It’s Time to Start a Direct Primary Care Practice

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Transcription PNC Podcast Episode 394

It's Time to Start a Direct Primary Care Practice

- Never Bill Health Insurance Again

John: Let's get to today's topic of discussion. Recently, I've become more and more interested in DPC as a solution to the unfulfilling corporate employment and its lack of autonomy, the lower pay, the long hours, and the interference in the physician-patient relationship. I've been doing a lot of research on this and a lot of reading, and I want to explain today why I think you should really consider developing your own DPC practice.

Now, this is for those of you who have been employed with a large system or a large group and you're thinking, "Okay, I'm burned out. I need to go into something completely nonclinical or unconventional." And really, I'm starting to believe that DPC practice is one option for you to consider.

It has some barriers and some caveats that I'll explain in a moment, but it's really a way to recapture the joy of practicing medicine and seeing patients, if that's really what you want to do.

What is a DPC practice? Hopefully, most of you have heard of it, but a DPC is direct primary care practice, a model where patients pay a monthly, quarterly, or annual fee directly to their primary care physician, rather than relying on traditional insurance billing or really relying on insurance as a payment method at all.

If you think about when you get rid of the insurance involvement in care, you really enable a physician, yourself, to spend more time with your patients. You're getting paid at the beginning of each month or each quarter. There's no collections, there's no billing, there's no sending overdue bills to a collecting agency, and you don't have to hire the staff to focus on things like coding and documentation and billing and so forth.

It really takes away a lot of the headaches and frees up time to spend with patients and also reduces your documentation time and other things. So let me just give you a little background.

DPC model began showing up around the early 2000s, and over the years, it's begun to catch on and building up steam and growing. In 2010, the Affordable Care Act recognized direct primary care as a viable healthcare delivery model, allowing DPC practices to compete with other more traditional settings, traditional not insofar as like from 50 years ago, but traditional as of the last 20-30 years. And now there's, I think, about 2,500 known DPC practices in all 50 states across the country and in Washington, D.C. And so, it seems to be growing and there's much more interest in it.

One of the questions that people have when they first get involved with this and start thinking about it is, "Well, look, if I'm doing this, can we still use Medicare for DPC? And if not, well, then how's that going to work? Because so many people depend on Medicare, and it's hard to convince them to switch over to a DPC model."

Patients can continue to use Medicare when they're involved with a DPC, but it would be for anything not happening in the physician's office. In other words, you could still use it for hospital care, expensive testing, inpatient visits, imaging, prescriptions, things like that. It's just that when it comes to the day-to-day ongoing chronic care and treatment of acute illnesses in the office, everything can be put under this new type of model.

Most DPC physicians do opt out of Medicare because they really don't want to have to interact and meet all the requirements for any kind of a Medicare payment. So you're best to just opt out, although there are some exceptions. If someone has chosen Medicare Advantage, then there may be network restrictions and so on. There may be some challenges. And these are all things you have to figure out before you set up your first DPC practice.

Now, I'm going to pause here and say, what's the best way to approach this from the standpoint of, is this something I can go into right after residency or fellowship? And probably not, because it would take a lot of planning. You'd have to spend the last year of your residency or fellowship thinking about how you're going to do the DPC, learn about marketing, put aside some money or arrange to borrow some money to set up the practice. I think it has been done. But to me, it makes more sense, you're fresh out of residency as let's say, a primary care doctor, and you would go to work for a hospital system or a large group, get a guaranteed salary, have them help pay off some of your loans.

But you would have this idea that maybe in three or four years, you're going to go out on your own into this kind of a practice, which has more flexibility and a better lifestyle. And so, one of the things you want to do early on then as you're looking at those contracts is you want to think about, well, if I want to leave that practice and maybe pick up some of those patients in my new DPC practice in three or four years, what do I need to do to plan for that?

And that's where an attorney comes in and looking at your contract. Can you get rid of the non-compete that will prevent you from moving away from that practice to a new practice and take some of the patients with you? Even if you can't take away the patients, like there might be a limitation on marketing to those previous patients, you still want to have the ability to actually set up another practice without too much of a restriction.

