Mischievous Foundations?

Early in 2017, I became aware of a policy initiative by the Georgia Public Policy Foundation the gist of which was to expand Medicaid in Georgia to more beneficiaries while, simultaneously, reducing the total per person expenditure on Medicaid to $2500 per annum. The Foundation’s plan also purported to eliminate the burden of uncompensated care on Georgia providers, especially hospitals .

At the center of the Foundation’s proposal lay two health care finance components:  a state payment of $750 per year to provide for each Medicaid recipient an annual membership in a Direct Primary Care clinic, and a state payment of a $1750 annual premium for a insurance policy providing catastrophic coverage.

Since Medicaid expansion under the Affordable Care Act costs at the time of the Foundation’s proposal substantially exceeded $6000 annually per covered individual, since $1750 per annum can buy only coverage with a  deductible far beyond the means of any Medicaid recipient, and since the Foundation’s plan removed the burden of uncompensated care from providers, the Foundation’s proposal turned on obtaining very substantial cost savings effects of beneficiary participation in direct primary care.  Starting at articles and links on Foundation’s website, I examined the evidence that direct primary care might be able to reduce the medical costs for a Medicaid beneficiary from over $6000 to a mere $2500.

In 2017 and early 2018, I wrote a series of posts arguing that direct primary care had not been, and could not be, shown to have massive cost reduction effects. I’ve transferred those posts to this blog, some with corrections.

Around the time the Georgia Public Policy Foundation (GPPF) was floating its Medicaid DPC proposal, North Carolina’s John Locke Foundation (JLF) was advancing the position that state and local governments could similarly cut costs by putting its benefited employees into direct primary care clinics. Both GFFP and JLF are state level versions of the Heritage Foundation, and both relied on Heritage Foundation material addressing direct primary care.

All three foundations tend toward strong fiscal conservatism. Certainly, if direct primary care has real value in reducing the costs of medical care, it would make sense that all three foundations would get behind firmly behind direct primary care.  At the same time, even if direct primary care does not reduce the cost of providing care, it may nonetheless give the appearance of reducing the cost of providing care. Then, it can be used to justify lower government expenditures for the health of Medicaid recipients and government employees.

Georgia leads the nation … into what?

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, provides valuable material 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 will be examining those assumptions and various implications of the report in upcoming posts. I will also put the AEG/WP report into the context of other bits of an on-going discussion about direct primary care.

The gym club model. For healthcare?

Addressing those new to the idea, direct primary care partisans often start to explain the model by comparing it to membership in a fitness club with nearly unlimited access for a fixed monthly fee.

I’m puzzled.

Gym clubs are subject to high member churn rates. Is this wise for health care?

High churn owes in part to people signing up who then turn out for whatever reason to have low utilization. Low utilizers pay the same price as those who use the club’s resources more frequently. In the health care context, that seems similar to kind of subsidization built into the ACA’s community rated, full benefit packages. Yet, some of the most strident voices opposing such subsidization in Obamacare lead the charge for a primary care model in which low utilizers subsidize high utilizers rather than a model in which each person pays for the primary care they get.

The demand for time on the best exercise machines at gym clubs cycles up and down, varying enormously by time, day of the week, and date of the year. Periods of excessive demand are likely result of an unlimited access model. If your gym is slammed on January 2nd because of New Year’s resolutions, you just go home and no harm is done. Your unlimited access clinic and its two doctors might, on the other hand, be slammed with flu case appointments that, in the absence of “unlimited access”, might never have been made. If you need a truly urgent appointment, you might wish you had elected fee for service primary care.


Once fixed fee arrangements are in place, there is no “skin in the game” to keep a lid on overutilization. Yet, some of the same organizations that spent decades touting “consumer driven”, high deductible policies as an important response to overutilization, currently endorse prepaid, fixed fee direct primary care.

To pursue a revenue boost for its clinics, the direct primary care establishment seeks federal legislation that would allow HSA funds spent for direct primary care subscription fees to fulfill high deductibles. Yet, to a consumer, DPC membership fees work quite like payments of health insurance premiums in transferring most of the immediate, specific costs of a doctor from the patient to a different payer. Why do institutions that have long argued that “skin in the game” is paramount, specifically support taking skin out of the primary care game?

Direct Primary Care Poster Child Qliance has collapsed.

I  had  told  you  that would  happen  and  why.

It did, and now 25,000+ people have had less than a month’s notice to make new primary care arrangements. But the whole idea of direct primary care was to have been that these patients chose to pay a subscription fee to Qliance instead of maintaining an insurance plan adequate to their primary care needs.

