DPC is uniquely able to telemed: a meme that suffered an early death.

An update to this post.

Larry A Green Center / Primary Care Collaborative’s Covid-19 primary care survey, May 8-11, 2020:

In less than two months, clinicians have transformed primary care, the largest health care platform in the nation, with 85% now making significant use of virtual health through video-based and telephone-based care.

Larry A Green Center and Primary Car Collaborative.

These words spelled the end of the meme that direct primary care was uniquely able to telmed. “DPC-Telly”, as the meme was known to her close friends, was briefly survived by her near constant companion, “Covid-19 means FFS is failing financially, but DPC is fine”. Further details here.

The Nextera/DigitalGlobe study design made any conclusion on the downstream effect of subscription primary care impossible.

The study indiscriminately mixed subscription patients with pay-per-visit patients. Selection bias was self-evident; the study period was brief; and the study cohort tiny. Still, the study suggests that choosing Nextera and its doctors was associated with lower costs; but the study’s core defect prevent the drawing of conclusions about subscription primary care.

UPDATED JUNE 2020. Here’s a link to an earlier version.

The Nextera/DigitalGlobe “whitepaper” on Nextera Healthcare’s “direct primary care” arrangement for 205 members of a Colorado employer’s health plan is such a landmark that, in his most recent book , an acknowledged thought leader of the DPC community footnotes it twice on the same page, in two consecutive sentences, once as the work of a large DPC provider and a second time, for contrast, as the work of a small DPC provider.

The defining characteristic of direct primary care is that it entails a fixed periodic fee for primary care services, as opposed to fee for service or per visit charges. DPC practitioners, their leadership organizations, and their lobbyists have made a broad, aggressive effort to have that definition inscribed into law at the federal level and in every state .

So why then does the Nextera whitepaper rely on the downstream claims costs of a group of 205 Nextera members, many of whom Nextera allowed to pay a flat per visit rather than having compensation only through than a fixed monthly subscription fee?

This “concession” by Nextera preserved HSA tax advantages for those members. This worked tax-wise because creating a significant marginal cost for each visit in this way actually brings this form of non-subscription practice within the intended medical economic goals for which HDHP/HSA plans were created— in precisely the way that a subscription plan, which puts a zero marginal cost on each visit, cannot.

The core idea is that having more immediate “skin the game” prompts patients to become better shoppers for health care services, and lowers patient costs. Those who pay subscription fees and those who pay per visit fees obviously face very different incentive structures at the primary care level. It would certainly have been interesting to see whether Nextera members who paid under the two different models differed in their primary care utilization.

More importantly, however, precisely because the fee per visit cohort all had HDHP/HSAs, they had enhanced incentives to control their consumption of downstream costs compared to those placed in the subscription plan, who did not have HDHP/HSA accounts. The per-visit cohort can, therefore, reasonably be assumed to have been responsible for greater downstream cost reduction per member than their subscription counterparts.

Had the whitepaper broken the plan participants into three groups — non-Nextera, Nextera-subscriber, Nextera per-visit — there is good reason to believe that the subscription model would have come out a loser.

Instead, Nextera analyzed only two groups, with all Nextera members bunched together. And, precisely because the group mixed significant numbers of both fixed fee members and fee for service members, it is logically impossible to say from the given data whether the subscription-based Nextera members experienced downstream cost reduction that were greater than, the same as, or less than the per-visit-based Nextera members. So, while the study does suggest that Nextera clinics are associate with downstream care savings, it could not demonstrate that even a penny of the observed benefit was associated with the subscription direct primary care model.

Here are the core data from the Nextera report.

Nextera Healthcare + DigitalGlobe: A Case Study

205 members joined Nextera; they had prior claim costs PMPM of $283.11; the others had prior claim costs PMPM of $408.31. This a huge selection effect. The group that selected Nextera had pre-Nextera claims that were over 30% lower than those declining Nextera.

Rather than award itself credit for that evident selection bias, Nextera more reasoanbly relied on a form of “difference in differences” ( DiD) analysis. They credited themselves, instead, for Nextera patients having claims costs decline during seven months of Nextera enrollment by a larger percentage basis (25.4%) than claim cost for their non-Nextera peers (5.0%), which works out to a difference in differences (DiD) of 20.4%.