If you have a six-month non-compete and then you can open your doors in six months, that's not too bad. If the geographic limitation is within driving distance, so you really want to have an attorney help you think through that when you're signing your first contract as an employee. So that's really all I'm going to say about that.

But to me, you start out when you're first on a residency or fellowship, it's good to have continued interaction with other physicians in your specialty in a controlled environment where you don't have to worry about all those things that we're talking about.

But then once you're out three or four years, you should feel confident to start your own practice if that's what you want to do. Now as an aside, I'll say right now there are DPC practices which are quite large where the physician is actually employed in a DPC practice, but I'll talk about that more in a minute.

Let me review again the key features of a DPC practice. There's no insurance billing, period. Patients are paying monthly, quarterly, or annually. Sometimes employers are the ones paying. If you have a large employer or medium-sized employer that would like to provide for the care of its employees and there's not a lot of good primary care nearby, you can sometimes get the employer to pay for some or all of this on a membership or subscription basis because it keeps the employees at work. And some companies are really facing problems with employees constantly being injured or sick and you can work with employers to address that issue.

But most DPCs, I think the majority are actually just taking care of patients, usually within either like a family medicine or internal medicine or pediatric type of practice where you might focus on just a certain age groups, pediatric age groups or some might focus on adults in the middle ages and then sometimes senior practices.

But the nice thing is you get the flat membership fee. You're not billing patients. You can usually have a panel of no more than six or eight hundred at the most, so you can spend more time with your patients. 30 to 60 minutes per visit is often quite doable. And a lot of the benefit too is the improved access in non-traditional ways. So phone calls, using email, telemedicine, just messaging them on your telephone and even sometimes home visits.

And that all enables you to reduce the expenses in the office and really help people more quickly. And most DPCs have openings pretty much within one to two days as opposed to a two or three week backlog of patients. And then in that situation, again, the patients are much more happy with the longer time you spend with them and the fact that they have improved access and they become very secure with that kind of arrangement, much like concierge medicine, but obviously done in to meet the needs of chronic conditions as opposed to concierge, which usually focuses on acute things or just some carve out a particular type of specialty. I could belabor that, but I think it's really a nice model. Income is usually pretty good, and I'll get into that in a minute.

What are some of the potential downsides? The main one is that you have to create your own business, your own new practice from scratch, and it takes a while to plan. You have to learn some new things, perhaps, in terms of how to run a business. If you're doing high paying procedures, that doesn't lend itself to any kind of prepaid monthly payment as opposed to fee for service. And you have to learn how to market yourself so you can build that panel. You want to get to two, three, four hundred as quickly as you can.

And so, the biggest barrier basically is that up front investment and need to do all this planning, find a place to work and hire at least one person maybe after. You can start with just yourself when you only have five or ten patients, but once you start to get more and more and you're doing some marketing and they're starting to sign up, then you'll probably need at least one staff. But it's really pretty limited, one or two, if you're doing that kind of DPC.

Now, you could do another thing, and that would be to look for a practice that already is employing physicians and you would be an employee, but it would still have some of the advantage of a DPC if it's set up that way, because you'd have your own panel and you'd have some coverage. And again, the lifestyle would be better and you wouldn't be filling out a lot of paperwork. And even the charting is easier because you're not doing charting just for the sake of billing.

All right, let's go in a little deeper about this DPC model. I've kind of described the basics, and if we're thinking about starting a practice like this, you have to think about different things. You're going to have to actually create a business plan. Now, a business plan is just a document. It can be relatively short. It says, what do you plan to do? Who's your intended audience or patients you're going to recruit? What are you proposing to charge? Do a pro forma and engage an accountant and say, okay, well, if this thing grows in a certain way, let's say we're picking up so many patients per month for the first year, how quickly can you get to 200 or 300 patients, let's say in a basic internal medicine DPC practice? What can we expect in terms of all the expenses that will be covered during that first year and then in an ongoing basis?

