Before you set out to land an employer contract for your DPC practice, it’s important to be aware of potential stumbling blocks that you might encounter. In this fifth and final installment of our series on DPC employer contracts, we’ll cover several business and legal issues that commonly arise during discussions with local companies and provide you strategies to address them.
Some of these possible problems are relevant only to businesses with a certain number of employees or a particular type of insurance situation, but all of them can throw a monkey wrench into your pitch when you’ve got a CEO or HR director on the hook. Read on to stay a step ahead!
You can also get all of the advice in this blog series in one consolidated place by downloading our full ebook on DPC employer contracts right now: “Secrets of Direct Primary Care: 5 Keys to Landing Employer Contracts.”
Key #5: Be Aware of Potential Roadblocks
Every potential relationship between a DPC clinic and an employer is unique, but a few areas in all of them are rife with potential hang-ups. Let’s cover three of the biggest roadblocks you might find.
Roadblock 1: Running into an “Unfriendly” Benefits Administrator
When you convince a decision-maker at a self-funded employer to incorporate DPC into their health offerings, realize that you may still face a significant hurdle before any contract is inked: the benefits administrator.
As we discussed before, the majority of self-funded companies enlist third-party administrators (TPAs) to run their health benefits programs. These TPA organizations can be independent or they can be connected to a large insurance carrier, either by being part of the carrier directly or by using its provider network.
An employer who is really excited about what you are doing will demand their TPA or agent work with you…
If an employer’s TPA is associated with an insurance company, it will have a strong bias against any potential option that is not provided under the existing umbrella of that insurance company. This directly translates into a bias against making use of your offering or that of any other DPC practice.
Megan Freedman of the Free Market Medical Association notes that this tendency to exclude DPC can extend even to some independent TPAs, depending on their incentives, and she offers clear (if non-trivial) advice on navigating the dilemma: “Many self-funded employers utilize a large carrier as their TPA or have a potentially anti-free-market agent. An employer who is really excited about what you are doing will demand their TPA or agent work with you and will follow up to ensure it is happening. They will not pawn you off on their vendors to ‘handle.'”
Another useful tactic is to bring your own TPA to the table. “Sit down with a TPA that understands your value,” said Dr. Jeffrey Davenport of One Focus Medical. “I have one that’s involved in FMMA and that thinks like we do. They can put together DPC-linked plans, and when I had a big company on the line, they were perfect to go to. I introduced the CEO to them, and they came to an agreement.”
Roadblock 2: Getting Tripped up by Legal Issues
There are several unpleasant ways to get derailed by the law when orchestrating an arrangement between your DPC practice and an employer, but they can be worked around with care.
First, although high-deductible health plans (HDHPs) pair well with the DPC model, there are some caveats to such a match. Most importantly, if a person with an HDHP joins a DPC practice with a monthly membership fee, the IRS will consider that person ineligible to make tax-deductible contributions to a Health Savings Account (HSA).1 Furthermore, the IRS does not treat monthly DPC fees as a qualified medical expense, so such costs cannot be deducted from a person’s taxes or paid for from money in an HSA.2 There is pending legislation to change this, but it has not yet passed.
If issues related to HSAs and qualified medical expenses are threatening to stymie a deal, however, a smart tax lawyer may be able to help you structure things in a compliant way. “We spent more on lawyers than we wanted to, but we found a way to get fees covered under an HSA,” said one DPC physician of his experience with this area of the law.
Another subtle legal minefield is the vast body of state law. Ms. Freedman notes that, in some states, “if the employer pays DPC fees directly, the state will consider the arrangement an insurance product and subject you to that regulation.”
To avoid this fate, she advises that DPC practices have their potential employer partners look into Health Reimbursement Accounts (HRAs). “If a self-funded business is in a DPC-friendly state, they can easily pay for membership expenses by setting up an HRA and using that to reimburse their employees for DPC fees. This also preserves employee choice, letting them pick whichever DPC practice they want instead of being forced to go to one doctor.”
Roadblock 3: Not Having Enough Providers or Covering Enough Area
Large companies have large needs, and it can be difficult to argue cogently that one DPC practice can adequately serve a population of hundreds or possibly thousands of employees who may not all be in one geographic area. Furthermore, even if you have the schedule space and happen to be located close to all of them, some number will always want to see a physician outside of your clinic for whatever reason.
Both state and federal law can affect DPC employer contracts; make sure you understand the legal environment.
“For a big company, if you’re one doctor doing DPC, you’re usually not going to be very interesting to them because they have diverse needs,” said Dr. Davenport. “If they have branches spread out across the whole state, does it make sense for them to push DPC? Maybe not. We don’t have enough DPCs to be truly palatable to most large companies.”
When a 300-person company near to Dr. Davenport’s office launched a plan for its workers that incorporated a DPC option, he picked up many new patients, but he was quick to note that “it was only possible [for the employer] because there were other DPCs around. The company talked to multiple DPCs when they were pitching their new approach, and some of their employees eventually chose a female physician farther away, while some picked other places. You have to have those options for people.”
In discussing the issue with other DPC practices and with Ms. Freedman, who has helped organize plans that contain DPC options, it seems that Dr. Davenport’s experience is common. If you plan to fish for big employers, it would be smart to know the other DPCs in your area ahead of time and have friendly relationships with them. Being able to talk knowledgeably about your area’s DPC “network” may head off concerns about limitations in options and accessibility.
Thanks for joining us over the past month as we’ve covered the ins and outs of DPC employer contracts!
You know, as do we here at Spruce, that DPC has the power to keep people healthier and happier while also saving money for the system and reducing inefficiency. It only makes sense for employers to adopt DPC benefits for their employees as time goes on, and we sincerely hope that this blog series will help make that possible. We’d love to hear your feedback on it, too; let us know how it goes for you out there in the business community!
Finally, don’t forget to download our full ebook on DPC employer contracts right now so that you’ve got everything in one convenient place: “Secrets of Direct Primary Care: 5 Keys to Landing Employer Contracts.” We’ve put an extra bonus section in there, too, to sweeten the deal, so don’t miss out.