Total claims cost caution: when DPC is implemented primary care claims vanish. AEG/WP’s 15% estimate is not conservative in the least.

When the direct primary advocates toss out figures about overall claims cost reductions, it’s important to carefully separate overall cost, downstream care claims costs, and overall claims costs.

For example, the authors of the AEG/WP pitch for DPC in Georgia, have assumed a 15% reduction in downstream care costs and claimed that it “represents the low end of possible savings.” At the same time, they have relied on sources like the Arvada County clinic and the Nextera clinic that have show overall claims cost reductions of 22% and 20%, respectively. Properly understood, the reports from those two clinics suggest that 15% is anything but a conservative estimate of downstream care costs. Here’s why.

In analyzing potential Georgia savings, the AEG/WP authors correctly recognized that direct primary care enrollees would cease to incur claims costs for primary care. To amend their calculations, they relied on widely available medical claims cost data that indicated 7.0% of all medical claims were claims for primary care. Accordingly, they reduced overall claims cost by 7% to determine the base amount of downstream claims.

The same common sense needs to be applied to the Arvada and Nextera overall claims cost data. Since direct primary care members pay a fixed fee instead of making claims for for primary care, enrolling in direct primary directly reduces overall claims cost by 7%. So, for example, when the brochure for the Arvada clinic notes 22% lower claims costs for DPC-members vs FFS member, 7% is due to elimination of primary care claims, leaving only 15% that can be fairly attributed to downstream claims cost reductions. For Nextera, which sees a 20% lower claims cost for Nextera members, an even smaller downstream care cost reduction is demonstrated,

Even if the Arvada and Nextera claims data were entirely free of selection bias or any other errors, they come nearer to refuting than to supporting AEG/WP’s assertion that a 15% reduction in downstream care costs “represents the low end of possible savings”.

A possible 11% reduction in overall care cost, adjusted for risk, is suggested by Union County’s 2018 report.

NEVERMIND! In Union County adoption of a DPC option cost the county money. So say actual actuaries. I’ll leave this post essentially intact, for the record (of my folly!)

Here’s some data that shows plausible overall cost reduction from direct primary care even after adjusting selection bias. It comes from the Paladina-operated clinic in Union County, North Carolina, the principal subject of two prior posts.

The county employees choose either a high-deductible HSA under which primary care is received on a fee for service basis or a plan under which they receive primary care at a direct primary care clinic. About 1000 persons were enrolled in each group. The county reported that for the plan year that ended in 2018, overall costs to the employer for the DPC group were 26% lower than those in the FFS group.

The county also reported relative medical risk scores for the the two groups, and these were distinctly different: 1.11 for the FFS group and 0.92 for the DPC group. Based on these risk factors, the DPC group could be expected to have total medical costs that were 17% lower than the FFS group.

The expected costs for the DPC based on these risk factors would 83% of those for the FFS group. Instead, the costs were 74% of the FFS group. When the difference of 9% is divided by the 83% base figure, it suggests that the beneficial effect of direct primary care was just under 11%. That’s well short of the 26% that appears in a first glance at the County’s report; reasonable risk adjustment makes a big difference.

Seemingly, however, direct primary care can make a significant difference as well.

Bear in mind that, however valid the 11% improvement may be, it will not necessarily hold up when extended from the the relatively healthy (“0.92”) group to a significantly less healthy (“1.11”) group. See this prior post.

See “NEVERMIND” above. Extending the reductions backward to the less healthy group is more complicated than I thought.

To learn how much direct primary care can do, try it first in the ACA-compliant, full-benefit individual market.

If Georgia must mandate the availability of direct primary care, here’s how.

For some future open enrollment period, the individual market will offer paired plans that differ only by how primary care is paid for and how it is received. Bigco, for example, offers Bigco Silver FFS and Bigco Silver Direct ; MajorCo probably offers MajorCo Silver FFS and MajorCo Silver Direct. There will be similar paired offerings from Aetna, Cigna, and LargeCo. Each company has contracted with primary care practices to provide fee for service, primary care services at in-network rates; each company has also contracted with one or more direct primary care practices to provide in-network primary care services at an agreed monthly fixed fee.

