Dr. Ryan Neuhofel joins us this week to talk about his practice, NeuCare, which is a very different way to approach primary care medicine in the United States.
What is direct primary care? How should health insurance work, and how is it broken in our health care system today? How do primary care doctors currently get paid? Why is managed health care so expensive? Is direct primary care part of what a free market in medicine might look like?
Show Notes and Further Reading
You can find more information about Dr. Neuhofel’s practice at neucare.net.
Our episode on “The Statrix” is what originally prompted Dr. Neuhofel to send us an email.
Trevor Burrus: Welcome to Free Thoughts from Libertarianism.org and the Cato Institute. I’m Trevor Burrus.
Aaron Ross Powell: And I’m Aaron Powell.
Trevor Burrus: Joining us today is Dr. Ryan Neuhofel, a physician in Lawrence, Kansas. A few weeks ago, a few episodes ago, on an episode we did about the Statrix, I discussed Dr. Neu, as he goes, as his patients call him, Dr. Neu’s practice, which is called – sometimes called “concierge medicine” and sometimes called “direct primary care medicine”.
I brought it up as a really good example of something that defeats the Statrix and then Dr. Neuhofel actually contacted me, which is how this episode got started. So welcome to Free Thoughts by the way, Dr. Neu.
Ryan Neuhofel: Thank you for having me.
Trevor Burrus: And I guess we should start there. In the episode, I directed our listeners to NeuCare.net, which is the website of your practice. But if they go there, they really see that it’s very different. It has prices and a bunch of things that you never see in American medicine. So what is the model of this direct primary care you’re running and how does it generally work?
Ryan Neuhofel: Yeah, well – yeah, thanks for having me. So direct primary care has been around for quite a while and simply put, it’s a direct relationship financially with a primary care physician. So the way that most practices are structured is kind of like joining a gym or subscribing to Netflix. People pay us a monthly fee, a membership fee as what most people call it.
For that monthly fee, we provide full transparency than most primary care services and we’re able to do things a lot better for people and save them money in many circumstances. But it’s really – it’s kind of stripping away all of the red tape and the middle men that normal healthcare has in America.
Aaron Ross Powell: What’s then the benefit for you? Because obviously this isn’t the model of most physicians. So why aren’t more of them doing this sort of thing?
Ryan Neuhofel: Well, that’s a big complicated question of why more people aren’t doing it. I mean to me, the benefits are self‐evident. But the doctors who are doing this, the big difference is when you’re running a medical practice, it is a business at some level.
So the red tape, the paperwork, the administrative load, the business of medicine, is very, very complex and so when you’re running a small business, the simpler your business model is, the more you can focus on your mission, the service that you provide.
Unfortunately, in American healthcare, the system has gotten so complicated that it distracts you from what you’re really trying to do, which is care for people and provide them that service, your professional service. So that’s really the big benefit is you can kind of start with a blank slate and structure things to your patient’s needs and I don’t have to worry as much about the paperwork side of things. There are many studies on this and the awareness of the administrative bloat is very well‐known and very well‐studied in medicine. But people don’t quite know how they’re supposed to escape that. So everyone regardless of their politics says yes, there’s too much paperwork. There are too many hoops to jump through. But what can we possibly do about that?
So we’ve kind of created this monster and people just don’t know how to get away from it. Direct primary care is an attempt to do that.
Trevor Burrus: What do you have to do in order to set up this – you have to reject certain things that the government offers in order to set this up. So what do you have to do?
Ryan Neuhofel: Well, if you think about the normal healthcare system, people actually – it’s very difficult to actually talk about healthcare to most lay people because they immediately start associating everything with health insurance and they don’t even often make a distinction between the two and you can hear this even in people who are fairly well‐versed in healthcare and health policy. They use the terms interchangeably.
So the entire structure of our healthcare system is based upon a third party fee for service payment, meaning that some third party has collected the money, either an insurance company or the government, and then they dole that out in the way that they see best fit a fee for every service that I provide.
So that transaction between the doctor and whoever is paying, which is 90 percent of the time not the patient paying or 90 percent of that tab is not paid by the patient, that dictates everything. You know, the way that you get paid, it requires certain documentation. It requires certain things that the doctor does in order to get paid and oftentimes that doesn’t – it doesn’t really align with the service you’re even trying to provide. So it really limits you in what you can do. But most people, they think about their healthcare and health insurance as this one kind of messy thing. But they don’t make a distinction between me and then a health insurance company at some level.
Trevor Burrus: So you don’t take Medicare or Medicaid.
Ryan Neuhofel: I don’t take any insurance at all and really that system, that fee for service system is implemented in private healthcare, in government healthcare. So it’s not unique just to Medicare and Medicaid. I would say dealing with BlueCross or ETNA or take the pick of your private insurance company is very similar. I mean there are some distinctions but this is not unique to just government payers. This is true of all third party payers and really it’s not even health insurance at this point. At that point is a prepaid managed care system. We call that an HMO or a PPO and so really it’s not insurance as we would think of in any other industry. If you have house insurance, you don’t use your house insurance to clean your carpets or fix a broken window or repaint your front door. You use it in case that your house burns down to the ground and car insurance, you can make a lot of other analogies.
But we really don’t have insurance at all. We have a prepaid, managed care system and healthcare at least for the past 40 to 50 years in America.
Aaron Ross Powell: In the episode of Free Thoughts where Trevor first introduced your practice, the argument that he was making more broadly was that we get these laws and these regulations and in this case, the system that created our modern health insurance or managed care regime, and then it becomes really difficult to kind of think outside of that box.
