Is Direct Primary Care a Solution to the Healthcare Crisis?
by David H. Fater

Health-care policy is often portrayed as a fight between government and insurance companies. But one of the most effective cost-saving measures is to cut out both and allow patients to deal directly with doctors. This can be accomplished in a variety of ways, one of which is referred to as Direct Primary Care (DPC), a concept that has been around for several years but is gaining traction. As with any facet of healthcare there are advantages and disadvantages and one has to understand both the concept, as well as the benefits and the pitfalls. It also is important to differentiate Direct Primary Care from Concierge Medicine.  There are similarities but there are also significant differences.

Also, it should be kept in mind that many of these groups are pioneering next generation care models as well, incorporating nutrition, mental health and coaching services into holistic treatment plans that strike at the root of chronic disease. These integrated care teams design plans and wellness environments that are about as similar to traditional healthcare as Amazon.com was to Barnes and Nobles.

Let’s look at Todd Gibbons (Patient) from Any City, USA. When he has an aching shoulder or needs a physical, he can call and schedule an appointment on a day’s notice, maybe the same day. His physician is also available for phone consultations and even makes house calls. It all costs Mr. Gibbons $150 a month to cover his family of five. Costs are so low and coverage so good because the Gibbons family goes to PTC Direct Primary Care—a medical practice that treats patients for routine care and procedures for a monthly membership fee. Virtually every routine service—from electrocardiograms and pap smears to stitches and physicals—is included. There are no office-visit fees or copayments. All physician services and procedures offered at PTC are covered, and all without the use of health insurance.

Without third parties taking money and adding overhead, PTC can offer medications and lab tests not covered by the monthly fee at wholesale prices. A cholesterol blood test is $3.20 for a PTC member, but $22 at other in-network providers.  Drugs are cheaper. PTC buys directly from three national wholesalers, which compete to provide medications at the best possible price for any given patient, and PTC resells them at cost. A 30-day supply of the generic equivalent of 40 mg Lipitor for cholesterol is $3.30 at PTC. At Walmart it’s $9. Sildenafil, the generic for Viagra, is 37 cents a pill. The next cheapest option is Safeway at $2.13. Over-the-counter drugs are also cheaper and available in-house at PTC. Cetirizine allergy pills (the generic version of Zyrtec) are 6 cents a tablet at PTC, about half the Walmart price.

Costs are low and transparent. The monthly fee, whether paid by employer or individual, is predictable and easy to budget. It is important to bear in mind that patients still need high-deductible insurance or cost-sharing pools to cover nonroutine procedures and care. But complementing a direct primary care plan with one of those two options still can produce the cheapest coverage.

One of the negatives is that tax incentives currently discourage employers from switching to direct primary care plans. One possible fix would allow patients to use health-savings accounts to pay for membership. The IRS could make this change by redefining a direct primary care membership as an eligible HSA expense. Cutting the middlemen out of daily health care won’t solve all of the medical system’s problems. But altering the tax code to encourage employers to use direct primary care could help control or even shrink costs. Most important, it would improve the quality of care by letting doctors spend less time filling out paperwork for reimbursement and more time helping patients.

Direct primary care could be viewed as yet another in a long line of ideas to help reinvigorate primary care for both doctors and patients. Some view it as a panacea, others as snake oil. I am not sure what it is exactly, but I do know it is not a transformative innovation for making primary care more relevant, responsive, and affordable on a large scale. Simply put, direct primary care is a model for delivering primary care, and only primary care. The doctor charges each patient a monthly fee, generally ranging from $50 to $200, in return for timely, convenient access and a buffet-like menu of mostly basic primary care services. The amount of the monthly fee is presumably set in relation to the scope of services covered, though every practice may do it differently. For services that aren’t covered under the fee, like more extensive management of a chronic disease, the patient’s insurance — if it exists — must be billed to pay for the service or, in some cases, the physician or practice will charge the patient extra fees to cover those services.

On the physician side, direct primary care is appealing to a growing number of doctors. Many are burned out and dissatisfied working in traditional primary care practices, where the administrative hassles are high and physicians do not get to spend enough time with their patients. Many want to return to a time when Marcus Welby, MD practiced and the doctor-patient relationship was more central to the delivery of primary care. Many want greater predictability and control in their work lives.

