Marcus Welby & Steve Jobs: Tips for Gov. Kitzhaber to save billions on healthcare

[Editor: If there’s any market that’s primed for a startup to disrupt it, it’s healthcare. That’s why it’s nice to see another guest post from Dave Chase, providing some guidance on what Oregon could do to take a lead in the healthcare market.]

Not a week goes by without seeing some headline about deficits pushing municipalities to desperation or Bill Gates describing state budgets using accounting techniques that would make Enron blush. The common culprit? Healthcare costs with Medicaid being the biggest driver.

Oregon will be watched nationally with the recent $1.9 Billion agreement with the Obama Administration and has an amazing opportunity to lead the nation in an approach that has produced the biggest cost savings AND received customer satisfaction that exceeds Google and Apple. Sound too good to be true? Read on…

Fortunately, there is a solution that has bipartisan support and has shown to reduce healthcare costs by 40-80% (e.g., Seattle-based Qliance). It can be described as two parts Marcus Welby and one part Steve Jobs. The federal health reform bill included a little-noticed clause allowing for Direct Primary Care (DPC) models to be a part of the state health insurance exchanges. That little-noticed clause (Section 1301 (a)(3) of the Affordable Care Act and proposed HR3315 to expand DPC to Medicare recipients) should have the effect of massively spreading the DPC model throughout the country.

The future is already here—it’s just not very evenly distributed. – William Gibson

A common myth is DPC is the same or similar to their more expensive cousin—concierge medicine. Not so. Typically one-third of DPC practices are uninsured people.

AtlasMD in Wichita, KS is run by Dr. Josh Umbehr who recently mentioned to me one of his patients. Due to tough economic times, she’s living in a storage unit. Her monthly fee ($50/month which is inclusive of all fees) is less than she was paying in co-pays at the local public health facility.

Another is MedLion. One of their recent clinics is in Salinas, CA (a farming community) and caters to farm workers . The waiting rooms are nicer than a public health facility because can put their resources towards a more pleasant experience than billing systems and personnel. AtlasMD has 2 MDs and one NP. No admin staff. Zero. Zip. Nada. Everything is low cost software, etc.

DPC organizations such as WhiteGlove Health and arriveMD have even lower overhead as their practice are run as a clinic on wheels. The most successful DPC models such as Iora Health have made the most inroad with unions yet it’s a model that the most conservative members of Congress love. [Disclosure: Two of the organizations mentioned, arriveMD and MedLion are customers of my software company, Avado.]

Let’s break down how it’s possible to provide such a high level of service at such an affordable price (i.e., less than a typical cable bill). It’s simple: low overhead.

It’s not unusual for a primary care practice to have 3-5 administrative staff for every doctor. This is necessary to deal with the myriad insurance billing schemes that can best be described as a Gordian Knot designed by Rube Goldberg. Smart utilization of affordable technology (often in the low hundreds of dollars per month vs. many thousands and ongoing headaches) is at the heart of it. This allows the doctor to practice medicine the way they were trained, rather than pulling their hair out dealing with insurance for the medical equivalent of a trip to Jiffy Lube.

In other words, the practices run similar to the fabled Marcus Welby, MD, days. Yet, they are improved upon with a dose of Steve Jobs enabling enhancements that weren’t possible in the past such as virtual house calls. In anticipation of the rapid expansion of these models, entrepreneurs such as BJ Lawson, MD of Physician Care Direct have developed software to run the business side of these practices. (See more on how practices are overcoming obstacles to switching to Direct Primary Care.)

Thus far, DPC has had success in the private market. I put the question of why not use DPC for the Medicaid population (reportedly that is in the works in West Virginia) to DPC practitioners. The response below is a summary of their perspective. It is estimated that if DPC was scaled nationally it could save 20-30% off of overall healthcare costs. That would be the difference between states defaulting and sustained balanced budgets.

The issue of using DPC for the poor is from my point of view a no brainer. Why use the most expensive inflationary system available (by which I mean the insurance system, whether public or private) to take care of those with the least money and most in need of basic services?

The structure that makes sense to me is to create a thriving marketplace in direct primary care, competing on price, access and quality—and working exclusively for our patients. Then add a fixed monthly stipend for primary care for every Medicaid patient in the United States—a stipend that covers the lowest priced/highest functioning primary care available.

This could be a voucher or credit card account for each Medicaid patient. The allowance could only be spent on primary care and the patients could buy up to higher priced practices if they saw value worth purchasing. That would convert the Medicaid patient from being a low paying, high utilizing patient to a valued customer who can pay cash for care at a reasonable price.

This makes all kinds of sense economically:

1. No government management system to control or manage care—it manages itself with the patient at the helm.
2. Converting dependent impoverished citizens into patients with economic clout and respectful treatment.
3. Eliminating the cost overhead of insurance billing on both the MD and the government side.
4. No more barriers to basic care for Medicaid patients—they can use all they need.
5. Eliminating the fee-for-service incentive disaster that produces massive over-utilization and huge downstream expenses.
6. Financially stabilizing the primary care world with consistent monthly fee payments to cover our fixed costs while allowing those docs with better ideas or higher prices to go for the upscale patients or those wanting better art work and longer visits.
7. Free up primary care docs to further improve their quality, access and patient centered services – not their billing savvy.
8. If the government wanted to regulate, they could demand an annual report on each patient they support, giving the actual utilization, health care outcomes and proof of appropriate management of common illnesses, immunizations and cancer screening. The government could actually pay for results, not process. Primary care practices would have to be certified as producing an acceptable level of results and patients would have access to our success profiles both in terms of cost and quality when selecting their doc for next year. [Note: A standard is being defined by the Healthcare Delivery Innovation Alliance which is seeking outside input.]
9. The government could track the overall costs created by each practice and make those numbers public as well. The high cost practices would eventually lose certification, particularly if the money ended up in the hands of their employer (hospitals, big multispecialty clinics).
10. If the government wants to tackle the HotSpotters patients, they just need to up the monthly ante for the sickest patients—they will get their money back with huge interest from the reduced downstream costs and reduced transaction costs that these folks generate. With the big fees they will also be able to require more complete reporting of how their chronic illnesses are being managed.

Medicare should do the same—stop paying fee-for-service for Primary Care and start paying a fixed monthly fee (allowing patients to buy up if the government gets the price wrong, as it almost certainly would). The patient should have total control over which primary care doc gets the money – remember, we want to work for the patient, no matter who pays the bill.

So that’s the solution—a simple system where the patient is in charge, the government buys good basic care and the patients can buy up. The system itself is created within a free market structure which the government is simply choosing to ride (like food stamps and grocery stores) with patients running the show, so service and quality could go up every year while prices remain stable or decline—like any real functioning market system in the world.

Direct Primary Care is the only available model that could accomplish these goals. Everyone else is still trying to figure out how to “work” the insurance system. However, if the government has wisdom, they would also make the monthly fee deal available to prior fee-for-service docs—to boost competition and to accelerate the conversion to Direct Primary Care models. The right incentives produce the right results.

Dave Chase is the CEO of Avado.com, a patient portal & relationship management company. Previously he was a management consultant for Accenture’s healthcare practice and founder of Microsoft’s Health platform business. You can follow him on Twitter @chasedave.