We think of that as the way the world is and so I find myself – as you’re describing this kind of – still thinking within that box in that, so they – if I’m patient, your service provides primary care. But if I get into serious trouble, I’m going to have to go to a hospital or a specialist or something that’s going to be really expensive and something that I’m going to want insurance for. So I’m going to want insurance even if I’m using …
Ryan Neuhofel: Absolutely.
Aaron Ross Powell: So then why would I then go to you if I already have this insurance that would also be covering the kinds of things that you provide?
Ryan Neuhofel: Well, the system that covers A to Z already exists. It’s called an HMO or PPO and it’s what has led to what we have now. So no – and that’s one of the big misnomers that direct primary care – I’m not anti‐insurance. I am for using insurance in a smart way. To make an analogy – I know that cars and people are different. I think my job is special and what I do is unique.
But if you tried to use your car insurance to do everything related to your car, if you used it for tire rotations, oil changes, you would have to get a prior approval before you left town and they would tell you which gas station you go to.
So that wouldn’t make any sense. Everyone would reject that idea. Now if you have an accident and you wreck your car and you have to pay $10,000 to fix it or replace it, insurance then kind of makes sense. That tradeoff of payment for that makes sense, but much in the same way of healthcare. What I do as a primary care physician can accomplish what most people need on most years. I would say 80 to 90 percent of people 80 to 90 percent of the years of their life. They don’t need anything more than what a good high practicing primary care physician can provide them.
There are always going to be circumstances where things get very, very expensive and those unexpected expensive things, of course you need a financial tool in place to cover those. But why we are trying to cover or pay for primary care services and the very rare chance of getting run over by a bus in the same mechanism, the same manner really doesn’t make sense.
So yes, it’s all healthcare. But the way that neurosurgery or cancer treatment works is so radically different than what I do as a family physician. I don’t think there needs to be an overarching way that we do all of that in the same way.
Aaron Ross Powell: So one of the things that our – my colleagues at the Cato Institute doing healthcare have pushed for, for a long time, is health‐saving accounts. Among the things that you opt out with your models – so you opt out of insurance. But can you take – could I pay for your services with my HSA?
Ryan Neuhofel: Right now, that’s actually a pretty hotly debated topic in the direct primary care world. So, the way that the IRS used this and then structured HSAs has made it very complicated and the short answer is no. But I won’t bore people with all the IRS statements on this. So I think the system that we all envision is that people have great access to primary care because everyone regardless of their politics wants to figure out how do we provide people better primary care. If we can do that, we can keep people away from the expensive care most of the time.
So returning more control of the money back to people through an HSA is a good idea. But unfortunately the way the HSAs were structured was still kind of insurance‐centered. In fact, I have an HSA and because I changed my insurance policy, I don’t – I can’t contribute to it anymore. So HSAs are kind of a step in the right direction, but there’s still a lot of – they were still formulated on the idea that insurance is going to be managing all your care at all levels from A to Z.
Trevor Burrus: I’m looking at NeuCare.net right now and every time I look at this, my mind still gets blown. You have – OK, so membership, if you’re looking at this as individuals you pay – if you’re 18 and under, you pay $35 a month; adults, 19 to 69, pay $50 a month; and you get communications, phone text and emails with a doctor or nurse, which is mind‐blowing right now. I’m already pretty surprised. Clinic visits when required, yearly wellness and prevention planning, some routine labs and tests, medical equipment lease such as crutches, yearly flu shot and an access to discounted wholesale pricing on other services.
This is insane. You go back to this – you have high‐tech after hours. You do house calls, which is like 1920s kind of Our Town Thornton Wilder stuff I think. Same day, here – you can see them on the same day. You can have extended visits and you have upfront prices. Now, why doesn’t this stuff exist for people who aren’t doing correct primary care? Why is this so sci‐fi and why can’t you do it?
Ryan Neuhofel: Well, you can kind of get into the chicken or the egg argument. But I think the way that we have structured payment and the fee for service, third party, very complicated system, it’s not that doctors don’t care. It’s not that doctors don’t want to serve their patients. Almost every physician I’ve ever met is very caring and very committed to providing great care. But the payment, the business of medicine, does not lead to those types of things.
So what’s really interesting – I’m not trying to diminish how cool I am. But a lot of our patients don’t even quite understand this. They think maybe that I’m able to do the text message and email and see them just because I’m really nice. And I am pretty nice and sometimes cool but that’s not why I can do what I do. Doctors get paid for office visit in the normal system. So if that’s the only way a doctor can get paid, basically the only way they can change the revenue equation is to bring more people in per day. That’s the only way they get paid. They can do more stuff to people. But they don’t get paid to sit around and talk on the phone or email or text message with patients. I do. I structured my business so that I can meet people where they are when they need to be seen.
But even further, I have such a lean business model that if you look at the average practice, in order to run a practice, per physician or per provider, you’re looking at a minimum of four to eight staff just for kind of the administrative side of medicine. So the majority of overhead costs for a small medical practice or a hospital either is actually not clinical stuff. It’s people who are coders and builders and people who are waiting on hold.
It’s all this kind of very messy business stuff and most people are not – who are employed in healthcare are not clinical. They’re not actually talking to patients, taking care of them. Patients don’t see all this stuff. This is stuff that happens in an office or a backroom somewhere. Because I can work directly for my patients and not have to hassle with that stuff, my entire clinic is run with me and a nurse. I have no one else.
So my overhead is very, very low. It’s very high‐tech and very lean and I do it because I structured the payments so I can do those services. It’s not because I’m nice or cool. In the normal system, it makes total sense. I mean we are getting exactly what we pay for.