Do Georgia conservatives still want to free direct primary care companies like Qliance from having to maintain reserves to assure that patients are protected when direct primary care providers go under? Somehow, I am sure they do.

Giant direct primary care pioneer Qliance has turned to online begging.

“No deductibles or copayments, but we have a coin box at the reception desk for your donations.”

Qliance, the first corporate provider of insurance-free direct primary care and one of the three largest, seems to be headed down the drain. It has taken to online begging at gofundme.com.

Not even ten days before the donation drive began, Qliance was the leading poster child for direct primary care. A Forbes article by Daniel McCorry and Katherine Restrepo said this:

Washington State is deservedly recognized as the birthplace and one of the most prominent frontiers for DPC, in large part because of Qliance. The Seattle-based DPC conglomerate is recognized as an exemplary market force in the private sector of health care.

They went on to praise the State of Washington for its exemplary DPC-friendly legal and regulatory environment.

Qliance was the first, and only, direct primary care provider to have Medicaid patients. It was the first to be part of a plan on an ACA Exchange. It operates in the best state for direct primary care. It has over 35K patients; and it has over $20,000,000 in annual revenues.

Despite these revenues, lenders have not been impressed with Qliance’s business model.  So, now that it needs to raise $1,000,000 in about ten weeks, Qliance has decided to beg. Today, gofundme; tomorrow, coin boxes at the reception desk.

If the crash of Qliance surprises anyone, it will be those with unrealistic expectations of what direct primary care can accomplish. The above-quoted article by McCorry and Restrepo, for example. promises such an intensive level of primary care that expensive “downstream” care, like specialist consults and ER visits, can be cut by 66% and 65% respectively. Eliminating all overhead expenses associated with billing and insurance is said to make all this possible, because doing so is presumed to enable physicians to reduce their patient patient panel size by fifty percent (50%) or more.

Actually, that’s inconceivable.

A 2014 quantitatively detailed, peer reviewed academic study of billing and insurance-related administrative costs for physician practices found that these came to thirteen percent (13%) of gross revenues. So physicians could drop their panel size by thirteen percent (13%) and increase their face time with patients by fifteen (15%).  [Hint: divide average length of patient visit by 0.87.] 15% more face time does not produce miracles.

But surely 15% more face time will help reduce “downstream” care a bit? Sure. In 2015, Qliance’s most recent report claimed to have reduced specialist consults and ER visits, but only by fourteen percent (14%). Seems reasonable, a lot more reasonable than 66%. And specialist and ERs are expensive, so maybe there’s some net savings here, even at 14%, right?

Maybe. But Qliance is obviously having trouble persuading lenders, investors, or partners that it can perform that well.

Where did those inflated expectations for direct primary care, like a 65% reduction in specialist visits, come from.  They came from a table by Qliance summarizing unpublished internal data from a 2010 investor pitch by Qliance. They were mentioned in a feature article written for the British Medical Journal in 2013. Though this was not a research article, the gaudily-high figures were passed off in a Heritage Foundation report written by McCorry, as “a British Medical Journal study of Qliance.”

Qliance knew better than to try to pass these wildly high numbers off as “a British Medical Journal study”. On February 6, 2017, McCorry, writing in Forbes, again published the numbers from 2010, but this time without any link or citation.  Now that Qliance is in dire straits, however, those exaggerated 2010 results  – now attributed to Forbes – have made their way into Qliance’s gofundme pitch; their more recent and more relevant but far less compelling results have not.  That is precisely why you, in your exercise of due diligence, should not donate to Qliance.

A final note. Reducing billing and insurance overhead can be accomplished by a single-payer system perhaps even more easily than by direct primary care. But whether the system is fee for service, single payer, or direct primary care, the physician’s conjoined choices as to the size of her patient panel and the size of her income are the dominant drivers of the amount of personalized care each of her patients receives, far more so than the mechanism by which she is compensated. More intense primary care may have some net positive benefit, at least up to a point, but there is no clear evidence that that benefit is unique to the direct primary care model.

Going insurance-free does not, and cannot, reduce the overhead expenses of primary care practices by 60%, or even 40%.

Substantial correction made on 2/12/2-13.

About 13% of revenue (22% of overhead) according to academic research. 

I’ve back-tracked Katherine Restrepo’s and Julie Tisdale’s 2016 claim that:

By dealing directly with patients and filing no insurance billing whatsoever, DPC practices are able to eliminate 40-60 percent of their overhead expenses.

