Milliman’s valuation of DPC health care services at $8 PMPM rests on faulty data.

If I were a direct primary care practitioner, I’d be mildly miffed at Milliman’s reducing what I do to a series of CPT codes. I’d be more worried by Milliman’s team setting the value of my health care services at $8 PMPM.
The $8 PMPM figure Milliman declared as the health care service utilization to deliver primary care to DPC patients was based on apparent underreporting by the studied direct primary care provider, of a single class of data: the quantum of primary patient care actually delivered.
Although this data was of central importance and would have warranted a validation process for that reason alone, Milliman evidently took no steps to validate it. But there were clear warning signs warranting extra attention, including the employer’s public reports — known to Milliman — that DPC patients were visiting the DPC clinic three times a year.
Correcting the $8 PMPM to something reasonable shows that Milliman has vastly overstated net savings associated with DPC.

Note: Update of 6/24/2020.


The resources used by direct primary go beyond what has been recorded in CPT codes. DPC docs and advocates used to be the first to tell us that. Here’s a DPC industry leader, Erika Bliss, MD, telling us “how DPC helps”.

A large amount of DPC’s success comes from slowing down the pace of work so physicians can get to know our patients. While it might sound simplistic, having enough time to know a patient is fundamental to providing proper medical attention. Every experienced DPC physician understands that walking into the exam room relaxed, looking the patient in the eye, and asking personal questions dramatically improves treatment. [Emphasis supplied.]

https://blog.hint.com/what-qliance-taught-me-about-healthcare

Slower-paced and longer visits use real resources. As do all the other elements claimed to generate DPC success, such as same day appointments, nearly unlimited access 24/7, extended care coordination. A principal justification for the subscription payment model is that too much of the effort required for comprehensive primary care escapes capture in the traditional coding and billing model.


The Milliman report found no net cost savings to Union County from the money it spent on its DPC plan, a negative ROI. But some DPC advocates seek salvation in Milliman’s claim that application of its novel, CPT-code based, isolation model to Union County’s claims data turns that lemon into lemonade.

[T]he DPC option was associated with a statistically significant reduction in overall demand for health care services(−12.64%).

Milliman report at page 7.

As noted, that computation marks overall demand reduction across the system, in which lowered downstream care demands are measured as part of all demanded health care services including the health care services demanded by direct primary care itself.

Lemonade by Milliman — initial steps.

Downstream care utilization for both DPC and PPS patients, along with primary care for utilization non-DPC patients was assumed to be represented by the County’s paid claims. Milliman, in other words, felt it was actuarially sound to use the employer’s negotiated fee schedule as the appropriate yardstick to measure health care services utilization.

But DPC providers are not paid on a claims basis; they are paid on a subscription basis for nearly unlimited 24/7 access, same day appointments, long, slowed down visits, extensive care coordination and the like. How then is the “utilization” of direct primary care services to determined? Is there anything comparable to Union County’s negotiated fee schedule for fee for service medical services that might fit the bill for subscription primary care ?

How about Union County’s negotiated fee schedule for subscription direct primary care from the DPC? An average of $95 PMPM. Had that number been used in Milliman’s alternative model, I note, direct primary care delivered by the DPC would have been “associated with” a substantial increase in overall demand for health care services. Milliman, having found that Union County’s ability to negotiate fees was sauce for the FFS goose, did not find that Union County’s negotiating skill was an appropriate condiment for the subscription DPC gander.

How about setting the utilization of direct primary services at an approximation of market price for subscriptions to bundled primary care services, using perhaps the reports of DPC fees gathered in a survey that was part of the Milliman report? An average of $61 PMPM. Had that number been used in Milliman’s alternative model, I note, direct primary care delivered by the DPC would still have been “associated with” a modest increase in overall demand for health care services. But, hey, what do markets know? Milliman went a different route.

A cost approach, perhaps? I expect that Paladina, Union County’s client, would have declined, if asked, to provide data on the prices it paid for the inputs needed to provide Union County with the contracted direct primary care services. And it could well be that Paladina is as bad a price negotiator as Union County itself.

But these costs can be estimated, and the result would have more general applicability. A very conservative estimate of those costs would be $39 PMPM (based on Union County’s panel size of less than 500, a low PCP compensation package of $175k/yr, and overhead at a low 33% of PCP compensation). Had that number been used in Milliman’s alternative model, I note, direct primary care delivered by the DPC would have been “associated with” a modest decrease in overall demand for health care services of about 5% percent. Using AAFP reports of average PCP salaries and overhead instead of conservative assumptions would turn that number negative.

Using an estimate of the actual costs of putting a PCP into a DPC practice as a means of putting a value on the health care services demanded when a PCP is actually put into a DPC practice seems sensible.

But Milliman took a different course.


Breakthrough in Lemonading: the elements of the Milliman method for computing the health services utilization of direct primary care.

