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Join us for an insightful discussion on the current state of primary care in hospitals and the emergence of direct primary care (DPC) as a transformative solution. Our guest, Christopher Habig, co-founder and CEO of Freedom Healthworks, shares his expertise on why hospital-employed practices are bleeding money, the lack of transparency in pricing and referrals, and the challenges faced by rural hospitals. Discover how DPC offers a lifeline for hospitals, promotes financial sustainability, restores patient trust, and ensures access to quality health care in underserved communities.

Christopher Habig is co-founder and CEO, Freedom Healthworks, a company dedicated to scaling the direct primary care (DPC) practice model, putting doctors back in control of patient care.

He discusses the KevinMD article, “Health care’s hidden problem: hospital primary care losses.”

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Transcript

Kevin Pho: Hi, and welcome to the show. Subscribe at KevinMD.com/podcast, get CME for this episode by clicking on the CME link in the show notes. Today we welcome Christopher Habig. He’s the co-founder and CEO of Freedom Healthworks. Today’s KevinMD article is “Health care’s hidden problem: hospital primary care losses.” Christopher, welcome to the show.

Christopher Habig: It is a pleasure to be here. Thanks for having me.

Kevin Pho: So let’s start by briefly sharing your story and journey.

Christopher Habig: It all started really about 10 years ago for us. I grew up in a household, mom and dad were physicians, and so I thought I wanted to go kind of into the family business. And by the time I got to medical school was when the ACA was being debated hotly in Congress.

And I remember the day I shut my MCAT study book, and I hadn’t met a single physician, including my parents, who said that medical school is a good idea. And there’s a lot of uncertainty around the profession and around the calling, as we like to say.

So fast forward a couple years later, we decided to attack the business of medicine and helping physicians enter back into independent primary care using what we call now the direct primary care model. And so that’s what we do at Freedom Healthworks. And it’s been an interesting journey to get here with all the change happening in the industry, but that’s about the briefest overview I can get you.

Kevin Pho: All right. So I’ve talked to a lot of physicians who are in that direct primary care model, and they’re very, very happy, certainly, in that model. So why did you choose primary care to focus on in terms of helping the health care system?

Christopher Habig: It seemed like that’s where the most pain was, from a physician standpoint. They always talk about burnout, all this kind of stuff, and we have a very simple solution. We say, look, burnout can be a killer, literally and figuratively. The simple solution is to become your own boss. And so our mission is to make it as easy as possible for physicians to become their own bosses.

Primary care has a patient base that is tailor made for a recurring revenue and a membership model. You see multigenerational patients, and so you build relationships. And that is what good primary care really does, is be able to look at, as you and your listeners know, be able to look at a patient and be able to tell if they’re doing well or not. To me that is the pinnacle of medical care, where you have that strong relationship. And those relationships are being built at the primary care level, for sure.

Kevin Pho: All right. Your KevinMD article talks more about primary care, “Health care’s hidden problem: hospital primary care losses.” For those who didn’t get a chance to read your article, tell us what it’s about.

Christopher Habig: It’s about this notion that primary care doctors are treated as loss leaders in the business of hospitals. Most hospitals will lose anywhere from a hundred to $500,000 on a primary care clinic, from an employed physician standpoint.

Now people say, well, that’s a big number, what in the world is going on? And I just want to back up, make sure we understand that when I say a hospital employed primary care physician, I’m meaning somebody who sees two to 3,000 patients in a year and still loses money that the hospital has to subsidize.

Now, in any other industry that is a bad investment. But when hospitals view their primary care as loss leaders and just a very well-paid triage machine to send people into specialists and send people into surgeries that they do or do not need, that should be a huge cause of concern across the industry, between patients, physicians, and those people actually paying the bills.

Kevin Pho: Now, in general, is that business model sustainable? Because primary care has been a loss leader for what seems like decades now. The fact that hospitals are still doing it means that it may be a financially sustainable model.

Christopher Habig: It’s a great question, but I think we’re starting to see a lot of chinks in the armor there, because we see shutdowns of rural hospitals happening left and right. We see really implosions of people buying into primary care networks. I mean, you see big companies buying into primary care and then shutting them down. You see a lot of money being thrown at primary care, and they’re all focusing on a quantity game, not necessarily the quality game.

