Understanding the hybrid direct primary care practice

In the past several years, there has been a marked increase in interest on the topic of Direct Primary Care (DPC) practices.

There has been very little written about the poorly understood Hybrid DPC (HDPC) model, which is often muddled with a typical concierge practice business structure. What little has been written about HDPC has been critical, most panning it entirely. What is clear is that the majority of physicians in established practice do not have the stomach or financial flexibility to simply flip the switch, cutting off their patient relationships and entire revenue stream to become a DPC micro-practice. In order for the DPC movement to successfully grow and thrive as it has been, we believe that the HDPC structure can be a viable transitional vehicle to a successful DPC practice.

Along with Co-Founder, Dr. William L. Crouch, and Candice Nicoll, ARNP, we currently run Epiphany Health, a HDPC practice in Southwest Florida founded in 2010. The hybrid model allowed us to test and troubleshoot the model, add an additional steady revenue stream to our established practice, and gradually transition away from third parties on our own schedule. We have since transitioned from a full panel of traditionally insured patients to a practice that is essentially membership only under the age of 65 and Medicare fee-for-service for those 65 and over.

Defining a Hybrid DPC practice
DPC is a young and growing care model, and many are positioning themselves to have some ownership of the space. As such, there are varying definitions of what constitutes a DPC practice. In most circles, it is probably safe to say that any practice that has a contractual relationship directly between the care provider and the patient, that doesn't bill third parties for services provided, can safely be included in the definition of DPC. This is regardless of whether the practice charges a monthly membership fee or a transparent fee for service payable by the patient.

The HDPC practice is often confused with the concierge model of care. In a typical concierge relationship, a fee is levied which provides special privileges or access and services not covered by insurance. The practice typically will also bill the patient's insurance for services provided in the office, in addition to the concierge fee, which often ranges from $50-100 per month for adult members, plus deductibles and copayments. An HDPC practice will typically add the DPC component to an existing traditional third-party payer based practice. Some concierge practices charge fees in excess of $1,000 per month whereas DPC member fees rarely exceed $100 per month, and can be as low as $10 per month for children. Members will not have their insurance billed, and those that choose to use their insurance benefits will not be charged a membership fee. Conversely, members that have no insurance will only pay the membership fee.

For example, a concierge practice may charge an annual fee, which may get the patient access to the physician's cell phone, priority appointments, form completion or extended office visits. These value added benefits are those that are not covered services by traditional third party payers. However, any medical service that is provided in the office incurs an additional charge that is billed to an outside third party, subject to copayments and deductibles. In our HDPC practice, patients pay a flat monthly fee of $60. After that, anything that we can do in our office is included at no additional charge.

It is this conflation with concierge care that is partly responsible for the mischaracterization of DPC as elitist, only caring for the wealthy. In contrast, DPC practices often are the unseen safety nets, caring for those left behind by our broken health care system. In our HDPC practice, some patients drive as far as 3 hours for their primary care, as it is their only affordable option for care of their chronic medical conditions.

Understanding the HDPC Practice Structure
It is generally not advisable for a practice to have multiple fee schedules that vary depending on the payer. The HDPC needs to be structured in such a way that practices do not violate their existing insurance contracts. It is advisable to seek legal counsel to do so. At the time of Epiphany Health's inception, there were not many practices for us to emulate, so we relied on our legal team to set up a compliant structure.

Epiphany Health DPC was established as a separate Limited Liability Company (LLC) that acts as a contracting agent for the patient. This LLC does not provide any patient care, employ physicians or assume financial risk for patient care. It simply contracts with the patient and then contracts with the provider's established corporation to provide the defined primary care services, passing the membership fee from the patient to the practice. This new LLC does not show a profit or a loss. It is a zero sum transaction. From the practice perspective, it is no different than signing a capitation agreement with one company and a fee-for-service agreement with another. There are now national organizations that act as contracting agents who deliver patients to established practices willing to contract for care and keep a portion of the membership fee.

We never bill an insurance company for services for a patient paying a membership fee. Similarly, we also never charge a membership fee for those whom we bill insurance. As Medicare providers, we never charge Medicare eligible patients anything outside of approved Medicare allowable charges for covered services. We also do not charge a fee to Medicare eligible patients for non-covered services. For example, consider an established traditionally insured patient in our practice that might have us bill their insurance for services. If that patient carries a high deductible and is responsible for a large portion of, if not all of, the bill, that patient may find it more cost effective to sign up for a membership. Once they sign up for a membership, we stop billing insurance for our services. While the practice may leave some money on the table, they trade the unpredictable variable revenue for a predictable, fixed revenue. When that patient becomes eligible for Medicare, we immediately stop collecting a membership fee and the patient reverts to traditional fee-for-service Medicare until such time that the practice may opt-out of Medicare.

Advantages of HDPC vs DPC
Many physicians are risk averse. There is nothing natural about dismantling a mature practice of adored patients, even if that practice is not satisfying personally or financially. Many have fixed expenses, own real estate, and have mortgages, kids in school. They simply cannot walk away from their obligations and income stream. Adopting a HDPC approach allows a gradual transition to DPC that does not immediately jeopardize financial security.

Often, physicians that transition to DPC will need to seek moonlighting opportunities while their practice matures, though immediately opting out of Medicare greatly reduces those opportunities. Adopting a hybrid transition, without opting out of Medicare, keeps moonlighting opportunities in play should they become necessary during the transition.

Disadvantages of HDPC vs DPC
Critics of HDPC have valid arguments. The most common argument is that HDPC practices compete against themselves for patients. Why would a patient sign up for a membership if they can use their insurance benefits that they are paying for substantially? We certainly have seen this in our practice. To offset this problem, once we launched our HDPC, we immediately capped all of our insurance panels. Any new patients to the practice would become one by signing up as members, regardless of their insurance status. In reality, most patients now carry a high deductible health plan and are responsible for paying their medical care. The math for the established patient gets easy after a while, and the transition to DPC for them becomes obvious, such as the patient with the high deductible health plan that spends less through their membership. For the practice, while potentially lowering revenue, it converts a variable income to a fixed income, which can be very important to stabilize the finances of a small practice.

Another obvious challenge for the HDPC practice is that they still have to keep the infrastructure and staffing in place to interact with insurers. They also need to have software packages that are compliant for third party billing and coding.

Direct Primary Care will continue to evolve as a care model, and it has the potential to improve primary care drastically in the U.S. The practices are as individualized as their patients and their communities. While the hybrid DPC practice structure offers unique challenges, it opens up the possibility of DPC conversion to a much broader population within the physician community.

The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.

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