Medicaid-driven Budget Crisis Needs a Marcus Welby/Steve Jobs Solution

Not a week goes by without seeing some headline about deficits pushing municipalities to desperation or Bill Gates describing state budgets using accounting techniques that would make Enron blush.  The common culprit: healthcare costs with Medicaid being the biggest driver.

Recently Carly Fiorina opined on The Health Care Blog about Health Care, Not Coverage. She pointed out the unnecessary administrative burden that could be better spent on delivering healthcare. Fortunately, there is already a proven model, developed and run by physicians, that has shown it can reduce costs 20-40% by removing administrative overhead while improving outcomes (e.g., 40-80% reductions in hospital admissions) and greatly increasing patient satisfaction with Google/Apple level of patient satisfaction.

It can be described as two parts Marcus Welby and one part Steve Jobs. The federal health reform bill included a little-noticed clause allowing for Direct Primary Care (DPC) models to be a part of the state health insurance exchanges. That little-noticed clause (Section 1301 (a)(3) of the Affordable Care Act and proposed HR3315 to expand DPC to Medicare recipients) should have the effect of massively spreading the DPC model throughout the country. In California, the DPC model was introduced in a bill to bring explicit support for the DPC model as has been done in the state of Washington and elsewhere.

The future is already here — it’s just not very evenly distributed. – William Gibson

A common myth is DPC is the same or similar to their more expensive cousin — concierge medicine. Not so. Typically one-third of DPC practices are uninsured people. AtlasMD in Wichita, KS is run by Dr. Josh Umbehr. Due to tough economic times, one of Dr. Umbehr’s patients lives in a storage unit. Her monthly fee ($50/mth which is inclusive of all fees) is less than she was paying in co-pays at the local public health facility. Another is MedLion. One of their recent clinics is in Salinas, CA (a farming community) and caters to farm workers . The waiting rooms are nicer than a public health facility because can put their resources towards a more pleasant experience than billing systems and personnel. AtlasMD has 2 MDs and one NP. No admin staff. Zero. Zip. It’s all run with low cost software.  DPC organizations such as WhiteGlove Health and arriveMD have even lower overhead as their practice are run as a clinic on wheels. [Disclosure: Two of the organizations mentioned, arriveMD and MedLion are customers of my software company, Avado.]

Let’s break down how it’s possible to provide such a high level of service at such an affordable price (i.e., less than a typical cable bill). It’s simple: low overhead. It’s not unusual for a primary care practice to have 3-5 administrative staff for every doctor. This is necessary to deal with the myriad insurance billing schemes that can best be described as a Gordian Knot designed by Rube Goldberg. Smart utilization of affordable technology (often in the low hundreds of dollars per month vs. many thousands and ongoing headaches of server management and the like) is at the heart of it. DPC allows the doctor to practice medicine the way they were trained, rather than pulling their hair out dealing with insurance for the medical equivalent of a trip to Jiffy Lube. In other words, the practices run similar to the fabled Marcus Welby, MD days. Yet, they are improved upon with a dose of Steve Jobs enabling enhancements that weren’t possible in the past such as virtual house calls. In anticipation of the rapid expansion of these models, entrepreneurs such as BJ Lawson, MD of Physician Care Direct have developed software to run the business side of these practices. [See more on how practices are overcoming obstacles to switching to Direct Primary Care.]

Thus far, DPC has had success in the private market. I put the question of why not use DPC for the Medicaid population (reportedly that is in the works in West Virginia) to DPC practitioners. The response below is a summary of their perspective. It is estimated that if DPC was scaled nationally it could save 20-30% off of overall healthcare costs. That would be the difference between states defaulting and sustained balanced budgets.

The issue of using DPC for the poor is from my point of view a no brainer. Why use the most expensive inflationary system available (by which I mean the insurance system, whether public or private) to take care of those with the least money and most in need of basic services? The structure that makes sense to me is to create a thriving marketplace in direct primary care, competing on price, access and quality – and working exclusively for our patients. Then add a fixed monthly stipend for primary care for every Medicaid patient in the United States – a stipend that covers the lowest priced/highest functioning primary care available. This could be a voucher or credit card account for each Medicaid patient. The allowance could only be spent on primary care and the patients could buy up to higher priced practices if they saw value worth purchasing. That would convert the Medicaid patient from being a low paying, high utilizing patient to a valued customer who can pay cash for care at a reasonable price. This makes all kinds of sense economically:

