During the 2017 regular session, the Kentucky Legislature paved the way for the “Direct Primary Care” practice model with the passage of SB79. This article will discuss the benefits, and disadvantages, of the Direct Primary Care practice model, and how it differs from the original “concierge” practice model.
A pure “concierge” practice charges patients an annual retainer fee, upwards of thousands of dollars, in exchange for the guarantee of same day appointments, 24/7 access to care, and even house calls. By charging a retainer that must be paid in addition to health insurance premiums and costs for medical services, concierge practices limit the number of patients by excluding those who are unable or unwilling to pay the fee. Having fewer patients allows the practitioner time to provide personalized care to each patient. Because the retainer does not cover actual medical services, concierge practices bill their patients’ health plan for services rendered and collect co-pays, and insurers will not apply the retainer to a plan member’s deductible or maximum out-of-pocket limit.
Direct Primary Care (DPC) offers the benefits of a concierge practice in a more consumer friendly package. A DPC practice charges a flat periodic “membership” fee in return for a range of primary care services. The payment terms and services offered are detailed in a “direct primary care membership agreement,” the terms of which are now governed by Kentucky law.1 DPC practices do not accept or bill health insurance and usually opt-out of Medicare and Medicaid.2 They do, however, encourage patients to carry the coverage required by the Affordable Care Act. By not accepting insurance, a DPC practice reduces its practice overhead and passes the savings on to patients in the form of affordable membership fees that cover primary care, 24/7 access to the practitioner, telehealth, same-day appointments, short wait times, preventive and wellness care, and even urgent care. DPC practices may elect to dispense generic prescription drugs to their patients that are priced at the practitioner’s cost, and arrange with labs and other diagnostic facilities to provide their services at reduced rates.
SB79 removed barriers in Kentucky to Direct Primary Care and established consumer protections for patients by defining the term primary care provider for Direct Primary Care to include physicians, osteopaths and APRNs3 and clarifying that in Kentucky, DPC is not a health benefit plan or other form of health insurance regulated by the Department of Insurance, and entering a DPC membership agreement will not cause an individual to forfeit their plan coverage.
Unfortunately, while Kentucky has legally recognized the model, Congress has yet to do the same. The federal tax code does not support DPC as an option for consumers with high deductible plans with health savings accounts (HDP/HSA), even though they are the most popular group health insurance product on the market.4 The Internal Revenue Code restricts the use of “pre-tax” HSA funds to paying for qualified medical expenses, but DPC membership fees are not listed in the tax code sections governing HDP/HSAs as qualified medical expenses, and DPC memberships are not included as one of the types of other insurance an individual with an HDP/HSA is permitted to have.5 Consequently, the IRS views DPC memberships as non-permitted insurance and membership fees as premium. This means that a person with an HDP/HSA cannot pay DPC membership fees from their HSA without risking taxation of their HSA contributions. Worse, having a DPC membership could theoretically result in forfeiture of their HDP coverage. Bills filed in Congress last January to amend the relevant sections of the Internal Revenue Code to permit people with HDP/HSAs to have DPC memberships and pay the fees from their HSA went nowhere.6
Even if all regulatory roadblocks are removed, the ongoing shortage of primary care providers in Kentucky7 presents a practical hindrance to the DPC model becoming available to more than a small segment of the population. The DPC model depends on the practitioner having a much smaller number of patients than traditional practices.8 Until there is a surplus of primary care practitioners rather than a shortage, it is hard to envision the model having a measurable impact on accessibility to quality primary care in the near future.
1See KY 2017 Regular Session, SB 79/HC1, amending K.R.S. Chapter 311, 314 and 304 at http://www.lrc.ky.gov/record/17RS/SB79.htm (last accessed 007/27/2017).
2A practitioner that wants to convert to a DPC model and still accept Medicare/Medicaid patients cannot charge their Medicare/Medicaid beneficiaries a monthly membership fee. They still have to bill Medicare/Medicaid and maintain compliance with CMS and state regulations for those programs.
3Adding new sections to KRS Chapters 311–(Physicians, Osteopaths, Podiatrist and Related Medical Practitioners, and 314–Registered Nurses, effective June 29, 2017.
4Rosata, D., “How to Survive a High-Deductible Health Plan,” Consumer Reports Nov. 2016 (http://www.consumerreports.org/health-insurance/high-deductible-health-plan). A quarter of all U.S. companies have moved from other group health insurance products to high deductible plans with HSAs; they are the norm as far as products available on state exchanges. “Is High-Deductible Health Insurance Worth the Risk?” New York Times Business Day, Oct. 31, 2016. (https://www.nytimes.com/2016/11/01/business/is-high-deductible-health-insurance-worth-the-risk.html).
526 U.S.C. §§ 213(d) and 223(c).
6See H.R. 365, 115th Congress (2017–2018) – “Primary Care Enhancement Act of 2017” (www.congress.gov/bill/115th-congress/house-bill/365, last accessed 08/07/2017), ref. to House Comm. on Ways and Means; S. 28, 115th Congress (2017–2018) – “Primary Care Enhancement Act of 2017” ref. to Sen. Comm. Fin., (www.congress.gov/bill/115th-congress/senate-bill/28, last accessed 08/07/2017); see also S. 403, 115th Congress (2017–2018) “Health Savings Act of 2017” http://www.congress.gov/bill/115th-congress/senate-bill/403/ (last accessed 08/07/2017).
7As of June 30, 2017, the federal Health Resource Security Administration reports that Kentucky had 150 primary care health professional shortage areas with 926,865 Kentucky residents underserved or not served. See https://ersrs.hrsa.gov/ReportServer?/HGDW_Reports/BCD_HPSA (last accessed 07/05/2017).
8Ideally, a DPC will have around 600 patients. Traditional practices often carry 2,000 or more patients.
Sarah Charles Wright is a member of Sturgill, Turner, Barker & Moloney, PLLC, in Lexington, who specializes in managed care and healthcare compliance. She may be reached at email@example.com. This article is intended to be a summary of state and federal law and does not constitute legal advice.