The two largest and most current AEG/WP examples of downstream cost reduction failed to adequately address selection bias.

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, makes some valuable contributions to deliberations about direct primary care. The AEG/WP team clearly explained their computations and made clear the assumptions underlying their report.

This facilitates the public discussion that the Georgia Public Policy Foundation sought to foster in publishing the report. I have been examining those assumptions in prior posts and there are more to come. In this post, I continue a multi-post evaluation of AEG/WP’s claims regarding the effectiveness of direct primary care in reducing downstream care costs.

Although the AEG/WP report does not support its key claim with data or citation, the report’s authors responded to my request for information by indicating their sources. One of them was an e-zine article about the CHI clinic. The other two were promotional brochures, denominated case studies used, by the DPC companies Paladina and Nextera, to solicit business from self-insuring employers.

CHI’s direct primary care enrollment (1130) was more than three times that of the enrollment in a second source consulted by Wilson Partners, Paladina/Arvada (350), and more than five and one-half times larger than the remaining source, Nextera/Globe (205). Of the source clinics, the information from CHI is from 2018; that from Paladina is from 2016; and that from Nextera is from 2015. Both age and population numbers suggest a sequence for addressing the reports from the three clinics.

I begin with CHI and continue to Paladina in this post. I will conclude with Nextera — which represents not more than 10% of the populations addressed in AEG/WP’s sources — but this will be in a separate post, largely because the information from Nextera presents certain distinctive and complex issues as will be seen.


As recounted in a “Health Leaders” e-zine article, CHI Health offered a direct primary care option to its roughly 20,000 members in Nebraska; about 1130 enrolled; the rest remained in a traditional PPO arrangement. CHI reported data for the first three months of 2018 that showed those who opted for direct primary care that showed a $387 PMPM for specialist and facility charge versus a $488 PMPM, a difference of about 20%.

But the article cautioned that the CHI data was not risk-adjusted.


Note too that the claimed 20% reduction by CHI included only specialist and facility costs. But there are other medical costs, like prescription medications, that help keep other downstream care costs low. Any assessment of the effect of direct primary care in reducing other care costs should address all relevant care costs.


Wilson Partners also sourced a brochure produced by Paladina Health which presented its bottom line claim of 22% claims cost reduction in the year 2016 for those 350 or so employees of the City of Arvada, Colorado, who elected to use a Paladina direct primary care clinic rather than receive primary care elsewhere. There is no indication that the reported total claims cost reduction data for Paladina/Arvada has been adjusted for risk. (After having invited further questions, AEG/WP did not respond to a specific inquiry on this point.)

Unlike the case of Paladina’s clinic in Union County, North Carolina, we do not have data that compares the ages of Paladina members in the Arvada clinic versus those in traditional primary care. At the same time, there appears no significant operational difference between these two Paladina clinics, no significant operational difference in how Paladina relates to the local government entities who sponsor the two clinic, and no systemic difference between the employee populations served in the two places. Accordingly, it is wise to assume that the selection bias seen in Union County plays a similar role in Arvada.

Without analysis that seriously engages the question of selection bias, neither the CHI experience nor that at Paladina/Arvada is meaningful evidence that direct primary care is a potent tool for reducing downstream care costs.


Even if we assume that there is no selection bias in play at Arvada, the cost-effectiveness of that program seems doubtful. Assuming membership at Paladina/Arvada costs the same $125 a month as membership at Paladina of Union County, reducing overall medical costs by the 22% claimed for Paladina Arvada would imply, under the AEG/WP methodology, that use of a direct primary care clinic reduces downstream claim costs by nearly 35%. That alone is not a proposition on which to bet the health of hundreds of thousands of Georgia citizens. But it’s an even poorer bet when the monthly membership is priced at $70 a month.

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