But I would look at hospital mergers, hospital acquisitions, buying up and then consolidating facilities into more profitable urban centers. That’s the canary in the coal mine for us, that we’re leaving large swaths of America without any type of health care. And this business model that is prevailing is just not sustainable for those types of reasons.

Kevin Pho: So let’s talk more about the root causes as to why hospital-owned primary care practices lose money. Are you saying that there is no way that a hospital-owned primary care practice can generate enough revenue to make a profit?

Christopher Habig: Not in the current reimbursement model, there’s no way. It’s health care, as we laugh, it’s the only thing with steady or increasing demand that is achieving unprofitable results for many, many employers and hospitals across the country.

My article, and this kind of crazy idea we had, is saying, look, we at Freedom Healthworks have a programmatic approach to the direct primary care world, and these primary care practices are profitable. And I think doctors need to be comfortable using the word profit. It’s OK to make money doing what you’re doing. Not many people in this world can actually do this. That’s why you’re able to go to medical school and able to really have that empathy for patients. Not everybody can do this, and so you should be compensated very, very well.

In the DPC model it is profitable. And so my article goes through, and I like to present solutions, not just shout at problems and throw my hands up and say, what are we going to do about it?

But I would love to see some enterprising hospitals that want to partner with physicians to ease the burnout, to ease the access in some of these underserved areas, while still maintaining the fact that primary care is going to need those hospital facilities, for labs, for imaging, for specialists. So there can be a nice little referral pipeline there. You can’t mandate it, but why not get those primary care losses off of your books and actually turn that referral pipeline into even bigger revenue generators for the hospital? Now, what they do with those revenues, that’s up to them. But we think that this could be a very interesting experiment for hospitals all over the country to start running.

Kevin Pho: Now, talk about the conflict of interest under that traditional hospital-owned model, where hospitals treat primary care offices as loss leaders so they can refer more patients to the hospital’s consultants and testing and imaging, where the real money makers are. So talk about the inherent conflict of interest in that.

Christopher Habig: A couple years ago, we’re based out of Indianapolis, so we had a surgeon here with a major hospital system who said, look, I’m fed up with this. He’s an orthopedic guy, did a lot of professional sports work with the Indianapolis Colts, Indiana Pacers.

And I said, doc, what was the final push, what was the straw that broke the camel’s back there? He goes, Chris, I had an administrator lambasting me because their revenue model was built off of me sending one out of three patients into surgery, whether they needed it or not.

And so when I talk about conflict of interest, there’s a business case that surgeries and highly trained specialists, they need that episodic care. It is almost like this milking parlor, where the hospitals don’t make money when patients are healed.

If we at Freedom Healthworks cure a patient’s diabetes and they lose weight and they’re able to overcome it, that’s great, we make more money on that because they’re a happy patient, recurring revenue comes in. If a hospital-based system actually heals a patient, they don’t make any more money off of that person.

And so when somebody presents to primary care and the primary care says, great, we need more testing because I only have five minutes to see you, I’m going to send you right down the hall, with no second opinion, no other judgment whatsoever, that is the conflict of interest that is very apparent to us. When we’re able to see kind of outside the system and say, look, people and patients and doctors do have options when it comes to accessing medical services.

Kevin Pho: So tell us a success story where Freedom Healthworks or a direct primary care system has partnered with a hospital successfully, in a model that you just mentioned.

Christopher Habig: There aren’t many with direct relationships. What we’re able to do is, a lot of it is actually through the non-compete conversations, that hospitals will willingly say, look, let’s tear up your non-compete, you’re going to go out, start up an independent practice. And then they maintain those friendly relationships.

Because we do have great hospitals in this country, we have the best health care in the world, the way we pay for it is a little messed up. But once hospitals realize that, hey, that is not a competitive type of a practice model, we still need to be very collaborative here, all the kinds of things open up.

And so instead of trying to close off the system, we’re able to open it up and say, look, we can all work together. It’s kind of returning to where primary care was four or five decades ago, when you did have the small town doctor doing house calls, and you did have the doctor who was able to answer the phone after hours.

And then that collaborative spirit is still very much alive and well when it comes to helping patients access very sophisticated treatments and highly technological procedures that are probably going to be needed. But we just don’t see as many of them in the direct care model, because that physician is there at the first sign of trouble.