Trevor Burrus: So your patients then – I mean there are people – we talked before and you didn’t like the term “concierge medicine”. But your patients – you’re in Lawrence, Kansas, which is a nice college town. They’re pretty rich I assume and this probably – well, it doesn’t work if they’re poorer patients.
Ryan Neuhofel: Yeah. Another huge misconception – thanks for the setup.
Ryan Neuhofel: Yeah. So yeah, I think that’s the big misperception that the majority of people who are struggling to afford healthcare are not – they’re not all poor. So the patients that we serve in fact are probably a lower socioeconomic demographic than what even the average practice is. Fifty percent of my patients are uninsured. Majority of them have high deductible. So they’re paying boatloads of money, inflated mind you costs out of pocket for what they need.
So we’re really trying to serve both of those. We’re not just trying to say like, well, the country club, if you pay me $1000, I will take better care of you. I don’t have any qualms with that. I don’t begrudge anyone for doing that. But what we’re trying to solve is a much bigger problem. We want to provide better quality care and we also want to make it more affordable and more transparent.
So almost every direct primary care physician I know is serving that demographic. We’re serving regular, middle class people. Now not everyone knows about us. Not everyone understands what we do. But we’re not serving and the reason I’m reluctant – and I never use the term “concierge” – is because a lot of concierge – probably a majority of people who call themselves concierge, they are charging a membership fee, a retainer fee. But that’s on top of the normal, messy insurance billing system. So there’s a huge company called MDVIP. They consider themselves concierge. I mean it’s VIP. It’s in their name.
They basically are charging people about $1600 a year on top of the normal insurance coding and billing systems. When people go in, they’re still paying their office visits. They’re not doing the ancillary discounts and services that we are. So I think we’ve been very kind of typecast because concierge medicine has been around for a long time. It will always exist. There’s always going to be people catering to the country club.
But I think direct primary care is trying to solve a much bigger problem than just people who are wanting special treatment.
Aaron Ross Powell: How scalable is this model? So it works for primary care. But could it be used to replace our current system for things like specialists or hospitals or the bigger, more scary stuff?
Ryan Neuhofel: Well, I mean primary care is unique. There’s no doubt about that. The ongoing relationship that people have with their primary doctor – you know, I might be overly romantic about this. But I think it is a unique relationship. So the way that other services should be structured, I don’t think that you can take all the same principles that we have applied as primary care doctors, who have this kind of longitudinal ongoing relationship with people. I’m going to apply that to something like – someone needing an orthopedic surgery.
However, there are specialists who are catering to more transparent pricing models. I think the Cato Institute has highlighted the Surgery Center of Oklahoma, Dr. Keith Smith. So he has shown that you can absolutely strip away some of the fat in medicine and boil down the payment system, make it simpler. Of course those things – there’s always going to be a time and place. If you get admitted to the hospital, if you have surgery, those things are kind of inherently expensive.
But I do think that what we’re seeing in the market is because direct primary care is growing so much, that there are services that are starting to cater to us. An example of that would be – there’s a company called RubiconMD, which is basically an e‐consultant platform. Think of it kind of like a doctor’s – primary care doctors and specialists having like a secure place like Facebook where we can chat about our patients.
So I can use a platform like this. Share a case of one of my patients with this consultant service and I get responses within hours typically of the specialist. So I can share a picture of a rash or lab values or an X‐ray and instead of sending people through the normal – you know, you got to pay your co‐pay and wait two weeks to see the specialist. I can get responses within the same day.
That’s also mind‐blowing when I describe that to people, that I can meet online with a specialist. That won’t work for everything. They can’t do surgery over the internet. But the intellectual side of that specialty care could be handled most of the time with a remote, efficient – and I don’t charge my patients for that service at all. So they basically get free online consultants, unlimited as much as they need.
So that’s how much like a radical shift in thinking can occur if you kind of strip away the managed care aspect of these things.
Trevor Burrus: My head is spinning. I thought I even understand a little bit to get out of the Statrix mindset about how much you can do.
Ryan Neuhofel: We all live there.
Trevor Burrus: Yeah. You have a grade term you use. We talked before battered patient syndrome. Can you describe what that means when people come to you and experience your care?
Ryan Neuhofel: What I have experienced doing this for almost five years is that it’s really hard for people to even imagine something different. So I have – I’ve had many experiences where I spelled out what we do to a patient. They have their own medical history and they’ve kind of thought we were cool. They heard friends say we were cool. But they want to know on paper. How can you save me money? I want to see it.
So we spell that out for them. It’s $50 a month. If you average three or four visits a year, you get these labs done. We have these discounts on these meds. We’ve demonstrated to them in black and white you can save money with us.
Trevor Burrus: And then they say, “At what point are you trying to sell me timeshares in Mexico or Amway products?”
Ryan Neuhofel: Absolutely. And they think there’s some type of catch that either I’m giving – I’m importing drugs illegally from Guatemala or that I’m somehow like a huckster. It’s really hard for them to even get over that, that it’s possible to do what I do for the price that I do it, because they have seen – I’ve had patients – a good example, patients who have had an MRI previously and need another one. They paid $2000 at the hospital and they said, “You know, doc. I think I need an MRI in the other knee. But I really don’t want to pay for it.”
So well, the good news is I know a place that’s not too far away from here. It’s – they give you an upfront cash price for MRI, 450 bucks. So we can get it done. You don’t have to pay $2000 and they’re like, “Whoa! I don’t know. I want a good MRI.” Like somehow, it was like some type of generic like, terrible – no, it’s actually a big radiology center. It’s owned by radiologists. It’s probably a better machine than the hospitals.
