Direct Primary Care

post by sarahconstantin · 2018-09-25T18:00:01.747Z · score: 46 (14 votes) · LW · GW · 5 comments

Epistemic Status: PSA and raising questions

Medical care in the US is expensive. There aren’t that many demonstrated ways to make it drastically cheaper.

Direct primary care seems to be an exception.  It makes routine medical expenses 95% cheaper.

Yes, really.

If you have a cash-only, or “direct”, primary care practice — i.e. you don’t accept insurance — you can negotiate much lower wholesale rates from providers of tests (like EKGs, MRIs, blood tests) or prescription drugs. Why? Because you can guarantee the providers immediate payment, rather than the uncertainty and inconvenience of insurance reimbursement.  They’re willing to give you a discount for that.

Direct primary care also cuts down on paperwork for doctors, because they don’t have to document everything with the ICD codes that insurance companies require.

Atlas MD is an EMR designed for direct primary care practices that use a subscription model, founded by Dr. Josh Umbehr, who also uses it in his own direct primary care practice in Wichita.  I’ve spoken to him via phone and tried to poke holes in his model, and came away even more impressed.

My question is, could this model scale up nationwide — and would it still be as effective at cutting costs if it did?

Right now, as I understand, direct primary care practices negotiate individually with suppliers to get discounts. I imagine that it would be much more efficient if done by a nationwide chain of direct primary care practices.  Bulk wholesale purchases, after all, could be even cheaper than what a single practice might hope to get.

With Amazon moving into healthcare, direct primary care might get a chance to shine. Amazon has a lot of experience cutting prices through economies of scale & supply chain optimization. Jeff Bezos even funded direct primary care startup Qliance, which went bankrupt last year.

Direct primary care only works as a complement to insurance that pays for more catastrophic care like emergency room visits and specialists.  And if you can get a “minimalist” insurance plan that’s not redundant with the direct primary care membership, your total healthcare costs (membership + premiums) can be much lower.  The potential problem arises if it’s difficult to sell sufficiently “bare-bones” insurance plans — in that case patients wouldn’t be willing to pay out of pocket for a direct-care membership in addition to their already pricey insurance.

Umbehr has managed to negotiate deals with insurers to offer lower premiums when patients bought insurance along with direct care subscriptions, but maybe Qliance, which apparently struggled to keep customers, didn’t successfully pull it off.

At any rate, if I’m not missing something, this seems like an ideal opportunity for Amazon to make healthcare a lot more affordable. Are there barriers I haven’t thought of?

5 comments

Comments sorted by top scores.

comment by Dagon · 2018-09-25T22:25:13.738Z · score: 5 (3 votes) · LW · GW

The scaling question is a good one. There are a _LOT_ of businesses where marginal cost is much less than average cost, due to capital and fixed expenses, and transaction costs that are more about setup and initial exploration rather than scaling with supply.

To the extent that healthcare suppliers are in this category, it's quite believable that they'd negotiate steep discounts for a "excess" business, which they can undertake without needing additional capital or headcount. But they cannot give those discounts to a majority of their customers or they'll go out of business.

Effectively, these discounts may be "leftover capacity" from the more expensive insurance-paid traffic that these suppliers get.

comment by adamzerner · 2018-09-25T19:33:38.492Z · score: 3 (2 votes) · LW · GW

If you can negotiate better rates by guaranteeing immediate payment, well, there seem to be other ways to solve that problem. Eg. the office pays immediately; then, when and if the insurance pays, the provider refunds the office their initial payment. From the offices perspective, the benefit is cheaper rates, and the cost is the risk of insurance not paying. And perhaps if the risk is too large, they could get insurance for that risk. Or maybe a third party could do it all in exchange for a fee. Eg. a third party would pay immediately, get a refund when and if the insurance payment goes through, and take a small fee from the doctors office.

comment by PeterMcCluskey · 2018-09-26T01:48:54.190Z · score: 2 (2 votes) · LW · GW

The ACA puts restrictions on buying minimalist insurance. I don't understand the details well enough to say how much it affects these goals.

comment by Dr_Manhattan · 2018-09-25T18:28:23.409Z · score: 2 (1 votes) · LW · GW

It seems if this works on small scale it should scale up. The one counter-force to keep in mind are the rent seekers in this space; they can afford to ignore a small quirky operation but fighting this at scale is existential for them. You might actually need Amazon scale to fight them.

For reference on political forces around this:

Obama said, continuing on the healthcare theme. “Everybody who supports single-payer healthcare says, ‘Look at all this money we would be saving from insurance and paperwork.’ That represents 1 million, 2 million, 3 million jobs of people who are working at Blue Cross Blue Shield or Kaiser or other places. What are we doing with them? Where are we employing them?”

https://www.thenation.com/article/mr-obama-goes-washington/

comment by adamzerner · 2018-09-25T19:35:44.192Z · score: 2 (1 votes) · LW · GW

I had that thought too, but I couldn't really think of a somewhat plausible argument lobbyists could use. "Visiting a doctor without insurance isn't fair for patients, because you could unexpectedly have to pay a lot of money, and thus we shouldn't allow patients to put themselves in this position"?