The scope of direct primary care services to be covered by the fixed fee is defined in a list. The sole compensation to direct primary care practices by the insurer is the monthly fixed fee. In addition, the direct primary care practices may, if they wish, perform unlisted services at the insurer’s in-network rates.

BigCo, MajorCo, and the other large insurers will have sat down with competing direct primary care providers and will have been presented with data purportedly showing potential downstream care reduction performance . The competing insurers will each have a team of actuaries and econometricians make an independent evaluation of these performance claims; the insurers will then determine which direct primary care providers, if any, are likely to deliver cost-effective results if contracted to the insurers network.

Some insurers may accurately estimate the performance of direct primary care and produce appropriately priced DPC policies for the market, relative to FFS policies. Some insurers may make inaccurate estimates of DPC performance, resulting in relative underpricing or overpricing of DPC policies. Any underpriced policies will spell losses for the insurer on a per policy basis; moreover, these loses will be magnified because the underpriced policies will attract a enhanced disproportion of policy sales.

While subsequent enrollment cycles approach, however, insurers’ econometric/acutarial teams will adjust prices based on accumualting performance data. The payments insurers are willing to make willing to make and the prices DPC providers are able to demand will move as needed toward pricing that reflects whatever actual downstream cost reduction performance direct primary care has delivered.

The resulting premium differential, if any, between DPC and FFS coverage will come to reflect strongly, if not entirely, the real difference, if there is any, between DPC and FFS in cost-effectiveness. However that turns out, there would likely remain some willing to pay a premium to remain in particular plans to retain the FFS or DPC primary care physicians they prefer.

At least in the individual and small group markets, moreover, selection bias would not play a role determining how an ACA marketplace comparison of DPC and FFS delivery would turn out. The Affordable Care Act includes a risk adjustment process under which plans with riskier populations receive funds from plans with less risky populations. The very intent of risk adjustments was to get providers to compete by innovating in healthcare systems instead of competing by risk selection. Accordingly, a mandate that Georgia insurers make direct primary care available for a serious market test might be relatively safe in the risk-adjusted market.

Since Georgia is not a command economy, however, it seems wise that any mandated test be of limited scale, say something limited to an urban county, a rural county and one in between. A limited test may also be wise given that there are relatively few direct primary care providers in Georgia. Upscaling for a full statewide test could stretch direct primary care resources too thin. Relatedly, some attention might be needed to assure that neither negotiating insurers nor physician practices willing to provide direct primary care are forced by the mandate’s design to make bargains that would prevent the real value of direct primary care from being correctly determined and reflected in the market.

For the large group market, the ACA does not have a built in risk adjustment procedure. Without that backstop, it would make sense to allow direct primary care prove its cost-effectiveness in an individual market experiment, prior to mandating the availability of direct primary care in the large employer market.

On the other had, allowing the large group market to test direct primary care would be dandy.

The best reason to limit and, even, to eschew entirely any mandate is that insurers can figure all of this out on their own. Some large insurers seem to be moving on their own toward incorporating something like direct primary care. See, e.g., this piece which ties together direct primary care, Aetna’s merger with the drug delivery giant CVS, and CVS’s experiment in offering somewhat DPC-like “Health Hubs”. For another example, large insurers are working alongside both and established DPC providers on coordinated arrangements like these involving Boeing, Iora Primary Care, Aetna and Cigna.

At same time, the features or results of direct primary care that are touted as being most effective for reducing downstream costs are already known to insurance companies through past and/or present experience: a set number of primary care visits included without any charge; primary care visits for a small copay; “welcome” physicals; wellness programs; fees-for-service that pay primary care physicians more money for longer visit durations; and, of course, primary capitation itself, including that with rates tied to results.