But they just – they’re confused about how that’s possible. How can one place charge $2500 and you’re telling me, if I just paid cash, I could spend $400 and it’s just as good? They think there’s some kind of trick. So I think that kind of – over decades of having this managed care and lack of transparency, that people – it’s hard for them to fathom that we could do what we do and they think there’s some kind of trick to it.
Aaron Ross Powell: Why are the prices – so the insurance companies are at least to some extent competing with each other and they tell you how much your premiums are going to be. We would all like to be paying less. So if an MRI can cost 450 bucks, why is the insurance company charging 2500? Why isn’t someone else, some other insurance company saying, “Hey, we’re going to provide the same managed care. But the amounts we’re going to pay to the radiologist and elsewhere is going to be so much lower, that you’re going to pay a much lower premium”?
Ryan Neuhofel: Well, I think the equation starts – the formulation of this starts at the provider level, because the insurance is just a payment – managed care is a payment mechanism. It’s not where kind of the cost of everything starts.
So if you look at where everything starts, if we take lab work, office visits, MRIs, whatever you’re discussing, if the person providing that has to have all of this overhead expense. So labs are a great example. So we subcontract or client‐bill labs and when we contract out the rate for our labs, we’re paying them a simple invoice, monthly invoice. There’s no coding. There’s no alphabet soup for them to justify getting paid by an insurance company.
For everyone who deals with insurance, that’s very, very complicated and that comes at a cost. It’s usually a direct cost in employing someone to do that. But if you can have a simple cash transaction, it changes everything.
When we client‐bill our lab work or X‐rays, we’re getting them at less than half or sometimes 80 percent less, even what Medicare would pay. People consider Medicare a low payer. But that’s because the people that are providing that service, the lab company or the place that takes my X‐rays, they’re like I just – you just – it’s a simple cash payment. Well, yeah, we can do that for 25 bucks then.
But if we have to deal with all the hassles and hoops of billing insurance – because if you went and used your MRI – your insurance to pay for that MRI, well, the hospital and I – I’m still dealing with that paperwork and all of that administrative aspects of things. But if they just got an upfront simple transaction, it lowers the cost all around.
So, even other providers are recognizing – but even that is not that simple because I have specialists and other companies who are like uncomfortable accepting cash for payment and that’s kind of where the Statrix comes in. Some people can’t even realize that, oh, this would actually be much easier for me and I would still make as much money.
Trevor Burrus: They don’t want to see the cash on the front end. They just want them to hide on the back end. That makes them feel good about it.
Ryan Neuhofel: That may be part of it. Yeah, there’s definitely some kind of –
Trevor Burrus: There’s already cash being transacted in the insurance system.
Ryan Neuhofel: Well, yeah.
Trevor Burrus: You want to go in and walk out with just your co‐pay or whatever and you feel good about yourself.
Ryan Neuhofel: Well, it’s funny because a lot of the critics of direct primary care, they will kind of in a disparaging way – they will say, “We’re cash‐based and we only work for cash.” My immediate response is, “Is BlueCross paying you in potatoes?” I mean they’re paying you in cash. I don’t see altruism in a third party paying me versus – you know, a big company paying me versus my patient directly.
But yeah, I mean – so there’s a lot of kind of like subtle things, saying something is cash‐based when – I know that there are other physicians in my community who charge $400, $500 for ingrown toenail removal. My patients get – get $10 because of the procedure equipment that I use.
So yes, I’m cash‐based. It was $10 for them to get their ingrown toenail removed and it’s $450 in another place in town. So yeah, I mean I guess we’re both cash‐based.
Trevor Burrus: So this sounds like someone could be thinking that you’re in the profit mode of game here and that there’s something unseemly about this. That’s sort of essentially the – one of the big critiques of any sort of market‐based medicine. It’s like medicine for profit is inherently immoral.
Now of course you have your two‐person operation and you have a family and you want to take home something at the end of the day.
Ryan Neuhofel: Yes, I do.
Trevor Burrus: This has something to do with how you negotiate prices for example. You negotiate prices on these MRIs and you’re testing and you use your patient pool to negotiate this. But you also have a personal incentive to make it as cheap for them and also so you don’t have to pay as much either. So you can actually welcome it. That seems to be ultimately a good thing for the patients.
Ryan Neuhofel: I mean I think it’s a win‐win all around.
Trevor Burrus: Of course, yes.
Ryan Neuhofel: So yes, this is my business. This is my livelihood. I absolutely could not do this if I didn’t make an income. I even have patients kind of think that I’m some type of saint, which I’m happy that they want to label me as that. But no, I mean this is my livelihood and so my expectation was to make at least an average income for a family physician. If I somehow make more than that down the line, that’s awesome. But yeah, I mean this is not – I’m not doing this out of the purely altruistic thing.
I mean I – if I want to do that, I would go volunteer and I do do that. But yeah, this is my livelihood. I’m trying to be an advocate for my patients by providing them the transparency in services. But yes, at the end of the day, I have to make money or I can’t do this.
Trevor Burrus: You talked about – a lot of discussion is discussed on the – turning people away, turning chronic conditions, and that’s a big part of – every time we reform healthcare as we did with Obamacare, it turned diabetics or people like this way. How does your model deal with chronic conditions? Are you faced with the situation of turning people away and – I was going to say and letting them die on the streets, because that’s what – again, that’s the classic routine.
Ryan Neuhofel: Well, I think I care for them much better. So the funny thing is, is because of the flexibility of what we do, I’m able to meet people’s needs of all levels. I have patients who are extremely sick on hospice. I have patients who are extremely complicated with chronic diseases. I think they need this type of care more than anything else, more than anyone else.
