Alternative Health Plans: Why Direct Primary Care is the Future of Healthcare

September 1st, 2020

Adam Wheeler, M.D., is a co-founder of Big Tree Medical Home, a direct primary care clinic, where he serves as Chief Executive Officer. Dr. Wheeler enjoys hacking the health system and may be the only doctor in the U.S. who secretly dreams of working in finance.

Tell us about your journey toward co-founding Big Tree.

After medical school, I spent 10 years doing primary care pediatrics in a traditional practice. During that time, I helped the practice transition into a patient-centered medical home - a healthcare delivery model in which a patient’s care is centrally coordinated through their primary care physician.

Working on this project, I was introduced to the concept of value-based care and alternative primary care models. I was trying to figure out a way to increase the ability of primary care to serve patients in the populations we were working with. This mission led me to become interested in the direct primary care model.

Promising Discoveries

Through my research and work with the pediatric practice, I found that a direct payment structure between the payer - patients, or in some cases, their employers - and the medical care provider on a monthly basis (vs. per visit) better aligned incentives among all parties.

I discovered that this model led to better outcomes for patients and doctors preferred it. It opened doors for technology to play a larger role in care and thereby lowered costs.

When I realized I was onto something, I turned back to the data the pediatric center had on more than 20,000 patients. I looked at the numbers and realized that the pricing necessary for a sustainable model was actually reasonable: about $50-60 per person per month.

This was exciting news, and I began discussions with my colleagues in adult care, who were less than receptive. I learned that doctors are so conservative in the way they approach the universe that nobody wanted to play ball with me. So I went back and did some training in adult care myself and ended up opening Big Tree.

How does the Big Tree model work, and what does your customer base look like?

Big Tree’s service model works differently for different kinds of people. At a high level, the payer is charged monthly payments for the patient to have unlimited access to their health team. Our patients fall into a few categories:

Employer-funded: Half of Big Tree patients have access as an employer benefit. Out of those, about half have a Big Tree plan as a supplement to health insurance - typically a policy that covers catastrophic costs only. For the other half of the employer-funded bucket, a Big Tree plan is the only benefit the employer offers. These patients don’t have any type of insurance and Big Tree is usually their only access to healthcare.

Patient-funded: The other half of Big Tree patients are paying for their plan out of pocket; it’s not through an employer. Of this group, about half have insurance as well, but it’s a high-deductible health plan or their access to primary care is otherwise limited. The other half, again, are uninsured with Big Tree as their primary healthcare channel.

In all, about 40% of Big Tree patients are uninsured.

In terms of demographics, Big Tree really has something for everyone. Often, younger patients like the model because of its simplicity and use of technology. They appreciate the fact that they can get their sinus infection treated via text message. Many older patients find great value in our extensive list of free or at-cost medications, as well as the streamlining of their complex medical needs.

Services and procedures outside of Big Tree

As a Big Tree patient, your care team can handle many of your needs in-house and through strategic partnerships. For example, we buy generic prescriptions at wholesale cost and pass that savings onto patients. For employer-sponsored plans, generic medications are free.

The company has similar deals with medical labs and suppliers: We get many lab services for up to 90% off the retail price, and supplies like CPAP machines at wholesale prices for our patients.

To sum up Big Tree’s philosophy: We like to say you’re paying for a relationship, not a doctor’s visit.

What has been the most fulfilling aspect of your journey growing Big Tree?

The biggest reward in providing direct primary care is seeing patients who previously didn’t have functional access to healthcare get that for the first time. These patients suddenly realize they can afford healthcare now.

Through traditional models, employers and patients pay hundreds of dollars per month for insurance but often still don’t have functional access to care because, for example, they can’t afford their deductible.

Big Tree can provide about 90% of all healthcare services - for about 10% of the traditional cost. Most of our patients are getting everything they need through Big Tree for the fixed monthly fee.

Surprising customer feedback

People are shocked at how simple it is. It’s much different from their experiences in the past. In fact, our providers frequently get feedback from customers that we’re charging too little for our services.

They’ll say, “Hey, don’t change my pricing… but how are you charging so little?” Our goal is to bring these services to the entire population.

One unexpected discovery has been the role text messaging plays in making care more accessible and affordable. Patients with simple questions often don’t need to make an appointment and take time off work just to speak with their doctor. A short conversation via text is more efficient for both parties. However, there’s not much flexibility to pay for this type of interaction in traditional models. Big Tree’s monthly fee structure allows for and encourages it.

Why do you think the discussion of price is such a challenge in healthcare?

Price is a crucial part of the healthcare discussion that’s often lacking. When prices aren’t transparent, they tend to go up; people within the system are incentivized to make money. When that happens, there will be more people who can’t afford care.

The theory behind the health savings account (HSA) was that patients would feel the impact of paying for services, therefore encouraging more responsible spending. However, research is now showing that this cause-and-effect simply is not happening.

The primary disconnect is a lack of transparent price information. The direct primary care model opens the discussion about price, and the patient becomes a customer who knows how much things are going to cost and what they’re getting. It works because the customer is able to see and understand the full equation behind every healthcare decision.

At that point, healthcare becomes a market, and then you have all the mechanisms of a market in place to help improve quality and lower cost.

Connecting the dots for educated consumers

The role of our doctors at Big Tree is to help patients with those decisions - to understand the prices of services, as well as their relative value.

Take, for example, an MRI for a patient with back pain. The first step is to give the patient visibility into how much that MRI will cost. The second step is to help the patient decide whether the MRI will be valuable for that price. In some cases, an MRI might give insight into the patient’s back issue, but it’s less likely to impact the care plan. The patient might choose to forego the MRI in this scenario.

What are some of the challenges employers face when it comes to designing their healthcare benefit plans?

Healthcare benefits can be complex and intimidating to many employers. It’s difficult for employers to make informed decisions because most of them are not healthcare finance experts.

In some cases, employers may be working with brokers or insurance carriers whose financial incentives are not aligned with their own. These misaligned incentives can make it even more challenging for employers to design plans that truly benefit their employees and the company’s bottom line. For this reason, I encourage all employers to do their own research when possible and evaluate new benefits options with open minds.

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