Rather than a new mandate, why shouldn’t the health insurance marketplace work out the role of direct primary care on its own?

Three bad ways to bet the health of Georgia citizens on direct primary care.

Every published claim that direct primary care makes a significant dent in necessary health care spending is dubious at best. See, for example, here, here, here, here, here, here, here, here, here, here and here. When the data from the Union County clinic — a Georgia Public Policy Foundation favorite — is age-adjusted, it indicates that the direct primary care option is at least as likely to have increased that county’s overall costs as to have reduced them. There is no proven performance that would justify the State of Georgia mandating that insurers offer direct primary care.

The major attraction of direct primary care to some advocates surely is its potential for limiting the public subsidies health care, whether for Georgia’s indigents or Georgians of modest means. Even if direct primary care could be shown to have some ability to lower overall healthcare spending, that ability needs to measured against a realistic expectation of what health care costs.

The recent report on healthcare innovation prepared on behalf of Georgia PPF by AEG/Wilson Partners was based on annual claim cost to insurers for the year 2020 of just under $5000 per person per annum for the relatively inexpensive large employer insurance market. The figure did not include a penny for insurance company administration and profit. It was also based on policies with an actuarial value of under 80%. That puts the annual average cost of healthcare goods and services well over $6000.

The annual cost per person of Medicaid expansion has been with sight of that number. For 2018, the 94% federal share and the 6% federal share worked out to a little over $5200 a year. That’s also almost exactly what Union County paid for each person covered by its direct primary care plan in 2016; but those county beneficiaries paid on average an additional $379 out of their own pockets to bring the average 2016 cost for Union County insureds in its much-praised DPC clinic over $5500. ACA Medicaid expansion does not look too bad in that light.

Bad idea #1. Direct primary care as an alternative to ACA Medicaid expansion.

A 2017 GPPF proposal for Medicaid is built around a direct primary care model claimed to be so cost-effective that the healthcare of indigent Georgia citizens can be safely be budgeted at $2500 per person per annum; and the same GPPF proposal would, concurrently, relieve Georgia public hospitals of all obligations to the indigent. That’s well under half the amount that the GPPF’s vaunted Union County spends on its direct primary care members. It’s magical thinking, or cynical.

Bad idea #2. Massive cuts to public employee benefits based on migration to direct primary care.

The aforementioned GPPF-sponsored healthcare innovation report, without a word of explanation, identifies the State Health Benefits Program as an “obvious candidate to pioneer” direct primary care. How long before GPPF proposes huge budget cuts for the SHBP built around wholesale migration to direct primary care? Hopefully, not until direct primary care has proven its worth in a fair, significant marketplace test.

Bad idea #3. A §1332 waiver implementation, or any other scheme, that encourages the seemingly healthy to enroll at direct primary care clinics without maintaining an insurance plan that offers comprehensive, catastrophic coverage.

Here’s what the people running direct primary care have to say about maintaining wrap-around health insurance.

From SALTA, a direct primary care firm founded by one of the principal authors of the GPPF direct primary care proposals, says: “We recommend you continue to carry private health insurance to cover the additional medical services not covered in the program”

From CHI Health Clinics, one principal sources relied in the GPPF direct primary care proposal: “Do I still need health insurance? Yes, by all means keep your insurance to cover specialty care, hospitalizations, high-cost imaging, medications and true emergencies.”

From Nextera, another main source relied on in the GPPF DPC proposal:”Patients are generally best served by combining Nextera Healthcare membership with a high-deductible insurance policy to cover specialist physician and hospital services.”

From Evans Direct Primary Care (Evans, GA): “You need healthcare insurance for hospitalizations, ER and specialist visits, X-rays, Labs, Meds, etc. . . .”

From Southern Care Direct (Calhoun, Georgia): “[O]ur affordable fees make our high level of service ideal for individuals with low cost, high-deductible insurance plans (with or without accompanying health savings accounts). . . .”

