Primary Care Private Practice

Primary care fee-for-service business model misaligns with optimal operating model, leading to ineffectiveness and inefficiency.

Traditional primary care physician practices suffer from general ineffectiveness. The business model of the U.S. primary care physician is to serve as the patient’s longitudinal doctor. Throughout this longitudinal relationship, this physician is meant to maximize overall wellness, manage common chronic diseases, address urgent care issues, and refer and coordinate with specialists when needed. Traditionally, this physician is paid by private and public insurance reimbursement, typically per visit, with the amount depending on the type of visit, length of visit, and diagnosis (as a proxy for difficulty).

Unfortunately, this is a circumstance where the business models and the optimal operating models are misaligned. A big constraint is the fee-for-service payment model, where the biggest driver of physician reimbursement is the volume of patient visits. In other words, the payment model poorly compensates these physicians for the added time needed to treat a patient with a number of complex conditions, compared to, for example, a patient presenting with simple viral infection. And it does nothing to compensate for physicians for the time needed to coordinate with specialists.

The above payment/business model, as one might expect, creates practical distortions in adopting what might be an optimal model for patient care. Physicians may have a tendency, for example, to ask a patient to come for an office visit if they are calling with a routine issue. While the optimal operating model would have the physician conduct the consultation and/or write the prescription over the phone, the business/payment model dictates that the physician must see the patient in the office in order to be paid for their time. On the other end of the spectrum, a primary care physician may be incented to essentially over-utilize specialty care collaborators, even though they may be qualified to treat the patient’s specific condition, simply because the payment model does not appropriately compensate the primary care physician for this effort.

Similarly, the prevailing fee-for-service business model fails to provide services that the patients may value most from a primary care physician. For example, PCPs are generally not available to treat patients’ urgent care issues outside of business hours. This leads patients to pursue care in an emergency room for non-emergent issues. Even during business hours, patients may find it difficult for their PCP to see them on short notice due to a schedule that is already at-capacity. Patients are thus left to seek value from urgent care centers and emergency rooms for services that a primary care physician has the comparative advantage in providing (comparative advantage due to their longitudinal relationship with the patient and lower-cost alternative to the emergency room).

The traditional primary care physician practice is thus an example where the business/payment model does not well-align with the ideal operating model. This leads to an inefficient operating model that increases costs and, arguably, decreases quality. For these reasons, many clinicians, policymakers, and businesspeople are working hard to develop innovative business models that better fit the ideal operating model.


Harry’s | Giving Men’s Grooming a Clean Shave


Buffer: Gaining an edge in the Valley with a 100% remote workforce model

Leave a comment