By Todd Hixon, Forbes, Contributor
AUGUST 29, 2014 – Last week I posted about the huge, neglected value of proactive medicine. Afterwards I talked with Bret Jorgensen, CEO of MDVIP, the pioneer Concierge Medicine company. We talked about the results that different intensive primary care models are demonstrating, and the challenges they face when they attempt to convince payers to invest resources in proactive medicine in order to enjoy those benefits.
“Proactive Medicine” refers to medical services that focus heavily on engaging patients while they are healthy or early in the disease process, developing strong relationships, and providing early treatment or driving behavior change that prevents or delays serious illness. Intensive primary care, often called “Concierge Medicine” or “Direct Primary Care”, has emerged recently as one of the most effective forms of Proactive Medicine. Entrepreneurs/start-up companies have led the way here: MD VIP, Iora, OneMedical, among others. (1)
Intensive primary care is important because 1) primary care impacts almost 100% of the population and 2) the benefits are big. Jorgensen reports that MDVIP has seen reductions of 80% plus in ER and hospital utilization and in hospital readmissions among a large group of Medicare patients that benefit from MDVIP’s particularly intensive primary care service. This generated ~$300 millions of savings; most of the savings benefitted the Medicare program. More important, it improves the health status and quality of life of patients.
But [always a “but”], to implement intensive primary care someone needs to spend more money up front. Health insurance plans typically budget $25-$30 per member per month (PMPM) for primary care. Intensive primary care costs at least $65 PMPM. Total U.S. healthcare spending is about $700 per person per month. Spending $35 more on primary care pays off if the other $670 can be cut by 5%. Data that I have seen, both published and unpublished, indicates that intensive primary care saves 10%-20% of total health care cost (e.g.: 1, 2 ). At national scale, that opportunity adds up to $300-$600 billion. In addition there is the economic benefit of a healthier, more-productive population, and the social benefit of longer, healthier lives.
The bottom-line question is: who will pay for the up-front investment in primary care? In the beginning it was the patients themselves. MDVIP has 220,000 members in 41 states who pay about $135 PMPM on top of their health insurance, mainly from personal funds. High-end self-insured employers are starting to invest in intensive primary care. OneMedical has successfully sold its moderately-priced Concierge Medicine service to a number of employers, particularly silicon valley companies that compete aggressively for talent and regard benefits as a way to attract employees and keep them productive and happy. Comcast CMCSA +0.05% is investing in Direct Primary Care for its employees.
Mainstream commercial health plans and government payers, which together spend at least 2/3 of U.S. health care dollars, have not embraced intensive primary care significantly, however. Inertia and an awkward tax issue are factors. Beyond that, however, government and large insurers seem to be locked into the old-fashioned purchasing agent view of cost reduction: put the squeeze on every vendor every day. That approach produces short term results, but it does not capture the bigger savings that a systems view of healthcare would enable: by spending more on intensive primary care, payers can achieve a much larger savings in the cost of advanced medical care.
Another common objection goes: “Primary care doctors are in short supply, so it’s impossible to provide more-intensive primary care.” That’s a short-sighted argument. In the near term, capacity can be expanded by increasing the numbers of nurse practitioners and physician’s assistants, and by exploiting the enormous, untapped potential of telemedicine in primary care. In the longer term increasing investment in primary care and its status will increase the supply of MDs, both from medical school and closely-related specialties.
Here’s how we can accelerate enjoying the benefits of more-intensive primary care. Intensive primary care providers need to keep producing outstanding results, and they need to document those results with studies that are accepted by peer-reviewed journals and insurance actuaries. This is happening. Payers need to pull back a bit from their huge immediate challenges and take a longer term, system view of how to get more bang from the healthcare buck (2). It can’t happen soon enough.
- New Atlantic Ventures, in which I am a partner, invests in this type of company, but we do not have a financial interest in any of the companies mentioned in this post.
- This term comes from defense policy leaders in the 1950s and 1960s who successfully advocated for a “systems analysis” view of defense programs, aimed at providing more combat effectiveness per dollar: “more bang for the buck” (more).