If someone is healthy and they never see the doctor, then I guess no medical are is really that helpful for them. But yeah, I think the need of those types of patients, this is more important to them than anyone else. So whenever we have people enroll with us, our pricing is based upon age to a small degree. I mean all adults 19 to 69 pay the same and seniors pay a little more and kids pay a little bit less. But we don’t have any type of screening process in terms of their medical conditions.
In fact, most of our patients to have chronic diseases because they see a much better value, because I’m providing them lab work and they tend to require more visits. So they’re getting a much better bang for their buck than a person who never goes to the doctor. So yeah, I think that I don’t have to worry about that at my level, because primary care is – everyone needs primary care, whether they’re a horribly‐controlled diabetic or they’re a healthy 22‐year‐old. They need different things at different times. But I don’t necessarily have to factor that in. I have to factor in can I have enough patients who are paying a fee to make my revenue high enough that I can take home a decent pay.
But I have no requirement or no litmus test or anything like that about people’s preexisting medical conditions. Now that’s different when you start talking about insurance and they have a risk adjustment. But the riskiest thing is I have to see people a little bit more. But I’m not on the hook for – you know, if they end up with a heart attack or dialysis, because I’m not insurance. So that doesn’t even enter our equation at all.
Trevor Burrus: So now, you told me a story about a patient who came in to see you, who was at a – I think it was the Direct Primary Care Summit who discussed – who seems like one of these patients that the American healthcare system – or has been consistently reformed to try and save. But still, they’re constantly there. They slip through the cracks. They slip through the safety net. They have many different preexisting conditions. Can you tell that story to our listeners?
Ryan Neuhofel: Yeah. So last year at the Direct Primary Care Summit, which is a big group meeting for the doctors who are practicing this model or planning on it, I had – one of my patients actually got up on stage and tell his story. I think that people’s stories are so much more powerful about the bad aspects of our system than anything I could ever say. I could talk here for hours and I’m a doctor and I’m in it for myself and all of that. But whenever you sit down and you listen to people’s stories about how the system has failed them, it really changes your thinking about it. So despite everyone’s best intentions – and I think most people who are in healthcare, even – probably most of the people in the policy world, they think what they’re doing is helping people.
But as a doctor in the trenches, I see so many people, whether they have insurance or not, who fall through the cracks, who get bad care, who avoid care. So I took one of my patients who had had a really bad stroke, was hospitalized for a week, had really never gotten much medical care prior to that, because the – hardworking guy, didn’t – he had insurance a little bit here and there, but he had never really probably taken care of himself like he should. He ended up having a stroke and got discharged from the hospital with a boatload of medications and sure, he had a social worker in the hospital and he ran through the hospital system like I’m sure most people think should be done.
But they sent them out into the wild with no actual plan to take care of these problems. So they ended up referring him to kind of a safety net clinic which is supposed to take care of poor, uninsured people and I know this clinic. They’re very well‐meaning, very well‐intentioned. And because of some paperwork, snafu, this guy, because he’s self‐employed, it made it look like he made a little more than he really did.
So they referred him to me. He was very upset about his whole experience. He wanted to get back to work and really was determined to do that. But he felt very turned off and felt like they were kind of just trying to push him onto disability or something like that, according to him.
But they sent him home with a bunch of prescriptions that cost hundreds or thousands of dollars when he went to the pharmacy. He said, “I have no way to pay for any of that stuff. So I’m glad they gave me these, but they didn’t really give me a plan. I have no way to afford this.”
So through a relationship that took over a year, we worked very hard to kind of get control of his diabetes and his high blood pressure and all of these problems. We were able to lower the cost for him tremendously because we were aware of it.
So he’s back working full time and he’s the type of guy that I think a lot of times gets kind of written off, that we call them a train wreck and they have a terrible thing happen. They’re very difficult from a medical standpoint to kind of get on the right track. I think in the normal system, I’ve seen so many people like him fail because there wasn’t someone there to be his advocate.
Again, it’s not that we don’t have resources. They gave him lots of paperwork and tried to direct him in the right place. But there really was no one there. So what I’ve kind of developed in my community is in some respects, I’ve become often a safety net for the safety net clinics. If someone doesn’t have the right paperwork, if they’re not a citizen, if they don’t live in the right county, it they make a little bit too much, they’re kind of like, well, you either have insurance or you’re qualified for this or you’re SOL. So I think that’s a huge need that we’re serving here for a lot of people.
Trevor Burrus: It seems that relationship too. The ability to – a relationship with your patient without the administrative load infecting everything about what you’re doing. In terms of the kind of attention and care and discussion that you have in the doctor‐patient relationship, it seems that the system we have now, the system created by and run by government is parasitic on creating good relationships between doctors and patients and maybe that’s one of the appeals that doctors see in the direct primary care model.
Ryan Neuhofel: Oh, 100 percent. The least valued thing in our current healthcare system is time. You don’t get paid to spend time with people. In the normal insurance‐based world, if I did a knee injection for someone with arthritis, I injected a steroid in their knee, Medicare, private insurance company would probably reimburse me $100 to $200. As an orthopedic surgeon, $300 or $400 for some odd reason.
But if I spent 30 minutes talking to someone about their diabetes, which would never happen, because we don’t have the luxury of doing that, I probably would get paid about $70 or $60 and the injection takes me by the way about one minute.
So you’re really setting up a system where you’re incentivized to do things to people. We’re really good in America at doing procedures and testing and all that stuff. But we’re really not good at doing stuff for people and sometimes that’s time. It’s not easy to kind of wrap your hands around that from a scientific standpoint. But the average physician visit in America for an established patient is less than 10 minutes. If someone comes in with a sore throat, yeah, I can handle that in 10 minutes.
