Welcome to Zappos-Style Health Innovation

1/14/14Follow @rushika1

Zappos CEO Tony Hsieh’s effort to revitalize downtown Las Vegas includes last month’s launch of a new clinic, run by Iora Health and spearheaded by physician Zubin Damania. Stanford-trained, Damania also happens to rap by the name of ZDoggMD. So it’s no wonder the project has drawn attention.

But there’s another unusual aspect to this clinic. Many of the patients will be paying for care out of their own pockets, thereby sidestepping the administrative overhead and pressures caused by health insurance.

A growing number of primary care doctors see this not only as a respite from their increasingly demoralizing work circumstances, but as a chance to do what they dreamed of in medical school. Research has long shown that good primary care is the cornerstone of a cost-effective healthcare system. In this type of setting, they can do more to help their patients—and without working to exhaustion or running up huge costs.

The patients pay for their care out of their own pockets with a modest ($60-80) monthly subscription fee. Annualized, that’s actually lower than many of today’s health plan deductibles. The doctors spend as much time with the patients as needed. They are even accessible 24/7 by phone and e-mail. In addition, each patient gets a personal health coach to help them improve their health. A coach may help diabetics learn to shop for food or help people with respiratory problems learn to allergy-proof their home.

Getting rid of insurance overhead alone cuts costs by as much as 40 percent. Letting the doctors take their time and concentrate on treatment and diagnosis also saves big money in the long run. Iora practices, and others like them, have reported savings in the 20 to 30 percent range so far.

One reason for that: The more time that primary care doctors spend with their patients, the fewer referrals to costly specialists they make, and fewer tests and procedures they need to order. Over the last ten years, the rate of referrals has skyrocketed as primary care doctors have been squeezed to do more in less time. In the 10-to-15-minute window insurance reimburses for, there is often little time to do more than type in a referral.

These newer types of clinics are a growing phenomenon in U.S. healthcare. They are referred to as concierge or direct primary care. The concierge practices are usually high-priced, cater to wealthy patients, and provide extra frills. But price-friendly, subscription-based primary care is now catching on. The number of such offices is growing at a rate of 25 percent per year, according to the American Academy of Private Physicians.

Some big-name investors seem to agree there’s promise in this approach. Hsieh recently invested in our company, Iora Health. Amazon’s Jeff Bezos was an early investor in one of our competitors, Qliance, as were Michael Dell and Drew Carey. We and others have attracted a growing number of venture capital investments as well.

Direct primary care is not just for the rich or middle class. In New York, we are partnering with Grameen PrimaCare to provide health care for members of Grameen America, a microfinance organization founded by Nobel Peace Laureate Muhammad Yunus. Together, we are building a clinic to open in mid-2014 that can meet the needs of even the poorest of New York’s working poor.

What’s driving this trend? Recent reports about insurance rate shock and big out-of-pocket expenses remind us that simply giving people access to health insurance doesn’t make them healthier. If they can’t afford the premiums or deductibles, they won’t get care. Company CEOs are particularly familiar with this problem. They want their employees to be healthy without breaking the bank. In a recent Gallup survey, 30 percent of adults reported skipping needed care because of costs.

Imagine spending as long as you need talking to your doctor about your health. What if your mother’s doctor called the hospital before she was admitted, stayed in close communication with them during her stay, and then saw her the day she was released to review her medications and treatment plan?

A provision in Obamacare even allows insurance companies to offer very low cost policies (wrap arounds) that complement this new enhanced primary care service. These policies only cover the type of specialized care you can’t get in your family doctor’s office as well as tests, hospital care, and medications, making them especially affordable. Will insurance companies see an advantage to offering such plans? Uptake nationally so far has been slow, but we are working with the Nevada Health Co-Op to offer just such a plan for the Las Vegas practice.

The self-pay primary care movement is currently small; only about half a million patients use such a practice today. But the patients who do use it report tremendous satisfaction. Direct primary care could be a big boon for middle-class patients caught between rising costs and shrinking paychecks.

For the working poor, however, such a model could be lifesaving. That’s why we plan eventually to build such clinics throughout the world. Imagine the U.S. exporting affordable care delivery to the rest of the globe? That would certainly get people’s attention.

Rushika Fernandopulle is a primary care physician, former director of the Harvard Interfaculty Program for Health Systems Improvement, and the co-founder and CEO of Iora Health. Follow @rushika1

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  • Shelterock

    Great concept, I hope it helps the right people. Closing statement is completely ridiculous. “US exporting affordable care delivery to the rest of the world” Harvard has gone to your head man!! At 20-40% savings you are still more expensive than single payer systems in the EU and they spend the necessary time with you as well, with better clinical outcomes. I’m all for Doctors and Nurses to get their fair pay and cutting Insurance profits out of the equation, but really, exporting affordable care delivery, you have got to be kidding me!

  • Jim Ingham

    With the free flow of information, pricing for healthcare services is heading down and will be much more cost effective. This type of model will play a central role moving forward, assuming, and this is a big assumption, new ACA edicts do not get in the way.

  • chuck swartz

    The burdensome costs to consumers are not the office visits, but all costs associated with diagnostic tests. This “cheap concierge” plan does not address this real problem.

    • Carol Foulds, M.D.

      Yes it does address the real problem and is the answer to rising health care costs which are caused , not as you state by expensive diagnostic tests, but by intrusion of health care carriers in the health care equation. Specialists can adopt a similar model…..all physician can deliver less expensive and “better” healthcare by adopting a direct patient care model. The mistake that Zappos CEO and Iora Health CEO are making is that they are building infrastructure which is not needed. They should be acting as match makers between patients and existing physicians practices not building new clinics and hiring physicians. The Qliance and Iora models currently deliver care from F.P.’s and I’ve yet to meet the family practicioner who can stand-in for an ophthalmologist or dermatologist.
      The direct patient care model can also be expanded to involve hospital care and this will lower costs not increase them . Back to your point about diagnostic testing…..a number of these direct patient care groups offer labwork and radiographic tests as included in their monthly fees. Some include house calls and unlimited visits (I’m not sure how they manage that but more power to them.). Others negotiate markedly reduced fees for diagnostic testing which they can’t provide. Again this is possibly because the labs etc… would rather deal directly with the patient and the insurance carrier is not a part of the transaction.
      Mr. Hsieh and Dr. Damania I have a model that will include specialists and make a great deal more money for you than building
      and staffing “direct patient care” clinics. Call me!

  • http://www.physiciantools.com/ Jim Ingham

    Good post, thank you. This is a growing movement given newer deductibles and premiums that are much higher with ACA for the vast majority of people. It actually is the way things were done before insurance companies became so heavily involved in paying for healthcare. Better primary care has actually led to lower overall healthcare costs form less ER visits, hospital stays, etc. This is a very good trend to see.