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Primary Care Direct Model: ‘Neither Insurance nor Health Plan’

A new model of health care delivery — direct primary care — could be déjà vu for some Californians, a retreat to the past when insurance wasn’t a part of the health care equation. Direct primary care emphasizes prevention and a reduction in the use of “downstream services” — treating symptoms rather than the problems themselves.

The new approach involves monthly payments for primary care — similar to the way insurance covers health care, but without the insurance. Instead of filing claims through an insurer, participants — individuals and employers — pay a monthly membership fee directly to their health care providers.

“Direct primary care is simply an atypical payment arrangement between patient and doctor for primary care services rendered,” said Michael McClelland, an attorney with McClelland Advocacy in Sacramento. “It is neither health insurance nor a health plan and is not marketed as such.”

McClelland, former chief prosecutor for the state Department of Managed Health Care who now is running his own law firm, said some states are skeptical about the direct primary care model because it might place too much risk on physicians. The California Legislature earlier this year rejected a bill to establish a statewide framework for the direct pay model.

McClelland also said in some states, the direct practice model might be equated to concierge medicine, a model in which patients also pay monthly or annual fees for increased access to their providers.  Concierge medicine, also known as boutique or retainer-based medicine, comes in a variety of packaging — with and without insurance, with and without per-visit payments — just as direct primary care models do. The most significant differences, proponents say, are that direct primary care puts more emphasis on family physicians instead of specialists and generally costs less than most concierge offerings.

“Pure direct primary care skips visit-based billing altogether, which could take a huge bite out of operating costs,” according to Rushika Fernandopulle, co-founder and CEO of Iora Health, a Boston-based health care company. “Our sponsors (patients and employers) pay us directly through a per-member, per-month arrangement, and patients don’t have to pay anything for primary care services.”

Lacking a Clear Definition

As with many innovations and changes in health care, direct primary care is not clearly defined.

Erika Bliss, president and CEO of Seattle-based Qliance and a pioneer of the direct primary care model, said the newer primary care models could come in many flavors:

  • Hybrids that offer fee-for-service insurance or a flat monthly fee (not insurance);
  • Access model, which charges members an annual or monthly fee for providing enhanced services and bills insurance companies; and
  • Qliance’s brand of care, the direct practice model, which charges a flat fee for unrestricted access to primary care services and does not bill insurance.

California does not explicitly recognize direct primary care. Only Washington state and Oregon have passed legislation establishing the new model. California state Sen. Tom Harmon (R-Orange County) proposed SB 1320 to define a direct primary care practice and specify how it would be regulated. The Senate health committee rejected the bill earlier this year.

Similar to care innovations such as minute clinics and medical homes, direct primary care has “face logic,” said Arnold Milstein, director of the Stanford Clinical Excellence Research Center.

“Whether it will reduce per-capita spending and attract patients pivots on accomplishing two jobs economically and skillfully — winning patients’ confidence that the care team is concerned about them personally and will be swiftly accessible and limiting costly and dangerous health crises and patients’ use of specialty care of unlikely value,” Milstein said.

Direct Primary Care Enters Northern California Marketplace

Samir Qamar launched a Northern California-based direct care business, MedLion Direct Primary Care, in 2009. MedLion has clinics in Fresno, Monterey, Mountain View, Salinas, San Francisco and Watsonville, with plans to open more in Washington state and Las Vegas. Qamar founded a private physician service in Monterey, formerly known as Q Concierge Physicians, now called Dr. Q — Personal Physician.

MedLion charges three levels of membership fees to provide primary care services to individuals and employer groups: $59/month for non-seniors, $39/month for seniors 65 and older who may have limited incomes and $19/month for children and dependents under 21. Every office visit is $10 no matter how complex.

Although MedLion provides only outpatient services, Qamar said his company tries to find discounts when referring to specialists, labs, imaging and for generic drugs. Qamar said MedLion physicians have an average of 1,500 patients. The average in California is about  2,000 patients for each primary care physician, according to the California Academy of Family Physicians.

“We remove the tremendous overhead associated with insurance billing, claims and collections — an estimated 35% for a private practice — eliminate the need for numerous exam rooms and utilize electronic records to maximize efficiency,” Qamar said.

Another cost saver, he said, is putting doctors on salary to prevent unnecessary use of services. Qamar said his company has reduced costs by 40% compared with practices funded by traditional insurance.

Some direct primary practices admit that their offering might attract healthier patients, skewing the equation toward adverse selection. Qamar said MedLion does not screen its patients before they join the practice.

Getting on the Exchange

Although Section 1301 (a)(3) of the Affordable Care Act enables a qualified health plan to provide coverage with a direct primary care medical home plan, there is a caveat. A pure direct primary care model is not insurance, thus omitting it from the California Health Benefit Exchange unless it can be bundled with a lower cost, wrap-around insurance plan. 

In a letter to the California Health Benefit Exchange, the Healthcare Exchange Advocacy & Responsibility Team, a statewide alliance of California health care stakeholders, indicated its support of several models of primary care delivery — including the patient-centered medical home and the direct primary care medical home — as team-approach options that meet standards of affordable, high-quality care.

Both kinds of medical homes, when configured with a wrap-around insurance plan, would fit into ACA’s description of an appropriate offering on the exchange.

Consumer Uptake May Be Slow Going

Patrick Johnston, president and CEO of the California Association of Health Plans, a statewide organization representing 40 full-service health plans, said he prefers integrating all health care services under one umbrella.

“Insurance is necessary for paying the high cost of health care services, and decoupling it from primary care probably will not be too attractive to many in California,” Johnston said.

Anthony Wright, executive director of Health Access, a statewide consumer advocacy coalition, agrees with Johnston. “The model is the opposite of the direction in which health care is going — the team-based approach — and places primary care into a separate silo,” he said. “If primary care is not integrated into the entire spectrum of care, consumers may find themselves falling through the cracks.”

Wright is concerned that a direct primary care model may prey upon consumers’ lack of understanding of their future health care needs and pitch itself as a replacement for insurance.

Looking through the lens of his California employer group clients, James Bush, principal with Deloitte Consulting in San Francisco, said employers tend to be cost-sensitive and value-conscious and would likely direct employees to use flexible spending account funds or high-deductible plans to fund extras like direct primary care.

He also suggested that if the model is to be successful, there needs to be a regional or national network of providers with a standardized, direct primary care product offering.

However, Mark Blum, a member of the steering committee of the Healthcare Exchange Advocacy & Responsibility Team, believes that the advanced direct primary care medical home is a highly scalable model conducive to developing clusters of primary care networks near where patients live and work. He anticipates that the direct primary care medical home will provide more choice for patients and reduce health care costs.

The National Scene

Neither direct care nor concierge medicine has gained much of a foothold so far nationally. According to the American Academy of Family Physicians’ 2010 Practice Profile survey, only 3% of respondents were practicing in a cash-only, direct care, concierge, boutique or medical practice in 2010.

One action on the national front is the Direct M.D. Care Act (HR 3315), introduced in 2011 by Reps. Bill Cassidy (R-La.) and Jay Inslee (D-Wash.). It was assigned to a congressional committee for consideration last fall. The bill, which has not yet moved to the full Senate or House, would establish a direct payment demonstration project for dual eligibles — those qualifying for both Medicaid and Medicare — as well as other Medicare beneficiaries.

According to a spokesperson for the Direct Primary Care Coalition, the model proposed under HR 3315 is a potential pathway for a transition from traditional fee-for-service Medicare, which pays for volume, to ones like direct primary care that reward physicians for improved health outcomes and other quality measurements. 

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