A footnote there takes you to a 2015 Katherine Restrepo article in Forbes that says:

By cutting 40 percent of overhead that is normally spent on getting paid by insurance companies, primary care providers can devote hour-long appointments to their patients and deliver care at a fraction of the cost. (Emphasis supplied.)

I will leave to Restrepo and Tisdale to explain why Restrepo-Tisdale 2016 bumps the earlier figure from Restrepo 2015 up to as high as 60.  Meanwhile, follow the link in Restrepo 2015 to an article by a free lance reporter, who wrote this: 

Jay Keese is the executive director of the Direct Primary Care Coalition, an advocacy group representing DPC physicians, residents, and medical students. 

<snip>

“What direct primary care does is takes out all the administrative costs so the cost of getting paid for primary care is gone,” Keese says. “We look at that as a 40 percent cost differential. Currently 40 percent of a practice’s expenses are spent on getting paid. Because the doctor is paid directly in direct primary care, some of that savings goes to increase payment to the physician and some of that is just savings to the system.” (Emphasis supplied.)

Keese is a long time lobbyist and political consultant. He does have B.A. in history and he does have the delusion that direct primary care will not entail any administrative costs of getting paid: no costs for soliciting and negotiating direct primary care contracts with individuals, employers, or other payers; no costs of billing or processing payments; no membership cards or annual renewals; no bounced checks, late payments or defaulting payers.

What Keese ( at 40 percent) and Restrepo-Tisdale (as much as 60 percent) do not have is any reliable evidence for these wildly inflated claims. 

Rather than rely on endlessly recycled alternative facts, look instead at this 2014 quantitatively detailed, peer reviewed academic study 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 over 20% of the estimated 60% overhead expenses for family practice physicians.

Even if going insurance-free could eliminate all costs of getting paid (it can’t), thirteen percent (13%) of revenues is a figure that could support primary care physicians being able to increase their time with patients, while keeping their income the same, about one-third.

A third more time is significant, but hardly revolutionary. Claims that eliminating all billing and insurance-related overhead will cut patient panels by half or more and triple regular appointment times up to the hour mark, and do it all at a fraction of the cost, are far out of line. 

Deduct any reasonable amount for the costs of getting paid, some which will exist even for direct primary care clinics, and the ability of insurance-free direct primary care to work miracles of any kind is all the more questionable.  

No wonder it is so easy to explode the phony claims of savings made for such poster child examples of direct primary care as Qliance, Empower3 (formerly PHS) and Union County.

The only academic journal studies on point failed to show the efficacy of direct primary care.

Georgia’s conservative fans of direct primary care swoon over PHS, a 1500 member, insurance-free, hospital-based, direct primary care clinic in Altoona, Pennsylvania. PHS was the subject of not just one, but two quantitatively detailed academic journal articles addressing the efficacy of direct primary care. Since the oft-cited British Medical Journal study on the efficiency of direct primary care does not actually exist, the two articles on PHS appear to be the only academic studies addressing the question. Yet, though the author list of both articles includes the clinic’s own medical director, the data presented do not show that the direct primary care (DPC) model is superior in any way to traditional insurance-based primary care.

Astonishingly, the articles tell us that the entire physician staff of the clinic amounted to three part-timers, two of whom were uncompensated volunteers and one of whom was paid only $24,000. The total value of the donated physician services can not even be estimated, because neither article tells us how many hours or full-time equivalents the primary care physician staff worked at giving primary care. The omission is fatal to any attempt at cost-benefit analysis — and astonishing, given that direct primary care advocates usually claim that greater provider contact is the source of every virtue attributed to direct primary care.

The authors do present data showing that primary care received in the insurance-free direct primary care clinic helped reduce the number of emergency department visits. But there was no attempt to show that the insurance-free direct primary care clinic was any better than insurance-based primary care at calling forth this somewhat obvious by-product of primary care.

The twin articles undertook only one direct comparison of the effectiveness of the clinic to that of insurance-based practices. That effort revealed that the hospital admissions rate for PHS members was about 55% of the rate for those who received primary care through insurance-based practices.

The authors eagerly attribute this large difference in hospital admission rates to the superiority of the insurance-free direct primary care model on which PHS was built. But there is a better explanation.

For the years under study, about 1 in 6 adults in the US was uninsured. But only about 1 in 16 hospital admittees were uninsured patients. In other words, the uninsured typically have a hospital admission rate that is about 3/8ths that of the insured. Might that be because, relative to the insured, the uninsured have trouble paying for hospital stays?