From Direct Primary Care of Marietta (Georgia): “All patients should maintain current health care insurance coverage or purchase a high deductible health care plan to cover emergent, urgent, hospital, specialist, radiology, laboratory, pathology, home health, Physical or Occupational Therapy or any other medical service not provided by [us].”

Let’s follow what direct primary clinics actually preach about wrap-around coverage, rather than combine claims of direct primary care efficiency with a §1332 waiver to support bad health insurance choices.

It is also likely that diversion of significant numbers of the relatively healthy into direct primary care plans with no other insurance would create a very large adverse selection problem. That in turn would tend to convert ACA-compliant, full benefit plans in the individual market into high-risk pools with premiums unaffordable to the unsubsidized middle class.

Instead of these three bad ideas, let’s look at this somewhat better idea.

AEG/WP’s chosen actuary did not validate the assumption that direct primary care reduces downstream care costs.

AEG/WP report declares that “[Nyhart, an independent] actuary determined that “(1) the modeling assumptions are reasonable for this type of analysis and (2) the illustrative projections and savings are reasonable outcomes based on the modeling assumptions and data inputs selected.” This statement sounds like powerful support for report’s key assumption that direct primary care brings huge reductions in downstream care. It seems intended to convey the idea that the actuary from Nyhart engaged in an independent, probing analysis of past claims data to make an actuarial sound prediction of future claims. But that’s not what Nyhart was asked to do.

As the actuary also noted:

Nyhart relied on AEG and WP for the accuracy of the data provided to us and accepted it without audit. To the extent that the data provided is not accurate, the projections provided in this report would need to be modified to reflect revised information.


Claims Reduction Due to Direct Primary Care Model: A 15% reduction in total claims (medical and prescription drug) was assumed. The factor is based on research and case studies prepared by Wilson Partners and represents the low end of possible savings.

Taken together these passages suggested that the actuary, Randy Gomez of the Nyhart firm, had concluded no more than that the 15% was “on the low end” of the specific material presented to him by Wilson Partners. Mr Gomez has confirmed that understanding to me in an extended telephone conversation.

We have previously examined the source data used by Wilson Partners: a 2018 20% claim of possible involving CHI; a 2016 claim of possible savings for 22% for Paladina/Arvada; and 21 % possible savings for Nextera in 2015. Mr Gomez could appropriately sign off on Wilson Partners suggestion that 15% represented a safe low end figure for possible savings after assuming 20%, 22% and 21% were accurate possible savings data points. Gomez intended no more than that.

Gomez, in other words, had accepted but not validated the cost reduction claims presented to him by Wilson Partners. Specifically, Gomez was not asked to undertake, and did not undertake, an actuarial examination of medical risk data or historical claims data from the clinics identified to him. He was not hired to, and did not, in any way address selection bias or any similar factor. When asked about the clinical and risk data supporting the cost reduction assumptions, Gomez referred me back to Wilson Partners.

Reach out to Mr Gomez at or (317) 845-3595. He was interested in the subject, candid, and a pleasure to talk to.

But what if AEG/WP had found an actuary who claimed to have actually validated the 15% downstream cost reduction claim for direct primary care? In that case, the appropriate response would have been, “Show me.”

The reality is that neither actuaries nor Wilson Partners nor anyone else has as yet demonstrated that direct primary care lowers downstream claim costs after adjustment for selection or other biases — by any amount.

Bupkes. Nextera reported a claims cost reduction of $72 PMPM; subtracting a $70 fee, and AEG/WP’s billion dollar promises fall nearly 95%.

Asked for sources supporting their assumption of 15% downstream care claims cost reduction, the authors of Healthcare Innovations in Georgia — Anderson Economic Group and Wilson Partners (AEG/WP) — point to Nextera’s contract with DigitalGlobe, as reported in Nextera’s self-published study here.

And here’s the exact table from that study showing claims cost reductions for DPC members.

That’s a overall claims cost reduction of $71.98 per month.