Again, the data from mixed subscription and per-visit member can only show the beneficial effect of choosing Nextera, rather than declining Nextera. The observed difference appears to be a nice feather in Nextera’s cap; but the data presented is necessarily silent on whether that feather can be associated with a subscription model of care.

It cannot be presumed that Nextera’s success could have been replicated on other DigitalGlobe members.

In the time since the report, Nextera has actively claimed that its DigitalGlobe experience demonstrates that it can reduce claim costs by 25%. Nextera should certainly amend that number to the reflect the smaller difference in differences that its report actually shows (20%). But even that substituted claim of 20% cost reduction would require significant qualification before extension to other populations.

Even before they were Nextera members, those who eventually enrolled seem to have had remarkably low claims costs. Difference in differences analysis relies on a “parallel trend assumption“. The Nextera population may be so much different from those who declined Nextera that the trend observed for the Nextera cohort population can not be assumed even for the non-Nextera cohort from DigitalGlobe, let alone for a large, unselected population like the entire insured population of Georgia.

Consider, for example, an important pair of clues from the Nextera report itself: first, Nextera noted that signups were lower than expected, in part because of many employees showed “hesitancy to move away from an existing physicians they were actively engaged with”; second, “[a] surprising number of participants did not have a primary care doctor at the time the DPC program was introduced”.

As further noted in the report, the latter group “began to receive the health-related care and attention they had avoided up until then.”

A glance at Medicare, reminds us that routine screening at the primary care level is uniquely cost-effective for beneficiaries who may previously avoided costly health care. Medicare’s failure to cover regular routine physical examinations is notorious. But there is one reasonably complete physical examination that Medicare does cover: the “Welcome to Medicare” exam.

First attention to a population of “primary care naives” is likely a way to pick the lowest hanging fruit available to primary care. Far more can be harvested from a population enriched with people receiving attention for a first time than from a group enriched with those previously engaged with a PCP.

Accordingly, a “parallel trend” can not be assumed; and the 20% difference in differences savings in the Nextera group can not be directly extended to the non-Nextera group.

Relatedly, the comparative pre-Nextera claim cost figure may reflect that the Nextera population had a disproportionately high percentage of children, of whom a large number will be “primary care naive” and similarly present a one-time only opportunity for significant returns to initial preventative measures. But a disproportionately high number of children in the Nextera group means a diminished number of children in the remainder — and two groups that could not be presumed to respond identically to Nextera’s particular brand of medicine.

A similar factor might have arisen from the unusual way in which Nextera recruited its enrollees. A group of DigitalGlobe employees with a prior relationship with some Nextera physicians first brought Nextera to DigitalGlobe’s attention and then apparently became part of the enrollee recruiting team. Because of their personalized relationship with particular co-workers and their families, the co-employee recruiters would have been able to identify good matches between the needs of specific potential enrollees and the capabilities of specific Nextera physicians. But this patient panel engineering would result in a population of non-Nextera enrollees that was inherently less amenable to “Nexterity”. Again, it simply cannot can be assumed that the improvement seen with the one group can simply be assumed for any other.

I don’t actually know the technical names of these possible sources of bias. However named, these kinds of possibilities should be accounted for in any attempt to use the Nextera results to predict downstream cost reductions outcomes for a general population.

Perhaps, the low pre-Nextera claims costs of the group that later elected Nextera reflects nothing more than the Nextera group having a high proportion of price-savvy HDHP/HSA members. If that is the case, Nextera can fairly take credit for making the savvy even savvier. But it cannot be presumed that Nextera could do as working with a less savvy group or with those who do not have HDHPs.

Whether or not Nextera inadvertently recruited a study population that made Nextera look good, that study population was tiny.

Another basis for caution before taking Nextera’s 20% claim into any broader context is the limited amount of total experience reflected in the Nextera data — seven months experience for 205 Nextera patients. In fact, Nextera’s own report explains that before turning to Nextera, DigitalGlobe approached several larger direct primary care companies (almost certainly including Qliance and Paladina Health); these larger companies declined to participate in the proposed study, perhaps because it was too short and too small. The recent Milliman report was based ten fold greater claims experience – and even then it had too few hospitalizations for statistically significance.

Total claims for the short period of the Nextera experiment were barely over $300,000, the 20% difference in difference for claimed savings comes to about $60,000. That’s a pittance.

