Brekke’s “Paying for Primary Care”, Comment on Part 1

In the winter of 2021, actuary Gayle Brekke penned a fourpartblogpostseries arguing that the cost of insurance primary care delivery in the insurance system is at least 50% higher the cost of delivering primary care through subscription model DPC. Notably, Brekke’s work was theoretical rather than empirical; she attempted to compute the relative costs of primary care under the two models, rather than simply measure them. In this post series in response to Brekke, I argue that the measured version of reality came out differently than the reality she computed because of analytical errors and omissions, mistaken presumptions, and misinterpreted references on Brekke’s part.

Health Care Cost Institute data presenting the 2017 primary care costs of millions of insureds shows an average annual primary care spend for 25-50 year olds of just less than $450. The total costs of paying for primary care are larger because they include, in addition to the spend, the amounts that insurers are allowed, under medical loss ratio (MLR) rules, to cover associated administrative costs and profits up to 25% of the insurers’ share of that spend. As direct primary care advocates point out with remarkable regularity, however, annual deductibles result in a disproportionate and large share of primary care costs being paid by insureds rather than by insurers.

Therefore, assuming insurers administrative and profit allocable to primary care medical loss spend are a full 25% of 100% of primary care medical loss spend, then taking 125% of the primary care medical loss spend should be a safely over-generous estimate of the total cost of paying for primary care through insurance. That would come to $565 per year.

For the same period, the cost of direct primary care for same-aged subscribers was $900. Although you might consider direct primary care for its concierge-like (or concierge-lite) features, direct primary care hardly seems a cheap way of meeting primary care needs; in fact, primary care delivered under the $900 subscription model appears to cost at least 50% more than that under the $565 insurance-based model. But I’m not an actuary.

Provider-side billing costs savings from direct versus insured pay.

A certain Dr Bujold made an observation relating to overhead in a JAMA letter; specifically, when he began doing fewer low overhead hospital calls, his practice-wide percentage overhead went up. Duh.

Since the same kind of shift would have occurred whether he was an FFS-PCP or D-PCP, Bujold’s observation has no implications whatsoever for determining the effect of different payment model on billing and insurance costs. There’s nothing in Bujold that indicates any effort or intention to compare insurance based and direct pay overhead costs. If you want to waste your own time trying to figure out why Ms Brekke cited Dr Bujold’s article as one of two references footnoted as if to support her computation that sets FFS-billing and insurance at nearly 60% of FFS-provider overhead, be my guest; it beats me.

The “actual” numbers on which Brekke bases her computation of provider-side billing savings come from her second, and her only other, cited source. In an AAFP practice profile , a certain Dr Forrest contrasts a somewhat widely accepted 60% figure for total overhead in family practices to what he claims are 25% overhead costs in his own, solo direct pay practice. If you know enough about accounting to giggle when you read his explanation for excluding from his computation any cost for the nurse-practitioner who works with him during patient visits, your sides may split when you also note that he actually claims that his overhead for office space is negative. If recognized principles of accounting were applied, Forrest’s overhead would plainly be vastly higher than he claims. And Dr Forrest accounts himself a significantly bad-ass cost reducer across all of the overhead board, for example, buying bargain basement equipment and supplies and taking out his own trash.

Most importantly, most of the tactics Forrest identifies for reducing overhead are independent of his payment model choice. Forrest could equally use both zero-cost nurse-practitioners and negative overhead medical space arrangements (if such things existed) while taking his own trash out of the door of an FFS practice. Forrest gives us no basis to determine how much of the purported 60% to 25% overhead cutdown is simply an artifact of his bizarre accounting methods, how much the result of his having perfected parsimony, and how much the result of his decision to ditch insurance as a payment model.

The only thing that can reasonably be inferred from the Forrest article about how much direct pay reduced Forrest’s billing and insurance costs is that the amount was significantly smaller than a 60% to 25% cutdown.

But Brekke took the full 35% cutdown as if every penny represented provider side billing and insurance costs savings. She also assumed that Forrest’s practice (despite his claim to be paying negative office rent and taking out his own trash) was typical of DPC practices. Her resulting computation came up with a net provider-side billing and insurance cost burden of nearly 30%, a step that by itself accounts for most of the money in her final computation that insuring direct primary care imposes a 50% drag on primary care.

On this calculations page, I have set forth of Brekke’s calculation and a parallel calculation in which I have substituted a value derived from an alternative to Dr Forrest’s one-off personal saga. Look at this 2014 quantitatively detailed, peer reviewed academic study by Jiwani et al of “Billing and insurance-related administrative costs in United States health care“. Its evidence-based figure for billing and insurance-related costs in physician practices puts it at thirteen percent (13%) of gross revenues. This works out to a bit under 22% of a 60% overhead.

