The days of using your insurance to see the family doctor are numbered.

As more patients join the practice and I hear every new patient’s story, I become more impressed with the benefits of direct primary care for both the patient and the physician.

Recently, a 63-year-old female, who we’ll call Martha (which pretty much means her name is anything but Martha), found me through a local magazine. Martha is an out of work chef who hasn’t had health insurance for three years. She moved to Austin with her husband to be near family when he lost his job at a large telecommunications company.

Despite having very poorly controlled diabetes, high blood pressure, and a chronic skin condition, Martha took no prescription medication during the three years that she’d been without health insurance. This wasn’t because the medications themselves were too expensive. All five of the medications that I currently prescribe for her can be purchased on a local pharmacy’s discount drug list, and her total bill per month is less than $35, including insulin. The reason Martha was without medication was that the cost to see a doctor was too high and, therefore, she could not obtain a prescription.

I’ve seen other patients that have told this same story, including a 53-year-old male who was bouncing from urgent care to urgent care for 30 days worth of thyroid medication at a time. Then he would cut the pills in half so his prescription would last twice as long. He could afford the medication, which was once again on the discount drug list. He couldn’t, however, afford to consistently see a doctor.

Another 38-year-old woman had been reduced to taking her mother’s medication for her own diabetes. She’d been a patient at a well-known citywide clinic in Austin. Unfortunately, diabetes is a chronic disease and usually involves at least 3-4 visits per year, along with lab tests at each visit. This patient had apparently built up a bad debt with the clinic, and she was finally told that she couldn’t receive further care unless she paid the bill.

Why can’t these people afford to see a physician? PRIMARY CARE IS RELATIVELY CHEAP TO PROVIDE! So what’s the catch?

The answer starts with how clinics are structured. The clinics frequented by most people bill insurance for the great majority of the clinic’s income. Once a decision is made to bill insurance for healthcare services it starts a chain reaction that ends in having to hire a large number of people and/or invest in a lot of technology. This increases the clinic’s overhead. Overhead expenses don’t fluctuate with the volume of people that walk through the door.

Employees and software are needed to make sure that the patient’s insurance is active before the visit starts—employees have to be hired to call the insurance
company to obtain pre-authorization for suggested procedures, software is needed to prepare the bill that has to be in a certain format, and more people are needed to call the insurance company after the bill is returned unpaid with a note saying that an “i” wasn’t dotted or a “t” wasn’t crossed, and they won’t pay until the “t” is crossed. Patients- just like you have to wait 15-30 minutes and listen to bad hold music to speak to an actual human being when you call your insurance company on the phone, healthcare professionals have to wait just as long. (And the music is just as bad.) So every time we need to get in touch with the insurance company to clear some hurdle, an employee has to wait on hold
until an insurance employee picks up. This is not news. There are numerous rants from doctors all over the Internet concerning this issue.

Before traditional doctors even open the doors of the clinic they’ve had to hire a number of people just to manage the clinic’s relationship with insurance companies. Those people expect to be paid every two weeks whether patients come through the door or not. Part of the clinic’s overhead expenses are these employees that must be paid even when no patient comes in. And these paid positions have nothing to do with the quality of medical care that the patients receive.

Now let’s talk about what your insurance company will pay for your visit. For a typical follow-up visit for low to moderate severity issues, your insurance company pays anywhere from $45-$75 to the doctor’s office. You can also add your $20 copay to this amount. The American Medical Association suggests that these visits are supposed to take 15 minutes face-to-face with the patient. That doesn’t happen very often.

If your doctor does 4 of these visits per hour, she is paid anywhere from $260- $380 when you include the payment from the insurance company and the collected co-pay. The last primary care doctor I spoke with told me that his hourly overhead is $700. When your expenses are greater than your revenue the math doesn’t work, but those are the numbers.

If the clinic takes insurance they have to make up for the low reimbursement somehow. They do it by making a profit on every little thing that they offer you. This is the $50 tablet of Tylenol issue. Labs are marked up 500-1,000%. An EKG charge may be above $100 when in actuality it only costs the clinic an extra $1 for the stickers that they use to attach the leads. The materials for an arm splint are worth about $10-12. You, however, might be charged close to $120 for the supplies and creation of an arm splint at one of these clinics.

