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Direct Primary Care (DPC) – New Iowa Healthcare Law Flies Under the Radar

During the 2018 session, the Iowa legislature and governor passed and signed legislation that affects Iowa law on a number of healthcare-related issues – specifically banning nearly all abortions, changing the state mental health system, developing association health plans and allowing the Iowa Farm Bureau Federation to work with Wellmark Blue Cross and Blue Shield to sell health insurance plans that are exempt from state-regulation scrutiny. All have received a great deal of public interest and varied opinions – both from supporters and detractors.

Direct Primary Care (DPC)

But, there was another Iowa health-related bill (HF 2356) signed into law on March 28 – that has not received the amount of attention that it potentially deserves. This particular law is the Direct Primary Care arrangement, or DPC. To date, 25 states have passed DPC laws, including Iowa. Five other states have introduced DPC into their legislation process. Suffice it to say this ‘movement’ has reached a critical tipping-point in the U.S.

What is DPC, you ask?

At the state level, DPC provides a viable legal arrangement for physicians to provide primary care to patients at a lower cost than traditional practice models typically available through insurance plans. Generally, with DPC, a primary care physician or group practice charges patients a membership fee (also known as a medical retainer) ranging from $30 to $500 a month giving patients most primary care services – including chronic care management – for no additional payment when they need it. Advocates of DPC arrangements suggest that market forces will set the price for services based on demand instead of relying on distant third-party payers and central planners. Patients who use medical services outside the DPC arrangement will still need to purchase high-deductible insurance coverage to cover other non-primary care services, such as hospitalization, specialized care, prescription drugs, etc. NOTE: To provide premium relief to DPC patients, it would be ideal for them to eventually purchase high-deductible plans that EXCLUDE primary care services from its’ premium pricing.

DPC arrangements are not considered insurance contracts. This means that no insurance company is involved between the primary care physician and the patient – reducing the red tape hassles of reimbursement costs that require both time and money. DPC advocates claim there is a dramatic cost reduction using this approach, in addition to allowing the physician to spend more time with patients and improving the quality of care.

DPCs are typically exempt from scrutiny by state insurance regulators, and in return, are restricted from billing insurers for consultations on a traditional fee-for-service basis. Additionally, DPC laws – Iowa included – require a valid written agreement between the provider and patient that outlines the following agreement requirements:

  • Must be in writing
  • Be signed by the direct provider (or provider agent) and the direct patient (or patient representative)
  • Describe scope of primary care health services covered by the provider
  • State the location(s) of the direct provider and any out-of-office primary care services covered by the agreement
  • Specify the direct service charge, frequency and payment terms
  • Specify any additional costs not covered by this arrangement
  • Specify the duration of the agreement, and whether renewal is automatic
  • Terms and conditions under which this agreement can be terminated by the direct provider or the patient
  • Include a notice in bold, twelve-point font that states this agreement is NOT health insurance and is NOT a plan that provides health coverage for purposes of any federal mandates. Recommends the patient obtain health insurance to cover healthcare services not covered under the DPC agreement

One key feature within the Iowa law is that a direct care provider cannot refuse to accept a new direct patient OR “discontinue care of an existing direct patient based solely on the new patient’s or the existing direct patient’s health status.”

DPCs Can Be Funded by Third Parties

Another very interesting portion of this law states that direct providers “may accept payment of a direct service charge for a direct patient either directly or indirectly from a third party.”

Employers can be involved with DPC under the following approach:

“A direct provider may accept all or part of a direct service charge paid by an employer on behalf of an employee who is a direct patient of the direct provider. A direct provider shall not enter directly into an agreement with an employer relating to a direct primary care agreement between the direct provider and employees of the employer, other than an agreement to establish the timing and method of the payment of a direct service charge paid by the employer on behalf of the employee.”

Based on the above language, this arrangement opens up the possibility of third parties being not only employers, but public payers, such as Medicaid and/or Medicare.  In fact, in just the last two weeks, America’s Physician Groups, an association of medical groups, submitted to the Centers for Medicare and Medicaid Services (CMS) a provider contracting model that would allow a provider network to receive Medicare funds upfront to manage their patients’ care – through the DPC method.

It is common knowledge that many physicians and healthcare staff are operating within the current medical environment under great stress – if not burnout conditions. In fact, from the results of our 2017 Iowa Patient Safety Study, patients feel a large reason that medical errors occur are directly linked to overworked (and stressed) medical staff. For many physicians who have adopted DPCs in other states, they praise DPC because it allows them to spend more time with patients and less time dealing with the bureaucracy of filing claims to various insurance vendors that do not provide the value patients are hoping to have when seeking care.

Currently, Iowa does not appear to have many primary care physicians operating on a medical retainer basis. However, this new law will most likely generate more interest from primary care physicians wishing to deliver more affordable care while enhancing a direct relationship with their patients. Not surprisingly, insurance companies and other critics of DPCs claim that direct providers may withhold necessary services to be profitable. However, according to DPC advocates, this concern has been unwarranted in other states with DPC laws.