The AEG/WP report assumes a $70 PMPM direct primary care fee (which seems to be unrealistically low). Even at $70 a month, the Nextera experience suggests that we should expect net cost reductions of $2 PMPM.

That’s less than 4% of the net cost reductions of $53 developed in AEG/WP’s analysis. A conservative approximation, based on Nextera’s reported experience, indicates that AEG/WP’s prediction of $21.5 million dollar first year savings in the individual market is off by $20.8 million dollars.

Nextera’s marketing presentation establishes huge selection bias, while revealing modest evidence that Nextera cuts cost for some of its patients. But the data set is tiny, old, and contaminated by results for fee for service patients!

UPDATE 5/31/2019. This needs a correction, but I want to leave it intact below for the record. I have in the title above and the text below that the Nextera data is contaminated by FFS patient data. This is not correct. To preserve HSA tax advantages, many of the Nextera patients did not want to pay a subscription fee; as is somwhat common in other DPCs, these patients paid a flat individual visit charge instead of a subscription fee.

I fully described this process, but it may be misleading for me to identify these patients as “fee for service” patients. It would have been better to have identified them as “non-subscription patients”.

Even so, these patients pay in a very different way than the subscription model identified by AEG/WP and other DPC advocates as a key to DPC efficacy. Specifically, they face costs at every visit which, in comparison to a subscription model, discourage regular visits.

Interestingly, creating a significant marginal cost for each visit in this way actually brings this form of non-subscription practice into compliance 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.

Accordingly, it remains fair to conclude that the Nextera member data is contaminated in a way that makes it difficult to attribute any observed cost savings to subscription model (“DPC”) medicine.

The following paragraph begins the original post.

The basic premise of AEG/WP’s advocacy for direct primary care is succinctly stated in “Healthcare Innovations in Georgia: Two Recommendations” at page 24.

“Establishing a relationship with a doctor for a fixed monthly fee can induce and empower many patients to see their primary care physician regularly, which results in decreased healthcare expenses and reduced health insurance premiums for Georgia residents.” Accordingly, the report notes, “The direct primary care model requires members to establish a relationship with a primary care doctor that would cost a fixed monthly fee.”

So why did AEG/WP source their claim that direct primary care reduces downstream care costs to a Nextera sales brochure touting its experience with DigitalGlobe, a document that reports on downstream claims costs of a small group of Nextera members, a large number of whom paid per visit charges rather than a fixed monthly fee?

Because of certain complexities in the tax treatment of payments for medical care, Nextera had good reasons for this admitted departure from the “ideal” of direct primary care. In any case, Nextera’s own account reveals that many members of the group for which cost reductions were claimed, were not direct primary care patients as defined by the AEG/WP recommendations.

Because the group had significant numbers of both fixed fee members and fee for service members, it is logically impossible to say from the given data whether the fixed fee Nextera members experienced downstream cost reduction that were greater than, the same as, or worse than the fee for service Nextera members. So, while the study does suggest that Nextera clinics foster downstream care savings, it can not demonstrate that fixed-fee direct primary care has any benefit.

Here are the core data from the Nextera report.

Nextera Healthcare + DigitalGlobe: A Case Study

205 selected 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 selection bias, Nextera relied on a “difference in differences” ( DiD) analysis. It credited itself, 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%.

What the data does not show is whether those who picked Nextera doctors and paid a fixed fee had any better downstream claims experience than those who picked Nextera doctors and paid on a fee for service basis.

The data presented in the Nextera brochure, in other words, do not isolate direct primary care status as the cause of the improvement. What the data show instead is the apparent effect, not of the “directness” of care but, of the “Nexterity” of care.

The principal conclusions of Nextera’s sales brochure, which the company styled a “case study”, are also tainted by errors of arithmetic.

Here’s an image of a table clipped directly from their piece.

Do the arithmetic. The reduction rounds off to 5.0%, the number I used in the larger table above. Nextera’s ability to handle numbers is plainly suspect.