You have to estimate those things and try and work out a pro forma of how you're going to go from losing money at the beginning, which obviously, if you have no patients, you're going to have some expenses and no income. The income is going to ramp up over time. You're going to be doing a lot of marketing.

When's the break even point? When's the point when you can start taking a salary? When's the point where you have to hire one or maybe a second employee and so forth? You need to spend some time thinking about the location. You can get creative and share space and really try and minimize the cost of your lease and the overhead associated with the clinic location. You have to choose an electronic health record and patient management software, that kind of thing.

Again, you're going to have to work on your pricing model. From what I read, typically children, you're going to charge $25 to $50 per month. Adults, $75 to $100 per month. For young ages, let's say $18 to $39. For older adults, maybe $100 to $125. And then when you get above age 65, probably $125 to $150. If you're in an affluent area, you may be able to get up as high as $200 for the kind of special service that you're going to be providing as a direct primary care practice.

With the children, I had a guest on. He was really on my show to talk about a new product that he had developed that he was selling. It was a software to help run and market a DPC practice.

But he did note that the charges for children depend a lot on the vaccine. So if you're getting newborns and those up to 18 months, three years, and they're going to receive a lot of vaccines, you have to make sure that you include that, consider that in your fees. As they get older, of course, all they're getting is routine checkups with almost no lab tests and no vaccinations.

And so that's where that price can get quite low on a monthly basis just to see them once a year for their physical, assuming they don't have any chronic illnesses, which would be not that common in a pediatric practice.

You're going to have to build that panel. You're going to have to set up a website, learn a little bit, pick some social media sites that will help promote and market your practice. You want to do community outreach where you're doing things live at health fairs or visiting local businesses and networking and doing some education in the community, which will get your name and your face out there.

And then in some cases, you might partner with an employer, as I mentioned earlier, which would be a way to try and keep the workforce healthy, especially when there's a lack of primary care in the area.

Staffing can be an issue only because you just need to decide how many staff you need, what they're actually going to do. But again, the requirements are much less than in a traditional practice. You might have six staff supporting a single physician with the billing and the scheduling and so forth. But when you're in a DPC, you're probably going to get along with one or two at the most to begin.

You're also going to have to set up your finances. The payments are coming in regular, so you're kind of prepaid. When you're doing it monthly, you're actually getting paid at the beginning of the month for each patient. And so you can very quickly see what it's going to take to break even. And then as you continue to grow, start becoming profitable. Some of the startup costs, I'm just giving you gross numbers, but you could probably start it from $40,000 to $100,000 overhead for that first year if you include the lease, the medical equipment, all the supplies, malpractice insurance, EHR, billing software.

Again, it's really just making sure that the membership fees have been paid. Marketing website and office supplies. Most break-even practices occur or reach that level when they've got about 250 to 300 members. Actually, you can kind of keep in mind. Now, I'm sure there are multiple books and courses and things that you can take to help walk you through this process. And I will be putting some resources at the end of the show notes. I'll mention it right now by going to nonclinicalphysicians.com/direct-primary-care-practice.

I think I've given you enough to get some idea what we're talking about and really start thinking about this. The other question that comes up from time to time is, can physician specialists build a successful direct primary care practice? Well, obviously, it's not a direct primary care practice, but it's a DPC style practice. And sometimes, yes, it can be very successful. The model needs a little bit of modification depending on what you're doing, but the model can be used by specialists for high demand specialty services and sometimes for employer contracts.

Let me give you some examples for this. For example, cardiology. Well, hypertension, heart failure, arrhythmia, sometimes there's chronic ongoing disease management for that. And cardiologists could carve out part of their practice following that kind of model in which they're getting a membership type payment every month or quarter. Now you have to, again, revisit this issue of can you do that. You can't do that for Medicare patients, obviously, if you are still a Medicare provider.