The implications of this new Iowa law will play out over time. Given that healthcare price transparency is such a hot topic, and rightfully so, this new legislation is intriguing for both patients and payers alike.

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Healthcare – Time to Recognize and Confront the ‘Elephant in the Room’

Have you ever been involved with an obvious situation, either personally or professionally, that was largely ignored and going unaddressed? Perhaps a work scenario in which a manager who wields considerable organizational power was impacting the workplace culture in an extremely uncomfortable and unhealthy direction. Speaking up may cause one to lose his/her job or suffer long-term upward job mobility opportunities. Self-preservation is a natural powerful reaction when confronting a seemingly formidable opponent – we simply choose not to act at all.

The fear of speaking up is a metaphor for an ‘Elephant in the room.’

This is happening today in our healthcare delivery and payment environment. We frequently see or experience unacceptable situations that clearly require action to prevent it from happening in the future. As a reader of my blogs, you are keenly aware of the egregious nature of the medical establishment hiding their preventable medical error ‘indiscretions’ in the proverbial litterbox – covering up preventable mistakes that are not meant for public viewing. Yet, without being held accountable for their actions, the medical community will continue to repeat what should be un-repeatable.

The elephant exists in healthcare in a number of ways. Below are just a few prime examples.

Employers are Reluctant

Employers serve as the real payers of healthcare, yet oddly sit on the sidelines exhaustively complaining about the high cost of health insurance and how it adversely impacts their competitiveness in the markets they serve. Unfortunately, most employers are reluctant to bring up the inherent dysfunctional problems because hospitals and medical practices are considered to be ‘other’ large, recognizable community members that are off-limits to public correction. In fact, many business owners are board members at the local hospital, making it difficult to publicly speak up while serving in a ‘distinguished’ role. As real payers, employers can clearly climb into the driver’s seat to collectively initiate sorely-needed changes in how the healthcare establishment behaves. But to do so, they must firmly take hold of the steering wheel to begin the journey. Instead, the employers have historically farmed out this responsibility to the insurance companies.

Insurance Companies Lack Initiative

One can be equally mystified by insurance companies’ lack of initiative when it comes to medical errors. By default, these ‘third-party payers’ assume the purchasing role as an intermediary between the real payers and health providers. More often than not, employers assume that insurance companies are adequately vetting the quality-of-care their network providers are giving to their employees and family members. This is largely not happening. As a paid intermediary, insurers can play a vital role in determining whether their subscribers are receiving the best possible outcomes from the care being purchased through the insurers’ networks.

Because the medical community will not admit their playful litterbox games, an appropriate opportunity for safety-conscious insurers would be to randomly survey their members after they have been discharged from a hospital to learn about their experiences – specifically as it relates to preventable medical errors. Doing so could be a great branding opportunity for innovative, forward-thinking insurance carriers. Over time, when enough patient feedback has been collected and analyzed, insurers can then become a more engaged advocate for employers and their employees when vetting network providers. Why are insurers not performing this difficult but necessary work on behalf of their members? Great question. They should.

Medical Community Touts Economic Strength

The medical community, specifically hospitals, spend a good deal of our[1] money to help perpetuate their economic value in the communities they serve. Recently, the Iowa Hospital Association purchased airtime on at least one local television station to help educate Iowans about the “economic impact” hospitals have in Iowa, including:

  • Number of hospital workers employed in Iowa
  • Benefits hospitals provide to the communities
  • Number of additional jobs created by hospitals

Similar to a certain species of cicadas, which are insects that remain underground from 2-to-17 years before emerging to be seen and heard, the hospital community will annually reveal themselves to promote their substantial workforce and economic growth – but remain curiously silent on the indiscretions buried deep inside the litterbox. Apparently, this marketing scheme successfully elevates their status as the elephant in any room, whether it be in Iowa or some other state. This diversional tactic makes it difficult for others to honestly speak out about the associated problems the elephant causes within our communities. After all, who doesn’t want jobs? No one wants to be ridiculed as a ‘naysayer.’ Unfortunately, honesty may come at a great expense.

Joe Gardyasz of the Des Moines Business Record recently wrote an insightful piece (subscription required) about healthcare jobs in Iowa. Even though jobs in the healthcare sector have surpassed U.S. manufacturing and retail sectors for the first time in 2017, Iowa’s manufacturing sector – at least for now – still outpaces healthcare jobs in our state.

Why healthcare has become the most dominant sector in our country

Other than rising demographic trends of an older population requiring more healthcare services, the most plausible reason for more healthcare jobs is likely due to gross inefficiencies in an inordinately complex environment. As mentioned in my previous blog, “Healthcare Billing Process – The Cost of Doing Business,” non-healthcare industries might typically employ 100 full-time equivalents to collect payment for $1 billion in services, but healthcare employs 770 full-time equivalents per $1 billion of physician services. Keep in mind, healthcare is now a $3+ trillion-dollar industry – which primarily explains why healthcare jobs are soaring past other more-efficient sectors.