  1. No government management system to control or manage care – it manages itself with the patient at the helm.
  2. Converting dependent impoverished citizens into patients with economic clout and respectful treatment
  3. Eliminating the cost overhead of insurance billing on both the doctor and the government side
  4. No more barriers to basic care for Medicaid patients – they can use all they need
  5. Eliminating the fee-for-service incentive disaster that produces massive overutilization and huge downstream expenses
  6. Financially stabilizing the primary care world with consistent monthly fee payments to cover our fixed costs while allowing those docs with better ideas or higher prices to go for the upscale patients or those wanting better art work and longer visits.
  7. Free up primary care docs to further improve their quality, access and patient centered services – not their billing savvy
  8. If the government wanted to regulate, they could demand an annual report on each patient they support, giving the actual utilization, health care outcomes and proof of appropriate management of common illnesses, immunizations and cancer screening. The government could actually pay for results, not process. Primary care practices would have to be certified as producing an acceptable level of results and patients would have access to our success profiles both in terms of cost and quality when selecting their doc for next year. [Note: A standard is being defined by the Healthcare Delivery Innovation Alliance which is seeking outside input.]
  9. The government could track the overall costs created by each practice and make those numbers public as well. The high cost practices would eventually lose certification, particularly if the money ended up in the hands of their employer (hospitals, big multispecialty clinics).
  10. If the government wants to tackle the HotSpotters patients, they just need to up the monthly ante for the sickest patients – they will get their money back with huge interest from the reduced downstream costs and reduced transaction costs that these folks generate. With the big fees they will also be able to require more complete reporting of how their chronic illnesses are being managed.

Medicare should do the same – stop paying fee-for-service for Primary Care and start paying a fixed monthly fee (allowing patients to buy up if the government gets the price wrong, as it almost certainly would). The patient should have total control over which primary care doc gets the money – remember, we want to work for the patient, no matter who pays the bill.

So that’s the solution – a simple system where the patient is in charge, the government buys good basic care and the patients can buy up. The system itself is created within a free market structure which the government is simply choosing to ride (like food stamps and grocery stores) with patients running the show, so service and quality could go up every year while prices remain stable or decline – like any real functioning market system in the world. Direct Primary Care is the only available model that could accomplish these goals. Everyone else is still trying to figure out how to “work” the insurance system. However, if the government has wisdom, they would also make the monthly fee deal available to prior fee-for-service docs – to boost competition and to accelerate the conversion to Direct Primary Care models. The right incentives produce the right results.

This guest post was written by Dave Chase, the CEO of Avado.com, a patient portal & relationship management company. Previously he was a management consultant for Accenture’s healthcare practice and founder of Microsoft’s Health platform business. You can follow him on Twitter @chasedave.

20 replies »

  1. This is a very good tip particularly to those fresh to the blogosphere.
    Brief but very precise info… Many thanks for sharing this one.
    A must read post!

  2. For instance, the main characters are both
    trying very hard to get into an Ivy League school, and almost fail to do so, but
    they both succeed in the end. How much should a lawn services business charge
    a customer. If you have several employees, you’ll
    be able to do the same for them.

  3. Hey fantastic website! Does running a blog similar to this take a massive amount work?

    I have virtually no knowledge of computer programming but I
    had been hoping to start my own blog soon. Anyhow, should you have any suggestions or tips for new blog owners please share.

    I understand this is off subject nevertheless I just needed to
    ask. Thanks a lot!

    Review my web-site; houses for sale london

  4. Hi, I think your website might be having browser compatibility issues.

    When I look at your website in Safari, it looks fine but when opening in Internet Explorer, it has
    some overlapping. I just wanted to give you a quick heads
    up! Other then that, great blog!

  5. I do trust all of the ideas you have introduced in your post.

    They are very convincing and will certainly work. Still, the
    posts are very brief for novices. May you please lengthen them a bit from subsequent time?
    Thanks for the post.

  6. Car tires cost less when using Walmart tire coupons.
    Dairy distribution is one of the important functions of the Braums Company.
    Most companies have coupons that they are more
    than happy to oblige their customers with on request.

  7. I’m not certain the place you are getting your information, but great topic.
    I must spend some time learning more or understanding more.

    Thanks for excellent information I was in search of this information for
    my mission.

  8. Hey there! I understand this is kind of off-topic but I needed
    to ask. Does managing a well-established blog such
    as yours require a large amount of work? I am brand new to writing a blog but I do
    write in my diary every day. I’d like to start a blog so I can share
    my experience and views online. Please let me know if you have any kind of recommendations or tips for brand new aspiring blog owners.