  • Assume that utilization of subscription-based holistic, integrative direct primary care can be accurately modeled using the same billing and coding technology used in fee for service medicine.
  • Ignore that a very frequently-given, explicit justification for subscription-based direct primary case is that the fee for service billing and coding methodology can not accurately model holistic, integrative direct primary care.
  • Ignore that direct primary care physicians as a group loudly disparage coding as a waste of their valuable time, strongly resist it, and do not use standard industry EHRs that are designed for purposes of payment, relying instead on software streamlined for patient care only.
  • Rely on disbelieving, reluctant DPC physicians, using EHRs ill-equipped for the task, to have accurately coded all services delivered to patients, used those codes to prepare “ghost claims” resembling those used for payment adjudication, and submitted the ghost claims to the employer’s TPA, not to prompt payment, but solely for reporting purposes.
  • Have the TPA apply the FFS fee schedule to the ghost claims.
  • Carefully verify the accuracy of the FFS fee schedule amounts applied to the ghost claims.
  • Do precisely nothing to verify the accuracy of the ghost claims to which the verified FFS fee schedule amounts were applied.
  • Perform no reality check on the resulting estimate of health care services utilization
    • Do not compare the results to those articles on Union County you have consulted, referred to and even quoted in your own study.
    • Do not compare the results to the market prices for direct primary care services revealed in your own study’s market survey.

Anyone see a potential weakness in this methodology?

This methodology resulted in $8 PMPM. That, I note, was the number which when used in Milliman’s alternative model, showed that direct primary care delivered by the DPC was “associated with” a decrease in overall demand for health care services of a 12.6%.

Milliman identifies its methodology as a tidy “apples-to-apples” comparison of FFS primary care services and direct primary care services measured by a common yardstick. But that look comes with the feeling that Milliman have emulated Procrustes, gaining a tidy fit to the iron bed of the fee schedule by cutting off the theoretical underpinnings of direct primary care model.

DPC practitioners, however, are very much bottom-line people who will endure repudiation of their ideology in Milliman’s study details as long as the ostensible headlines serve up something they might be able to monetize: a supposedly “actuarially sound” demonstration that the direct primary care model saves big bucks.

That demonstration, however, hinges on the $8 PMPM result being somewhere near accurate. But that result is at war with reality.


Milliman’s $8 PMPM result defies known facts and common sense — and does indeed contradict the core values of the DPC model.

Whether for the average patient panel size (~450) reported in Milliman’s survey of DPC practices, or for the specific panel size (~500) for the DPC practice in Milliman’s case study, $8 PMPM ($96 PMPY) works out to less than $50,000 per PCP per year. That’s not credible.

That Union County DPC patients see their PCP around three times a year is apparent from the public statements of the employer’s then-director of human resources and his successor and even from an article on Union County from which the Milliman study’s literature review quoted verbatim. The three visits are said to have lasted at least half an hour, as long as a full hour, and to be available on same day basis. $96 a year does not pay for that.

Consider also the logical implications of accepting that $8 PMPM yield by Milliman’s process accurately reflected actual office visit duration and frequency for the DPC population. That’s roughly one garden-variety visit per year. In that case, what exactly is there to account for downstream care cost reduction?

Were those reductions in ER visits caused simply by writing “Direct Primary Care” on the clinic door? Were hospital admissions reduced for patients anointed with DPC pixie dust?

What Milliman misses is magic, just not that kind.

It’s the magic of hard, but slowed down, work by DPC practioners. It’s their time doing things for which CPT codes may not or, at least, may not yet exist.* It’s relaxed schedules that assure availability for same day appointments. It’s 24/7 commitments. It’s knowing your patient well enough to ask the personal questions that Dr Bliss mentioned. Collectively this demands more health service resources than are captured by the CPT codes for little more than a single routine PCP visit.


The data set from which Milliman calculated utilization of direct primary care services underreported the patient care given at the clinic.

The only visible path to Milliman’s $8 PMPM figure for health services demand for the delivery of direct primary care is that the direct primary care physicians ghost claims were consistently underreported. That’s a kind of outcome that can reasonably be anticipated when disbelieving, reluctant DPC physicians, using EHRs ill-equipped for the task, are expected to accurately code all services delivered to patients, use those codes to prepare “ghost claims” resembling those used for payment adjudication, and submit those ghost claims to the employer’s TPA, not to prompt payment, but solely for reporting purposes.

In fact, Milliman even knew that the coding habits of the DPC practitioners were inconsistent, in that the ghost claims sometimes contained diagnosis codes and sometimes did not. Report at page 56.

Yet, Milliman did nothing to validate the “ghost claims”.

Whatever the justification for Milliman’s reconstructing the utilization of direct primary care health services demand from CPT codes collected in the situation these were, no meaningful conclusions can be drawn if the raw data used in the reconstruction is incomplete. Milliman does not appear to have investigated whether this key data set was accurate.


As a result of its apparent failure to capture the true resource costs of DPC-covered services rendered by the DPC, Milliman’s determination that the DPC model reduces overall utilization by 12.6% is far too high.

A plausible estimate of the demand for health care services for direct primary care services could be derived from widely-acccepted estimates of primary care physician compensation and practice overhead. Substituting any estimate of those costs greater than $45 PMPM for the $8 PMPM at which Milliman arrived would bring the calculated OVERALL medical services utilization gap between DPC and FFS well below four percent.

Another plausible estimate of the demand for health care services for direct primary care services is the market price of DPC services. Milliman’s estimate of that number was $61 PMPM. Substituting that market price for the $8 PMPM at which Milliman arrived turns the health care services utilization gap between DPC and FFS in favor of FFS.


Note

* After the period Milliman studied, for example, CMS came up with 99491.

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