Consider that two or three members may have elected to eschew Nextera in May 2015 because, no matter how many primary care visits they might have been anticipating in the coming months, they knew they would hit their yearly out-of-pocket maximum and, therefore, not be any further out of pocket. Maybe one was planning a June maternity stay; another, a June scheduled knee replacement. A third, perhaps, was in hospital because of an automobile accident at the time for election. Did Nextera-abstention of these kinds of cases contribute importantly to pre-Nextera claims cost differentials?

The matter is raised here primarily to suggest the fragility of a purported post-Nextera savings of a mere $60,000 over seven months. An eighth month auto accident, hip replacement, or Cesarean birth could evaporate a huge share of such savings in a single day. The Nextera experience is too small to be reliable.

Nextera has yet to augment the study numbers or duration.

Nextera has not chosen to publish any comparably detailed study of downstream claims reduction experience more recent than 2015 data — whether for DigitalGlobe or or any other group of Nextera patients. That’s a long time.

Nextera now has over one-hundred doctors, a presence in eight different states, and patient numbers in the tens of thousands. Shouldn’t there be newer, more complete, and more revealing data?


Because of its short duration and limited number of participants, because it has not been carried forward in time, because of the sharp and unexplained pre-Nextera claims rate differences between the Nextera group and the non-Nextera group, and because its reported cost reduction do not distinguish between subscription members and per-visit members, the Nextera study cannot be relied on as giving a reasonable account of the overall effectiveness of subscription direct primary care in reducing care costs.

Nextera’s case study also had errors of arithmetic, like this one:

The reduction rounds off to 5.0%, the number I used in the larger table above.

Iora’s Las Vegas experience is an inapt model for DPC, and shows no real cost reduction.

While DPC Coalition features an Iora Clinic in Las Vegas as a data model of the joys of direct primary care, it is simply not representative of a general population. That clinic focused on a very high need population, every member chronically ill. We are looking at people with $11,000 claim levels at 2014 prices; they are “superutilizers” in what is called a “hotspotters” program.

A close look at the very Iora data that the DPC Coalition presented to the United States Senate makes clear how inappropriate it is to use outlier populations.


The green bars at left were drawn from what Iora and the DPC Coalition regards as “well-matched controls with equivalently sick populations”. Like the blue bars, which represent the Iora study group, the green bars are clearly far higher than the red bars that represent the general local population (Las Vegas). Since the blue bars are also a bit higher than the green bars, however, the question arises: in what sense were these controls “well-matched controls with equivalently sick populations”. To be meaningful, I suggest, these controls would had to have been matched by some assessment of chronic conditions and risk scores.

But why, if the groups were closely matched, is the pre-treatment bar at $935 for the study group but only $806 for the control group. If the controls were indeed well matched then there must have been some sort selection effect. I suggest that this was the result of members being recruited into the Iora program when they presented with acute exacerbations of their underlying chronic conditions.

A treatment year passed. A mix of medical inflation and noise bring the costs for the control group up to $861. But the total costs of the study group at the end of the treatment year, including the fees paid to Iora, are $889 and remain higher than the “well matched controls”.

And why have the total costs of the treatment group dropped by 5%? Because they’ve gotten better — regressing to the mean in their need for services. Indeed, if the controls were well matched by risk scores at the start of the year, this is entirely predictable.

Is this wild speculation on my part? Hardly. A NEJM research piece noted regression to the mean of matched controls when a study of one of the pioneering superutilizer programs (Camden) showed no difference in hospitalization rates during the original study period between plan members and non-members. Suree, there might be some other explanation for the exact levels and changes seen in the bar graphs.

But what remains is this: During the treatment period, the total costs of the Iora study group, including the fees paid to Iora, were 3% more than the total costs of what Iora claimed were well matched controls.

If “well matched controls” means anything sensible, the Iora study does not demonstrate a net cost reduction.

Back in the 90s, I did some federal legislative advocacy on health policy. I once asked Representative Sander Levin (D -Michigan) to present an amendment that would swing about $15 Billion in the direction of low income citizens.

“I’d love to do that, Mr. Ratner. But you’ll have to show me a $15 Billion offset. If you can find it, get it to me this week.”

I actually foundthe money. The CBO had missed a $15 billion item in scoring the bill. You can bet I busted my ass (and confirmed my understanding with my betters like Stan Dorn) to make sure that I was not casually handing a load of careless bullshit to a federal legislator.

