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Costs Continue to Rise. What Can Employers Do? The Answer May Be Direct Primary Care.

The U.S. Supreme Court ruled on Jun 28th by a 5-4 vote to let the individual mandate portion of the Affordable Care Act (Obamacare) stand. Immediately following, a CEO of one of the nation’s largest insurance companies was asked if people can expect their premiums to go up as this law is implemented. The answer was yes.  So what can employers do to protect themselves from the inevitable?

One strategy for driving market incentives back into the healthcare system and driving down costs is called consumer-driven health insurance, and it is growing in popularity. Historically, the consumer or patient has had very little monetary skin in the game when it comes to the cost of healthcare. We go to the doctor and pay our copay, and never have to worry about what it really costs for health care.

Many employers are now trying to incentivize their employees to be as prudent a purchaser of health care as they are of any other product or service. And they’re doing this by offering high-deductible health insurance policies combined with health savings accounts, or HSAs.

For the 50 percent of patients who collectively spend only 3.5 percent of all healthcare dollars, it’s a fantastic alternative. Instead of paying the high premiums for a lower-deductible plan to the insurance company for care you don’t use — that’s money that goes out the window unnecessarily — you can store the money away, accumulating it every year until a health event occurs when you really need it.

To be sure, a big drawback to these high-deductible insurance plans is the negative impact they can have on the five percent of patients who spend 50 percent of all healthcare dollars. Many worry that high-deductible plans will increase the total cost of healthcare because those with chronic healthcare problems won’t get the help they need until their condition gets so bad that they are forced to seek help — when obviously the cost will be much greater. They have a very valid point.


One solution to this problem is a new type of primary care called “Direct Primary Care.” Under this arrangement, patients struggling to manage multiple chronic health conditions pay their physician a flat monthly fee, usually $100 to $150 a month, for all their primary care needs. This pays for all office visits and office procedures, and the insurance company only gets billed when a specialist is involved or when the patient goes to the hospital for surgery and other more serious procedures.

Direct Primary Care seems to work well for both patients and physicians because it gives the doctor a financial incentive to do everything he or she can to keep that patient as healthy as possible. Instead of the usual 10 minutes per patient, the doctor will often spend an hour or more with the patient, especially initially, to really understand his or her problems. Initial assessments can often last several hours, during which the doctor does a detailed patient history and assesses the complex social and emotional factors affecting the patient’s health. No time is spent billing the insurance company.

Remember, under our current bill-for-procedures health care system, most primary care physicians have thousands of patients in their practices and must see each one as quickly as possible in order to bill enough office visits and procedures to earn even half the money earned by a specialist like a cardiologist. In contrast, a Direct Primary Care physician needs only about 500 patients in his or her practice to make a good living, and because of the lower case load, these patients now have much greater access to the physician.

Face-to-face appointments last as long as is needed, and the doctor is completely familiar with the patient’s needs and life challenges. The physician now has the time to educate, to motivate, and to focus on helping the patient make the behavioral changes that are oftentimes so crucial to his or her well-being — stopping smoking, for example, or losing weight and eating better.

When a referral to a specialist is needed, the Direct Primary Care doctor calls the specialist ahead of time to discuss the patient’s situation and then spends time discussing the patient’s follow-up needs with the specialist after the visit. Truth be told, this is the kind of healthcare that most physicians want to practice — it’s the reason most of them went into medicine in the first place.

In the new book, The Future of Health-Care Delivery: Why It Must Change and How It Will Affect You, author Stephen C. Schimpff, MD, tells the story of one chronically ill patient who went from needing 23 different prescriptions from four different doctors, to needing just seven prescriptions  — all because one Direct Primary Care doctor took the time to examine the patient’s needs closely and coordinate his care. The patient’s health and quality of life improved dramatically as a result.

I know of a Direct Primary Care physician in my own Salt Lake City area who spent many years as a traditional physician. Frustrated by having to see patients for only minutes while having to spend hours fighting with their insurance companies, he took a sabbatical. After seeing a television story about Direct Primary Care, he realized that’s the kind of medicine he’d always wanted to practice, so he set up his own Direct Primary Care office.

Each month, this doctor invites his patients to join him for a healthy free lunch, where he teaches them about this marvelous miracle called the body and how to take care of it. Who says there’s no free lunch? This doctor makes great use of them to incentivize his patients to learn how to stay healthy.

There is a lot that employers can do to curb the inevitable cost increases projected as a result of the implementation of the Affordable Care Act. Employers are in a pivotal position to drive market incentives back into healthcare in an effort to slow down future increases. Consumer driven health insurance is just one of many strategies employers can use.

Darrell Moon is CEO of Orriant, a wellness-program provider serving companies nationwide.

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RHDavid WinterbottomAnna YaLeeJimJulius Hibbert Recent comment authors
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Anna YaLee
Guest

I really like this website. I understand insurance here in America is going up with new changes. In my country insurance is different, not like here in America. I thank you for the information. Here it was easy for me to understand.