In the time since the report, Nextera has been actively claiming 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. But even the substituted claim of 20% cost reduction would require significant qualification before that figure could be extended to other instances.

Even before they were Nextera members, those who were eventually enrolled seem to have been markedly low risk, lower I believe than any cohort previously identified in any of the literature addressing direct primary care. Difference in differences analysis relies on a “parallel trend assumption“. The Nextera population may be so much different from those who declined that the trend observed for the one DigitalGlobe population can not be assumed even for the other DigitalGlobe population, 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 signup were lower than expected, in part because of many employees “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 attending to their health. Medicare’s failure to cover regular routine physical examinations is notorious. But there is one reasonably complete physical examination that Medicare does cover: its “Welcome to Medicare” exam.

First attention to a population of “primary care naives” is a way to pick the lowest hanging fruit available to primary care. Far more of that fruit can be harvested from a population enriched with people who are receiving attention they have avoided than from a populations enriched with those who are already actively engaged with their existing physician.

Accordingly, a “parallel trend” can not be assumed; and the 20% difference in differences savings 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 such preventative measures as a routine physical. 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 expected 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 enrollee needs and the capabilities of specific Nextera physicians. But this process would result in a population of non-Nextera enrollees that was less amenable to whatever was unique about Nextera. Again, no parallel trend could be assumed.

I am uncertain whether the results of these kinds of considerations would be deemed “selection bias” by a trained econometrician; I suspect they might be characterized instead as instances of “omitted variable bias”. However designated, 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, unselected population as envisioned by the AEG/WP authors.

Whether or not Nextera inadvertently recruited a population that made Nextera look good, that 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. The report covered seven months experience for 205 Nextera patients. In fact, Nextera’s own report explains that before turning to Nextera, DigitalGlobe approached several large direct primary care companies (almost certainly including Qliance and Paladina Health); these larger companies declined to participate in a study so short for a group so small.

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

Consider the two or three members who did not join Nextera in May 2015 because, no matter how many primary care visits they might want 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 was in hospital because of an automobile accident at the time for election. It is likely Nextera-abstention of these kinds contribute importantly to pre-Nextera claims cost differentials.

But 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, knee replacement, or Caesarian could evaporate a huge share of such savings in a single day. The Nextera experience is too small to be reliable.

This seems a good juncture to note that Nextera has not chosen to present any downstream claims reduction experience more recent that 2015 — whether for DigitalGlobe or or any other group of Nextera patients. Perhaps Wilson Partners should have asked Nextera for data showing results for some of the forty-one months that intervened between the end of the initial seven month period and the time at which Wilson Partners addressed Nextera’s seemingly self-serving report .

Nextera now has over fifty doctors, a presence in seven different states, and patient numbers likely in thousands by now; it should have no problem generating 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, because the Nextera team makes patent errors of arithmetic, and because its cost reduction figures are contaminated by the inclusion of a significant number of fee for service patients, the Nextera study cannot be relied on as giving a reasonable account of the overall effectiveness of direct primary care in reducing care costs.

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

Healthcare Innovations in Georgia:Two Recommendations”, the report prepared by the Anderson Economic Group and Wilson Partners (AEG/WP) for the Georgia Public Policy Foundation, makes some valuable contributions to deliberations about direct primary care. The AEG/WP team clearly explained their computations and made clear the assumptions underlying their report.

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

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

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

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

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

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

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

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

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

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

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

Why did Wilson Partners’ research into DPC cost-reduction bypass uniquely available and pointedly relevant data?

Healthcare Innovations in Georgia:Two Recommendations”, the report prepared by the Anderson Economic Group and Wilson Partners (AEG/WP) for the Georgia Public Policy Foundation, makes some valuable contributions to deliberations about direct primary care. The AEG/WP team clearly explained their computations and made clear the assumptions underlying their report.

