The Direct Primary Care (DPC) practice model is relatively new and still evolving; there is no single accepted definition of what constitutes a DPC practice. The most commonly used definition is as follows:

DPC physician practices:

1. Charge patients a recurring membership fee, typically monthly, to cover most or all primary care-related services.
2. Do not charge patients per-visit out-of-pocket amounts greater than the monthly equivalent of the membership fee.
3. Do not bill third parties on a fee-for-service basis for services provided.

The Society of Actuaries commissioned us to develop a study on DPC practices with the goal of providing a comprehensive description of DPC and evaluating certain claims that are made about its effectiveness. In particular, our study published in May 2020 sought to provide an actuarial perspective to the robust debate about the impact of this model of primary care on overall levels of healthcare utilization and cost.

We procured a longitudinal claims data set from an employer's health benefits plan where covered employees and dependents can choose to enroll in a traditional preferred provider organization (PPO)-style plan option or they can choose to enroll in an option that includes a DPC practice membership and waives the medical deductible for all services.* We compared utilization and cost outcomes for about 900 patients enrolled in DPC to outcomes for about 1,100 patients not enrolled in DPC during a two-year period, and risk-adjusted the results to control for differences in health status between the DPC and PPO cohorts.

What did we find out?

What does this mean for the debate about DPC?

1. Controlling for patient selection in DPC studies is imperative
   For the group that we analyzed, DPC patients were expected to have lower overall healthcare costs than PPO patients due to differences in age, gender, and health status (i.e., mix and severity of medical conditions). We expect that other employers similarly offering DPC as an option will see similar selection patterns; that is, we expect that on average those electing to enroll in DPC in a healthcare plan choice setting will have lower average costs than those electing to remain in their prior plans. It is imperative to control for patient selection in DPC studies; otherwise, differences in cost due to underlying patient differences may be erroneously assigned as differences caused by DPC.
2. Enrollment in DPC can result in using less downstream healthcare services
   After accounting for differences in health status between DPC and PPO patients, we observed lower utilization of healthcare services for those enrolled in the DPC option, driven primarily by reductions in utilization rates for certain facility services including emergency department services. This result was consistent with claims made by proponents of DPC; namely that the model's enhanced patient access and continuous primary care resulted in reduced need for downstream healthcare services relative to traditional primary care.
3. The financing and structure of the total benefits package matters
   While we estimate that patients enrolled in this employer's DPC option used less healthcare services, our midpoint estimate is that the employer's net non-administrative costs for patients enrolled in the DPC option were 1.3% higher than if the patients had been enrolled in the traditional PPO option. Our estimate of the change in employer net costs per patient ranged from a 5.2% reduction to a 7.8% increase. However, it is noteworthy that, for this particular employer, there were additional plan costs associated with the DPC option--covering the DPC membership fee on behalf of the employee and waiving the medical deductible for all services (not just primary care).
   
   Two key tenets of the DPC model are increased provider payments per patient for primary care and reduced patient out-of-pocket costs. Both increase net plan costs for self-funded employers or other payers (by paying comparatively more for primary care services and covering more of the cost for patients). The extent to which the DPC model will result in lower net plan costs will depend on whether the model can drive sufficient reduction in the use of downstream healthcare services (i.e., those not provided by the DPC practice) to cover the larger up-front investment in primary care. Employers reducing patient out-of-pocket costs through the reduction of copays or deductibles--such as was the case for this particular employer--will require even greater reduction in the usage of downstream services.**
4. Qualitative considerations should not be ignored
   We believe that the consideration of a DPC option for many employers will go beyond purely financial factors. Other considerations may--and likely should--include the impact of DPC on patient access to care, patient out-of-pocket costs, employee absenteeism rates, and employee retention, among other factors. We believe that, for many employers, introducing DPC on a cost-neutral basis while positively affecting these qualitative considerations would represent a sufficient return on investment.

Next steps

Our employer case study is the first of its kind in many respects but there are some key limitations that readers should keep in mind:

• Our case study focused on a single DPC provider and a single employer; outcomes for other DPC providers and other employers will vary from the outcomes that we observed. Additional data from other sources, for more patients, and over longer durations is necessary to assess the broader impacts of the model.
• Given the largely grassroots nature of the DPC model there is no standard DPC model of care nor a template for physicians to follow. In fact, there is disagreement among some DPC providers as to what exactly constitutes a DPC practice. Therefore, results among providers practicing this new model may vary more than results would among other providers practicing other more standardized models.
• Due to the nature of the data set provided for our analysis we were unable to assess the validity of claims that DPC improves the quality of care and patient satisfaction.
• The DPC model of care is somewhat unique in that it has both direct-to-consumer and direct-to-employer offerings, and the patient selection pattern for each of them is likely to vary materially. Individuals choosing to enroll in a DPC membership on their own are likely to have more healthcare needs than patients not choosing to enroll on their own. Conversely, employees and dependents choosing to switch from a traditional plan option to a DPC plan option are likely to have less healthcare needs than patients not choosing to switch to DPC. Thus, results observed for DPC patients enrolled via an employee benefit, such as those in our employer case study, may not be representative of results for DPC patients enrolled as individuals.

* We are not affiliated with either the employer group or their DPC provider.

** In addition to increasing an employer's share of costs, benefit changes can also affect how much care members utilize. This affect is commonly referred to by actuaries as induced utilization, and should be considered by employers when structuring DPC options and by those evaluating the impacts of DPC. For our case study, the benefit design under the DPC option was slightly richer in aggregate than the PPO option, meaning that based on benefit design differences alone, members would be expected to use slightly more services in aggregate when enrolled in the DPC option than when enrolled in the PPO option. This is due to the employer waiving cost sharing for primary care services as well as the medical deductible for all services under the DPC option. Since the difference was relatively small, we conservatively did not apply an induced utilization adjustment in our estimates. If we had, the reduction in demand corresponding to enrollment in the DPC option would have been slightly greater.