Direct Pay Independent Practice: Remnant of the Past and Wave of the Future

Presentation Before Association of American Physicians and Surgeons (AAPS), “Survive and Thrive” Conference, Minneapolis Marriott.Minneapolis, Minnesota,  May 9, 2014

The wave of the future is coming and there is no fighting it.

Anne Marrow Lindbergh (1906-2001),  The Wave of the Future 

Now is the time for physicians to say enough is enough.

Daniel F. Craviotto, Jr. MD, 58 year old orthopedic surgeon,  Santa Barbara, Calif, “ A Doctor’s Declaration of Independence, “ Wall Street Journal,  April 29, 2014

Thank you, Dave, for that introduction. You piqued my curiosity.  After that introduction,  I can hardly wait to see what I am going to say.

General Thanks and Special Thanks

I  thank Dr. Jane Orient, executive director of AAPS for the last 25 years, for her clarity and directness of thought;   her assistant, Jeremy Snavely, with whom I have had many conversations; and Dave Racer, of DGR Communications  in St. Paul, a good friend, and a prime organizer of this and  a previous “Survive and Thrive” 2013  DPIP Conference, and budding author of a new book on  DPIP.   

A  special thanks to six pioneer heroes in the direct pay movement who I personally interviewed  to prepare for this talk -  Doctors Jane Orient of Tucson,  James English and Donald Gehrig,  Twin Cities Internists,  Keith Smith of Oklahoma City, founder and director of a surgery center there;  Josh Umbrer of Wichita (his partner Doug Nunamacher is here today and will talk to you later) and Lee Gross of Northport, Florida, both  family physicians; and Dan Goldberg, of Manhattan,  an entrepreneur  who founded and serves as  president of the Free Market Health Care Group. 

 I interviewed them all.  Their interviews are in your information packet along with a printed copy of this presentation.    

They are the surfers forming and leading that incoming, surging wave known as the Direct Pay Independent Practice.

A final note of thanks to Doctor Richard Amerling, your new president, who on July 4, 2013,  set the stage for all of this by writing,  “The Physicians Declaration of Independence.”

This will take 20 minutes.  Dave tells me at 20 minutes, I get the hook.  So here goes, by hook or by crook. 

If I do not finish on time,  read the full text of what I am saying  in the printed copy of my talk. It is present in your information packet.

To begin, I am your advocate and your cheerleader.  This is pep talk and a prep talk, not that you need me.  

You are highly motivated,  and I know you ride the wave.  Most of you have already ridden the wave.  You have conceived.  You have believed.  You have broken free of 3rd parties.

I am glad to be back in Minnesota, the land of 10,000 Lakes, 10,000 physicians, and 10,000 memories.

Thank you for inviting me back to Minneapolis, where I practiced pathology 25 years from 1965 to 1990, where my wife and I raised two  sons, where I was editor of Minnesota Medicine from 1975-1990,  where I co-owned the largest private independent outpatient laboratory in Minnesota,  where I had a farm, whre I developed by sense of humus and where I was a man outstanding in my field, where I witnessed the creation of a physician-led precursor to United Healthcare  in the 1970s, and where I wrote a 1988 book  And Who Shall Care for the Sick? The Corporate Transformation of Medicine in Minnesota.    

Before that 1988 book, I  produced a 1982  book, A Collection of Editorials from Minnesota Medicine, 1975-1982.  Minnesota Medicine received an unprecedented  1000 requests for reprints of my editorials.  I apologize for the humor in that book.  I know this is a serious occasion, but there is always gloom for improvement.

A complimentary copy is at the back desk.  I have been writing about the corporate transformation of medicine and health reform for 40 years.  In 1975, many thought national health reform, led by Senator Ted Kennedy, was inevitable and HMOs and other health plans would subjugate physicians to a lesser role in the scheme of things.  

 Universal coverage remains elusive, but physician subjugation is in full swing.

In my 1988 book, I warned of a future physician shortage, Physicians, I said, would be disillusioned  and   an independent  physician exodus from private  practice would follow

These things  have come to pass. Independent primary care practitioners are in short supply.

Today managed care and big organizations dominate the Twin Cities practice scene. Less than 10% in physicians are in independent private practice. Hospitals or large physician groups employ most physicians.   

I predicted a corporate takeover of health care.  

That has happened, not only in Minnesota but elsewhere.  Today United Health, as the nation’s largest health insurer, has $24 billion in annual revenues, United  is  the single biggest employer in Minnesota. United  has some 70,000 employees covering 70 million people nationwide.  

George Halvorson, who was CEO of HealthPartners in the Twin Cities, moved on to become CEO of Kaiser Permanente, headquartered in California , which has revenues of $50 billion a year.  

A  billion dollars here, a billion dollars there. A trillion dollars here, a trillion dollars thee. Pretty soon we’re talking real money.  

The Exodus  

The exodus from independent practice continues.  Doctors are retiring early, seeing fewer patients, being employed by hospitals.  Half of practicing doctors are no longer accepting Medicaid or restricting Medicare access, and  a wave back to private independent practices is swelling.

But unlike big corporations and big government, independent  physicians lack organized capital.   You need a national organization to organize and  market  your cause.   AAPS  may be it, and business sponsors and banks holding HSA monies  may be your source of capital.

The Countervailing Wave

Still,  despite its capital and organizational deficiencies, a  spontaneous, countervailing  incoming wave, largely under-reported and unnoticed,   is growing and cresting  out there and splashing and lapping and breaking  upon the health reform beaches.    

Is is a macrowave, not a micowave.

According to the American College of Private Physicians, there are now 27,000 physicians in Direct Independent/Concierge Practices and 81,000 in cash only practices(Medscape Compensation Report, 2014).   This far exceeds the usual estimate of 5000 doctors in direct pay/concierge/cash-only practices. 

Personal for Physicians

The wave to direct pay independent practice is  personal for you.  Compliance with demands  parties compliance demands  account for 50% of your overhead.  This busy  work interferes with your abilities and time to practice personal medicine.   You want off the 3^rd party line hamster wheel. 

Keep these words and figures in mind:  3^rd party intervention eat ups  25% of your time away from patients and  50% of your overhead.

That is why I call Independent  direct pay  medicine,   a 25/50 practice freedom wave.

The wave exists for good reason.  Practicing personal medicine is what you spent 12 to 15 years of your life and $200,000 to $500,000 preparing and training for.    It is what you dreamed of doing –  practicing medicine and helping patients rather than serving as indentured servants  for 3^rd parties.  You want your freedom.

Personal for Patients

It’s not only personal for doctors, it’s  personal for patients as well.   

They want to spend more time with a personal doctor. They want a doctor dealing directly with them, rather than a doctor glued behind a computer screen, staring hypnotically at it,  interrupting them every 10 seconds,  looking anxiously at their watch,  to get at the core of their problem so they can get on to the next patient,  or the parade of patients they must “process’ at the rate of one every 7 to 10 minutes,  so they can make ends meet to pay for that 50% extra overhead imposed by 3^rd parties and to make up for that 25% of your time  away from patients due to government regulations.   Patients want to tell you their own  story.  

Personal for Interviewees

It was personal for those I interviewed. This talk is based on interviews I conducted with six of you . 

I shall share with you their personal thoughts and motivations,  which you may also read about and ponder  in your packet of six print interviews.    Some of them in the audience today, and I encourage you to learn from them.

Personal Lessons

From these personal interviews,  I learned some of the Can-Do  lessons, which were forecast by Dr. Orient in her 1994 book  Your Doctor Is Not In: Healthy Skepticism about National Health Care (Random House).

One,  Skinning the DPIP Cat

There is more than one way to skin the direct independent practice (DPIP) cat.   You can do it by retainer, annual or monthly.    You can do it by being paid cash for each  episode or each  procedure.  You can do it through global bundled fees or individual fees. You can do it through primary care doctors or specialists.  You can do it  by slowly layering on a concierge model to a traditional practice while making the transition to a 3^rd party-free practice.  You can do it marketing your practice online.

Two, Importance of Courage 

IT takes courage to make the transition.   It goes against the grain of the government and liberal elite, who are highly paid but who enjoy spending other peoples’ money.    But you can do it because of the courage of your convictions  about the power of the free market,  the power of personal care,  and the power of getting your priorities straight – to serve the patient before you serve the needs of 3^rd parties and the government.

Three, Lessons Learned – Transparency, Constancy, and Online Creativity

 You can do it because you have learned certain lessons from your peers at meetings like these  - to make your prices transparent and upfront so patients and payers will know exactly what to expect,  to bundle your services into one global package so no surprises will be forthcoming,  to have a common and commonsensical  electronic health record,  to use software to create websites, to offer  innovative clinical services, and to market those services.

Four, The Importance of Partnering and New Business Models

You can do it because you have learned other business models are possible, profitable and productive.   You can do it by  combining direct independent models with traditional 3^rd party models.    You can do it by  partnering  with other physicians to form networks of  physicians linked to businesses with health savings accounts and high deductible plans, You can do it by  partnering  and consulting  with business payers, many who offer health savings accounts,  to lower their health coverage expenses and the premiums of their workers.   You can do it by  partnering  with hospitalists and hospitals to create bundled prices for episodes o f hospital care backed by reinsurance.    And you can partner with physical therapy groups, labs, imaging centers, pharmaceutical firms, and  specialists who offer direct cash discounts  for the patient, in the process lowering costs of the hypothetical  national health “system.”  And you can do it by  learning  from each other, as you are doing at this “Survive and Thrive” meeting.

 In doing so, you will  learn other countries with single payer systems  - Sweden,  France,  England, Canada, Australia , and others are furiously and frenetically introducing  private insurance  cash-based private care to cut waiting times and costs while the U.S. are going the opposite direction(see Per Bylund, “ What Sweden Can Teach Us about ObamaCare: Universal Public Health Means the Average Swede with ‘High Risk’ Prostate Cancer Waits 220 days for Treatment,” Wall Street Journal, April 18, 2014).

Five, The Unexpected  ObamaCare Opportunity

You  will soon learn, as everybody whom  I interviewed, emphasized ,  that ObamaCare no doubt unwittingly and inadvertently,  has begotten plans with high premiums with high deductibles and caused cancellations of millions of existing plans These two events   have generated a whole new line of business for DPIP for the insured, uninsured, and uncertain seeking timely,  convenient, confidential,  hassle-free and affordable  personal care from personal physicians.      

As a millennial recently commented,  “We may be young, but we’re not stupid!”  The millenials and others know what you offer is more personal and convenient and requires less waiting than any government-endorsed plans in  managed “systems”.

Six, Fundamental Priorities and Attitudes 

I  have on my desk a plaque bearing these words from Peter F. Drucker (1909-2005),  a management guru and very wise man, who wrote in his book The Effective Executive (Harpers, 1985-1986) these words: 

·         “Courage rather than analysis dictates the truly important rules for identifying priorities.”

(You know in your gut that practicing medicine is deeply personal  and serving your patient and giving them your full attention is your first priority and the essence of good medicine.)

·         Pick the future as against the past.

( Political analysts are predicting  that Republicans will capture the Senate in November,  and if that occurs,  all ObamaCare bets are off or at least suspended for the remaining two years of The Obama Presidency).  Will it be OSO (ObamaCare Shall Overcome), as in  the 2012 election,   or will it be SOS ( Second ObamaCare Shellacking), as in a  repeat of the 2010 midterms)?

·         Focus  on opportunity rather than problem.

( The opportunities are to spend more time with patients,  setting your own transparent pricing and  global  bundles  of services;  using creative software to evaluate and monitor patients ), and doing away with accounts receivable.

·         Choose your own direction , rather than climb on the bandwagon.

( The bandwagon is the ObamaCare bandwagon,  and private insurers who must follow the dictates and mandates of that bandwagon.   Read the personal interviews I  conducted  to  pick the direction that fits your personal style and circumstances.  In America, no  type or  size of practice or size of health plan  fits all.)

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·         Aim high, aim for something that makes a difference rather than something that is “safe” and easy to do.

Choosing to switch to Direct Independent Practice (DPIP) is not “safe” and easy to do.  But for many of you, it is worth it.   It combines the virtues of personal choice, personal responsibility, and personal incentives. 

The End Game – Riding the Wave and Recognizing  the Realities

I end with a personal salute to you and your courage to change.   Go for it!   Ride the DPIP wave.   Have fun, stay on your feet, get up if you fall, spit out the salt water, and rise to try again. 

Again,  you can achieve what you conceive and believe in.  You can do it.

Give your patients your very best, and give them my regards.

Remember This

And remember this: you are lead surfers riding the wave of a new health care business model: direct pay  without 3^rd party insurance and establishing  new innovative   contracts between patients and self-funded businesses and direct-pay independent primary care and specialist physicians.  

What you can conceive and believe in, you can achieve. You can do it.  You are the Can Do Kids.

And while you are riding the wave, keep these  four  May Day realities  in mind.

·         A health law that requires 2700 pages to explain is expensive, confusing, complex, and  may be inexplicable.

·         A health law that requires 2500 new regulations spanning  10,535 pages and consuming  1.15 million words to enforce its multiple mandates may be unenforceable.

·         A health law that requires $2.5 trillion (OMB estimate for next 10 years) may be  unaffordable.

·         A health law opposed by 95.5% of people in 458 national polls since 2009, with 65.3% opposing it by double digit margins,  may be  politically untenable. 

Good luck and happy and safe surfing.  The nation needs you. Patients need you. You need each other.