But a lot of patients are very complicated and even if they come in for a sore throat, they have all these other chronic conditions and they have all these social factors. So for a physician to sit down with someone for eight or ten minutes, you cannot accomplish very much. I don’t care how smart you are and I think patients sense that, that they walk away dissatisfied and doctors do the same.
I always tell people that I would rather be an average doctor with adequate time than the smartest doctor in the world with not enough time, because you just can’t – there’s no substitute for that. Unfortunately the way that the payment model is structured, I could have never done what I did with Blaine, my patient. I spent 30 to 45 minutes. I think probably an hour on the first visit and I did that every few weeks until we got his stuff under control. That’s impossible on the normal system. You can never do that. I mean you would never stay in business, I should say. You can do it. You would go out of business very quickly.
But yeah, I mean it really does just change that equation and puts the value back on time and I think that’s something that’s sorely missing.
Trevor Burrus: How much do you think that the – that administrative gloat that separates the doctors from the patients is contributing to this sort of well‐publicized exodus from the doctors, from the business, to either A, not go in in the first place or B, get out of it or get out of family care and get into specialization. But this is often discussed and it seems like there must be a contributing factor.
Ryan Neuhofel: Oh, yeah, no doubt about it. I think there are multiple factors at play here for the burnout issue and even if you look at – sadly, if you look at suicide rates among physicians, they have skyrocketed over the past decade or two.
I think that’s a huge part of it. You know, becoming a doctor is really, really hard. You make a ton of sacrifices to get to where you become – you know, able to care for people and then people are kind of smacked in the face with reality of feeling like they’re a clerk and I think that’s demoralizing. I talk to physicians all the time who are extremely burned out. Even a lot of my classmates and people I went to residency with, they’ve changed jobs two or three times. I’ve only been out of residency for five, six years now.
So yeah, I think that there’s a lot of dissatisfaction, people taking non‐clinical jobs. But yeah, I think the big reason that most people go in to medicine is because they truly want to help people. There’s a personal aspect of that.
Of course there’s an accomplishment and achievement and all of that. But I think it’s that personal connection that really kind of allows you to withstand all of the pressures and stressors of medicine. Without that, you’re just a really stressed‐out clerk and physicians don’t want to be that at all. So yeah, I think it’s a huge part of it.
Aaron Ross Powell: One of the common themes that we talk about quite a lot on Free Thoughts is the way that entrenched interests can interfere – can use politics to interfere with new and innovative models. So is that something that the direct primary care experiences? What’s the political environment for this now and into the future? Are there people working against it because it would hurt their models? What do politicians think of it?
Ryan Neuhofel: Yeah, yeah. Well, to this stage or at least until very recently, I would say direct primary care has been the most bipartisan healthcare topic around. I mean the awareness of it is relatively small, but growing quickly. So most of the states who have packed – passed direct primary care legislation which is – it’s kind of a formality. It doesn’t actually directly benefit us or grow us, but basically protects us from some types of regulations.
It has been very bipartisan. So in most states where this has kind of become a discussion at the legislature, for that state, it hasn’t been partisan at all. There have been a few things recently in the State of Virginia. Terry McAuliffe voted down a direct primary care bill. Apparently, there’s a lot of internal politics in Virginia that I don’t understand. But it’s more of a political move than anything else.
But the good thing is at this stage, at the federal level and most states, direct primary care has kind of been an acceptable idea. In fact direct primary care to many people’s shock is included in the Affordable Care Act. So even at the time – there was a handful of us I believe around – when that bill was written. But it is included in the Affordable Care Act as kind of an option. Now there are a lot of kind of messy things around that and what it means and HSS really hasn’t done much with it. But yeah, this is not like some type of political movement.
I’m really trying to be careful about trying to frame this and I think other direct primary care doctors are – we don’t want this to be a political issue because as soon as it gets framed like that, that this is a republican idea or a democrat idea, I think that people reflexively are going to say they’re against it, without thinking through it critically. So I think that’s pretty careful going forward that – I certainly have my own personal ideology. I have lots of friends who are direct primary care physicians and they’re politically all over the map. I mean both ends of the spectrum.
So I think this could be a solution that could be politically feasible but I think it’s a precarious think in America in any topic because people have to declare a team and whether it’s good or bad on their side, but yeah.
Ryan Neuhofel: Oh, yeah, yeah. So when I started my practice in 2011, as I would define direct primary care, I mean I would say there’s less than 100 but probably even dozens of physicians in this model who are doing bread and butter, strict direct primary care and now there’s definitely – you know, approaching a thousand. The communities surrounding this are just exploding. I can’t even keep up with the new practices that are opening.
So in some regions of the country and some cities, it’s absolutely exploding. In others, it’s a little harder for various reasons to get clinic started. So there are definitely some challenges in certain states. Certain states have restrictions against dispensing of medicines from a medical practice.
So every community, every state is a little bit unique. But it’s all around the country, East or West Coast, large towns, small towns. It’s really serving a need in a lot of areas and that’s the beauty of it is it’s flexible. I don’t have to think about like whatever Washington DC or Topeka, Kansas thinks about how I should serve my patients best. I can look at my patient population. You know, my philosophy and my community and tailor my business to serve those needs. I’m not looking to them to fix the problem.
Trevor Burrus: If it gets too big though – I don’t know what too big is in this thing. But it seems that with the increasing sort of Obamacare dysfunction, the doctors being driven out of the profession due to various things, but a lot of it having to do with the administrative bloat and what happens because of that. So we have a lot of doctors who might go into direct primary care. If it gets too big, does it actually start to challenge the viability of insurance models or Medicare and Medicaid in a way that maybe the insurers will try to fight against it?