Whatever the explanation, it turns out that 70% of the clinic’s members are uninsured, while 30% carry hospitalization insurance. Based on these proportions it can reasonably be projected that the PHS population would have had a hospitalization rate of about – you guessed it  – 55% that of a fully insured population. Most likely, enrollment in the PHS clinic had no impact on the rate of hospital admissions.

Benefit? None shown. Cost? Failed even to include the cost of direct primary care physicians who delivered the direct primary care!

In sum, the only quantitatively detailed academic studies of the cost-effectiveness of direct primary care failed to show that direct primary care was in any way superior to insurance-based primary care.

There never was a British Medical Journal study of Qliance.

The most heavily relied-on “study”purporting to prove the effectiveness of direct primary care is an important marker in a national debate with real consequences. But it is not a study at all.

In certain quarters, anything that appears on the sacred webpages of a Heritage Foundation report is taken as gospel truth.  So, when Heritage cited,  and even linked, what it called “a British Medical Journal study of Qliance” that “showed” what Heritage then presented as “positive results” of a “study” very favorable for direct primary care offered by Seattle-based Qliance, the data was re-presented dozens of times.

There was one source that might have been expected to promote a favorable “British Medical Journal study of Qliance” with particular enthusiasm — Qliance itself. Rather tellingly, it didn’t. The company must have known something that was not discernible to Daniel McCorry, the Heritage graduate fellow who wrote the misleading report.

The prestigious “British Medical Journal study of Qliance” for which Heritage claimed “positive results” does not – as such – exist. The item on which McCorry relied was not a research report of empirical results; it contained no quantitative detail; it was not peer-reviewed; and it certainly was not a British Medical Journal study. It was a BMJ news feature, by a journalist rather than a scholar, that included some figures simply transcribed without evaluation from a table summarizing data compiled by Qliance itself and “published” only in a slide show targeted at potential investors in its direct primary care business. Moreover, probably to reduce the danger of liability for defrauding those very investors, the table itself bore this red flag:  “Based on best available internal data, may not capture all non-primary care claims.”

But  McCorry had just completed his first year of medical school at the time. perhaps Georgetown SOM does not teach its students how to critically read a medical journal until second year.  Did McCorry achieve a passing grade in Georgetown’s required first-year course in evidence-based medicine, the one about “critically assessing various information sources” that “prepare(s) students to evaluate medical literature?” Did he have a problem with the BMJ paywall?

As if to underscore a real need for real research, Qliance’s self-assessments of effectiveness have varied over the years by as much as four-fold. For example, the table quoted in the October 2013 BMJ feature announced that Qliance members had 66% fewer ER visits and 65% fewer specialist visits than similar patients; less than fifteen months later, a Qliance press release reset both measures at a mere 14%. And fifteen months after that, in February 2017, McCorry, now an M.D., was still republishing in national media the older, gaudily-larger, but carefully hedged figures.

Serious research on Qliance’s effectiveness has yet to appear.

McCorry pulled even more impressive numbers from an actual peer-reviewed medical journal article, wasting spilling proportionally more ink in the process. Unfortunately, that American Journal of Managed Care piece was not a study of insurance-free direct primary care at all.

It’s subject was MD-VIP, a high-end concierge network that serves insurance-based primary practice physicians. McCorry simply misidentified it as a direct primary care group. MD-VIP sells an add-on package of exclusive easy access, extra screenings, and wellness benefits for which patients pay an annual fee that averages $1800. Patients still maintain insurance for all the usual primary costs; the physicians still bill for ordinary primary care; and the patients are still liable to the physicians for the usual copays and deductibles. To be fair to Daniel McCorry, he would have had to read more than 2/3 of the material on page one of the article to learn that.  Now that D.M. is an M.D., I’ll bet he knows what MD-VIP actually is.

From Heritage lips to the ears of all fighters for health care freedom: the MD-VIP blunder was, like the Qliance falsehood, repeated dozens of time.

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Update: February 23, 2017. Qliance appears to be in serious trouble.  Despite over $20,000,000 in annual revenues, it is seeking donations through gofundme.com. It needs $1,000,000 in the next few weeks and has not been able borrow what it needs. Astonishingly, the gofundme pitch quotes verbatim the outsized, outdated 2010 Qliance figures, attributing them to Daniel McCorry’s February 2017 article in Forbes, where they appear without any attribution at all.