1 in 10 Practice Owners are Planning a Transition to Concierge Medicine
As physicians experience more friction with insurance companies and unreasonable patient loads in order to meet their financial goals, more doctors say they are ready to leave the traditional healthcare system in favor of cash-only or concierge-based practices most commonly referred to as direct primary care.
A survey of 14,000 physicians found that 1 in 10 practice owners are planning to transition from traditional to concierge practices in the next 1-3 years.
The Rise of Direct Primary Care (and other terms)
Also referred to as ‘concierge’ or ‘retail’ care, the concept focuses around taking cash for healthcare services (inclusive of debit/credit card payments).
In a recent Forbes article, Sally Pipes of the Pacific Research Institute cited the following growth stats of concierge practices:
- Even before Obamacare, direct-pay practices were growing in popularity. According to the Center for Studying Health System Change, direct-payment practices increased from 9.2 percent of the market in 2001 to 12.4 percent by 2008.
- Accenture projects that one in three doctors in independent practice will adopt “subscription-based care models.”
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
So what’s driving this market growth? Well …
Pros & Cons of Direct Primary Care
Breaking this down into a traditional pros-and-cons list, there are some clear indicators that explore the benefits for both patients and providers:
Pro: Better Prices for Patients
Thirty-two year-old family physician Doug Nunamaker switched to a cash-only basis in 2010 after taking insurance for five years.
Under the traditional health insurance system, Dr. Nunamker had the following issues:
- A large staff was required just to navigate all the paperwork
- This staff resulted in high overhead, forcing doctors like himself to take on more patients to cover costs
- Additionally, the amount insurance companies were willing to pay for procedures was declining, leading to a vicious cycle of plugging more patients into an already overworked environment to make ends meet
By cutting out the middleman, Dr. Nunamaker said he can get a cholesterol test done for $3, versus the $90 the lab company he works with once billed to insurance carriers, a 97% better price than before. Additionally, Dr. Nunamaker cited that an MRI can be done for $400, compared to a typical billed rate of $2,000 or more, a 80% better price to the end patient.
Patients can see +90% better prices via the direct primary care model.
Kevin Peterson, a Las Vegas-based general surgeon, stopped taking insurance in 2005. When asked why he made this decision, he cited many of the same reasons Dr. Nunamaker mentioned: paperwork, overhead and general control lost across his entire practice.
“The insurance industry took over my practice,” Peterson said. “They were telling me what procedures I could do, who I could treat — I basically became their employee.”
M.Bohannon-Kaplan of Northern California agreed with Peterson and Nunamaker with this tweet:
@dpcconnection @noprezzie2012 That’s the way it used to be. It worked!!
— M.Bohannon-Kaplan (@AnotherWayNow) April 14, 2014
Pro: True Focus on the Patient — NOT the Paperwork
The beauty of direct pay physicians is that they are working for the patient, not an insurance company or government entity.
In an article posted on Kevin MD, Dr. Bryan Treacy, MD, cited one of the big reasons his practice moved over to cash-bashed payments was because their doctors get to — you guessed it — be doctors! This model is a true partnership between a physician and patient.
“By not having to employ support staff to deal with red tape and paperwork, a physician’s overhead is drastically reduced and prices can be set at a market competitive rate,” Dr. Treacy said.
Pro: Physicians Chance to Own a New Market
According to a study conducted by the Center for Studying Health System Changes (HSC) back in 2010, the volume cash-based providers varies significantly by state and region.
Their research is summed up in the graph below; anything in red or pink shows a serious lack of cash-based healthcare providers in that geographic area of the United States:
When they re-visited the topic, the HSC found that the number of direct care physicians focused on general practice, pediatrics as well as internists has continued to rise over the past two calendar years.
Con: Recruiting New Patients Is Not an Easy Task
According to a recent MedScape article, a move to concierge medicine presents 2 immediate challenges:
- Challenge #1: Holding onto as many patients as possible among those you already have as you switch to a direct-pay model of care
- Challenge #2: Attracting and keeping new patients.
“It’s common for doctors, particularly those with long-standing patients, to significantly underestimate ‘ramp-up time’ — how long it takes to get new people signed up,” says Helen Hadley, Founder and CEO of VantagePoint Healthcare Advisors in Hamden, Connecticut, which has concierge physicians as clients.
Many doctors think, “My patients have been coming to me for years. They’ll keep on coming.” When you no longer take insurance, however, that probably won’t be true. Holding on to even one half of your current patients “would be wonderful,” Hadley says — but probably not realistic. Converting even 10% of a 3000-patient panel is doing pretty well. “We like to set our doctors up to make $300,000 a year,” Hadley says, “but it doesn’t happen right away.”
Con: Start Up Costs for Physicians are Significant
Medscape’s Compensation Report is the nation’s largest self-reported physician survey; It consistently shows that concierge medicine is experiencing incremental growth from one year to the next — but only by a mean of 1%-2%.
So what’s the hold up? According to physicians in the space, transitioning to a direct pay practice is not a cheap or easy task.
“Some doctors who have been in practice for many years think that all they have to do is hang out a shingle and presto, there’s a new practice: Dr. Smith, Concierge Medicine,” Hadley says. “But there are sizable start-up costs. You need significant cash reserves just to open the door. I don’t think many doctors anticipate that it’s going to be quite as much as it turns out to be.”
Hadley estimates that a minimum of $150,000-$250,000 is needed to carry a concierge practice until there are enough new patients to start paying the bills.
The Future of Direct Primary Care
As stated at the beginning of this article, ten percent of doctors say they are planning to change to some form of direct-pay care in the next three years, according to a survey of 13,000 doctors conducted by the Physicians Foundation.
In our opinion, as these doctors abandon the traditional healthcare system to strike out on their own we’ll begin to see the following trends:
- A Focus Connecting Physicians and Patients: In the past, direct pay providers were lumped into less-than-helpful lists (like this one) for patients to sift through. Now, we’re seeing the rise of Yelp-like aggregators such as Direct Primary Care Connection to help patients compare their options
- Relationship Between Health Systems and Independent Providers: If this trend continues, how will health systems react to patients walking away from $2,000+ MRI scans and working with direct pay providers?
- Technology Enhancing The Experience for Physicians And Patients: As technology continues to evolve at an ever-increasing pace, we’ll start seeing direct primary care providers embrace the use of apps and new ways of building relationships with patients. Google Glass has already made an impact in the healthcare space, as an example.
The future looks bright for the direct primary care/retail/concierge model. What are your thoughts? Anything we missed in our pros & cons list? Have any experiences about the direct primary care you would like to share?
**Edited to add**
Dr. Samir Qamar, MD, CEO of MedLion, has left a very valuable comment that should be included in this article to help explain the differences between concierge medicine and direct primary care. MedLion is leading the direct primary care charge and more can be learned about them at http://www.medlion.com.
Direct Primary Care (DPC) has to be differentiated from concierge medicine — they are not the same. In the latter, insurance is typically billed for medical visits in addition to a monthly subscription for access. In DPC, there is no billing of insurance, and the monthly subscription is usually less than $99/month for all primary care services provided by the host facility. The differentiation is especially important as DPC is explicitly included in the Affordable Care Act, whereas concierge medicine is not.