Ryan Neuhofel: Well, we haven’t seen that very much. In Virginia, that was part of the equation. Apparently the insurance lobby there was against this bill and it’s kind of a minor technicality issue honestly in Virginia. So there are some insurance companies who have kind of spoken negatively about this model. But at the same time, there are some direct primary care companies. There’s one based out of Boston called Iora Health, who has actually partnered with insurance companies.
There’s several different – you know, larger direct primary care groups who have grown large enough, where they’ve started approaching third parties like that, managed care companies, even like Medicare Advantage Plans, and try to figure out how they could work their model and stay true to that model, yet work with these kind of third party payers, insurance companies and governments. In fact, in the State of Washington, Qliance – I’m actually partnered with a Medicaid managed care company.
From my perspective, my personal business perspective, I’m a little bit skeptical of doing that at this stage, just because I think there will be too many strings attached. But there are certainly ways that people are trying to figure out how this all fits together. I think we need to do that at some level. We need to figure out how direct primary care kind of fits into this giant, messy puzzle. But at the same time, I think that part of the problem has been in American medicine and the reason that primary care has kind of fallen out of grace and the reason that it’s not as good as it should, is because we’re – as physicians, I should focus on what I do and do it the best that I can.
So I’m not stupid enough to think that I can figure out how to best organize brain surgery and payment of brain surgery. That I think family physicians – you know, we need to be aware of these larger issues and how it will work in the system. But at the same time, it’s so much larger and complicated that if – I think if we as primary care physicians focused on our own patients and our own practices first, and then have everyone else kind of adapt to us, I think that’s a much better way to think about it. But again, we’re tiny and the rest of the system is huge.
So yeah, I think that’s going forward. That’s what everyone’s questioning is. OK. You guys have demonstrated you can do this cool thing. You can make it affordable. How do we pay for it? How do we make sure that everyone has access to that care? How does that work with insurance? I certainly have my ideas. I think insurance could be used in a much smarter way. I think it would be less expensive and I think the total amount that we spend would be less.
If you look in American healthcare, I mean we spend I think over $10,000 per person. If you add up all of the money spent on healthcare in America, from employers, governments and out of own people’s pockets, I think it’s over $10,000 per person last year in total healthcare expenditures.
So the problem is not that there’s not enough money to go around. I mean I charge $50 a month. That’s $600 a year. Clearly there’s enough money per person to go around. The problem is in allocating that money and who controls that money, because the pot is definitely large enough. We just spend it in really stupid ways.
Trevor Burrus: Well, you mentioned – due to the agility of some of these local – it seems like the direct primary care model has a lot of versatility to it as you said, based on being able to react to your community. In one of your blog posts about this, you wrote that the adaptability of direct practice doctors and clinics based on community needs, something is – that’s missing in the micromanaged status quo. Some of the DPC practices were helping large employers or unions in urban areas tackle escalating health costs while others, based on rural towns, were working with a large number of uninsured patients. The creativity of DPC physicians is truly awesome.
That seems to be something that’s lacking in the healthcare system in general but that the DPC model helps bring back in, the innovation that we need.
Ryan Neuhofel: Yeah, yeah. It’s funny because whenever I talk to my colleagues who are in normal practices, they mostly just scratch their heads like – it’s hard. From the inside, it’s kind of hard to describe it. So whenever you go to a practice management meeting, which is where all the – you know, the doctors and the nurses and the clinic staff. They would get together and talk about it, about the clinic and the business and they’re almost …
Trevor Burrus: Like everyone who works at an HMO you’re saying or …
Ryan Neuhofel: Well, no. I’m thinking of a clinic.
Trevor Burrus: Oh, in a clinic. OK.
Ryan Neuhofel: A doctor’s practice. So whenever we have a practice management meeting or practice meeting, people get around and they talk about all of this kind of nuanced things about like scheduling and billing and maximizing reimbursements and making sure that we bill out more 99 – you know, level four visits and kind of all of these things that really aren’t medical care. They’re kind of the administrative thing. We never – at least from my experience when I was staying around the practice management meetings, very rarely was the discussion about how do we serve our patients better. How do we make our care better? How do we become more accessible to patients?
So those are the things. Like a normal business, if I was running an ice cream shop, I wouldn’t sit around for hours talking about exactly – you know, how to bill out my ice cream cone. I would be talking about how do we make our ice cream better. How do we make the patients – or the customer’s experience better?
So those are the things that I focus on but I think in the normal system, we’re not really trying to be creative in meeting those needs. We’re just trying to – well, there’s a checkbox that – Medicare gave us a checkbox. In order to get paid by BlueCross, we have to check off A through Z. That is the only focus is making sure that you get that paperwork done and put people through that system. They’re not thinking creatively about how do we follow‐up better with a diabetic. How do we reach out to people and make sure they’re taking good care of themselves?
So we’re really – we don’t have to worry about that kind of – the billing payment system like they do. I think it really is distracting because I think a lot of doctors, they’re – they want better care for their patients. They would like to have the freedom to do that, but they’re basically just holding their breath, waiting for Washington DC or whatever state capital you’re in, to kind of fix these things. I’m not holding my breath for that to happen.
Aaron Ross Powell: Well, on that then, what are some of the ways that federal or state or local governments going forward might better enable direct primary care or make it more accessible to more people or just otherwise improve it?
Ryan Neuhofel: Yeah, I mean – so there are some technical things that could be done. In fact, there’s something called the Primary Care Enhancement Act that has been introduced in congress, which I presume will take about 25 years to pass.
