Post 1: The Economics of Primary Care

It’s no secret that running a primary care practice isn’t what it used to be. While there are debates about whether there is a shortage of doctors overall, almost everyone agrees there is a shortage of primary care clinicians. (If you want to learn more, check out this recent Politico article.)

Like many things in healthcare, the problem boils down to money: primary care offers (at best) razor-thin margins, and that assumes you run a tight ship. Based on our back-of-the-envelope calculations, and using standard Medicare reimbursement rates, a primary care provider would need to conduct nearly 5,000 visits a year (~100 visits/week, ~20 visits/day or ~2.5 visits/hour in an 8 hour day) simply to cover costs. This leaves little time for note-writing, care coordination, or other administrative tasks. And heaven forbid if the clinician is out sick for more than a day or two each year …

At first blush, the math is depressing for those who believe in primary care and even more for those – like us – trying to run a practice. But as is often the case, there are a variety of creative solutions for the primary care financial conundrum. Below are 5 potential approaches, followed by an explanation for why we at Starfield Primary Care are pursuing strategy #5:

1) Subsidies From Other Specialties: A primary care practice that breaks even – or even loses money – may be sustainable if it is embedded within a health system that generates profits from specialty care. This is the strategy many large health systems – particularly Academic Medical Centers – have employed.

Pros: Lowers pressure to churn through patients and skimp on quality.

Cons: When the health system budget is tight, primary care is the first service to get cut. Additionally, primary care providers may feel pressure to refer their patients to lucrative (and sometimes unnecessary) specialty care.

2) Incentives for Lowering Costs: This is the approach managed care organizations often take to reduce costs. Primary care clinicians may receive bonuses for limiting expensive services – such as specialty referrals and advanced imaging tests. In the extreme, they may be given a budget for their patient panel and allowed to keep any savings at the end of the year.

Pros: Reduces wasteful care.

Cons: May cause primary clinicians to (consciously or unconsciously) limit necessary services.

3) The Federally Qualified Health Center Program: This program provides enhanced reimbursement and annual grants for medical practices that serve low-income populations – particularly Medicaid and the uninsured.

Pros: Supports primary care for vulnerable patients.

Cons: Does not provide a sustainable strategy for the middle class. Also, it creates a healthcare system with “separate but equal” facilities for low-income populations.

4) Concierge Fees: Fees paid directly by the patient (or the patient’s employer) that enable primary care clinicians to support high quality primary care.

Pros: Allows primary care clinicians to spend more time helping each patient in a sustainable way.

Cons: Only an effective strategy for those able to afford a concierge fee. Additionally, since concierge clinicians may see fewer patients to ensure high quality service, there may not be enough primary care clinicians to serve the entire population using this model.

5) Rethink How Primary Care is Delivered: The way most primary care practices are structured is crazy! We expect patients to take time off from work, drive to a medical office (often with expensive parking fees), wait (often for an hour or more) for a rushed 12-minute visit, and then schedule a return visit to review tests and results. Primary care clinicians, for their part, spend the day on a hamster wheel, whipping through patients every 15-20 minutes, only to be left with hours of paperwork to complete.

What if we flipped the script?

It actually doesn’t take much imagination to propose a better way. Here are a few high-impact ideas for starters:

• Offer telemedicine (video and phone visits) as the first option for care, reserving in-person visits for when it truly is required. This approach is more convenient and efficient (and despite what the critics say, it is absolutely still possible to develop a strong patient-clinician relationship!);
• Reserve time each day for clinicians to return patient phone calls and messages, review lab results, and coordinate care. These activities will significantly reduce the need for visits in the first place.
• Leverage now common-place technologies (e.g. artificial intelligence scribes to complete paperwork) to de-burden primary care clinicians so they can focus on what matters – the patient.

In case you couldn’t tell, this final approach is the one we are embracing at SPC. Are there “cons” to this approach? One big challenge is that primary care services are often paid on a “per visit” basis, most commonly by PPO insurance plans. This is challenging because primary care clinicians only get paid for visits, discouraging common sense actions like calling patients to review lab results rather than scheduling a visit. But thankfully some health plans – particularly HMOs – offer set monthly reimbursement (called “capitation”) for primary care. This allows clinicians to be more flexible, e.g. refilling a prescription without an unnecessary visit, without worrying about not getting paid since the monthly fee is fixed. At SPC, we will accept all forms of insurance– including PPO, HMO, fee-for-service, and capitation. Nevertheless, whenever possible we will encourage health plans to pay us on a capitated vs. fee-for-service basis.