I guess times have changed.

Why is subscription DPC the precise hill on which self-styled “patient-centered” providers have chosen to make a stand?

A subscription model is not the most patient-centered way.

Consider this primary health care arrangement:

  • Provider operates a cash practice
    • no insurance taken
    • no third party billed
  • Provider may secure payment with a retainer
    • balance is carried
    • refreshed when balance falls below a set threshold
  • Provider may bill patient for services rendered on any basis other than subscription
    • specific fees for specific services; or
    • flat per visit fee for all patients; or
    • patient-specific flat visit fee, based on patient’s risk score; or
    • patient-specific flat visit fee, based on affinity discounts for Bulldog fans; or
    • fee tiers based on time/day of service peak/off-peak; or
    • fee tiers based on communication device: face-to-face/ phone/ video/ drum/ smoke signal; or
    • any transparent fee system based on transparent factors; but
  • Provider elects not to bill a subscription fee, e.g., she does not require regular periodic fees paid in consideration for an undetermined quantum of professional services.

The plan above is price transparent to both parties. It is more transparent than a subscription plan because it is easier for each party to determine a precise value of what is being exchanged.

The plan above gives a patient “skin in the game” whenever she makes a decision about utilization.

Patient and doctor have complete freedom to pair and unpair as they wish. There will no inertial force from the presence of a subscription plan to interfer with the doctor-patient relationship.

The patient gets to use HSA funds, today. The plan above is fullly consistent with existing law and its policy rationale; a subscription plan is not.

Precisely because this plan beats subscription plans on freedom, transparency, and “skin in the game”, this plan is likely to lower your patient’s total costs better than a subscription plan — even if your patient does not have an HSA.

The specific fees and fee-setting methods will be disciplined by market forces. Some providers, for example, might find that the increased administrative costs of a risk-adjusted fee are warranted, while other stick with simpler models. Importantly, forgoing subscription fees should reduce the market distortions that arise when contracts that allocate medical cost risk between parties.

Health care economics has lessons about cherry picking, underwriting and death spirals, dangers associated with increased costs. These dangers have palpably afflicted health insurance contracts. Subscription service vendors are not immune. A subscription-based PCP unwilling to pick cherries will be left with a panel of lemons.

HDHP/HSA plans were created as a countermeasure to the phenomenon described by Pauley in 1968 , that when “the cost of the individual’s excess usage is spread over all other purchasers of that insurance, the individual is not prompted to restrain his usage of care“. A state legislature declaring that subscription medicine “is not insurance” does nothing to check the rational economic behavior of a DPC subscriber with no skin to lose when seeking her next office visit.

Some who generally do subscription medicine have, for years, also used per visit fees like those suggested above to address concerns about HSA accounts. In fact, one of the more widely touted self-studies by a direct provider, Nextera’s whitepaper on Digitial Globe, supported its claim of downstream claims cost reduction by comparing traditional FFS patients and a “DPC” population that included a significant proportion of per visit flat rate patients. Although Nextera claims that its study validates “DPC”, it presented no data that would allow determination of which DPC model – subscription or flat rate – was more effective.

In fact, before the end of March 2020, several DPC practices responded to the pandemic by offering one-time flat-rate Covid-19 assessment to non-members, such as non-subscribed children or spouses of subscribed members. Those flat-rated family members would have been able to use HSA funds for that care in situations in which the actual members might well have been unable.

I urge the rest of the no-insurance primary care community to reconsider its insistence on a subscription system that simultaneously reduces the ambit of “skin in the game” and cuts off the access of 23 million potential patients to tax-advantages HSAs. There’s a better way — less entangled with regulation, less expensive, more free, more transparent, and even more “patient-centered”.

UPDATE: IRS showed in recent rulemaking process that it fully believes DPC subscription fees are, by law, a deal breaker for HSAs, despite the president* signalling his favor for DPCs. In my opinion, IRS would prevail in court if it cared to enforce its view. Philip Eskew of DPC Frontier is 100% correct that the odds of the IRS winning on this are closer to 10% than they are to 1%, just not in the way he apparently meant it.

Union County Direct Primary Care in a nutshell.

