Subscription Health: The Rise of Direct Primary Care

What would happen if primary care physicians stopped accepting insurance?

They would avoid the incredible stress that insurance bureaucracy brings. Patients, too, would benefit from enhanced access to primary care services, complete with clear and straightforward pricing.

This isn’t unrealistic: this is the foundation of Direct Primary Care.

In this article, I’ll touch on the true purpose of health insurance, dive into Direct Primary Care, and highlight its current trajectory and potential implications for the healthcare system.

A Quick Word on Health Insurance

Health insurance’s main purpose is to prevent financial catastrophe when something bad and unpredictable happens to your health.

A healthcare economist would go a step further and say, “health insurance helps you make regular and predictable payments when you’re healthy instead of random, unpredictable, and expensive payments when you’re very sick.”

Therefore, there’s something to be said about health insurance covering primary care services, which are often routine, predictable, and affordable. These services include check-ups, vaccinations, and other preventive measures. Economists argue that the routine nature of these services does not align with the original intent of insurance, which is to cover unpredictable and expensive risks. Direct Primary Care Physicians align with this, too!

Covering primary care with insurance can lead to higher premiums and increased overall healthcare spending due to the moral hazard and administrative costs associated with processing these claims. While I’m an advocate for healthcare access and affordability, I merely mention this economic perspective to set the stage for explaining Direct Primary Care.

The Deets on Direct Primary Care

Direct Primary Care (DPC) simplifies the payment structure of primary care to enhance the patient-provider relationship, improve the quality of care, and reduce overall healthcare costs by cutting out the middlemen — the insurance companies.

This model foregoes the traditional fee-for-service framework in favor of a flat, recurring membership fee that covers all or most primary care services. This can include clinical, laboratory, consultative services, care coordination, and comprehensive care management. DPC practices typically don’t accept health insurance, which proponents argue reduces overhead and administrative complexities, allowing for better quality of care and increased time spent with patients.

Here are three key highlights of the DPC model:

• Membership fee medicine, minimal service fees: consumers (or employers) pay a low-cost monthly subscription, ranging from $10 to $100 per patient. This isn’t fee for service medicine, so services fees are typically $0, and if there are service fees, they’re less than the monthly subscription.

• Payer contracting: for a majority of DPCs, they’re directly contracting with employers or consumers—no insurers. Around 57% of DPCs contract with an employer.

• Intimate patient panel sizes: panel sizes range from 200-600, roughly 85% smaller than a traditional PCP’s panel size (~3000), leading to quicker access to care and longer visits.

There are around 2,100 DPC practices in the U.S., largely composed of single family practice physicians. This represents ~1.5% of all family practice physicians! Note, DPC is a relatively new model, and around 75% of DPC practices are three to five years old.

DPC doctors Paulius Mui and Kenneth Qiu wrote a wonderful piece on DPC, breaking down the DPC space into corporate vs individual DPC practices targeting patients (retail) vs employers.

Dashevsky’s Dissection

DPC cuts out the complexity of insurance to simplify patient care and reimbursement. Since DPC patient panels are 85% smaller than traditional primary care, DPC physicians can spend more time with patients, which would theoretically improve care. DPC physicians also don’t have to deal with prior authorizations or accounts payable (since money is passed directly from the patient to DPC physician), two dreaded aspects of traditional fee-for-service/insurance models.

Sounds attractive, right?

The proliferation of health tech during the pandemic has made starting a DPC practice easier than it was prior:

• Ease helps doctors and clinicians build and launch private practices

• Atlas.md is a web-based DPC-specific EMR.

• Hint Health offers DPC solutions such as and EHR-integrated membership management & billing software.

• Spruce Health is a HIPAA-compliant communication platform for physicians and patients.

• RubiconMD is a referral network, helps connect primary care teams to specialists.

Despite the growing trend of DPC and the ease to starting such a practice model, there remain concerns about who the model is best for and if the model will have a positive impact on the system at large.

First, DPC may be best for patients with high-deductible health plans, patients without insurance, and patients who are medically simple (as opposed to medically complex). Patients on high-deductible health plans can benefit from the predictable primary care costs and potentially reduces the need to use their insurance for basic healthcare services, which can be significant given their high deductibles. Similarly, uninsured patients may find DPC a viable option because it offers access to primary care services at a predictable, flat monthly rate without the need for insurance. Lastly, DPC may not be the best fit for patients with complex medical conditions that require frequent specialist care, expensive diagnostic tests, or hospitalizations. However, DPC could serve as a complement to traditional insurance for such patients by ensuring they have access to quality primary care management.

Second, while the model may be beneficial for some, it poses potential systemic challenges. It could exacerbate the physician shortage due to its smaller patient panels, effectively requiring a tripling of the current physician workforce to provide equivalent access. The model's resemblance to insurance (charging a monthly fee… ?premium) without corresponding regulation raises concerns over patient protections against discriminatory practices. Finally, DPC's influence may contribute to the erosion of medical benefits by promoting high-deductible health plans, which can deter both necessary and unnecessary care due to increased out-of-pocket costs.

Overall, the DPC model is young and has immense potential for growth and iterative improvement. The unique model has several benefits for physicians and patients, but at the same time, may have a questionable impact on the system at large. There’s perhaps no better time to move into the DPC space, given all the health tech at disposal that can help start up a practice and run operations.