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

As noted in a prior post, the report by the Anderson Economic Group and Wilson Partners supported the assumption that direct primary care reduces downstream care cost by 15% with nothing more than a cryptic reference to “research and case studies prepared by Wilson Partners”, presented with neither data nor citation. Initially, I thought this secreted research effort might focus on the experience drawn from the SALTA direct care clinics in Michigan.

Let me explain.

David Wilson, the principal of Wilson Partners, co-founded SALTA Direct. At the time of the report, SALTA charged self-insuring self-insuring employers and individual members $70 a month. Wilson’s direct primary care company also boasted that, “The SALTA Direct Primary Care solution has been shown to reduce overall healthcare costs by 20%.”

Wilson’s own company, in other words, both operated at the Qliance-like prices and touted the Qliance-like results needed to support the cost-effectiveness claims assumed by Wilson and his AEG/WP report colleagues. Because of David Wilson’s unique proximity to the SALTA experience, I somehow assumed that data from SALTA formed the backbone of the “research and case studies prepared by Wilson Partners” on which the conclusions of the AEG/WP report so heavily rest.

Well, silly me! The research performed by Wilson Partners for the AEG/WP study apparently did not include any of the cost and performance data of which David Wilson’s SALTA proudly boasts.

Instead, the AEG/WP report authors responded to my request for information by indicating that the “research and case studies prepared by Wilson Partners” comprised the harvesting of three items off the web. One of them was an e-zine article about the CHI clinic. The other two were promotional brochures, denominated as case studies, by the DPC companies Paladina and Nextera and to solicit business from self-insuring employers.

In two upcoming posts, I will examine these items. If they provide sound evidence that direct primary care reduces the costs of downstream care, no one need bother to ask why Wilson’s partnership eschewed data from Wilson’s company.

Selection bias infected the best documented argument that direct primary care reduced downstream costs.

An update appears at the bottom of the page.

Healthcare Innovations in Georgia:Two Recommendations”, the report prepared by the Anderson Economic Group and Wilson Partners (AEG/WP) for the Georgia Public Policy Foundation, makes some valuable contributions to deliberations about direct primary care. The AEG/WP team clearly explained their computations and made clear the assumptions underlying their report.

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

A unique and powerful opportunity for quantitatively informed assessment of such claims has come from a DPC clinic serving employees of Union County. There, health plan members are able to choose between receiving primary care in a DPC clinic or through physicians under traditional model of insurance and fee for service.

Mark Watson is the county official responsible for this innovation. He made available some key data needed for comparing medical costs for DPC patients and those receiving primary care to the John Locke Foundation (“JLF” is NC’s version of GPPF) and others, . The most recent report about Union County by JLF claims that DPC patients experience costs that are 28% lower than those in traditional primary care.

But the very same report expressly notes that the DPC group patients have lower medical risk scores than the traditional group patients.

A large part of medical risk scoring derives from patient age. In that regard, Watson had Union County’s human resources office compile basic demographic data on the two populations. These data showed that the average participant in the DPC group was at the time of compilation about four years younger than an average participant counterpart in the traditional group.

Four years may not seem like much, but age/claim cost curves are steep. A figure of 5:1 is widely cited in comparing the medical claims experience of 64 year-olds relative to 21 year-olds. Even an age/cost curve with an average slope of 4:1 can explain every penny of the 28% cost differential between two Union County groups separated in age by four years. If the 5:1 ratio most broadly accepted is accurate, than Union County’s primary care option actually increased the county’s costs.

Younger people, lower claims cost, lower premiums.

It is virtually certain that what looks like a claims cost reduction is an illusion resulting from the segmentation of Union County’s insureds by selection bias.

Likely sources of selection bias at the Union County clinic are discussed here.

Union County’s presentation of comparative claims data is available here.

Union County’s summary of comparative age data is available here.

Union County’s contract with its direct primary care clinic operator is available here.

Age-cost curves may be viewed here.

Update: See this post for some cost-adjusted data that confirms signficant selection bias, while still suggesting that direct primary care has net positive effects.