Overview
We spoke with a direct primary care (DPC) physician/practice owner in Metro Detroit, MI, and came away from the discussion thinking that there's a long runway for growth for new primary care models such as ONEM, OSH, CANO, et al. As we explore the savings and satisfaction that can be achieved by evolving away from fee-for-service, we are constantly reminded about how consumer and physician unfriendly the "legacy" model is. In this case, it was particularly interesting to hear about how profitable a DCP practice can be, as well as think through the white space available given minimal DPC/advanced primary care (APC) and value-based penetration to date.
Highlights
- DPC can be a very attractive model for physicians and patients who have reached the end of the line with ~8-minute patient visits and sub-par care. It is possible to have a high-margin practice with a ~500 patient panel.
- Not all docs are willing to leave a salaried position or walk away from the investment in their current practice. Most doctors are risk-averse, generally speaking.
- Peak penetration among family medicine doctors can eventually hit 20% of all primary care over 10+ years from ~1.5% in DPC practices today.
- We need to look more closely at OSH practices which may benefit the practice, but are expensive plan changes for the patients resulting in higher co-pays for drugs and care outside OSH.
Call Notes
Edited lightly for length and clarity.
Background: Our contact started his DPC practice ~5 years ago with a grassroots effort. About 10% of patients are through local employers and the remaining 90% are individuals - everything is built on a "trusting relationship." The practice has 3 doctors and over 1k patients in total as of this time. The median income in Detroit is $26k, and there are under 100 PCPs in the whole city (one for every 6k residents).
- Practice demographics: about 50% African American, the majority of the rest of the patients are Caucasian with some Hispanic as well; 5%-10% over 65yo, 5%-10% kids. Mostly middle-income (the cutoff for Medicaid is $17k).
We've seen a lot of primary care companies come public - One Medical, Oak Street, and all sorts of variations - and we're trying to think through the "bin" of unnecessary care/costs that can fund transportation, meals, etc. for patients, as well as the value proposition for employers...
- For $250/employee per month, it's a great benefit and employee retention tool. I can take better care of employees and after 6 mos. of employment, someone is eligible for comprehensive DPC. Employees appreciate the access (text, phone, etc. for whatever issues).
Take your classic example of a 55yo male that makes $15/hr. and has known for the last 20 years that he has high blood pressure and diabetes and is uninsured.
- The last time he might have seen a doctor was 10yrs ago, it was a $200 visit, he had $500 in labs, and meds (insulin and BP) cost him $300. If he goes for that visit quarterly, it's $4k/yr that he doesn't have. Then, he goes to the ER due to a large abscess that must be surgically drained... He's discharged and comes to us for follow-up - it's $69/month for care, he needs the statin and 2 BP meds, as well as insulin. It's a $10 total cost for the meds because we're buying at wholesale and can get him the insulin he needs too (long-acting and short-acting).
- The coolest thing - this patient that was willfully ignoring care is now excited about managing his own health and comes in with his blood sugar readings. We see him every 3 mos. and all's well.
Do you mind sharing your thoughts on Oak Street? Why the reaction (our contact had a noticeable reaction to the company's name)?
- I think there are some issues for seniors. A patient of ours tried them, and they may make people change health plans to one that allows for all free care at OSH; however, the Rx benefit can change, resulting in a doubling or tripling, or more, of some costs. They set up a practice and give out free T-shirts, and the goal seems to be to max out reimbursement for OSH, and it may be to the detriment of the sometimes medically illiterate members of the population they are targeting.
- Say a senior has BCBS with a $30 copay, $10 Rx copay - they go to OSH and switch to Cigna or Humana, or whatever makes all care at OSH free, then they go to get care outside for whatever reason(s), and the costs are astronomical - our patient ended up with a bill for blood thinner that was 4x as expensive because it was no longer a covered benefit.
Got it - the $200-$300 uninsured bill seems comparable, no?
- Yes, quarterly it is at $69/month, but it just goes on a [credit] card and they have interim access to us (text, phone, etc.) vs. one visit.
What percentage of your patients are insured and how do you run visits with your panel? Do you lose patients?
- Sure, we lose 5-10 patients per month because of a new job or moving, but we get ~50 new per month - my panel is always full.