Union County is estimated by Milliman to have lost money. The odds that Union County saved more than 5.2% are less than one in twenty. The odds that Union County saved 28% or anything near that are miniscule.


Do you remember when DPC was claimed to be saving Union County $1.25 Million per year? So why did Union County’s health benefits expenditure rise twice as fast as can be explained by the combined effect of medical price inflation and workforce growth?

Union Countu Budget and Bureau of Labor Statistics

DPC Alliance manifesto steps on its own foot attempting to prove that DPC saves money.

On May 13th, the Direct Primary Alliance published a manifesto: Building the Path to Direct Primary Care. It was signed by every officer and board member of the largest membership organization of direct primary care physicians.

In so many words, it said:

  1. FFS primary care practice is being destroyed, financially, by the Covid-19 pandemic.
  2. DPC is thriving, financially.
  3. DPC has always been great, and has always been superior to FFS.
  4. Because of the pandemic, DPC is now even greater and even more superior to FFS.
  5. DPC will be even greater than it is now and even more superior to FFS than it is now, if we get help from government, insurers, employers, patients and everyone else.
  6. DPC achieves lower overall healthcare spending.
  7. DPC Alliance will help FFS practicitioners transfer to DPC.

In a recent post, I addressed the DPC-PATH’s claims regarding how well, relative to FFS practices, DPC practices were weathering covid-induced financial stress.

Here I turn to DPC-PATH as representing DPC Aliance’s clearest statement yet of the perennial claim by DPC advocates that “Direct pay primary care models provide health care purchasers with a means to achieve lower overall healthcare spending.5 6“.

Ah, yes, the footnotes.

Here’s Footnote 5:

Basu, Sanjay, et al. “Utilization and Cost of an Employer-Sponsored Comprehensive Primary Care Delivery Model.” JAMA Network Open, vol. 3, no. 4, 2020, doi:10.1001/jamanetworkopen.2020.3803.

This was a lengthy, exhaustive study, of a large number of employees of a single employer, and it featured serious efforts at adjusting for demographic factors. The employees were offered the option of receiving primary care through traditional community PCPs or through either one on-site or fifteen near-site employer-sponsored clinics. It may well be the soundest study ever to show success in a primary care cost savings initiative. The study found savings of $167 PMPM, 45%, for those using primarily the on-site, near-site clinics delivery model.

But that delivery model was absolutely not direct primary care. Every employee visit in both the “treatment” group and the “control” group was reimbursed to the providers on a fee for service basis by the employer and/or employee cost sharing (a mix of deductibles, co-pays, and coinsurance).

In other words, what DPC Alliance’s manifesto presented as its first piece of evidence that direct primary care can save money was an article that seemingly demonstrated that certain FFS-based primary care delivery clinics saved money.

Interestingly, the Basu article on FFS on-site, near-site clinics in DPC-PATH’s footnote 5 more or less steps on the second bit of evidence purported, by DPC Alliance in Footnote 6, to show that DPCs reduce cost. That footnote links to the claimed savings of 28% for a DPC option in the employee health plan of Union County, NC.

Surprise! DPC is offered in Union County through a proudly touted near-site clinic. So, the article presented by DPC-PATH Footnote 5 suggests that the results shown in the article presented by DPC-PATH Footnote 6 can be explained by the location of the Union County clinic rather than the payment model under which the Union County clinic operates.

More importantly, however, the Union County DPC plan is the best studied plan in the entire direct primary care universe. DPC advocates have bragged about it again and again (1k hits for “Union County” and “direct primary care”).

It is also the only DPC plan to date (May 2020) that has received extended, comprehensive, risk-adjusted analysis from an independent team of actuaries. They found that:

… [T]he introduction of a DPC option increased total nonadministrative plan costs for the employer by 1.3% after consideration of the DPC membership fee and other plan design changes for members enrolled in the DPC option.

Pleaase click here for further detail..

Apparently, not even using a near-site clinic could make DPC a money saving proposition for Union County. In fact, I show in a separate post that the DPC option likely increased Union County’s costs for covered employees, not by a mere 1.3%, but by nearly 8%.

dpcreferee’s 2017 op-ed on Union County’s failure to save with DPC proved to be almost spot on.

In February 2017, I sent the op-ed piece below to the Charlotte Observer. It was not selected for publication. But it has been proven accurate in a detailed, independent study by team of health care actuaries from a firm of highly regarded actuaries known widely for its health care work. The study was prepared for the Society of Actuaries. See discussion below my op-ed.