Five Factoids About Direct Primary Care
 
1. DPC physicians foster an enduring doctor-patient relationship
Developing an enduring doctor-patient relationship through adequate appointment time is a hallmark of Direct Primary Care. A typical Direct Primary Care practice has about 600 patients, compared with 2,500 patients for an average fee-for-service primary care practice. Instead of seeing up to 30 patients or more a day, Direct Primary Care providers typically see less than 10. Many physicians believe a lot of medicine can be done electronically. It should be noted that most Concierge Medicine practices limit their patients to 600 as well; However, the Concierge Fee is greater than the Direct Primary Care fee-ranging from $2,000-$2,500. (Interestingly enough, if you add up 12 payments of $150, you are close to the Concierge Fee-but recognize the Concierge physician does not have a "Family Plan).

Additionally, Direct Primary Care physicians profess that they know their patients by name and have time for them. These longer appointments in the DPC model allow time for discussions between a physician and patient that encompass lifestyle choices with the aim of long-term health and well-being.What everyone really needs to know is that patients do get better care when their doctor is more satisfied with what they are doing. And that takes time. That is what the [fee-for-service] system cannot provide -  time with the patient.

2. DPC is growing and DOs are joining in
In the past decade, the DPC model has grown from just 21 practices to over 1,000 practices in 49 states that care for an estimated 500,000 patients, according to the Direct Primary Care Coalition (DPCC), an advocacy group. The movement has been particularly popular among DOs who estimates that 30-40 percent of the group’s members are DOs, osteopathic residents and medical students.The high level of interest in DPC by DOs may be attributed to an already higher percentage of DOs practicing primary care- But DOs also tend to be a bit more entrepreneurial and independent and their training includes some additional non-traditional treatment techniques.

3. Efforts are underway to enhance DPC
The American Osteopathic Association supports the DPC model, and has urged Congress to support a Primary Care Enhancement Act (PCEA) that includes a DPC model which would allow physicians to provide health care to the full extent of their scope of practice, including providing diagnostic services and dispensing prescription drugs. Currently, the IRS views DPC as a type of health insurance and bars the use of health savings account funds to pay for DPC. The PCEA would allow patients to use the funds from their HSA to pay for DPC. One of the downsides of direct primary care is that it can be challenging to find patients who can afford their membership dues, particularly in medically underserved areas.

4. DPC offers upfront pricing
DPC practices offer transparent pricing upfront. A monthly membership fee (typically under $100 per member, often with family discounts) covers unlimited primary care office visits and services. Patients are encouraged to buy a complementary insurance plan, such as a high deductible health plan, to pay for any complex or catastrophic medical services outside of primary care.While both concierge and DPC charge a periodic membership fee to the patient, most DPC physicians don’t accept insurance. Concierge practices, on the other hand, typically still bill insurance and often add an annual retainer fee that is usually higher than the DPC annualized membership fee.

5. DPC embraces the ‘quadruple aim of medicine’
The triple aim of medicine—to enhance the patient experience, improve population health and reduce health care costs—is well-documented and embedded in the triple aims promulgated by the ACA. DPC providers are focused on “the quadruple aim of medicine” which acknowledges that improving the work-life balance of physicians is necessary in order for the other three aims to happen.

Direct Primary Care will continue to evolve (as will Concierge Medicine). It probably will not be the solution to our broken health care system but it does provide some interesting alternatives both for physicians and patients. Primary Care Physicians should consider this concept to include in their practice as the crisis continues to evolve but this will also entail a change in the mindset of physicians.
 

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To explore ways in which we can provide assistance in assisting with your  strategy, implementing Direct Primary Care or decipher the changing reimbursement rules being promulgated by CMS in this evolving health care environment, please contact David H. Fater at dfater@alda-associates.com or Richard M. Cohen at rcohen@alda-associates.com

Is International Business Right For You?  by Richard M. Cohen, Ph.D.

(This is the third part of a three part series on whether internationalization is right for your business)

Having briefly sketched the global marketplace and addressed the question of when a company should consider an international venture.  What factors make doing business abroad worthwhile?  And when does a company have insufficient reason to proceed overseas? Having last identified the wrong reasons for going international, let's look at the right reasons.