Put another way, if non-healthcare sectors wish to tout their economic dominance in their respective communities or state, they would need to become bloated with inefficiencies that would inflate costs, revenue and increase employment opportunities. Thankfully, largely due to powerful market forces that are embedded with price and quality transparencies, those sectors are forced to act efficiently by offering reasonably-priced products and services that are of the highest value. The healthcare industry, it seems, is oddly immune from having to play by these transparency rules. According to Warren Buffett, “Healthcare is the tapeworm of the American economy.”

Through our entrenched relationships (e.g. family, work, business and community), we are too often reticent about changing the status quo when it might possibly ‘threaten’ the comforts of doing nothing. Employers, insurance companies and the medical establishment are each capable of making the necessary changes, but at times, must be ‘nudged’ to do so. The late Stephen Hawking made a great point by writing, “I have noticed even people who claim everything is predestined, and that we can do nothing to change it, look before they cross the road.”

What IS the Elephant?

Regarding healthcare, if each of us fails to recognize, acknowledge and confront the elephant in the room, we too become complicit in this persistent, serious and increasingly costly and harmful problem. If we continue to sit on our hands and do nothing, we eventually enable the elephant to become even larger and more undisciplined.

So what is this elephant in our collective “healthcare room?” John Atkinson of Wrong Hands developed a ‘chartoon‘ about this metaphor, whether the elephant appears in healthcare or elsewhere.

Isn’t it time to begin “eating” this elephant one bite at a time? It starts by recognizing and acknowledging the elephant in the room, and then crossing that road to initiate necessary improvement.

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[1] For the services they provide, hospitals are predominantly recipients of our tax dollars, government-related grants, philanthropic donations, insurance premiums and personal out-of-pocket payments.

The Medical Error Problem – Do Employers Have Solutions?

Medical errors do not discriminate. In fact, preventable medical errors occur on an ‘equal-opportunity’ basis to patients, regardless of age, gender, race, political ideology and the type of medical plan you may (or may not) have. This means that employer-sponsored health plans are not exempt from medical mishaps and the associated costs that come with this problem.

Although the cost to employers can be massive – it is opaque and mostly hidden. Leah Binder, president of The Leapfrog Group, a national nonprofit organization whose mission is to address the quality, safety and affordability of American healthcare, has stated the cost associated with this unintended harm that silently creeps into the premiums that employers and employees pay – is a “hidden surcharge.”

This ‘surcharge’ not only includes additional costs to fix the medical problem resulting from the error, but the lost productivity of absenteeism and presenteeism – when employees lose time away from work and the emotional toll it takes when they do show up for work.

Simply put, employers own this problem, whether they know it or not. Relying on your insurance company or vendor to apply leverage on healthcare providers is most likely a delusional strategy in trying to improve this problem.

A 2013 Leapfrog Group white paper calculates that hospitals with a grade of “A” on their Hospital Safety Grade (hospitals who participate in Leapfrog surveys that rate patient safety efforts), will have a hidden surcharge for medical errors of $6,962, while a hospital with a grade of “C” or lower will command a hidden surcharge of $958 higher ($7,920 total). It is quite evident, especially when it comes to safety of medical care, not all hospitals are created equal. This is a fact that both patients and payers alike must acknowledge – and address.

Recently, Leapfrog announced that five states showed the most improvement over the five-year period since the Hospital Safety Grade’s inception. The states are Oregon, Rhode Island, Hawaii, Wisconsin and Idaho. Just as politics is considered to be local, so too is the healthcare that is delivered to patients. Though patient safety is a national problem, the solutions must begin locally, within each of our communities and within state borders. See how Iowa ranks in the most recent Leapfrog rankings.

With this in mind, what can Iowa employers do about patient safety issues? Actually, quite a bit.

What can Iowa Employers do about Patient Safety Issues?

Heartland Health Research Institute recently wrote a fact sheet, “What Employers Can Do About Medical Errors,” that addresses at least six approaches Iowa employers can consider taking to reduce the incidence of medical errors. The approaches include:

  1. Make insurance contracting decision-making process part of the medical error strategy.
  2. Develop a coalition with other like-minded employers and purchasers in your community.
  3. Meet with local hospital(s) and clinic(s) to convey the importance of safety and quality – require they demonstrate ‘cultures of safety’ within their respective organizations.
  4. Actively communicate the importance of safety issues to employees.
  5. Encourage employees to report medical errors when they occur.
  6. Visit with both state and federally-elected officials, trade association groups in which your organization participates, and other local commerce organizations.

It is tough sledding to make policy recommendations that would have a chance of becoming law. Instead, to disrupt healthcare into being delivered more safely, it really must begin with those who actually pay the healthcare bills – the employers and their employees, and yes, the taxpayers who ultimately fund Medicare and Medicaid and other state healthcare programs. In the past, this applied-pressure usually started (and ended) with only the largest of employers. But for this new movement to gain local traction, employers of all sizes and industries must embrace the approach that there is zero-tolerance for preventable medical errors.

Just remember, when we don’t demand safety in our healthcare, they don’t supply it. There’s no better time than now to begin taking action.

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