So if you pay cash for your care—and even if you have insurance, you are paying cash for your care until you meet your deductible—you’re getting a rotten deal at a clinic that bills insurance. You’re getting a bum deal because even though the clinic doesn’t need all of the overhead that it has to collect payment from you, since you are paying cash either now or after your insurance company says that you haven’t met your deductible, the overhead still exists. Those employees are still there, still listening to the bad hold music. Which means that the cost shifting still exists. Which means that you are overpaying for nearly everything in the clinic. Even after you meet your deductible, when you look at what you pay versus the time you get from the doctor, you’re still overpaying. A $20 copay gets you, at most, 10 minutes face-to-face with the doctor. That means on an hourly basis you are paying $120/hour for that doctors time.

Now I will certainly argue that a doctor’s time is worth more than $120/hour because…well…I’m a doctor. But when you consider the type of service that you’re getting from the clinic, I would bet that you don’t feel as though you are getting $120/hour worth of time and attention. And if you are uninsured and paying cash out of hand, the majority of your money is paying for staff and equipment required to deal with insured patients rather than your actual medical care.

Now that you have a better understanding of why everything is so expensive at your doctor’s office we can discuss why it is more affordable to see a direct primary care doctor.

My overhead is a phone, an electronic medical record, internet access, rent for office space and one medical assistant. The clinic is built lean because we don’t have costs to shift, we don’t have to waste time on the phone with the insurance company, we don’t have to check if your insurance is still active before you walk through the door.

The revenue that is generated through the monthly fee is where we get the money to pay our overhead and the doctor’s salary. We don’t need
to make a profit on anything else. So what do we do? We spend more time with you, and we pass our savings on everything else related to your healthcare to you.

Labs are relatively cheap. The great majority of the most common labs are $5 at my clinic. Supplies for urgent care issues like a broken ankle or wrist range from $30-$55. Procedures at my clinic like a repairing a cut, an EKG or removing a toenail are FREE! We don’t even recover our costs for the procedures. The same principle applies to medications given at the clinic. A bag of intravenous fluid costs $10. Such a coveted luxury would likely cost more than $175 at an insurance clinic.

Since we know that most of our patients will be price sensitive because they either don’t have insurance or will not have met their deductible, we’ve researched the lowest prices for healthcare that you’ll need outside of our office. Do you need a colonoscopy? Note I said “need” as opposed to “want.” If you are 50+ years old and haven’t had one, you definitely need one. Do you need a sleep study? If your BMI is more than 25, you should at least discuss the quality of your sleep with your doctor. We’ve found where you can get these studies for the lowest cash price. Many times, the cash price that we’ve found is 50% or more less expensive than what you would be charged if you went to a facility that normally billed insurance companies. We also help our patients save money on more routine things like MRI, CT, x-rays, DEXA, retinopathy exams and other fancy tests with names that are hard to pronounce and even harder to spell.

Direct primary care reduces barriers for people seeking to protect their health. It reduces the costs of care to the point where the average American and the working poor can once again afford to see a physician on a regular basis. THIS IS POWERFUL INFORMATION FOR OUR SOCIETY. Insurance isn’t necessary within this relationship because the care is affordable. Actually, keeping insurance out is what makes this relationship functional and affordable. Insurance is for unpredictable events that would be financially catastrophic. When you go to a clinic that bills insurance for visits that are predictable, like the yearly visits that you need for your chronic disease or the couple of sick visits that most of us need every year, you end up selecting a clinic that, by definition, has to overcharge you for the services that they’ll provide. At the beginning of this blog I made a prediction about how you would pay your family physician in the future. I’ve pulled the curtain on the financial reasons that direct primary care will disrupt this relationship. Once you experience direct primary care, you’ll be thankful for this disruption, as will your doctor. This is because your doctor will be happier working in a direct primary care. I’ll tell you more about that later.

I believe that direct primary care is the revolution that is necessary to change the trajectory of the missile that is healthcare spending in the U.S. It would likely even lead to better outcomes by allowing family physicians the actual amount of time that is necessary to help patients make substantial changes to their lives, eventually affecting chronic disease and overall health. Which is why most of us became doctors in the first place.