“Direct Care” vs. “Concierge Medicine”
By Tom Blue
As the field of private medicine rapidly expands and diversifies, an important yet confusing distinction among private physician practices has caught the attention of the media and other industry stakeholders. A growing number of practices are aggressively defying the widespread misperception of “concierge” medicine by pricing their services at levels easily affordable to almost anyone who values a primary care relationship.
Affordable pricing of private medicine began more than a decade ago with the dawn of what is referred to today as the “direct care” practice movement. One of the fathers of this movement, Dr. Garrison Bliss, founder of Qliance, made two important observations as he embarked on his journey to transform primary care.
First, he calculated that roughly forty cents of every dollar spent on primary care are consumed by reimbursement costs (insurance claims processing costs at the practice, claims processing at the carrier, and the insurance carrier’s profits).
Second, he observed that insurance should not be used to pay for primary care. The purpose of insurance is to protect individuals and businesses from financial ruin in the event of an unlikely event such as a house fire, a car accident, or cancer. A person’s need for primary care is in no way unlikely. To the contrary, it is a certainty. Everyone needs primary care and should be encouraged to access it in order to mitigate the risk of the more catastrophic health events that insurance is intended to cover.
Furthermore, the cost of primary care poses no threat to the financial stability of a household or business. Few people utilize primary care services over the course of a year that equal the cost of a health insurance premium for a single month. The use of third party payers for primary care adds no value to the patient or the medical practice and contributes only cost and friction to the delivery of this vital service to the population.
The direct care innovation is simple and rational. By eliminating the unnecessary financial burden imposed by third party payers (roughly 40% of the cost of primary care), practices are able to offer greater access to primary care at a price that is easily affordable - even to people who cannot afford health insurance.
This simple change to the economics of the medical practice simultaneously produces a better service for patients and greater profitability for the physician.
Now, years after Dr. Bliss conceived of direct care in the mid 1990s, private physicians offer direct care to patients on a membership basis for a monthly fee, on a transactional basis using transparent cash pricing for services, and on other terms combining these two approaches.
An Emerging Distinction
As direct care practices have grown substantially in numbers and in popularity, there is a tendency to observe the field of private medicine as bifurcated. One camp consists of direct care practices inventively serving the medical needs of the masses. The other camp consists of “concierge” physicians charging handsome sums to cater to the medical needs of the wealthy.
Is the distinction really a matter of price?
To the media and other casual observers, the distinction appears to be a matter of price. At some point a direct care practice membership is sufficiently expensive for the offering to be deemed “concierge medicine.” If this is the case, what is the magic price that separates direct care from concierge medicine? Is the tipping point the same in San Francisco or Manhattan as it is in Omaha or Little Rock?
Direct care memberships range in price from less than $50 per month to more than $25,000 per year. So who decides what the price tipping point is? Does it change with inflation or cost of living? Is it a function of the average household income in a given market?
The fact is that while low price points for private medicine have are eye-catching, price alone fails to sufficiently clarify this issue.
Is it the business model?
A clear understanding of the innovation behind the direct care movement suggests that the distinction between direct care and concierge medicine lies in the practice’s relationship to third party payers. Direct care creates value for patients and the physician’s practice by eliminating the non-productive cost burden of the third party payer system. Therefore, by definition, direct care practices do not contract with third party payers.
In 2013, the majority of private physicians contract with third party payers, so in this regard, a clear distinction does exist between the business models in private medicine. The problem with this distinction is that to the public, it is the price point, not the relationship to third party payers, that may be most remarkable.
High End Services Have Their Part to Play
As with almost all markets in which innovation drives productive transformation, creativity and successful experimentation at the high end of the market finds its way to efficient mass production for the benefit of the broader population.
Witness the majority of the breakthroughs in automobile safety, user experience, and performance. Most were introduced and perfected in high-end vehicles at the expense of consumers willing to pay a premium for what began as luxury innovation. Those enhancements that prove most valuable gradually find their way into more affordable cars.
Such is the case with private medicine. Wealthier consumers of concierge medicine as early adopters of state-of-the-art preventive medical technologies and services have paved the way for their wider availability to others. Genetic screening, imaging for preventive cardiovascular screening such as coronary calcium scoring and CIMT, adult stem cell banking, and a host of advanced lab tests are advancing mainstream medicine partly as a result of the catalytic role of concierge physicians and their clients.
Both the direct care model and the concierge model have their place in today’s rapidly evolving healthcare system. I would be interested to hear what others think about these increasingly visible practice models.
About the Author
Tom Blue is a veteran and pioneer in the field private (“concierge”) medicine. In 2009, Mr. Blue accepted the role of Executive Director of the American Academy of Private Physicians, the national professional association for private physicians.
Mr. Blue co-founded n1Health in 2011. n1Health is the first enterprise of its American Academy of Private Physicians kind to make active capital investments in partnerships with aspiring private physicians to launch their practices, equip them for long-term success, and grow them to their potential after they open. Tom can be reached by email at tblue@n1Health.com.