 THE RIGHT REASONS FOR GOING INTERNATIONAL
 
Five sound reasons justify undertaking an international venture.  These reasons are:

• Your company is approaching maturity in the United States, and you have the strength and resources to go overseas.
• Your current trade with overseas customers suggests a potential market and a competitive edge.
• Analysis of your competitors’ activities abroad indicates a potential market, or their activities in the domestic arena indicate that you should go overseas to compete effectively.
• Demand for your product in the United States is exceptional, and you believe you have a unique product with universal appeal.
• Demand for look-alike products is high, or your product is sufficiently superior to the competition that it would have international appeal (or would tend to generate look-alikes).

Right Reason 1:  Company Maturity
 
Entering the international marketplace requires time, money, and resources.  Unless you have a good track record at home and a history of stable performance, an overseas venture may strain your resources and complicate problems for your domestic operations.  You should be sure that your company is meeting the demand for its products and services in the domestic market before branching out into the foreign arena.
 
Some business people overestimate their company’s readiness for going international.  A firm that has been in business two or three years may have a record of good growth that tempts management to start looking overseas.  But companies in early stages of development rarely have the managerial talent to cope with their growth problems.  Such companies have generally not even begun to reach their potential in the U.S. market.  Further, companies of this sort often lack the financial resources necessary for start-up operations overseas, for adequate advertising campaigns in an unfamiliar culture, and for extensive marketing.  Under these circumstances, underestimating the initial problems of a new international business venture is easy-and dangerous.

If your company has a longer history of good performance, however, and if you have fulfilled your potential in the domestic market, then moving into the global arena may well make sense.

Right Reason 2:  Current Overseas Trade
 
Earlier, we discussed how a preexisting clientele in and of itself is generally insufficient reason for going international.  If a company’s U.S. customers shift some of their operations overseas, doing business with them may give an impression-a false one-of a foreign market for the firm’s products.  On the other hand, a significant number of orders from one or more countries does warrant further investigation.  Orders from customers with no U.S.-based operations suggest a potential market and point to a market niche that closer suppliers are not filling.
 
If you find yourself in this situation, you should consider visiting your overseas customers to discuss why they are buying your products.  Such a visit can be enlightening, and can indicate that you have a sound basis for an international venture.  You may find that your customers have not found a competitive product; in that case, you are at a competitive advantage either because of your product’s price or quality.  On the other hand, you may discover that the situation is in fact less promising than you first hoped.  You’re certainly better off experiencing an early, small disappointment than a larger, more expensive one.  In any case, the only way to determine the nature of the situation is to meet with your customers and find out why they buy your products.

Right Reason 3:  Market Potential
 
Doing simple market research or reviewing your competitors’ financial statements can give you an idea of the market other firms are servicing abroad.  You should look farther than your U.S. competition alone, however.  For example, if your business is manufacturing appliances, you should acquire financial and market data on Phillips, Siemens, and other European competitors, as well as on Japanese firms.  Similarly, if you are dealing in retail goods, consider visiting at least a few stores overseas.  Viewing, the products for sale and noting their origins can provide considerable information about the potential in these markets; talking with distributors and potential customers will give you an even more detailed impression.
 
Another situation that may justify going international is one in which your foreign competitors have invaded your domestic territory.  With the global nature of the contemporary marketplace, you cannot count on corporate survival on the basis of U.S. sales alone.  Some of your most energetic local competition may be based halfway around the world.  If you find that your company is losing sales to overseas rivals, you may have to confront them thousands of miles away simply to retain your home turf.

 Right Reason 4:  Exceptional Demand for Your Product
 
Some products catch the whole world’s fancy.  The companies producing them almost can’t go wrong in their marketing plans.  American blue jeans are a classic example.  From South America to Europe to Asia to the Soviet Union, people love to wear blue jeans.  Of course, companies in many countries produce these garments-often violating copyrights and trademark laws-but the authentic item holds a special appeal.  A single pair of Levi’s or Lee’s jeans sells for hundreds of dollars on the Soviet black market.  Similarly, American pop music sells wildly around the world.  Even in some of the most anti-American cultures, the same people who protest against the United States simultaneously covet and acquire American-made goods.  The upshot of this situation is that some products seem fail-safe overseas.
 