If you know a better study, let us all know by posting it in the comments. I will give it its own column in the calculator.

Brekke cast her computation in terms of finding a payment that would leave a direct pay practitioner with $60 in compensation; according to Brekke such a visit would cost $75 with direct pay and $96 with insured pay which she computed to be $96 using the values she derived from Forrest’s bizarre accounting. Using the values from Jiwana, I compute that such a visit would require a direct pay practitioner to charge $88.20.

Accordingly, using the result based on actual published, peer-reviewed research, additional provider side administrative costs when insurance is used would appear to be no more than 9%.

Based on her own misconstruction of already dubious figures from Forrest’s practice small solo practice, Brekke built the foundation of her argument on a number that was inflated at least three-fold.

Furthermore, the 9% figure based on the Jiwana paper, represents an upper limit on possible provider-side admin costs saved by ditching insurance. For the computation shown, I made the assumption that all billing and insurance costs would be eliminated under direct pay. But eschewing insurance pay does not remove all the provider side billing costs; in fact, direct pay can add some provider-side non-medical costs all its own.

Direct pay physicians have non-zero billing cost. For subscription direct PCP’s, there are both monthly fees to be billed and collected, and fees for primary care services not covered by the monthly fees. Direct pay physicians are not able to lean on insurers for items like enrollment and roster maintenance, patient identification cards. A look at subscription DPC social media, meanwhile, should make clear that direct pay physicians have had to be more active in recruiting patents. On the other hand, direct pay FFS-PCPs still must still bill and collect for itemized services.

Furthermore, many D-PCPs seek and enter contracts with self-insuring employers, some with multiple self-insuring employers. There’s plenty of administrative burden to go around, including reporting quality metrics to a myriad of employers.

Patients who rely on insurance for downstream care will still need their direct primary care physician, whether subscription or cash FFS, to document the clinical information needed to justify high priced downstream services for which insurers ask prior authorization. In other words, direct pay does not eliminate the PCP-side administrative costs of prior authorization.

Factors like these indicate that net PCP-side additional administrative costs when insurance is used are appreciably less than the 9% from our calculations page. Brekke’s result may be off by four-or-more-fold rather than three-fold.

Before we leave this discussion of Part 1, take a second to note that a frequent claim of direct primary care advocates is that provider-side insurance related savings are sufficient to fuel a tripling the length of primary care appointments. Even the 35% figure Ms. Brekke used falls far short in that regard.

Further commentary on Brekke’s series can be found here:

Paying for Primary Care with Insurance Makes Considerable Sense

Brekke’s “Paying for Primary Care”, Comment on Part 4

Brekke’s “Paying for Primary Care”, Comment on Part 3

Brekke’s “Paying for Primary Care”, Comment on Part 2

DPC, one year after receiving a heart transplant, prepares to have old heart reimplanted.

I’m old enough to remember pro-DPC advocacy focussed on the long, in person, face-to-face primary care visits, the very “heart of direct primary care”. Surely that’s what motivated Doctor Steve Springer when he proudly opened Southwest Louisiana’s first direct primary care clinic. I say this because it certainly wasn’t telehealth Springer had in mind. After all, he barely did any telehealth prior to two days in mid-March of 2020.

On those two days, though, he seems to have increased his telehealth practice by about 2000%, apparently going from about one virtual visit a week to about 40 visits per day. Here’s his tweet from 3/18/2020

I teased Springer for the obviousness of his opportunism in a reply tweet. Over the next few days, I watched the DPC advocacy community pull together a new spin in its long-standing pitch for DPC legislation, now presented as the definitive Congressional emergency response to the pandemic, even calling it “our bill . . . expanding virtual care to 23 million more Americans “. My favorite part of this effort was learning that the direct primary care movement had, much like Dr Springer, apparently had a sudden heart transplant, now proclaiming in near unison that “telehealth is the heart of direct primary care.”

Those 23 million Americans managed to get through the next 60 days without suffering from the lack of direct primary care’s Telehealth SuperPowers. By mid-May, as pointed out by the Larry A Green Center (a strongly pro-DPC health innovation think tank) 85% of all primary care providers of any stripe were using a significant measure of telehealth capability. Dr Springer was not the only one going from zero to sixty in a pandemic moment. Then, too, by mid-March 2021, in person visit rates had nearly returned to pre-pandemic levels.

