THE BLOG

Forget Health Care Reform, We Need a Health Care Transformation

08/13/2009 05:12 am ET | Updated May 25, 2011

Does the current health care reform debate sound like a broken record to you? U.S. spending on health care is $2.6 trillion -- 17% of GDP and headed toward 20% without a dramatic fix. Yet not one radically new idea has been proposed to fix the current system. The health care system is so far gone we don't need reform -- we need a disruptive business transformation.

In Washington State disruptive and transformative business models are our bread and butter. Think: Amazon, Costco, Starbucks, aQuantive, Expedia, Zillow - the list goes on. It is this kind of thinking that will uncover a better way to deliver health care to every American for less money than we spend today with 46 million uninsured. We need to do what Costco did for retailing, what Amazon did for the Internet, and what Expedia did for travel.

Washington State already has the disruptive business model that will fix health care. It will ensure that every American has access to quality, affordable health care that allows for one-on-one access to a primary care doctor who can spend more time to fix what ails you on a timely basis.

It's called direct primary care. These practices are not to be confused with pricey concierge practices that also take insurance. Direct primary care practices in Washington State replace insurance with membership fees ranging from $39 to $79 per month, depending on age, for unrestricted access to comprehensive primary, preventive and chronic disease care. Most will also coordinate specialist and hospital care, offering a direct version of what policy experts call the "primary care medical home."

Direct primary care practices were invented in Washington State in 1996 and have now spread to at least 18 states. They are already transforming local health care by eliminating the two most pernicious consequences of the traditional insurance-based system -- first, the massive amounts of needless overhead expense on the 90% of health care issues which are routine and not catastrophic or even expensive, and second, the inverted system of incentives that drive doctors to treat us, rather than cure us.

Direct practices are transformational in four key ways:

1) No insurance means lower upfront costs. Without insurance reimbursement requirements on the 90% of health care issues that should be handled by primary care physicians, we can remove 40 cents from every $1 in primary care that currently goes toward insurance and related overhead. Individuals and businesses in direct primary care practices report savings of 20% to 50% on comprehensive health care costs by adding a wrap-around insurance plan.

2) Monthly care fees align incentives. Direct primary care practices replace the "fee-for-service" insurance-based incentive system where doctors make more money by doing and charging more. An affordable direct monthly fee system means doctors make money by keeping you healthy, not sick, and making sure you see value in your relationship so you don't quit. This fee includes all primary, preventive and chronic illness management for everything from vaccinations and pneumonia to minor fractures and ongoing treatment for things like diabetes, hypertension, obesity and elevated cholesterol.

3) Coordinated, high-quality care and downstream savings. By eliminating the time and cost burden of insurance, providers can break even by seeing 10 to 12 patients a day as opposed to 25 to 30 under the high overhead, low reimbursement insurance-focused model. This allows for unhurried 30- to 60-minute appointments versus the average eight-minute appointment, providing ample time to diagnose and treat patients and coordinate any necessary care throughout the rest of the health care system. This shifts the focus of care away from expensive specialists and hospitals to inherently inexpensive primary care from a provider who knows you best.

4) Increased provider and patient satisfaction. Direct primary care practices provide doctors and nurses with a great living and a great job. With salaries replacing the reimbursement process, doctors can get off the conveyor belt of unmanageable patient loads and reclaim the close long-term patient-provider relationship for which they trained. This shift will re-attract doctors to the practice of primary medicine -- in an era where the primary care doctor is rapidly becoming an endangered species.

Under this model there is still an important need for insurance, but for what it was originally intended -- to cover the rare occurrence of expensive, unpredictable care. Based on how the current insurance-centric, fee-for-service system operates, we estimate that shifting to direct primary care practices, coupled with a wrap-around insurance plan for catastrophic care, could save $1,000 to $2,000 per person per year. That's a total savings of $300 to $600 billion per year, which could go toward providing similar health care to the 46 million uninsured today.

By bundling direct primary care with a lower premium wrap around insurance plan -- either private or public -- the Washington State direct primary care model has the potential to transform our broken health care system. Direct primary care practices offer the potential to revitalize the direct doctor patient relationship without the needless Kafkaesque burden of the insurance reimbursement system. We must be bold and rethink health care if we are to achieve true reform. The time for this health care transformation is now.

Nick Hanauer is a Seattle-based entrepreneur and venture capitalist and the founder of the True Patriot Network. He has helped launch over 20 businesses including Amazon, aQuantive, Insitu and most recently, Qliance Medical.