Direct Primary Care Goes Thud

Brett Sparks, May 22, 2017
1,450 Words

Most physicians would agree that the traditional primary care practice model is, (and has been), in serious trouble. With almost a singular reliance on health insurance contracts, traditional practices find themselves mired in the quicksand of market consolidation, shrinking reimbursement and ever-increasing governmental regulations. It is no surprise, then, that innovative primary care physicians have embraced other models. Just last year, I detailed the rise and fall of a concierge practice in Las Vegas that opened in 2009 and closed in 2012. That summary as well as the lessons learned can be read here. While that article dealt with an attempt to expand a concierge primary care model from Beverly Hills to Las Vegas, the news so far in 2017 hasn’t been good for another primary care model: Direct Primary Care (or DPC).

DPC practices charge patients a monthly membership fee for access to healthcare and/or collect cash for each visit. DPC practices do not participate with health insurance, which is one of their self-proclaimed strengths. By not dealing with health insurance, DPC practices eliminate the significant costs associated with submitting claims, posting insurance payments and managing patient billing. The practice is paid when services are rendered (or at the beginning of each month before services are rendered). DPC practices also claim cost savings for all of the other insurance-related tasks that they avoid. They don’t have to verify eligibility, determine the patient’s payment responsibility or input and update insurance information.

Besides “contracting” directly with patients, DPC practices can also look to contract with employers, who can pay all or some of the cost to contract with the DPC practice for their employees. Online platforms have emerged to help DPC practices manage patient and employer payments, such as These online platforms automate the recurring payment process to further reduce the paperwork and tasks required of the DPC practice staff. All of these efficiencies cut expenses, improve productivity and leave more time for patients. Unfortunately, several DPC practices have closed or announced their future closure in 2017.

The first practice of note with DPC elements to tank this year was Turntable Health in Las Vegas. While medical practices in Las Vegas seldom generate much positive national buzz, Turntable was different. It opened in December 2013 backed by Zappos CEO Tony Hsieh and fronted by Dr. Zubin Damania, whose notoriety as rapper ZDoggMD helped make Turntable a national story. Turntable’s initial model was detailed HERE and HERE.

Turntable intended on leveraging their relationships with Iora Health and the Nevada Health Co-Op as part of their DPC strategy. Patients without insurance would pay $80 a month for unlimited access to primary care. They also had X-boxes in the waiting room, incorporated health coaches to connect to patients, and created a “wellness ecosystem.” Turntable was so cool that it would have to make money. (Spoiler alert: It didn’t.)

When the Nevada Co-Op flamed out, Turntable lost that employer market and related revenue, leaving it needing a surge in individual members or another large employer contract. Apparently, neither of those materialized and Turntable was sunk. Well, at least Turntable as a medical practice was sunk. Dr. Damania maintained that Turntable Health would live on as an “ethos, brand, and movement.” Turntable Health apparel would be available for purchase! But the whole DPC, seeing patients wellness ecosystem thing that Turntable did is over as reported HERE and HERE (you’ll have to scroll half-way down the page or search for “ZDoggMD”).

The second DPC-related closure was Harken Health, which launched practices in Chicago and Atlanta in 2016. Owned by UnitedHealth, Harken Health was based on a slightly different DPC model. Like Turntable Health, Harken tried to build primary care around the provider-patient experience, (or practice-patient experience). Harken Health members received unlimited primary care at Harken practices at no charge. As an insurance company interested in the downstream costs, (specialists, emergency room visits, hospitalization, etc.), Harken’s premise was that a positive provider-patient relationship would increase patient compliance with provider recommendations, improve outcomes and make money. (Spoiler alert: I don’t think it did.)

Harken had plans to expand to the Miami and Fort Lauderdale markets in 2017. Instead, it fired its founding CEO in September 2016, scrapped plans for expansion and announced on May 15, 2017 that it is set to close its practices at the end of 2017. While some studies have shown that a positive provider-patient relationship improves health outcomes and saves money, this didn’t seem to be enough to offset including unlimited primary care in the cost of Harken Health premiums, (CLICK HERE). 

The biggest shock to the DPC practice model came just a few days after Harken’s announcement when Qliance Medical Management closed its six Seattle-based primary care practices after ten years of operation as detailed HERE and HERE. Qliance was essentially the poster-child for the DPC model. It generated so much buzz that by 2013, Qliance had received $33 million in total funding, (CLICK HERE). Qliance offered primary care services for $60 to $130 a month and built its DPC model to include approximately 13,000 members. Qliance also fostered relationships with employers, with one office located inside Expedia’s office in Bellevue, Washington.

A little quick math raises some questions about the efficiency of Qlaince’s DPC model. At $60 a month, 13,000 members would generate $780,000 a month—or $9,360,000 a year. Qliance obviously didn’t make this from Year 1, but assuming a ramp up of $1 million a year over ten years, (e.g. $1 million Year 1 revenue, $2 million in Year 2 revenue, etc.), Qliance’s revenue over ten years might be in the neighborhood of $55 million—plus the $33 million in funding. And yet at the end of ten years, after what could have been something like $88 million in capital, Qliance was rumored to have bounced checks and was said to owe some providers as much as $90,000. Hadn’t the DPC model put Qliance on the road to success by shedding the inefficiencies of the traditional insurance model? (Spoiler alert: It apparently didn’t.)

Of course, I’m being a little unfair to the DPC model by noting its inclusion in each of these practice failures. Plenty of other practice models have probably faired equally as poorly in 2017. There are certainly traditional practices and concierge practices that have closed, with other practices circling the drain. Even corporate primary care has had a bad 2017. On the same day Qliance made their statement, the Justice Department accused UnitedHealth Group of using its Medicare Advantage plans to overcharge the government by more than $1 billion over the past ten years, (CLICK HERE). (Fun fact: Government insurance plans have no look-back limitations on recouping funds!) Other insurers are expected to be hit with similar allegations soon.

That’s REALLY bad news for insurance companies who have used Medicare Advantage revenue to build and acquire physician networks to administer those plans, thereby consolidating provider markets and driving down rates for competing providers without access to a Medicare Advantage plan. UnitedHealth made almost $7 billion in 2015, though, so that $1 billion hit they might take won’t hurt too bad. The bigger impact will probably be the reduction in Medicare Advantage revenue moving forward.

Turntable, Harken and Qliance may have also failed due to circumstances unrelated to the DPC model. Turntable lost a major partner in the collapse of the Nevada Health Co-op. Harken might have fallen victim to the whims of its parent UnitedHealth. Qliance had to figure out how to spend something like $80 million. (Just kidding!) Losing insurance might have truly made these companies more efficient, but the underlying question about the DPC model lingers: Is the efficiency of the DPC model enough for DPC practices to be viable and sustainable?

I suspect that the answer is “Maybe” or “Who knows?” The only answer that seems to be certain is that the DPC model—and other models—aren’t a magic elixir to the volatile health care market. Everyone loves to criticize the traditional practice model, but other models have their own issues. Turntable and Qliance were hurt by the termination of provider contracts. It is likely that Qliance and Harken were hurt by their attempt to scale, (with more than one location), as this created administrative demand that probably undermined their efficiency.

Many entities in the health care market advocate one practice model or another to physicians. Concierge medicine is where it’s at! DPC practices are thriving! My barter for livestock model is the wave of the future! The lesson from these DPC practice closing is that no model solves all problems. Each model has strengths and weaknesses, opportunities and threats. Like all of the other practice models, the DPC practice model is execution dependent—even if you have famous investors, a rich parent company or cools rap videos.