Not that telehealth was just a flash in the pan. Some game-changing lessons for primary care were apparently learned, although not necessarily by the “traditional” direct primary care movement. One possible major development is underway at Amazon.

That company had been experimenting with providing its employees with primary care from Amazon employed or contracted doctors. The company was quick to start using telehealth during the pandemic. One thing they noticed was that the children of their employees were falling behind their vaccination schedules. They started a program of sending out vaccinators to employee homes. Then, the idea grew to embrace home delivery of many other services, like blood draws. It was, of course, particularly easy for Amazon to integrate home delivered medications and pulse-ox devices.

A year to the day after noting Dr Springer’s tweet, I saw a tweet from a national health care reporter that linked an announcement that Amazon was “expanding to bring virtual-first primary and urgent care to more Amazon employees, their families, and for U.S-based employers.” Backed by Amazon’s ability to deliver goods and services into the home, Amazon could well deliver a vastly more comprehensive “virtual-first” primary care package into the home that anything ever seen from any existing direct primary clinic.

Another staple of DPC advocate pride is the facilitation of discounted rates for downstream services like advanced radiology. But Amazon is potentially far more effective at “pricelining” MRIs and such than any network of small DPC practices, just as Expedia is more effective than private travel agencies.

And, while Amazon projects its service as “virtual-first”, the company also expects to backup with in-person sites.

The likeliest challenge facing Amazon’s service would appear to be in the area of establishing ongoing relationships between patient and a single primary care physician. Accordingly, within a few days**, I expect to hear from the DPC advocacy community that Amazon telehealth is just a shiny object of minor impact, but that what matters most are those long, in-person visits. Those visits will be born again as the heart of direct primary care.

Which is probably as it should be, because that premium, small panel service is the thing that small independent practices are likely to do fairly well. It actually makes very little sense for highly trained PCPs to spend their time drawing blood or chasing lab and MRI discounts. Whatever the semantics employed, small DPC is “concierge lite”. Premium small panel service takes a lot of valuable PCP time. That, in turn, requires DPC patients to pay significantly more money to their chosen PCP, even after insurance costs are squeezed out.

DPC docs should simply welcome that position in the health care world with, “We’re worth it!”.

** That was quick. Here’s a commentary from a DPC thought leader comparing efforts like Amazon’s to a venereal disease.

Do economic forces lead to healthier patients self-selecting to member- funded DPC practice?

And, favorable selection to member-funded DPC is likely even greater than that already actuarially documented for employer funded DPC.

[D]o economic forces lead to healthier patients self-selecting to a DPC practice? . . .

. . . The value proposition for chronically ill patients– needing frequent visits and savings on ancillary services (labs, meds, etc.)– is obviously higher. Given this, the bias for patients seeking care in the DPC model would lean towards sicker patients; not towards healthy people who don’t expect to have great medical needs.

R. Neuhofel, 2018.

In those words, a founding member and then-current-president of the Direct Primary Care Alliance asked an important question and provided his answer. That answer has been offered time and again, before and since, by DPC advocates. It’s also an answer with some significant truth; I address below why it is also a profoundly incomplete answer. But let’s start with some relevant evidence that points away from Dr Neuhofel’s conclusion.

Dr Neuhofel mentioned that studies of the demographics and health status of DPC patients were underway. And, in May 2020, we learned the results of the only independent study of DPC conducted by actual actuaries, that by a team from Milliman on behalf of the Society of Actuaries. That study found that patients electing a direct primary care option as part of their comprehensive employer health coverage had a significantly more favorable health status than those who elected a competing fee for service primary care option. The difference, in fact, contributed substantially to the reduction of what was once the DPC world’s poster child brag to post-Milliman rubble, from “Union County saved 23%” to “Union County lost 1%” .

The Milliman’s team finding is not wholly dispositive of Dr Neuhofel’s question. For one thing, it was only a single study of a single employer’s program. Other employer’s programs might be different, although no one has expressed any general reason to expect a significant departure. In fact, the only post-Milliman report of measurement of health status of the members of an employer’s DPC plan and its FFS plan indicates a selection bias differential that falls within 10% of that observed for Union County.

More importantly, direct primary care provided through an employer as part of a comprehensive health coverage package differs in potentially consequential ways from direct primary care offered directly to consumers by DPC clinics. The Milliman team itself suggested that might be the case, largely echoing Neuhofel in its rationale — and fleshing that out with an interesting example:

Members choosing to enroll in DPC and pay on their own may be less healthy simply because they are better able to justify the recurring monthly DPC membership fee (which is likely in addition to major medical insurance premiums) than members not choosing to enroll in DPC on their own. For example, assuming copays of $35 and $50 for PCP and specialist, respectively, under traditional coverage, an individual with a chronic condition would only have to see either a PCP or specialist roughly twice a month on average (total cost of $85) to justify paying the DPC membership fee, where there are typically no copays. Members without the need for this level of recurring primary care may be less likely to see the financial value in enrolling in a DPC practice.