My Op-Ed

Union County, scene of an 1865 dust-up involving General Sherman’s troops, is now the site of a skirmish in the national civil war over health care policy. Katherine Restrepo, Director of Health Policy at North Carolina’s John Locke Foundation, has been calling attention across the South, and in Forbes, to the county’s experience with a health care delivery vehicle known as direct primary care, or DPC.

In the Union County employee health system, all enrollees have insurance to cover most types of medical services other than primary care. For the latter, they have a choice between receiving primary care from hundreds of traditional insurance-based physicians, subject to deductibles and copayments, or receiving primary care exclusively from a small closed panel of physicians at a pre-paid insurance-free direct primary care clinic with no deductibles or copayments. According to its supporters, the primary clinic’s savings in insurance overhead allows its providers more time for patient care, which in turn curbs the need for expensive specialists, emergency rooms, hospitals, and costly medications.

When Union County created a direct primary care option for its employees and their dependents in 2015, a bit under half of them elected the DPC. When compared with the traditional plan, according to Ms. Restrepo, the direct care plan saved the county as much as 28% in medical expenses, an impressive $1500 per insured per year.

With claimed savings like that, she and other small-government advocates are eager to bet the health of every state and local government employee on DPC. They seem particularly eager to promote direct primary care as the core model for Medicaid.

But there are problems.

Unless asked directly, DPC advocates withhold the fact that the enrollees in the direct primary care group are five years younger than those in the traditional care group.  

Age matters though, and it matters a lot. Age-cost curves for health care are steep. In tirades against the Affordable Care Act, many conservatives insist that the costs for 64-year-olds are five times higher than costs for 21-year-olds; that insurance premiums should reflect this 5:1 ratio; and that the 3:1 curve mandated by the Affordable Care Act penalizes the relatively young. 

As an interim step pending ACA repeal, the Trump administration recently floated the idea of moving to an age-premium curve of 3.49:1. On that curve, a five-year gap in age would explain every penny of the difference between the health costs of the two Union County populations. 

The 5:1 curve would imply that offering the direct primary care program actually cost Union County well over $600,000.

Furthermore, DPC advocates make no adjustments for prior health experience. For example, patients with multiple health issues of long standing might choose to avoid the direct primary care clinic’s small, closed panel so they can keep an established relationship with their traditional primary care physician; it makes medical sense.

There are rigorous ways of evaluating whether Union County’s costs savings reflect some innate superiority of direct primary care or merely that the relatively healthy preferred a different plan than their less healthy counterparts. Restrepo compares group costs, but fails to carefully assess whether health status differences between the groups might be driving the “savings”.

Let’s not bet the health care of county enrollees, Medicaid recipients, or anyone else on the idea that little Union County won big savings by offering direct primary care. A far safer bet is that Union County’s decision makers managed only to segment their enrollee population by health status, then proclaim an unjustifiable win for a still-unproven health care concept.

An mistaken presumption in my op-ed

The calculations in the op-ed were based on there being a five year age difference between the two groups, my best estimate at the time. Later in 2017, the County advised me that the difference was almost exactly four years. Accordingly, my estimate of net County loss under a 5:1 curve should have been closer to $400,000.

Milliman’s study conclusion

Here’s the core conclusion from the Milliman firm:

[T]he introduction of a DPC option increased total nonadministrative plan costs for the employer by 1.3% after consideration of the DPC membership fee and other plan design changes for members enrolled in the DPC option.

https://www.soa.org/globalassets/assets/files/resources/research-report/2020/direct-primary-care-eval-model.pdf at page 7.

Milliman’s total cost computation was based on estimates monthly DPC of $75 per adult and $40 per child; using those numbers, the 1.3% increase corresponds to $7 per member per month, a net loss to the County of $6,000 vs a claimed savings of about $1.3 million.

Milliman’s typo

As recorded in the quotation just above from page 7 of Milliman report, Milliman found that introduction of a DPC option increased the employer’s expenses by 1.3%. Page 7 is part of the report’s executive summary. In a discussion section at page 46, however, the same report states that the introduction of a DPC option reduced costs by an unstated amount. How can this contradiction be resolved?

