The Employer Migration: Why Companies Are Buying Direct Primary Care for Their Workforces

Key Takeaways:

• Direct primary care (DPC) removes third-party fee-for-service billing and charges a periodic membership fee instead; in a 2015 national survey of DPC practices, 92% offered same-day appointments, 74% offered wholesale-priced labs, and 88% charged individual adults between $500 and $1,499 a year.
• In Medicare claims covering nearly 1.45 million beneficiaries, patients whose primary care physicians had the highest continuity of care had 14.1% lower adjusted total expenditures and 16.1% lower odds of hospitalization than those with the lowest continuity.
• The most rigorous actuarial look at an employer DPC option, a 2020 Society of Actuaries study, found lower use of services such as emergency care, but after counting membership fees its midpoint estimate of the employer’s net cost was 1.3% higher, with a plausible range from a 5.2% reduction to a 7.8% increase.

For the past several years, employers of every size have been quietly reshaping how they purchase primary care for their workers. The traditional arrangement, a commercial plan with a primary care physician tucked inside a sprawling network, is being supplemented and in some cases replaced by direct contracts with Direct Primary Care clinics, and direct primary care for employers has become one of the more closely watched experiments in benefits design. The logic is easy to follow. Primary care is the cheapest and highest-leverage tier of the health system, yet it is chronically underused because of access friction: copays and deductibles that discourage a visit, weeks-long waits for an appointment, and the time off work that even a short visit consumes. DPC removes much of that friction by replacing fee-for-service billing with a flat periodic membership fee. The model is distinct from high-priced concierge medicine; a national mapping of DPC practices confirmed lower price points and a broad geographic spread, and a 2015 survey found that most practices charged individual adults between $500 and $1,499 a year, had largely stopped billing insurance, and offered same-day appointments and wholesale-priced laboratory testing.

The strongest reason to expect better outcomes is not the payment model itself but what it makes possible. When patients can reach a physician they already know the same day, by phone, message, or telehealth, small problems are more likely to be handled early and in one place. Continuity of that kind is measurable, and it matters: in Medicare claims covering nearly 1.45 million beneficiaries, patients whose physicians delivered the highest continuity had 14.1 percent lower adjusted total spending and 16.1 percent lower odds of hospitalization than patients in the lowest-continuity group. That study was not about DPC, and it is observational, but it describes precisely the relationship DPC is built to protect. The administrative simplification helps too: without claims processing, prior authorizations, or referral bottlenecks, physician and staff time flows back toward patient care, and practices can keep panels to a few hundred patients rather than the thousands typical of insurance-based primary care.

Does direct primary care for employers actually save money?

It is honest to say the answer is still being written. Much of the widely circulated savings data, including claims of double-digit drops in total spending, comes from DPC vendors or individual employers reporting on their own programs, without independent risk adjustment or a comparison group, and it should be read as encouraging rather than settled. The most careful independent analysis to date, an actuarial study commissioned by the Society of Actuaries, examined one employer that offered a DPC option alongside its traditional plan. After adjusting for differences in the health of the people who chose each option, DPC members used fewer services, driven largely by lower use of facility care such as emergency department visits. Once the DPC membership fees were counted, however, the midpoint estimate of the employer’s net cost was 1.3 percent higher than the traditional plan, with a plausible range running from a 5.2 percent reduction to a 7.8 percent increase. That is not a failure; it suggests that the utilization benefits are real while the financial return depends heavily on how a contract is priced, how long it runs, and how fully employees engage. For employees, the experience itself shifts from a transactional encounter toward a longitudinal relationship, with longer visits, coordinated labs and imaging at transparent prices, and chronic conditions managed continuously rather than at quarterly check-ins. For employers weighing DPC this autumn as benefits decisions come due, the practical takeaway is to treat it as an investment in access and continuity, measure it against their own claims data over several years, and be skeptical of any promise of guaranteed savings.

References:

1. Eskew, P. M., & Klink, K. (2015). Direct primary care: Practice distribution and cost across the nation. Journal of the American Board of Family Medicine, 28(6), 793-801.
2. Rowe, K., Rowe, W., Umbehr, J., Dong, F., & Ablah, E. (2017). Direct primary care in 2015: A survey with selected comparisons to 2005 survey data. Kansas Journal of Medicine, 10(1), 3-6.
3. Bazemore, A., Petterson, S., Peterson, L. E., Bruno, R., Chung, Y., & Phillips, R. L., Jr. (2018). Higher primary care physician continuity is associated with lower costs and hospitalizations. Annals of Family Medicine, 16(6), 492-497.
4. Busch, F., Grzeskowiak, D., & Huth, E. (2020). Direct primary care: Evaluating a new model of delivery and financing. Society of Actuaries Research Report.