It is all but a given that among potential members with differing health status, if their ability to manage health costs coverage remains otherwise identical, the less healthy will have a stronger incentive to enroll in direct primary care. The problem with relying on this truism is that potential members will often not be “otherwise identical” in their ability to manage health costs, particularly when they do have differing health status.

Health status and health insurance

The sick may be “better able to justify” add on DPC fees, but as their level of sickness increases they are also increasingly “better able to justify” the higher monthly premiums of benefit rich policies, with lower cost-sharing, including lower deductibles and lower mOOPs. This is plainly an adverse selection environment for low deductible plans, the sicker one is the better the “value proposition” of gold policies over, say, bronze. This is demonstrated over millions of policies each year in the individual market.

But paying DPC fees is far less valuable for gold buyers than it is for bronze buyers. DPC is worth a lot less to those who hit their deductibles than to those who do not. So, the adverse selection into low deductible plans, leaves a pool with lowered sickness levels for DPC.

Consider the exact example offered by the Milliman team as quoted above: potential plan members who anticipate two dozen office visits in a coming year, half of those to specialists. They are so obviously not healthy that the vast majority of them likely have bigger medical cost worries than their primary care copayments. The vast majority of them, whether with employer or individual coverage, are happily avoiding high deductible plans. And even those whose coverage comes from the 20% of all employers who offer only high deductible plans are incurring medical costs at a level that not only exceeds their deductible ($2300 for an average employer HDHP plan in 2020), but approaches or exceeds their mOOP.

In any case, even among the relatively small universe of potential DPC members who are strictly limited to high deductible plans, and even given that the “least sick” have less reason to choose DPC than the “somewhat sick”, the “somewhat more sick” may see smaller net gains when from choosing between DPC and making cost-sharing payments, while the “OMG even more sick” may see net losses from the process.

So yes, even within an obligate high deductible sub-universe, there is likely to be a “Goldilocks” level of sickness at which is DPC the best value proposition. But beyond that point on the sickness axis, the net economic selection force for DPC is gradually diminished, then reversed.

Age, risk, and premiums

Under the ACA’s age banding system, even in the unsubsidized individual market, premiums for young are disproportionately high, making insurance less attractive to the young than the age-based odds warrant. In the subsided market, moreover, the premium skew against the young is actually magnified by the subsidies. Yet, for those who are both relatively young and relatively sick, insurance remains attractive. The upshot, as predicted (with a mix of crocodile tears and evident glee) by some ACA opponents, has been a disproportionate share of the young and healthy opting out of insurance coverage altogether, or choosing high deductible coverage.

DPC clinics benefit from the resulting enrichment of youth and health in the resulting pool of likely enrollees..

To be sure, of those have no (or reduced) insurance coverage, the least healthy are more likely to select DPC as Neuhofel would predict. But each of those drawn in will have been drawn from a group enriched with youth and health — they will be no more than the “sickest of the least sick”, a tail likely insufficient to wag an entire dog.

In the employer-based insurance world, age-driven effects are mitigated because employee shares of premiums are essentially level over all adult ages. DPC enrollment under employer DPC options is, therefore, not subject to the age-driven influx of good risks described above. Accordingly, we would expect consumer-paid DPC to have an even larger selection bias in their favor than the substantial selection bias already documented for employer paid DPC.

Wealth and social determinants of health

Another way in which economic factors leads to a disproportion of healthier patients in DPC panels is less direct, but likely consequential. Consumer-paid DPC is more accessible to those financially better able to add monthly DPC to whatever other financial arrangements they have for health care. Having a higher income helps in buying anything. As well, consider that high deductible plans that work best with DPC are also more financially accessible to those with accumulated savings.

In whatever form it takes, the same financial advantage that inevitably facilitates payment of DPC fees and election of high deductibles correlates with a long list of social determinants of health, such as the availability of stable housing or employment. A broad wealth/health nexus is real and well documented. That nexus pushes the mean of consumer-paid DPC panels in the direction of a healthy population.