Trevor Burrus: If you’re lucky.
Ryan Neuhofel: If I’m lucky, yeah, with the right partners. So Primary Care Enhancement Act clarifies a few different things. It does clarify the HSA issue, which is kind of a big bug‐a‐boo. In this world, it’s hard to describe to patients all the intricacies of that.
So we would clarify that issue. The HSA funds can be paid for direct primary care membership fees and that is an eligible medical expense according to the IRS. So that would be one kind of easy technical thing that I – would help. But I think on a larger scale, what I would like to see personally – I don’t speak for all direct primary care physicians – is returning some of that money in some form back to the individuals and families to control themselves. You can’t do that with 100 percent of the money. I’m not suggesting we just take that $10,000 and give people a $10,000 check.
But if you could give some of that money back to the individuals, and that could be funded in different ways. That may be some of your own money, just keeping it yourself. That may be employers. That may be governments subsidizing people who need help.
If you can return some of that money back to the individuals and let them control it, with them and their doctors, you wouldn’t need to do more than 10 or 20 percent. So that would be more than enough money for individuals to control and pay for something like what I do. I would love to see that happen. I think it would at least kind of create a more kind of cash economy, even if it was subsidized for people who needed help. Then it will allow physicians to meet those people’s needs and without worrying about the – all the other messy stuff.
But yeah, politically, I think that would be very, very hard to do because it’s a big pot of money and everyone wants to wrap their arms around it.
Trevor Burrus: Now even within this world of crazy regulations and overarching federal programs like Medicare and Medicaid and the inauguration of Obamacare, which is not making anything better, even within this, you guys have managed to carve out this little space where – would it be accurate to say that this is a really good example of how a free market or a freer market at medicine can work and what it can do.
Ryan Neuhofel: Yeah, absolutely. I don’t often describe what I do as some type of free market solution. But if you really look at what we do, I mean it’s me and my patients and there are no other third party influences. So I think when you really boil it all down, that’s exactly what we’re doing.
Trevor Burrus: But it sounds like when you – you might need to rethink healthcare in this country if we’re going to fix it. We just might be thinking about it in the wrong way then.
Ryan Neuhofel: Yeah, absolutely. I think that – it’s funny. Whenever I hear politicians, conservative or libertarian politicians, say that they want – they espouse that they want a free market solution, they really don’t spell out what that would look like and I think that’s a huge challenge to do that. But I don’t think you can just tell Americans, well, we’re just going to – the free market is going to fix it. I think we need to point to tangible things and stuff that we’re doing and direct primary care is probably the biggest part of that.
Things could be different. We could have things organized differently and the notion about free market wouldn’t be as scary, because it – if I’m putting myself in the patient’s shoes, when I hear free market or you’re going to be paying cash, what they see is using cash in the normal system, right? So they see that the hospital billed them $8000 for the MRI and that their insurance company gave them a discount for $2000. So people kind of presume that everything else will be the same. They’re just going to be on the hook for it out of their own pocket.
I think you have to think much more radically than that. I think it changes the entire equation. For me to suggest someone pays for their own diabetes labs, you will be like, “Oh my god! That’s so expensive.” But actually I include those labs in my prices for $50 a month. They’re $6 to $8 a few times a year. But if I told someone, oh, the free market is going to fix that, what they envision is paying these absurdly inflated prices, which were not graded by the free market. Basically, they will just be on the hook for it.
So yeah, I think it’s absolutely true when you boil it down to its essence. But I think you have to give people concrete examples of what that would look like or otherwise, people will just believe that they’re being fed to the wolves.
Trevor Burrus: Now, a few weeks ago you emailed me about how Gary Johnson, the libertarian party candidate who is doing pretty well on the polls, about how he is not doing a very good job of communicating on healthcare and what could be done in healthcare. Maybe he could listen to this episode at some point and get through – all the way to the end and really ask this question. We say – if you had one thing – he should listen to all of them of course. But if you had one thing to say to Gary Johnson and how he should be talking about healthcare, what would you say to him?
Ryan Neuhofel: I think you have to bring it down to the personal level and being able to tell a story about what healthcare would look like for a person in a free market system. I think it’s something that will be required. Regardless of people’s politics, just telling them that this idea of a free market system is going to make things better is not enough for most people. They’re very afraid of healthcare and healthcare is something that is very important to people.
So I think politicians, regardless of their ideology, if they want to connect with people and convince people that there’s a better way, they have to spell that out in real life examples of what that would look like for them and instead of just kind of speaking in theory, because most people aren’t nerds and they’re not listening to this podcast and they’re not reading Frederick Hayek or other economists.
Trevor Burrus: Unfortunately, yeah. More people need to listen to this podcast of course. So we help break out the Statrix by pointing out your practice and then people can realize that things could be better.
Ryan Neuhofel: I think so and you gave a great example about Uber in your Statrix podcast and I was applauding you in that entire podcast of course, but I think the way you described the Uber thing is people can’t quite fathom what that would look like, what kind of – some people describe it as anarchy in transportation services. What that would really look like, if you describe that to someone who had never done Uber, they’re like, oh, that sounds scary and that would be really expensive and people would rip me off. People don’t like taxi companies usually. But if you describe to them Uber, they would probably reject the idea. But the very first time you ride in an Uber and experience the service and the quality and the cost, you’re like, “That’s amazing! How is that not mainstream? How has this not been here forever?”
Trevor Burrus: Thanks for listening. If you enjoy Free Thoughts, please take a moment to rate us on iTunes. Free Thoughts is produced by Mark McDaniel and Evan Banks. To learn more about libertarianism, visit us on the web at www.libertarianism.org.