  9. I think this is among the most vital info for me. And i am glad reading your article.
    But should remark on few general things, The site style is wonderful, the articles is really excellent : D.
    Good job, cheers

  10. I’m truly enjoying the design andd layout of yor website.

    It’s a very easy on the eyess which makes it much more enjoyable for me to come
    here and visit more often. Did you hire out a developer to create your
    theme? Great work!

    my homepage: slep apnea cpap machine side effects (Carmel)

  11. Oh, by the way, those whose says this is not two on two basketball and are under the delusion that this is a team game and all that OBVIOUSLY haven’t watched enough NBA playoff basketball.
    Ray Bans Glasses Cheap
    [url=http://aktiv4u.at/a/ray-bans-glasses-cheap.php]Ray Bans Glasses Cheap[/url]

  12. Prisonaers should buy healthcare just like anyone else. They should buy insurance if they want it.

  13. There is a lot in the Affordable Care Act that most people do not know about and which provide support for finding answers to the myriad problems with US healthcare. As noted above, there is a lot of experimenting going on in the private sector – some of it will work and some won’t. (Employer sponsored clinics are a great example of the people and organizations with an interest in long-term cost and health stepping up to offer solutions.) The ACA provided support for some of those efforts, but Medicaid and other state health programs tend to be a bit more forward looking – I note, for example, the push for more telemedicine to serve prison populations in California.

    Great post.

  14. DPC models can address quite a bit of the health of a patient as they aren’t incented to push people out of their office every 10 minutes. However there is, of course, plenty of instances where one should work with a sub-specialist. The reality is a huge percentage of the population is being moved into a high deductible policy. I’m not sure the $$ you are talking about but it may be that it’s an appropriate use of insurance. My beef is layering an insurance bureaucracy on top of the equivalent of a Jiffy Lube visit.

    My observation is our elected “leaders” tend to follow. Individuals and employers are increasingly looking to alternatives to the status quo. Consider that 20% of employers with >500 employees are implementing onsite clinics for primary care. This is one example of what I call “DIY Health Reform.” That will happen with or without gov’t.

  15. Bravo to your article and clarity of ideas, once again David. Part of the CMS savings could also be directed to state (or even national) wide Health Information Exchanges to reduce the tremendous waste in duplication and lack of coordinated care.

    However as a subspecialist (Rheumatologist), we have tremendous waste and time sink in our prior authorizations with insurances (including CMS) to get approval for our expensive biologic drugs. The 7 of the 10 top grossing meds are now biologic drugs most of which are used in Rheumatology. I haven’t seen a good model yet on how we can get these meds to patients in a DPC model adapted for subspecialists.

    I hope policy makers read your work and effective change can be made, but unlike Dr. Walker, I have no confidence that significant change will come any time soon from our schizophrenic and dysfunctional government.

  16. Marcus Wellby drove a Chrysler (Obama bailout), hung out with Barbara Streisand’s main squeeze James Brolin, never filed a Medicare or Medicaid claim, probably did not carry malpractice insurance, had an entire hour for a single case and only took care of one person per week, had a hit TV show, (gravy on top of “Father Knows Best”)…..sign me up.

  17. I’ve been fascinated to study the DPC models. One of the most successful (from an outcomes basis) is Dr. Rushika Fernandopulle. His take on layering a retainer on top of fee-for-service (or visa versa) is it is like putting wings on a car and calling it an airplane. The beauty of DPC is the low overhead enabled, in part, by a monthly retainer. They aren’t mired in gaming visits and services which is one of the flaws of the current model. By keeping low overhead, a MD can charge $50-80/mth/pt (all in) and make a nice living with a panel of 500-1000 patients when they have a very small overhead (e.g., no need for complex billing procedures). Plenty of people did the equivalent of that in the “Marcus Welby” days. Now it’s a bit easier with some technology.

  18. Bravo! Clearly, the airline-like standardization model of healthcare delivery we dream and write about will eventually come (in est. 10 years), and that is the only long-term sustainable solution for the best healthcare for the masses; but meanwhile, there are signs that our early and present attempts to standardize care actually can be associated with harmful outcomes in some cases. Thus, meanwhile and between the old system and the fully-developed standardized delivery system to come, this direct patient care model (DPC, great acronym! hope to hear it more!) makes perfect sense. There is currently no substitute for the quality of care that results from a personal, bilaterally accountable, bilaterally trusting relationship between a real patient and a real doctor. And it is clearly true that primary care is the cheapest part of the delivery system, yet the most scarce; why not bolster it and make it the foundation of the interim delivery system we all need…and in a simple, uncomplicated model such as this post describes? I.e., just reimburse GPs (I am one, and that’s a fair title) in a sustainable way using a fee for service model? It would involve doubling or tripling current reimbursements for visits and services, but what possibly could be bad about doing just that?