The data and computations for computing over all costs are presented in Figure 12 on page 32, its key on pages 33 and 34, and a discussion on 35. These make quite clear that the average ROI estimated by Milliman was indeed a loss of 1.3%. Figure 12 is set out below.

Milliman’s one major error: its estimates of monthly fees were far too low.

Apparently Milliman’s team did not realize that, instead of estimating the month fees, they might have simply looked in the public record. The contract between the County and the provider set monthly fees at $125 per adult and $50 per child. Direct primary care cost Union County, not $7, but $41 per member per month — about $430,000 per year.

The deepest significance of the high DPC fees in Union County is not that the county lost a lot of money. Rather, it is that it took a very large investment to gain the downstream cost reductions, which were largely driven by reduced ED visits. $430,000 a year will easily fund an additional PCP to simply do phone calls and housecalls intended to intercept unnecessary ED visits, effectively attaching a glorified doc-in-the-box to the clinic. In fact, all care in the Union County DPC was provided by Board Certified Family Physicians. Without that extra money, i.e., with a $75/adult budget, it seems doubtful that a DPC clinic could accomplish ED visit reduction at even the modest standard at Union County.

That “DPC is working while FFS is failing financially because of COVID” meme takes a big hit; proof furnished by DPC Alliance.

Reality: while it is may not be a pretty picture, no one has a clear view what the pandemic’s ultimate effects on primary care practices, FFS or DPC, will be.

On May 13th, the Direct Primary Alliance published a manifesto: Building the Path to Direct Primary Care. It was signed by every officer and board member of the largest membership organization of direct primary care physicians.

In so many words, it said:

  1. FFS primary care practice is being destroyed, financially, by the Covid-19 pandemic.
  2. DPC is thriving, financially.
  3. DPC has always been great, and has always been superior to FFS.
  4. Because of the pandemic, DPC is now even greater and even more superior to FFS.
  5. DPC will be even greater than it is now and even more superior to FFS than it is now, if we get help from government, insurers, employers, patients and everyone else.
  6. DPC achieves lower overall healthcare spending.
  7. DPC Alliance will help FFS practicitioners transfer to DPC.

In this blog, I’ve dealt previously with several of these issues, but today’s special attention goes to the new information about financial viability in mid-May 2020 that came to my attention through the DPC-PATH manifesto itself.

For its key financial arguments, the manifesto relies on an end of April survey of primary care practices , including some DPC practices, by the Larry A Green Center. That center highlighted that an astonishing 32% of PCP respondents said they were likely to apply, in May, for SBA/PPP Covid-emergency money. That means a lot of PCPs expected to certify either they have suffered a significant economic harm because of the current emergency (SBA-EIDL) or that a loan is “necessary to support on-going operations”.

The Alliance also linked a breakout focused on DPC practices. 52% of PCP in direct primary care practice responding to the same survey expected to seek such loans.

I don’t think DPC Alliance should be bragging about how much better DPC is weathering a pandemic than FFS with a survey that indicates that DPC docs were 60% more likely to seek emergency assistance this month than their FFS counterparts.

When this survey result was brought to the attention of some DPC Alliance board members, some offered the small size of most DPC practices as an explanation. I was told they feared “doom” and that they applied for government help because of the economic uncertainty coupled to their fear that they would not get government help. Interesting rationale!

But I was also told that it was reckless of me to think that DPC practices who certified to a good faith belief that uncertain economic conditions make their PPP loans necessary actually believed what they certified. Yet, strange as it is for DPC advocates to suggest that some DPC practitioners had committed felonies, one advocate earned “likes” from DPC advocates when he hammered the point home by cheerfully noting that the SBA had announced that PPP loans under $2 million would not be audited.

In fact, the SBA did not announce this non-audit policy until more than two weeks after the Green Center survey. Even then, the policy was carefully explained as intended to relieve smaller businesses from the financial burden of audit (not from the consequences of crime — fines up to $1 million and 30 years imprisonment). When DPC docs say they needed PPP loans to maintain current operations, I believe the docs and not those who accuse them of committing felonies.

On the other hand, there are clear advantages that DPC practices have had over PPS in weathering, financially, the first few months of the pandemic.

Relative to FFS practices, DPCs are concentrated in states with lower infection rates; there is less shutdown, less lost wages, less social distancing, less risk to office visits, less public panic.