Note, too, how this issue of economic status again distinguishes employer-paid DPC from consumer-paid DPC. When an employer offers DPC to all employees, any wealth/health effect pushing employees toward DPC is attenuated. Accordingly, on this score as well, consumer-paid DPC choices should actually skew healthy relative to comparable employer-paid DPC options already demonstrated to skew healthy.

Some DPC advocates claim to serve more than a few uninsured subscribers. As I have suggested, at any level of income at which the choice to be uninsured is voluntary, the population so choosing will skew healthy. But what of those whose low incomes make the purchase of insurance impossible?

There is a large population with incomes below the poverty line that have no realistic possibility of paying for insurance coverage. Low incomes even skew high risk. Does the low income population significantly tip the balance of DPC panels? In over two-thirds of the states, they are Medicaid eligible. But in the remaining “non-expansion” states, there is a population in poverty who are eligible for neither “expanded Medicaid” nor for ACA subsidized private insurance. How many of these can muster $75 a month for a DPC membership? Arguably, some of the most sick of these might be able to justify DPC as the closest they can get to insurance. But note that many of the sickest of the poor can eligible for traditional, “unexpanded” Medicaid and/or Medicare coverage by reason of disability.

I’ve seen no evidence that DPC seeks or obtains significant numbers of sub-poverty level subscribers, let alone whether the handful they may get skews high risk.

Casual shout out. I know D-PCPs who are doing great things for some quite sick, low income, uninsureds, even doing tasks for which they would refer their insured patients to specialists. And here’s a second shout out to FFS-PCPs who do the exact same thing.

Hard actuarially sound evidence has already shown that employer-DPC skew young and healthy. We await comparable study of the demographic and health status of consumer-paid DPC.

Still, when we put the value proposition of DPC for the sick vs DPC for the well in the context of a broad, real world dynamic of available economic factors, it is far from obvious that consumer-paid DPC skews sick. Instead, the economic considerations point toward consumer-paid DPC skewing young and healthy — to an even greater extent than already demonstrated in employer-paid DPC.

After noting, as above, how employer-paid DPC seems likely to mitigate some of the selection pressures toward the sick in consumer-paid DPC, I gave some thought as to whether there were other structural differences tied to payment source that might predict other differences in skew. Paying DPC fees out-of-pocker puts more patient “skin in the game”; one predictable consequence would be to increase the tendency of the healthiest potential to eschew DPC; on the other side of the previously suggested “Goldilocks” point, however, employer payment of the DPC fee liberates the least healthy potential enrollees from the risk of unnecessarily leaving their own money on the table. Pending an injection of wisdom from somewhere else, I will reserve opinion on the net effect of transferring this bit of skin in the game until we see some actual study results.

Even so, I’ve seen enough to now attempt to monetize this blog in the following way. I will bet that the first credible, independent academic or actuarial study of the health status of broadly representative consumer-paid DPC patients shows that as a group they are healthier than the average commercial patient population. I invite those who disagree to negotiate with me an even-money wager contract in an amount sufficient to both provide significant stakes for the winner and to fund adjudication of a win through standard arbitration procedures. I am happy to afford each of us the opportunity to put our money where our mouth is, and into a escrow account.


While strongly endorsing direct primary care, the AAFP’s May 25, 2018 position statement to CMS on direct provider contractor models invoked the structural risk that the prevailing fee for service primary care practice model incentivizes the provision of unnecessary primary care services.

As yet, the fee for service primary care physicians who comprise the vast majority of AAFP members seem to have declined to throw a hissy fit about how their ethics and professionalism had been impugned.

Less than two months later, in an opinion piece in JAMA, Adashi et al., wrote :

[DPC models] are limited by a variety of structural flaws. Foremost, DPC practices lack specific mechanisms to counteract adverse selection that threatens equity in access to care. DPC presents physicians with an incentive structure built on accepting healthier patients with limited health care needs and a willingness to pay a retainer fee. Practices directly benefit when targeting healthier patients and declining coverage to the ill. (Emphasis supplied).

Direct Primary Care: One Step Forward, Two Steps Back
Adashi, et al. JAMA (2018) 320: 637-638

Within two weeks of online prepublication of the JAMA piece, the then-President of the Direct Primary Care Alliance, signing his piece with his official title, replied:

 I find such a perspective completely out of touch and offensive to the entire primary care community. . . . disparaging the ethics and professionalism of over 1000 [DPC] physicians. 

Ryan Neuhofel, A Response to a Clumsy Critique of DPC in JAMA

For good measure, Dr Neuhofel tossed in a direct accusation of academic dishonesty.

Doth protest too much, methinks.

New DPC leader is incredible – unfortunately, not in the good way.

