LC paperwork; but maybe it would take me less effort to work out a single contract with LC than it does to negotiate price and credit terms with individual drinkers.

And consider this, if Dr Qiu has opened his own Direct Lemonade stand, and has a panel that have prepaid a season’s worth of lemonade in advance, what incentive does he have to keep his quality up all season long.

Note, too, that Dr Qiu might be at risk of adverse selection by those heavy drinkers who are disproportionately attracted to all-you can-drink fixed-fee lemonade. Who would blame him if he targeted connaisseurs de limonade who sipped rather than gulped?

Yes, direct primary care has virtues. But, it in terms of incentivizing fewer visits and more referrals, or an alternative strategy of cherry-picking low-utilizers, a practice that turns on a fixed-fee for potentially unlimited visits resembles capitation in important ways.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: