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
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
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
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
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
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 of $39-$89 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
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
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
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 the 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.