Comparing the operational costs of traditional primary care, Direct Primary Care, and Virtual Primary Care

The easiest way to understand the costs of primary care is to simply consider the most expensive part of delivering primary care— the salaries and benefits of physicians, NPs/PAs, nurses, and staff. To keep things simple, we’ll ignore the other costs like facilities and operations.

For this exercise, we’ll consider a 10,000 patient primary care practice and we’ll compare three kinds of practices:

• A traditional fee-for-service, insurance-taking primary care practice

• A Direct Primary Care practice

• A Sherpaa (Virtual Primary Care) practice

Importantly, each model has vastly different physician to patient ratios. And physicians are, by far, the most well-compensated. Also, traditional primary care practices must maintain a lot of complexity due to billing, reimbursement, and maintaining busy patient flow in brick and mortar office settings.

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Conclusions from this exercise:

• Traditional primary care practices find it hard to break even due to the cost of maintaining all the insurance complexity and inefficient brick-and-mortar processes (hence the reason why they're being acquired by hospitals as loss leaders for far more lucrative specialist referrals).

• Because DPC practices are capped at 600 (the high end as many are capped at 500), it takes far more very expensive physicians to care for the same size group and costs 3 times as much as traditional primary care.

• Virtual Primary Care is a hyper-efficient process designed from the ground up to deliver more accessible full-scope primary care at a lesser cost than traditional primary care.

Assumptions made:

• Traditional primary care costs payors $25 per employee per month

• Typical traditional primary care practices have 1 doctor per 1,700 patients

• Direct Primary Care costs a payor $75 per employee per month

• Direct Primary Care practice is capped at 600 patients per physician

• Virtual Primary Care costs $270 per year per patient

• Virtual Primary Care practices have 1 doctor per 2,500 patients (background)

• For simplicity's sake, I standardized the salaries and made all salaries consistent across all models