- About 2/3 are insured, and I usually block out an hour for the first appointment, then do another hour one-month later to go through everything (joint pains, reflux, meds, etc.), and then it's on autopilot.
- Over the course of the year, the 4th of July week is slow. Then, toward the end of August, everyone with kids needs school physicals. It mostly balances out to 5-8 patients per day, on average, and a slower day will have just 2-3 in-person visits. A busier day might have 10-12.
What EHR do you use?
- Atlas - it's great - I just add SOAP notes, collect credit card information, and it can inventory medications, dispense through the EMR, and integrate w/ Quest for labs. It's $300/month per doctor, no installation fee. The only drawback is the lack of trend data for labs - that's hard to see.
Where are we in the cycle of evolution here? Why?
- The top specialties on the "road to happiness" are radiology, ophthalmology, anesthesiology, and dermatology. I also lump orthopedics in there because it's a high-paying specialty, usually with 2 days in the clinic, 3 days of cutting, and if the surgeon can manage that, it's a great specialty to be in.
- With primary care, there's an 80/20 rule at play. I think 80% of PCPs are comfortable w/ a solid income, being employed, dealing with student debt, etc. They need job/ income and do it. The other 20% is like, "Screw this. I want something where I take better care of patients and want more than 8-12 minutes, to offer/provide true value, etc."
- Currently, just 1.5% of the entire Primary Care workforce is doing DPC (out of 133k family physicians, there are maybe 1, DPC doctors). There's 18.5% to go... that's where things are exciting.
- It's a horrible feeling to not have time to provide adequate care.
How quickly can we draw down on that 18.5%?
- I'm not sure - but once you try DPC you don't want to leave (as a patient or doctor).
- That said, doctors are risk-averse. The training is to leave no stone unturned, and mistakes punished. I have a lot of medical students come through and I try to tell them, "It's ok to make mistakes [not deadly ones]. That's how you learn."
- Once a doctor starts earning $200k, if you ask them to give up to start their own practice, it's hard - they still have debt, maybe a kid, etc.
Can legacy/traditional family medicine/primary care do this? Why or why not?
- No, never. When you have 2,500 patients in the panel, you're going to see 1% each day (25 pts), regardless of how sick or healthy. If you block out an hour for one or two of them you back up and have less time for every other patient, never mind sick visits.
Any other structural problems here? Costs, fatigue, etc.?
- Yes, doctors lose autonomy - you must see X# of pts per day to meet revenue quota to get a bonus, and you lose control of the schedule, can't take time off, miss family stuff, the schedule is no longer theirs.
- With max 10-20 minutes, there's only so much complexity you can deal with. You're relegated to checking boxes and dealing w/ superficial concerns.
- It's a fixed salary - incremental effort is not rewarded.
How did the pandemic impact you and the wave earlier this year?
- This model is insulated - patients call any time. If they are sick, they call, stay in the car, we run out and do a swab. They get the test result in the AM. If they feel terrible and have COVID-19, stay home. If it's negative, come in. We had some lighter in-person weeks due to the spike(s) in cases, but we just text or facetime or call. If a patient has something I need to look at, just take a picture and send it to me.
So, OSH is potentially problematic, is anyone else doing this well or just not poorly?
- I like independently owned MD offices, even if they bill insurance. If a PCP takes funding (VC or other), they want to manage to a profit margin, and that's not great. You've got to scale up and see more volume - it's hard to scale.
- ONEM can do it, but they get the top 1%-10% of income earners in the country as members. The "average Joe" is not paying $200/year for a concierge thing, or "concierge light," on top of insurance.
How does the model grow? When do you need to hire another doctor and how does that work?
- Above 500 patients, you think about it, and then hiring another doctor means taking a loss for the first few months. However, I know 30-60 new members are coming per month, and there are ways to market (throw a party, social media, SEO). If you hire a doctor out of residency at $5k-$6k per month, they see their income grow as the panel grows, and they can live off of the revenue they bring in from new patients. Once you get to 500 pts, that's $35k per month and the docs can make up to 60% of that. If your price is anywhere around $70-$75/month and overhead is low, you can be successful with a 450/500-pt panel.
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Thomas Tobin
Managing Director
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