Assessing which products fall into this category is, of course, difficult, and the risks are great.  A product with widespread appeal, however, may justify the risk.  If the McDonald’s Corporation had based a decision about going international solely on reasons 2 and 3 (current trade with overseas customers and analysis of competitors’ activities), the company probably never would have taken the Big Mac and Egg McMuffin overseas.  Neither reason applied to McDonald’s.  Before the company’s inroads, little or no competition existed in its field.  Yet the company’s international operations have succeeded literally everywhere.  The McDonald’s outlet on Orchard Road in Singapore, for example, has the highest customer traffic of any in the world.  Someone within the McDonald’s organization had the foresight to believe that the company’s products would have international appeal.

Right Reason 5:  Demand for Look-alike Products
 
Do your products have the sort of appeal that will eventually tempt someone to copy them?  Clothing, appliances, luxury food items, and other high-status products often fall into this category.  The fact is, if you don’t take such products overseas, someone somewhere will copy them and reap the profits.  American businesses lose millions of dollars annually to look-alikes and pirated products marketed under their brand names.  The businesses that suffer are most often mature companies with established international operations.

In certain parts of Southeast Asia, for instance, you can buy imitation Rolex and Cartier watches for a small fraction of their cost in the United States.  Similarly, Apple and IBM computer look-alikes have been sold extensively during recent years.  Likewise, copies of designer clothes are sold well below the cost of the originals.

Here, as with the kinds of market research already mentioned, you need to proceed in part through “gut feel”.  However, you can get a sense of the situation by visiting the various countries around the world that might provide customers for your products.

WHY BOTHER?
 
The preceding discussions of the global marketplace, the complexities facing American businesses, and the wrong and right reasons for going international may have left you wondering why your company should bother in the first place.  Isn’t the task too difficult?  Isn’t it too risky?

The answer, as already noted, depends mostly on factors specific to each company.  However, the general situation is so significant that you should take special care not to miss the forest for the trees.

• The U.S. economy is limited in size and growth rate.  Several factors influence the situation.  The U.S. population is fairly stable; American consumers’ spending power has increased only slowly over the past decade; many products have reached maturity in their domestic life cycle.
• The world’s population is shifting.  Currently, the population of the earth has reached approximately five billion people.  By far the greatest growth is occurring in the Southern Hemisphere. 
• Per capital income is rising in some regions.  Until recently, most countries outside the Northern Hemisphere had only small population segments with any appreciable buying power.  Now many nations have become industrialized.  Even some previously depressed economies (such as those of India and the People’s Republic of China) show signs of remarkable development.
• Recent changes (like improved infrastructure and communications) are affecting the distribution of goods.  Obtaining raw materials, shipping finished products, and exchanging data are now easier than ever throughout the world and possible for the first time in some areas.
• Nations have become economically intertwined.  Companies across the world may present as much challenge to American firms as local competitors; there is no commercial safety in geographical distance.
• Other nations challenge American’s economic well-being.  The United States has half willingly, half unwittingly relinquished its economic primacy in the world market.  The consequences of ignoring global competition will affect the quality of life in this country for decades to come.
• Done right, international ventures are fun, challenging, profitable, and rewarding.  The potential benefits-personal and corporate, tangible and intangible-usually outweigh the potential risks.

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If you are interested in exploring the benefits of becoming an international company, please contact Richard M. Cohen at rcohen@alda-associates.com or David H. Fater at dfater@alda-associates.com.