Let’s meet Cladogh Ryan MD, one of the new board members for DPC Alliance for 2021 who picked up the torch from some of those golden oldies.

Dr Ryan cranked up a town meeting style event to recruit some of her Cook County, IL, fee-for-service patients into her new enterprise, Cara Direct Care. She layed on a familiar pitch: “Pay me more, it will cost you less.” In this case, $4,384 less per couple!

Here’s the key content from the video of her 2017 presentation, still proudly displayed on YouTube and on Cara Direct Care’s current homepage.

Really? Taking on an additional $3500 in deductible in 2017 cut insurance premiums by over 66% — by over $7,000 for a young couple in the middle of a 19-44 years old range?

No, it didn’t. It’s not even close.

In the real world outside Dr Ryan’s town hall, the premium spread between otherwise similar plans that differ only by a low versus high deductible was slightly over ten per cent for employer sponsored coverage, per Kaiser’s Employee Health Benefits Survey. In the ACA individual market for 2017, when Ryan made her presentation, the premium spread in her own Cook County, IL, between the policy with the lowest deductible policy and an otherwise similar policy having a $3500 larger deductible was less than 20%. See for yourself,**

The supposed point of Dr Ryan’s patient pitch, of course, is that the alleged premium spread of 66%/$7084 is sufficient to cover her proposed DPC fees, and other expectable costs, and still leave thousands in resulting savings. But the real premium spread was nowhere near $7K. At 2017 pricing levels in the ACA market in Cook County, that spread was under $1700 for a couple in the age bracket Ryan discussed. Her 2017 DPC fees swallowed over two-thirds of it.

Doc Ryan’s analysis began with a premium spread error of over $5,000 for the couple. Yet, even with the head start of a $5K falsehood, Dr Ryan ended up computing typical “DPC savings” of only $4384 for that couple. With real premium numbers, Dr Ryan’s own computation means a loss on DPC, not a savings. Dr Ryan’s analysis is nonsense.

By the way, the cheapest policy in the 2017 individual marketplace for a 21 year old couple near the bottom of Ryan’s range of 19-44, $5308 per year, about $2000 and 50% higher than the figure used by the good doctor for a presumably typical HDHP policy.

I decline to accuse Dr Ryan of addressing her potential patients in bad faith in 2017. But DPC thought leaders seem almost never willing to critically examine DPC-favorable information when it comes along. And, no response has been received from Dr Ryan to’s request for her comments on the material developed for this post.

** Here are tables of relevant offerings in the ACA individual market, for Cook County IL as follows: 2017, all policies; 2017 all silver policies; 2020 silver policies. All are sorted by deductible.

2017 Cook Cty All Policies
Cook Cty Silver, 2017
Silver Policies, 2021, Cook County

Note, for example, that in the current ACA individual market, the difference between a silver plan with the smallest deductible ($2000) and a silver plan with the maximum allowable deductible of $17,100 is less than $2681 — that’s a deductible spread of $15,000 (more than four times as large as Dr Ryan’s $3500), priced at a 27% premium spread (well less than half the 66% Dr Ryan’s calculation used.)

KPI Ninja and bad faith.

KPI Ninja missed so many boats — a whole fleet really — in its Nextera report, you may wonder whether they come to analysis in good faith. Well, there’s one note in their favor.

Sometimes, KPI Ninja’s inability to make important adjustments disfavors their DPC client. In their analysis of DirectAccessMD, for example, an induced utilization adjustment would have favored their client. Good to know.

One might suppose that KPI Ninja is sometimes uninformed but mostly just eyes-deep in confirmation bias. But, surely, not bad faith?

I mean, it’s not like KPI Ninja falsely told the world that it conducted risk score analysis on behalf of Nextera for a school district claims analysis in partnership with the Johns Hopkins’ ACG® Research Team, or anything like that.

Oh, wait.

Never mind.

Nextera and Paladina (Everside): a race to the top of Mount Brag

Updated 9/4/21

In 2015, Qliance still towered over all in the Direct Primary Care Bragging World with its claim of 20% overall cost reductions. Even that, of course, was quite a come down from the extravagant claims previously spewed under the Qliance banner; fond memories still linger of those heady days when the Heritage Foundation drooled over a non-existent British Medical Journal study alleged to have found that Qliance’s patients had 82% fewer surgeries, 66% fewer ED visits, and 65% fewer specialist visits.

