Even probably the most “reasonably priced” DPC fashions battle in lower-income markets as a result of the behavioral economics of those populations create excessive churn and unstable income. Practices that achieve underserved areas practically all the time diversify into employer partnerships, institutional contracts, or growth into higher-income neighborhoods. With out understanding these behavioral and financial realities, physicians danger constructing a mannequin the group can not maintain long-term.
I beforehand argued that physicians should reply 5 market questions earlier than launching DPC, questions that would have saved the College of Houston’s $1 million DPC clinic from closing after 13 months.
At the moment I’m analyzing a more durable reality: even “reasonably priced” DPC at $50–75/month faces hidden economics in lower-income markets. And the practices that achieve these communities accomplish that as a result of they essentially change their enterprise mannequin, not as a result of individual-pay membership magically works at scale.
Not too long ago, when questioned about DPC scalability, a distinguished doctor responded: “DPC was by no means meant to scale.” If that’s true (and I imagine it’s in sure demographics) then we have to cease insisting that membership charges alone can maintain practices in lower-income populations. The economics merely don’t assist it.
When authorities tries DPC
In 2018, Michigan launched an bold Medicaid DPC pilot often known as MiPureCare.
The objective was daring: goal 2,400 Medicaid enrollees and, if profitable, develop to all 2.4 million Michigan Medicaid beneficiaries, probably saving the state $3.4 billion.
By June 2018, about 100 members had expressed curiosity. After which, silence.
Regardless of FOIA requests and searches via 2024, publicly accessible outcomes by no means surfaced. In 2021, Whole Well being Care transferred its Medicaid enterprise to Precedence Well being Selection, and MiPureCare quietly disappeared.
When publicly funded pilots don’t produce clear outcomes, that silence is itself knowledge. As with the College of Houston’s clinic, this wasn’t a failure of doctor dedication, it was a failure to align the mannequin with the market.
The “Medicaid cliff” area of interest exists, but it surely’s slender
Some DPC practices have demonstrated that the “Medicaid cliff” inhabitants, incomes an excessive amount of for Medicaid however not sufficient for industrial insurance coverage, can maintain $50–75/month memberships.
However the practices that thrive long-term didn’t keep solely on this lane.
One city follow initially serving an underserved neighborhood ultimately added:
- A number of employer teams
- College district contracts
- Suburban growth
The founder later stated they grew to become “extra strategic about the place we open areas.” That is the real-world ceiling on particular person memberships in low-income areas.
The behavioral economics no person discusses
The revenue band simply above Medicaid eligibility has extremely variable monetary habits.
When somebody incomes $75,000 pays $90/month for DPC, it turns into routine background spending. When somebody incomes $32,000 pays $60/month, that fee competes with each monetary choice of that month.
Key traits of those households embody:
- Irregular or hourly revenue
- Competing pressing bills (automobile restore, hire, meals)
- Restricted financial savings or monetary cushion
This implies membership isn’t “set it and neglect it.” It turns into a recurring choice, not a set expense.
The churn downside
Based mostly on twenty years in well being care finance, operations, and community technique and conversations with follow operators, churn charges differ dramatically by fee supply:
- Employer-sponsored members: Low churn (10-15 p.c).
- Institutional contracts: Minimal churn.
- Particular person low-income members: Considerably larger churn (30-40 p.c+).
These patterns align with subscription economics in related revenue segments. Extra printed DPC-specific churn knowledge would profit the sphere.
Let’s apply this to a standard state of affairs: A follow wants 400 members at $60/month to maintain one doctor. With a 35 p.c churn price in low-income populations, you will need to substitute 140 members yearly, about 12 new sign-ups each month simply to take care of breakeven.
This will increase:
- Buyer acquisition prices
- Administrative workload
- Advertising and marketing expenditures
- Operational pressure
Evaluate that with employer-sponsored members with 10 p.c churn: solely 40 replacements yearly.
The absence of publicly shared churn knowledge from low-income-focused DPC practices is telling. When a follow has distinctive retention, they publish it.
Why profitable practices diversify
Practices that sustainably serve lower-income areas don’t rely solely on particular person memberships. They diversify into:
- Employer partnerships: Remove the affordability barrier
- Institutional or group contracts: Steady, predictable income
- Geographic growth: Larger-income markets that stabilize the panel
This isn’t a compromise. That is enterprise fundamentals.
The DPC motion has unintentionally created a false purity customary: In case you serve employers, faculty districts, or establishments, you’re in some way “much less” DPC. That ideology has contributed to extra follow failures than it has prevented.
The physicians who construct sturdy practices align their income mannequin with group economics, not with ideological purity.
What this implies to your market evaluation
If you wish to serve lower-income populations utilizing particular person memberships:
- Funds for top churn (30-40 p.c+).
- Construct a diversification technique from day one.
- Acknowledge that employer or group sponsorship could also be your major stabilizer.
Market evaluation can not cease at “can they afford $60/month?”
The actual questions are:
- What’s my anticipated churn?
- What does it price to accumulate one new member?
- Can I maintain ongoing recruitment?
- When ought to I pivot to employer or institutional partnerships?
The uncomfortable actuality
DPC has an revenue ground, even at “reasonably priced” pricing.
If you wish to serve lower-income areas, you want different fee streams, not simply good intentions. Essentially the most profitable follow is the one that’s nonetheless open in 5 years, not the one which launches with the purest ideology.
Sustainability requires understanding not solely whether or not your market can afford you, however whether or not you’ll be able to afford your market’s behavioral economics.
Dana Y. Lujan is a well being care strategist and operator with greater than twenty years of expertise throughout payers, suppliers, and well being methods. She is the founding father of Wellthlinks, a consulting agency that helps employers and suppliers redesign care fashions via concierge and direct major care, and creator of The CEO Doctor: Strategic Blueprint for Impartial Drugs. Dana has led multi-state community growth, payer contracting, monetary modeling, and compliance initiatives that strengthen supplier sustainability and employer worth. She beforehand served as president of the Nevada chapter of HFMA and is pursuing a JD to develop her experience in well being care legislation and compliance. She has been featured in Authority Journal and publishes on KevinMD, MedCity Information, and Medium, the place she writes on well being care innovation, direct major care, concierge medication, employer contracting, and compliance. She has forthcoming BenefitsPRO. Extra skilled updates will be discovered on LinkedIn and Instagram.
