Amended 6/26/20 3:15AM
The Milliman report’s insistence on the importance of risk adjustment will no doubt see the DPC movement pouring a lot of their old wine into new bottles, and perhaps even the creation of new wine. In the meantime, the old gang has been demanding attention to some of the old wine still in the old bottle, specifically, the alleged 68% cost care reductions attributed to Strada Healthcare in its work with a plumbing company of just over 100 persons in Nebraska.
KPI Ninja’s study of Strada’s direct primary care option with Burton Plumbing illustrates why so much of the old DPC wine turns to vinegar in the sunlight.
At an extreme, there will be those who anticipate hitting the plan’s mOOP in the coming year — perhaps because of a planned surgery or a long-standing record of having “mOOPed” year-in and year-out due to an expensive chronic condition; these employees will be indifferent to whether they reach the mOOP by deductible or other cost-sharing; for them, moreover, the $32 PMPM in fixed costs needed for DPC option is pure disincentive. Furthermore, any sicker cohort is more likely to have ongoing relationships with non-Strada PCPs with whom they wish to stay.
An average non-Strada patient is apparently having claims costs of $8000. With a $2000 deductible and say 20% coinsurance applied to the rest that’s an employee OOP of $3200 and a total employee cost of about $6100; with a $3000 deductible that’s an OOP of $4000 and a total cost of $7250 . Those who expect claims experience of $8000 are unlikely to have picked the DPC/$3K plan. Why $1100 pay more and have fewer PCPs from which to choose?
But what about an employee who anticipated claims only a quarter that size, $2000. With the $2000 deductible that would come to an OOP of $2000 and a total cost of $4860. With the $3000 deductible that would come to an OOP of $2000 and a total cost of $5250. For these healthier employees, the difference between plans is now less than a $400 difference. Why not pay $400 more if, for some reason, you hit it off with the D-PCP when Strada made its enrollment pitch?
The sicker a Burton employee was, the harder this paired-plan structure worked to push her away. It’s a fine cherry-picking machine.
Strada’s analyst, KPI Ninja, recently acknowledged Milliman’s May 2020 report as a breakthrough in the application of risk adjustment to DPC. In doing that, KPI Ninja tacitly confessed their own failure to work out how to reflect risk in assessing DPC for its string of older reports.
To date, as far as I can tell, not one of KPI Ninja’s published case studies has used risk-adjusted data. If risk adjustment was something that Milliman invented barely yesterday, it might be understandable how KPI Ninja’s “data-analytics” team had never used it. But risk adjustment has been around for decades. It’s significantly older than Direct Primary Care.
KPI Ninja should take this opportunity to revisit its Strada-Burton study, and apply risk adjustment to the results. Same for its Palmetto study and for its recently publicized, but risk-adjustment-free study, for DirectAccessMD. Or this one about Nextera.
Notice that, precisely because they have a higher deductible plan than their FFS counterparts, the Strada-Burton DPC patients faced greater cost-sharing discipline when seeking downstream care. How much of the savings claim in the Strada report owes to the direct primary care model, and how much to the a plan design that forced greater shopping incentives of DPC members?
It’s devilishly clever to start by picking the low-risk cherries and then use the leveraged benefit structure to make the picked cherries generate downstream cost savings.
The conjoined delivery of Strada DPC and enhanced HDHP makes the enhanced HDHP a “confounder” which, unless resolved, makes it virtually certain that even a risk adjusted estimate of DPC effectiveness will still be overly favorable to Strada DPC itself on utilization.
I have no doubt that risk adjustment and resolution of the confounding variable will shred Strada’s cost reduction claims. But, of course, if Strada is confident that it saved Burton money, they can bring KPI Ninja back for re-examination. It should be fun watching KPI Ninja learn on the job.
I’m not sure it would be fair for KPI Ninja to ask Strada to pay for this work, however. KPI Ninja’s website makes plain that its basic offering is data analytics that make DPC clinics look good. Strada may not like the result of a data analytic approach that replaces its current, attractive “data-patina” with mere accuracy.
I’ll skip explaining why the tiny sample size of the Strada-Burton study makes it of doubtful validity. Strada will see to that itself, with vigor, the moment it hears an employer request an actuarially sound version of its Burton study.
Special bonus segment. Burton had a bit over 100 employees in the study year, and a large fraction were not even in the DPC. I’m stumped that Burton had a one-year hospital admission rate of 2.09 per thousand. If Strada/Burton had a single hospital admission in the study year, Strada/Burton would had to have had 478 covered lives to reach a rate as low 2.09. See this spreadsheet. If even one of 200 covered lives had been admitted to the hospital, the inpatient hospitalization rate would have been 5.00.
The use of the 2.09 figure suggests that the hospital admission rate appearing in the whitepaper was simply reported by Strada to the KPI Ninja analyst. A good guess is that it was a hospitilization rate Strada determined for all of its patients. Often, DPC practices have a large number of uninsured patients. And uninsured patients have low hospitilization rates for a fairly obvious reason.