Yet, by the middle of 2016, Qliance was toppled; the pages of Forbes proclaimed the attainment of 38% reductions in medical costs by a Qliance rival, Paladina, at its clinic in Union County, NC. By November of 2016, even upstart Nextera Healthcare was bragging its “DigitalGlobe” study at the 25% level. The following month Nextera reached the brag-summit when Paladina’s Union County brag shrank to a still competitive 23%.

In early 2017, while DPC World eagerly awaited a counterpunch from its former leader, Qliance instead went bankrupt. But at least the torch had been passed!

For various reasons, including a bit of good luck, Paladina’s Union County clinic emerged in the three ensuing years as the principal poster child of the DPC movement.

In May of 2020, just as the Union County clinic’s iconic status reached it apogee, the game-changing Milliman study came along, . The tools of actuarial science, risk adjustment most prominently, were brought to bear in an independent study of the cost-effectiveness of a single clinic, and that one just happened to be Paladina’s Union County clinic. The result was not pretty.

The Milliman study essentially kicked to the curb ALL prior DPC cost-effectiveness studies, including both the Paladina and Nextera studies, rejecting the lot for want of proper risk adjustment. In fact, the Milliman study found that after claims cost risk adjustment to account for the health differences between the studied Union County populations, even Paladina’s most current and more modest savings claim of 23% vanished. The Milliman team made plain as day its estimate that Paladina’s Union County clinic program had not produced any significant cost savings at all.

Worse, the Milliman analysis had been wildly over generous to Paladina; it’s conclusion that Paladina’s program was only slightly worse than a break even proposition for the county was based on an estimate of $61 PMPM for the average DPC fee paid by the County. In fact, the publicly available contract between Paladina and the county, makes clear that the average DPC fee paid was $95 PMPM. While DPC supporters had bragged of over $1,000,000 in net annual savings, what the Paladina contract wrought was a net annual increase in the County’s health care costs in excess of $400,000.

The Milliman team also admonished that:

It is imperative to control for patient selection in DPC studies; otherwise, differences in cost due to underlying patient differences may be erroneously assigned as differences caused by DPC.

Grzeskowiak and Busch, What our study says about Direct Primary Care

This admonition might have had a useful, if sobering, effect on direct primary care, if the DPC community were actually interested in advancing the movement based on the proficiency of DPC medical doctors rather than on the shamelessness of DPC spin doctors.

I can honestly say that the previous champions of DPC cost-effectiveness data, Nextera and Paladina, have met this challenge with more than mere lip service. Instead, they mixed fraud and incompetence with that lip service, and raced anew to the top of Mount Brag Bullshit.

A few months after the Milliman report was published, Nextera made the first move, a bold coupling of a brag at the 27% level with a remarkable stunt:

“KPI Ninja** conducted risk score analysis in partnership with Johns Hopkins’ ACG® research team [.]” KPI Ninja’s Nextera study, page 7. 

“KPI Ninja brought in the Johns Hopkins research team that has significant expertise in what is called population risk measurement. . . . We took that extra step and brought on the Johns Hopkins team that has this ability to run analysis. It’s in their wheelhouse and they applied that . . . [The] Johns Hopkins Research Team did the risk analysis[.] Nextera presentation at 2020 Hint DPC Summit meeting.

Ah, but: 

“We were not directly involved in this analysis.” Associate Director,

Not only was there no academic team involved in Nextera’s deeply flawed study, there was no risk adjustment actually performed. It was an heroic risk adjustment charade.

When Nextera bragged a 27% cost savings sporting both fake academic robes and fake risk adjustment, imagine how alarmed competitor Paladina – still reeling from Milliman’s conclusion that risk -adjustment brought the Union County savings down from 23% to 0% – would have felt, if they took Nextera at its word.

Don’t fret; knowing the truth of Milliman, Paladina understood at once that all they had to do was launch their own charade.

Paladina, on its website, moved in January of 2021. After its own lip service to risk adjustment and even lavish praise of the Milliman study, Paladina’s spin doctor went on to declare that “Paladina Health’s Union County client, the employer case study featured in the Milliman report, also prospered from adopting the direct primary care model. . . . Union County taxpayers saved $1.28 million in employee health care costs . . .. 23% . . ..” No matter that the Milliman team had actually exploded that very conclusion when it concluded that the County had barely broken even.

And, as noted above, the reality is that the Paladina adventure cost the county $400,000 more per annum than the Milliman team had assumed. The net lie is over $1.7 million dollars.

Consider, too, the sheer misrepresentational brilliance of the Paladina webpage’s careful selection of two raw data apples and two risk-adjusted data oranges drawn from four of each in Milliman’s basket.

Paladina is okay with using risk-adjusted data, but only when it cuts in Paladina’s favor.

