Direct Primary Care: Evaluating A New Model Of Delivery .

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Health Care Cost TrendsDirect Primary Care: Evaluating a NewModel of Delivery and FinancingMay 2020

2Direct Primary Care: Evaluating a NewModel of Delivery and FinancingAUTHORSFritz Busch, FSA, MAAAConsulting ActuaryMilliman, Inc.SPONSORSSociety of ActuariesResearch Expanding Boundaries (REX)PoolDustin Grzeskowiak, FSA, MAAAConsulting ActuaryMilliman, Inc.Erik Huth, FSA, MAAAPrincipal and Consulting ActuaryMilliman, Inc.Caveat and DisclaimerThe opinions expressed and conclusions reached by the authors are their own and do not represent any official position or opinion of the Society ofActuaries or its members. The Society of Actuaries makes no representation or warranty to the accuracy of the information.This report was prepared by Milliman exclusively for the use or benefit of the Society of Actuaries for a specific and limited purpose. The report used datafrom various sources, which Milliman has not audited. Any third party recipient of this report who desires professional guidance should not rely uponMilliman’s report, but should engage qualified professionals for advice appropriate to its own specific needs.Copyright 2020 by the Society of Actuaries. All rights reserved.Copyright 2020 Society of Actuaries

3CONTENTS1. Executive Summary . 5Literature Review . 6Market Survey . 7Case Study . 72. Background . 9Current State of Primary Care . 9Milliman DPC Research . 103. Overview of DPC . 12Definition and Common Features . 12Key Findings from Market Survey . 144. Summary of DPC Literature Review . 17Overview. 17Selection Criteria . 17Summary of Existing Literature . 17Overview of DPC. 18Cost Outcomes . 19Gaps in Existing DPC Research . 225. Overview of Case Study. 23Study Structure . 23Study Goals . 23Data Description . 24Exposure Measures . 24Cost Measures . 25Benefit Coverages. 256. Case Study Findings . 27Population Differences . 27Demographics . 27Risk Selection and Morbidity . 28Overall Demand for Health Care Services . 28Emergency Department Visits . 31Inpatient Hospital Admissions . 32Total Employer Costs (DPC ROI) . 327. Case Study Generalized Actuarial Framework for Funding Employer DPC Options . 36Development of Estimated DPC FFS Claim Cost Savings . 36Overall DPC FFS Claim Cost Savings . 41Development of DPC Membership Fee Schedule . 41Other Considerations for Employers Considering a DPC Option. 438. Case Study Discussion and Limitations . 46Discussion . 46Limitations . 47Sample Size . 47Lack of Quality Measures . 47Variability in DPC . 48Data Quality . 48DPC Practice Structure . 49Reliance 49Copyright 2020 Society of Actuaries

49. Case Study Data Sources . 50Administrative Medical Claims . 50Administrative Prescription Drug Claims . 50Health Plan Enrollment . 50Benefit Plan Design . 5010. Case Study Methodology. 52Analytic Data Processing. 52Milliman Health Cost Guidelines Grouper (HCG Grouper). 52Milliman GlobalRVUs (GlobalRVUs) . 52Milliman Advanced Risk Adjusters (MARA) . 52Actuarial Methodology . 52Cohort Selection. 53Metric Selection . 54Risk Adjuster . 55Statistical Analysis . 5611. Lessons Learned/Future Research . 56Acknowledgments . 57Appendix A: Articles Included in Literature Review . 58Definitions of DPC . 58Overview of DPC . 61Cost Outcomes . 68Regulatory Considerations . 77Provider Experience . 81Patient Access . 83Appendix B: Full Market Survey Results . 86Appendix C: Additional Development Detail for Milliman Advanced Risk Adjusters (MARA) . 97About the Society of Actuaries . 98Copyright 2020 Society of Actuaries

5Direct Primary Care: Evaluating a New Modelof Delivery and Financing1. Executive SummaryPrimary care is a vital and even foundational component of any health care system. Primary care physicians (PCPs)are the front line of health care and are often the entry point for patients needing care. How often a patient accessesprimary care, and the quality of that care, can have significant impacts on downstream costs and patient healthoutcomes. However, while PCPs are almost universally acknowledged as essential to achieving the health care TripleAim of providing high-quality care, at lower cost, with improved patient experience, many health care experts describethe current state of primary care as being in crisis. This crisis is characterized by physician burnout, large PCP patientpanels, low pay for PCPs relative to other physician specialties, increas