Also, DPC practices do not accept Medicare, and have relatively tiny numbers of elderly patients relative to FFS practices. In average FFS- PCP practice during normal times, about one-quarter of patient visitors are over 65. But it is elders who, presently, have the strongest incentives to cancel office visits, to postpone routine care, and even to forgo minor sick visits or urgent care. Even in Georgia, the first state to “reopen”, the elderly remained subject to a gubernatorial stay at home order. FFS is taking a current revenue hit on patients who are barely visible in DPC practices.

That DPC providers tend to be located in less infected states and that their patient panels are nearly devoid of seniors means that DPC practices have likely caught a financial break relative to FFS. In terms of long-term policy goals and health care costs, however, DPC has found nothing in its response to the Covid crisis to brag about.

How will DPC practices compare to FFS practices six months or a year from now?

If Covid-19 survivors have a surge of primary care needs, DPC practices could be obliged to deliver more care for previously fixed revenue, but FFS practices are likely to be more able to match rising patient needs to rising revenues.

If social distancing continues to keep the number of in-office visits depressed, the perceived value of what was sold to patients as high-touch medicine will fall and subscribers may insist on lower subscription fees.

If the economy stays in the tank, patients may pay more attention to whether DPC gives good value. DPC would do well if those 85% cost reduction claims were anywhere near valid. But there is extremely little evidence to support the cost-effectiveness brags of DPC providers. Instead, there is solid actuarial evidence that can DPC increases cost.

Reality: while it may not be a pretty picture, no one has a clear view what the pandemic’s ultimate effects on primary care practices, FFS or DPC, will be.

DPC advocates: an undoubtedly small number of individuals can be as high as 23,000,000.

Summer 2019

DPC advocates argue against a $1.8 budget score for their pet DPC/HPHP/HSA fix. They argue the impact is zero, and they cite a study by The Moran Company that says:

The number of individuals presently barred from HSA participation solely by reason of DPC enrollment is undoubtedly small.

March 2020

DPC Coalition glumly reports that their DPC/HDHP/HSA fix was not included in the CARES act, even though:

We were successful in getting our [HSA fix] bill included in the original Senate Finance Committee draft of the [CARES] legislation as a means of expanding virtual care to 23 million more Americans with HDHP/HSA plans.

DPC: “Unlike FFS, we’re keeping our doors open, except when they’re not.”

Ahem, indeed!

The thrust of the vox.com article cited by Dr. Edwards is that primary care physicians are losing in-person visits and telemedicine visits return fewer dollars. It’s key sentence: “Doctors and other health care providers have seen a precipitous drop in the routine visits they depend on for revenue, and experts fear many offices will have to close.”

But the same pandemic constraints that have lead FFS docs away from in-person medicine have served to make the reality of FFS practivce and DPC practice more similar, not less.

How often do we hear DPC advocates and their fellow travelers mention that some of the rest of us confuse “insurance” with “access”? From a patient’s perspective, the current “access” problem is the result of social distancing, not payment model.

DPC docs have long relied heavily on patients perceiving exceptional value in frequent, lengthy, face to face visits. That perception paves the way for charging hefty fees on a subscription basis, month after month, visits or no visits, so that in-depth service is there more-or-less on demand. When DPC shifts its mix away from in person visits, patient perception of DPC value will surely fall.

Notwithstanding the difference in payment model, revenue of both FFS and DPC medicine will reflect a similar, pandemic-constrained mix of in-person visits and telemedicine. I can’t imagine what makes Dr. Edwards think DPC revenues will not take comparable hit, if slightly delayed, to those in traditional practice.

Consider too that the most distressed FFS practices cited in the Vox piece are small, independent practices – the smallest of which are probably close to the average size of a typical DOC clinic.

Moreover, a great many DPC patients receive their care through employer-clinic contracts. The DPC practices holding these contracts are likely to receive an immediate revenue hit as employees are laid off. See, e.g., this contract between Paladina, one of the largest DPC providers and Union County, NC, a county dependent on a % sales tax.

Similarly, DPC practices generally decline accept Medicaid. But it is estimated that between one-third and one-half of all who lose employer coverage will become enrolled in Medicaid. Many of those paying for DPC out of their own pocket will both lose the income they need to pay their DPC and will be able to join Medicaid plans with minimal out-of-pocket costs.