Representative Engagements

• Advisor to three drug development companies for raising capital, designing and implementing clinical trials and interfacing with the FDA.
• Initiated and developed a de novo Accountable Care Organization to participate in the Medicare Shared Savings Program which grew to over 250 physicians over three years which successfully generated savings.
• Financial advisor to large physician practice in connection with a potential acquisition transaction where engagement includes determination of strategic and fair value and assisting in negotiations for closing the acquisition and in post acquisition integration.
• Review and in-depth analysis of new Medicare Reimbursement rules for subsidiary of Fortune 50 insurance company and assistance in developing a business model enabling the capture of a new revenue stream for both physician practices and affiliated providers.
• Acquisition due diligence and integration assistance for a public healthcare staffing company involved in numerous acquisitions. Retained by parent company to manage acquired company for 22 weeks through ALDA developed integration plan.
• Turnaround assistance for a near bankrupt client company, including tax and financial restructuring, and ultimate sale at a significant cash price.
• Leadership of development of client company's strategic plan for the next decade and assistance in repositioning the company.
• Determination of strategic value of a client company, packaging for sale and assisting in negotiations.
• Providing the entire management team for several life science and healthcare companies from early stage through obtaining additional patent protection, guiding clinical development plans, navigating the pathway through the FDA, establishing the manufacturing processes, initiating commercial sales and eventually transforming the Company into a publicly traded Company.
• Determination of strategic implications of a line of business with weak performance; development of strategies to maximize profitability contribution.
• Turnaround assistance for a troubled venture-backed company, including raising additional debt and equity capital.
• Acquisition and financing assistance for a public, international railroad in connection with a $300 million cross-border acquisition and refinancing.

Our experienced professionals are dedicated to helping clients unlock inherent value and create new value.

The ALDA Team includes, among others:

David H. Fater - Chief Executive Officer

Strategy, capital markets, restructuring, and mergers and acquisitions experience with public healthcare companies focused on physician management, rural healthcare, nursing homes, HMO's, diagnostic imaging and medical devices. Deeply involved in the implementation of the Affordable Care Act with Accountable Care Organizations, Independent Practice Associations and Management Services Organizations. 

Richard M. Cohen - Senior Operations and Business Development Executive

Healthcare operations and worldwide sourcing experience. Skilled in healthcare (physician management, clinical trials, medical and patient process flow, diagnostic imaging and life science) operations as well as in issues dealing with importing, exporting and manufacturing operations in South America, Far East and Europe. 

Thomas J. Bohannon - Senior Financial Executive

Accomplished, creative CPA, outstanding analytical and technical abilities. Has experience for over 40 years in public accounting and private industry including nursing homes, medical device companies,  hospitals, not-for-profits, retail, manufacturing, import/export and natural resources.

A. Ronald Turner - Senior Healthcare Executive

Senior healthcare industry executive with strong entrepreneurial focus including CEO and COO positions with start-up hospital companies and a publicly-traded hospital company. Extensive and successful operations experience for more than 50 hospitals and 9 nursing homes, and senior reimbursement experience for a major publicly-traded hospital company and a national accounting firm. Experienced in mergers and acquisitions, led operational turnarounds and debt restructurings that created significant value.

Mark W. Caton – Senior Healthcare Executive

Senior hospital executive with over 30 years experience in operating not-for-profit and investor-owned rural/community hospitals as CEO or COO, and Regional COO with several national hospital companies.  Skilled in strategic planning and business development, operations management, revenue cycle management, medical staff development, and quality/resource management.

Daniel N. Weiss, M.D., F.A.C.C. - Chief Medical Officer

Medical devices and healthcare practice experience, engaged in a private medical electrophysiology practice where he performs numerous invasive cardiac procedures and has served as a consultant for several Fortune 500 Medical Device Companies including Philips, Boston Scientific/Guidant, St. Jude and Medtronic, as well as for several medical device and drug start-up companies. 

David Bott - Senior Information Technology Executive

Systems and network support solutions experience, proviedes analyis of strategic business needs and assessment of business models and their integration with technology.  

Santiago Guzman - International Executive

Experienced in new project development for companies in a variety of industries from start-up to Fortune 500. Client relations management, fluent in English and Spanish. Skilled facilitator for introductions with influential leaders in South America including those in the health care industry. 

With offices in:

• Delray Beach/Boca Raton, FL
• Atlanta
• New York
• Quito, Ecuador

For additional information, please contact:
David H. Fater, Chief Executive Officer
ALDA & Associates International, Inc.
15977 Brier Creek Drive, Suite 100
Delray Beach, FL 33446
(877) 845-4657
dfater@alda-associates.com