Thank You,

Julius Hibbert
Guest
Julius Hibbert

Mr. Moon, I just read your article and one phase, in particular, jumped out at me: “We go to the doctor and pay our copay, and never have to worry about what it really costs for health care.” Although you did not explicitly state this, your reasoning seems to be that if Americans paid more for health care, they would demand lower prices (or shop around for them) and this would in turn force efficiencies which would result in lower health care costs. My question is: what would ensure that, in the face of higher costs at the doctors’ office,… Read more »

tomd39
Guest
tomd39

Higher prices ARE causing people to simply stay away from the doctors. It is happening right now among self-pays like myself. “… prudent purchasers of health care…” In practical terms, what does that mean? I would say in real life, people will forego medical care until they are no longer able to function. And as far as HSAs are concerned, they are irrelevent to probably 20% of our population. One final … why do you say, “… in the face of higher costs at the doctor’s office, …”? Are you speaking hypothetically? If not, why would costs be higher? What… Read more »

Julius Hibbert
Guest
Julius Hibbert

Hi tomd39, it seems like we both have the same questions. I was actually hoping that Mr. Moon would provide us with some guidance on his phrasing (“prudent purchasers of health care”). In general, when I have heard people say this, they are talking about shifting risk away from insurers to the insured. The thinking seems to be that costs are high because now “we go to the doctor and pay our copay, and never have to worry about what it really costs for health care”, so insured individuals don’t have any “skin in the game” (again, this is the… Read more »

tomd39
Guest
tomd39

It is interesting being a self-pay, though I have to amend that by saying I am part of a co-op with 20,000-30,000 others that all help each other pay their bills. We ARE partly responsible for negotiating a discounted price from our providers, though. Here lies the rub. Doctors in northern Illinois do NOT and WILL NOT negotiate price with self-pays. They have a basic 20% off their insurance-based pricing and that’s it. Health Care Blue Book? Forget it. If you are not part of an established network, you pay. That is what discourages me from following through on health… Read more »

Randall Oates, M.D.
Guest
Randall Oates, M.D.

Barry – We are in complete agreement that the change is uncomfortable, but necessary. See – You have to get comfortable with being uncomfortable to disrupt health – http://www.kevinmd.com/blog/2012/07/comfortable-uncomfortable-disrupt-health.html
Adapt and thrive, or resist change and die.

Barry Carol
Guest
Barry Carol

Dr. Oates – Two initiatives that Dr. Gawande describes in his article that I referenced relate to hip replacements and remote monitoring of ICU’s. Both are clinician led yet they still encountered resistance and even hostility from some of the doctors, and, in the latter case, nurses. Maybe as more doctors become salaried employees of large hospital systems, progress will come faster and more easily. I agree with you that efforts to improve quality and reduce costs need to be clinician led but even then people need to learn to do things differently and there is an unavoidable learning curve… Read more »

Randall Oates, M.D.
Guest
Randall Oates, M.D.

As the fee-for-service gravy train slows and the payment system switches to so called pay for value mechanisms, the big health system’s profit centers become cost centers. Then it will quickly become untenable to continue to subsidize their primary care practices that will be little more than feeders to what become the new cost centers. The train is leaving the station, and most are still looking around for their coal shovels that are the solutions further reducing primary care capacity. Most doctors value quality and improvement over autonomy and independence. What they don’t like is the hubris of well-intended but… Read more »

Barry Carol
Guest
Barry Carol

Maggie – First, I agree with you about the benefits of using more NP’s. As for obesity, I don’t think genetics, brain chemistry, etc. has changed any over the last 30 years or so but the obesity rate in the U.S. increased significantly and the U.S. has the highest rate in the world. I think it has more to do with the proliferation of fast food restaurants, the upsizing of portions in restaurants and the longer term downward secular trend in the cost of food as a percentage of the typical middle class budget. With respect to the 50% of… Read more »

Randall Oates, M.D.
Guest
Randall Oates, M.D.

I salute any and all attempts to improve the patient experience. This is certainly a better model for many clinicians now burning out in the primary care space. But how is this going to address the fact that in less than 2 years, we are going to have millions of angry patients with insurance cards with no place to go and little to no access to their health records? Let’s face the current realities: 1. Clinicians are mostly consolidating into larger groups that are currently acquiring largely siloed EHRs and/or processes that have often lowered their capacity to actually see… Read more »

southern doc
Guest
southern doc

“The median income for a PCP is approaching $180,000— half earn more.
Median income for an NP is around $100,000 — probably shoudl be raised to $120,000.”

Payment to docs and NPs/PAs is a relatively small part of the expense in providing primary care. Overhead (approaching 70%) doesn’t change, regardless of the degree the provider has hanging on the wall.

Factoring in increased referrals by mid-levels and the fact that they also are now avoiding primary care, the savings are miniscule to non-existent.

RH
Guest
RH

I suggest increasing the supply of NPs so their median income can be reduced to $80,000 , then by being transparent with patients the income of the PCPs can also be reduced to $80,000
Based on supply and demand law, by oversupplying primary care providers, their income can be reduced to $60,000 or even lower.
See my other post comment.

