Time to start believing in Direct Primary Care’s impact on Healthcare Costs
This originated as a guest contribution to The Healthcare Renaissance blog by Chris O'Brien from March 12, 2019.
When I was asked by Chris to contribute to this blog, I suggested that I share my thoughts on Direct Primary Care (DPC) because I’m a big believer that it can help employers maintain high-value benefits and control costs in their self-funded health plans.
Little did I know that he would post a guest blog from a practicing DPC provider with the value proposition in the preceding month. In his blog, Dr. Lickerman articulates the tremendous value that DPC provides to the individual patient. This enhanced patient experience is hard to dispute and is generally accepted by most involved with health care.
So why haven’t more employers adopted this wonderful benefit and made it accessible to all of their workers?
It’s primarily because the fixed cost per enrolled member scares them off. It is a different financial model, so demonstrating the cost savings opportunity can be challenging for many advisors. They often default to mainstream approaches that appear less expensive, instead of working hard to see all of the care and adjunct services that can be replaced by a properly positioned DPC relationship.
To help advisors and DPC providers who are trying to convince employers to implement their program, I want to share the story of one midwestern manufacturer with a five-year track record with DPC integrated into their health plan.
In 2012, the company’s CFO was being pressed hard by their private owners to reduce costs and health care expense was a growing $3 million target. After much review, they determined that DPC could be used to better connect people to primary care and also emphasize the importance of healthy lifestyles to their members. They felt the independent DPC clinics could be used to help control “the system” and optimize delivery of high-value services. They phased in DPC to their non-union employee during 2013 to set up the model for use by their union employees in 2014.
Over the next five years, the program can only be described as a smashing success. Enrollment was high each year with between 60–70% of all eligible members signed up with the DPC doctors. Employee satisfaction was consistently over 90%, but we knew that employees would love the program (see Dr. Lickerman’s post again).
The financial results have also been incredible. Annual health care costs per employee (including all administrative expenses, stop loss insurance and DPC fees) were as follows:
- BEFORE DPC — preceding Two Year average — $9,595 PEPY
- AFTER DPC — post-implementation Five Year average — $9,583 PEPY
That’s a 0.1% reduction after five years! And that’s with a starting point that was already 11% lower than market benchmarks. Five years later, PEPY costs are now 22% below benchmark which is a gain of $1,500 PEPY relative to the market averages. And not once during the entire five-year period did costs exceed the market benchmark! Is this starting to make you believe that DPC may be worth a try?
But we know many will need to see a more direct connection to give DPC even partial credit for these financial results. So, let’s review the utilization rates for selected health care services as paid by the self-funded plan following the third year of program implementation.
-Emergency Room Visits — 84 visits/1000 members; 67% below carrier norm
-Specialist Visits — 1,766 visits/1000 members; 59% below carrier norm
-Urgent Care — 61 visits/1000 members; 56% below carrier norm
-Acute Hospitalizations — 87 days/1000 members; 76% below carrier norm
As expected, non-DPC primary care also dropped by more than 84% over the three-year introductory period. So, it’s clear that DPC absorbed a significant amount of care from the self-funded plan. Actual claims cost was reduced on average by about $500k annually in the post-DPC period (DPC fees averaged around $300k per year). Where did this care go if not to the DPC providers, but did they take better care of them as well?
The answer appears to be a big YES, based on member feedback and the clinical measures provided by the DPC providers. Clinical quality measures for members with diabetes and hypertension were better in every category versus market benchmarks, as were the screening rates for cervical, breast, and colorectal cancer. And, by the end of the third year, 77% of DPC members were reporting improved health. These are clear signs that the time DPC providers spent with their patients was paying off in better health!
One last thing to help the remaining skeptics along. The demographics for this group were very similar to the carrier norms. DPC members were older with an average age of 39.7 versus the carrier norm of 37.3. The risk profiles were also very similar — DPC members average risk score at 1.33 was just slightly lower than the carrier norm of 1.34. Oh, and there were no plan changes since the introduction of the DPC model to the union population.
Now, I know that with only 300 or so people enrolled in DPC each year, these results will never be considered statistically credible. But to the CFO and advisory team that put the whole program in play, five years of consistently flat costs, dramatically lower utilization, and improved health measures have made us believers!