Now, if you've decided to focus on just those under age 65, then you can just leave Medicare and just do that part. And again, as I mentioned earlier, the patients can still access their Medicare for the other parts of their care. But if you're going to do outpatient only and chronic disease management, you could do this model. And it might even be possible to mix both, but I think you really need to check with an attorney or do some more research on that. Obviously, endocrinology, you can do diabetes care, thyroid disorders, hormone therapy, dermatology, concierge type of practice, only prepaid rather than pay as you go.

It takes probably a little more research, a little more aggressiveness to figure out how this would work as a specialist, but it can be done. And I think the pediatric side wasn't one that grew a lot initially, but it seems to be catching up now because a pediatrician that I spoke with says they're trying to figure these out, these problems out and how to handle the injections and immunizations. And it can work out quite well.

The marketing is a little different for a specialist. You're probably going to market to your referral base rather than directly to patients, although you could do both. There are examples out there. There's a cardiology DPC that is charging $150 per month per patient for unlimited consultations and quick access to the doctor and stress tests and EKGs on a regular basis and being very successful. Dermatology, cash-based clinic with a $300 initial consult and $150 per follow-up. And it's mostly for cosmetic procedures like Botox and fillers and laser therapy.

I think there's a practice out West and one of my guests was doing in which she was seeing psychiatric patients on a DPC style of practice, prepaid membership type of care rather than the episodic and fee-for-service with insurers.

I think that that's all I have to say about the specialty side of things. It can be quite lucrative and it also, again, brings you closer to the patients and much higher satisfaction for both practitioner and patient.

Should a specialist consider this? Yes, if you specialize in a chronic disease management or cash pay procedures, should work okay. And you'll get less insurance hassle and more direct patient interaction and can be quite lucrative. Now, if your specialty requires hospital-based procedures, then it's probably not going to work out. And if you typically rely heavily on high insurance reimbursements for high cost treatments, then again, it probably won't.

I think this could be a solution for some of you to sum up here. If you've been in practice, if you're unhappy, if you have no objection to being involved in the business side, you can start your own DPC practice, I kind of like it because I think we know that in general, people who are the most successful financially in life are usually those that own a business.

You can get some high salaries and specialties and even becoming a nonclinical physician, a CMO at a hospital or something like that. But at the end of the day, when you retire, what you have is your retirement savings and whatever investments you've made with that money. But when you have a practice, you can grow that practice. You can hire other medical providers. You can leverage your own care with APNs and PAs. You can hire more physicians eventually if necessary to make it work. You could bring them in on as partners.

But at the end of the day, then you can sell that practice or sell it to your partners or get bought out. And in addition to the earnings that you've made, which are going to be quite positive. Again, I didn't say specifically, but it's very common for a DPC with a mature practice to be earning anywhere from $280,000 to $500,000 per year as a primary care. And specialists can do even better than that with a combination type of practice. That's why I encourage that if you have any inkling that that's something you think you can manage. You can hire an accountant and an attorney to set things up. Make sure you jump through all the proper hoops.

You can get someone to help you plan the business, but you need to be working and either having a lot of money saved up to start this thing or continue to work part-time and cut down on your traditional practice as you begin to accumulate patients. And then if you've got a hundred or so, you can cut those ties completely.

Most of the time, most DPC primary care doctors are going to have anywhere from 400 to 600 patients. And you can earn a lot more getting to 700 or 800, but then again, the lifestyle begins to suffer. If you want to learn more about starting a DPC, it will require planning, investment of time and money. But if you're successful, you'll find that you're much more satisfied, your patients are more satisfied, and you'll be able to make a very good income while enjoying a wonderful lifestyle.

Tell you right now that if you go to DPC Frontier at www.dpcfrontier.com, there's a lot of information there. There's been a lot published on this in the literature and there's a weekly podcast called My DPC Story with Dr. Maryal Concepcion. Since September of 2020, she's been doing a weekly podcast. There's lots and lots of success stories in that podcast. I will add more resources for you to look at, again, at www.nonclinicalphysicians.com/direct-primary-care-practice.

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