Maggie Mahar
Guest

A P.S. If we are not hit by a bus at an early age, virtually all of us will need very expensve specialized care at some point in time. We won’t always belong to the 50% of the population that spends 3.5% of heatlhcare dollars. And we don’t know when we will move into the other group— when we are fairly young and develop MS? When we are in our 40s and develop cancer? When we develop Alzheimer’s earlier than most people? Or what about when our 2-year-old is diagnosed with cancer and needs 10 years of treatment before finally… Read more »

Maggie Mahar
Guest

The best way to make primary care more affordable–for everyone– is to make much greater use of nurse-practioners. The median income for a PCP is approaching $180,000— half earn more. Median income for an NP is around $100,000 — probably shoudl be raised to $120,000. The ACA provides funding for many more NPs (and nursing school teachers.) Today, Cornell University provides most primary care to students and others mainly through NPs. (My son was a grad student there for 4 years and only saw NPs–even when he was hit by a care. He was very happy with the care, as… Read more »

RH
Guest
RH

Primary care should be redefined. I suggest the following. Reduce the yearly salary of Nurse Practitioners to $80,000. Reduce the yearly salary of Primary Care Physicians to the same $80,000 since they basically provide the same value to the patient as the Nurse Practitioners do. Significantly reduce the number of very expensive (to taxpayers) residency places for Primary Care Physicians and increase the number of training spaces to Nurse Practitioners. By producing oversupply of Nurse Practitioners their yearly income can be reduced to $60,000 or even lower (to be more consistent with the income of other highly trained professionals like… Read more »

Bill Springer
Guest
Bill Springer

This goes by another name as well, boutique or concierge medicine. For patients with serious chronic conditions who require ongoing management and intervention, the model makes good sense. It does provide financial incentives for the provider to keep the patient healthy while also centralizing coordination of care at a single medical site/provider. My only criticism is that it shouldn’t be limited solely to primary care physicians. In many instances endocrinologists or cardiologists may be better suited to coordinate patient care given their in depth knowledge of the underlying chronic conditions.

Craig "Quack" Vickstrom, M.D.
Guest
Craig "Quack" Vickstrom, M.D.

Oh, I believe the facts as you present them. I just doubt our system is able to implement anything this good. Sorry for the confusion.

tomd39
Guest
tomd39

This does nothing for the self-employed or unemployed or small business. May be a great idea for the few large companies, but does not solve the healthcare crisis in this country. Healthcare should be removed entirely from the employment realm.

Darrell Moon
Guest

tomd39, you are right that alone it does not solve the healthcare crisis in this country. However, it is one piece of a much larger puzzle that can and will solve our country’s health care crisis. I could not agree with you more that perhaps the number one reason we have a healthcare cost crisis in this country is because healthcare moved into the employment realm after the end of World War II. It has created the absence of a healthcare market place where economic market forces create what they do best; increase value at the most efficient price. I… Read more »

tomd39
Guest
tomd39

“…proper market forces …” I am fully convinced that the standard supply and demand model of capitalism does not work for healthcare. We need a paradigm shift to meet the needs of all, not just the employed of major corporations. And if we have “the best medical services in the world,” why is the average lifespan of someone in the U.S. 3 years less than Canada?

Jim
Guest
Jim

murders, low birth weight babys due to drug addicted mothers, less sedentary lifestyle, better diets. Compare obesity rates.

tomd39
Guest
tomd39

Could it have something to do with affordable health care available to all in Canada but not in the U.S.?

Jim
Guest
Jim

Standard supply and demand does not exist in American healthcare. To have that work, the individual purchaser (demand) must actually be spending their own money. Why is laser eye surgery 1/10 the cost it was when first introduced, and it’s 5 times safer too.

Jim
Guest
Jim

Do you really believe that only the people who die in America don’t have health insurance. If you are diagnosed with a serious illness, your best place for treatment is in the US. If that was not the case, then Americans would go to Canada for health care services – it is clearly the opposite.

Our average lifespan is lower because of our lifestyle, not because everyone doesn’t have health insurance. Everyone in the US has access to health care – it’s health insurance that some don’t (and some don’t choose to) have.

David Winterbottom
Guest
David Winterbottom

I realize this is an old thread… I couldn’t disagree more with your ideas about how to “fix” health care in this country. You think employers have a very real need that is met by offering health insurance benefits. It should have nothing to do with your employer. Why should my employer get to choose my health care providers by selecting which insurance program to offer? Insurance shouldn’t be lumped by employer groups in the first place. You are complicit with the scheme because your business requires participation through the employer vehicle. You sell your product to business owners as… Read more »

Craig "Quack" Vickstrom, M.D.
Guest
Craig "Quack" Vickstrom, M.D.

This sounds a bit too good to be true.

Darrell Moon
Guest

Some times the best answers are right in front of us. If you would like to know more about the physician in Salt Lake that I mentioned in the article, go to http://www.pfpslc.com/.