But wait. Paladina’s spin team wasn’t quite done. Six months later, they went ahead and matched Nextera’s invocation of academic work from Johns Hopkins that never took place by invoking academic work from Harvard that never took place. With Paladina newly rebranded as Everside, the spin team trotted out a “white paper” that, in addition to repeating their misrepresentations of the Milliman study, relied substantially on additional findings, favorable to the DPC model, from ” the Harvard DPC cost study”.

There was no “Harvard DPC cost study”. There was a Harvard study of the effect on insurance based fee for service providers of receiving PMPM payments to supplement fee for service payments. That study did not address, or even mention, direct primary care practices that eliminate FFS payment and rely on membership fees.

Technical query. Given that Nextera ventriloquized Johns Hopkins and Paladina ventriloquized both Milliman and Harvard, is it still “Charades”’?

Instead of racing to the top of Mount Bullshit, why not stick to calm, truthful analysis that reveals direct primary care’s actual ability to reduce the costs of care?

[**] KPI Ninja is an “analyst” that has a special division dedicated to compiling brags for Nextera and other DPC companies. See here for more on KPI Ninja.

In rural areas, decreased primary care panel size is a problem, not a solution.

Montana’s last governor twice vetoed DPC legislation. He was not wrong.

Over the last month or so, DPC advocates from think-tanks of the right have trotted out the proposition that direct primary care could be “the key to addressing disparities in health care access in underserved areas of Montana facing severe shortages of primary care”. They are very excited that eight DPC clinics have “opened” in Montana in just a few years. Yet, when the very same advocates testified before the Montana legislation, they brought along some real MT DPC docs whose own testimony made it clear that what really happened is that eight existing clinics or practitioners in Montana decided to switch to subscription model care.

And, no doubt, each such D-PCP significantly reduced the size of their patient panel. Typical DPC clinicians brag about reducing patient panel sizes to one-third the size of those in traditional practices. Indeed, some members of the same pack of DPC advocates in the same hearing stressed the glories of tripled visit times.

But reducing patient panels sizes by two-thirds obviously aggravates the problem of primary care physicians shortages.

The most common response of the DPC community has been that DPC lowers burnout, lengthening primary care careers, presumably mitigating that aggravation – to some unknown degree and at some unknown point in the future.

I did some math.

Each PCP who chooses DPC and reduces patient panel sizes by two-thirds would need to triple the length of his remaining career to cover the gap he created by going DPC. And it would take decades to do so.

Assume an average career length of 20 years for a burning out PCP, with retirement at the age of 50. Let’s suppose that DPC makes PCP life so sweet that he works until he is 80 years old.

By the end of those 30 additional years, the equivalent of one-quarter of the patients he left behind by going DPC will still be left in the cold Montana snow.

To fully close the gap his switch to DPC created, he would have to work until he was a 90 year old PCP. The good news is that he would be very experienced; the bad news is that some 90 year-olds might struggle with “24/7 direct cellphone access to your direct primary care physician”.

To supplement the patent insufficiency of this bleak scenario, DPC advocates further argue that DPC will lead to increases in the percentage of young professionals choosing primary care practice instead of other specialties. One of the think-tank “experts” from the Montana expedition has said that “we know” this to be the case, but provided no evidence other than the naked claim “we know”. Is this knowledge, or just speculation? Feel free to put a link to any significant evidence in the comments section below.

Even if there was hard evidence that DPC had shifted or might shift career choices toward primary care, it would still be wise to “be careful what you wish for”. Physician shortages in rural areas are not limited to primary care. To the contrary, there is ample evidence, such as this study from a Montana neighbor state, that rural communities face shortages of specialists that are even more consequential than the shortages of PCPs.

If a potentially gifted surgeon is willing to return to her roots in Whitefish, why turn her into a PCP?

Montana officials, beware.

Shorter KPI Ninja/Nextera SVVSD report

“We used a statistically valid risk measurement tool and determined that there was a a non-Nextera population had a 7.5% difference greater level of risk then our Nextera population. But don’t believe that result, because it was not statistically valid.”

“We reduced inpatient hospital 92.7%. Want to know how great we are? Our statistically valid risk measurement — we changed our minds again so you can count it this time —showed that our DPC population had a 37% higher frequency of the conditions most likely to result in an inpatient hospital admission.”

“Although we used only about $10 million out of nearly $15 million dollars in claims data, trust us when we say that the missing millions can only reinforce our brags.”

“Benefit plans? What benefit plans? We don’t read no benefit plans! We don’t gotta show you any stinking benefit plan!”