Kevin Pho: So how do you change the minds of hospitals? Because I’m sure a lot of them, they’re kind of wedded and used to the traditional revenue model. And I see you smiling, so I’m sure that you’re very familiar with that. How do you change the minds of these hospitals to perhaps think outside the box?

Christopher Habig: I think it’s solution based. I think it’s shows like this, and the work that you’re doing, and the listeners, that really have to show, look, there is a different way to do this. Because the status quo, the way we are going about things, it’s not sustainable.

And a lot of the hospitals point fingers at insurance companies, and the insurance companies point fingers at private equity, and all those things combined, and we’re not talking about the interaction between a patient and physician that a fifth of our economy is built off of. It is just not sustainable where we’re going right now.

I have talked to hospital executives and they say, yeah, this makes sense, yeah, please partner with 30 of my doctors so I can stop losing $15 million per year on those doctors and still preserve that pipeline. But nobody has the guts to really step through it yet, that we’ve been able to encounter.

So we’re still looking for somebody who’s enterprising, who’s going to say, this might be a solution for those rural hospitals and for those areas where health care is just not an option for a lot of people out there. So, kind of a funny way to answer that one, but we’re still looking for people who want to be a part of the solution.

Kevin Pho: Talk about the morale of primary care, almost being treated like pawns, being referred to as loss leaders informally, and being taken over by private equity with very little say. And contrast that to the empowerment that direct primary care gives them. So talk about the morale of the primary care physician in those contrasting models.

Christopher Habig: I think it started a couple years ago, and it was a vocabulary switch, when hospitals started referring to physicians as providers. I think that’s really where the fire was lit underneath the rear ends of a lot of these physicians, to say, I went to medical school and residency, and I worked my tail off, and perhaps I went into a lot of debt. I did that to be called a physician, not a provider.

And so when hospitals treat their physicians, their highly trained, highly educated physicians, as commodities, that everybody wearing a white lab coat and everybody wearing a stethoscope is all the same no matter what initials or credentials they have, that’s when they start to lose a lot of identity. And that’s when I think the pawns really started. And when your hospital admin is like, OK, well, here’s a doc here, here’s a doc here, if a patient’s looking for care, go ahead and just start calling people off of this list and see which one you can get into first, without asking the patient what type of doctor they’re actually looking for. It really dehumanizes everybody in that system.

Now, when we’re able to grab a doctor and I have calls with them, and within 10, 15 minutes, you’re like, hey look, there’s another way to go about doing this and be happy practicing medicine, it’s like the lights kind of come on, they kind of sit up and they start smiling once again for the first time in a while. It’s really rewarding from our side.

And we have an old joke in the industry, that whenever you go to a physician trade show or conference, you look all around, how do you tell who the DPC doctors are? They’re the ones smiling. And that happens more often than not.

And so when they are empowered to really be their own bosses, make their own calls from a care standpoint and a relationship standpoint, and then you have somebody like us who’s able to help out on kind of the front office, back office business side of it, I really enjoy telling doctors that, hey, go on this model and you get to actually focus on patient care, and that is OK. And you get to make money doing it, and that is also OK.

Kevin Pho: So you talk about the DPC hospital partnership that can help in rural areas. However, a lot of rural patients socioeconomically are on the lower end of the spectrum. So do you find that to be an obstacle when you’re asking them to pay a monthly membership fee?

Christopher Habig: Really don’t. We’re able to price locally. Just like politics, I’m a firm believer that health care is local. All politics are local, all health care is local.

Now, I don’t have the slightest premonition, or this idea, that if somebody’s practicing medicine in downtown Manhattan or downtown Chicago or downtown LA, they’re going to have the same pricing as somebody who’s in the middle of Indiana, right? It’s just not there. Like, no other product or service is priced just this blanket one size fits all.

So when you’re able to price according to local needs and meet customers where they are according to cost of living, you see people like, oh my gosh, this is amazing, you’re the first doctor in eight years who’s accepting new patients in my area, I can’t wait to join you. People see the value of having that physician right there, and not just presenting an insurance card to a doctor and saying, I’m going to take whatever this gets me.

Kevin Pho: We’re talking to Christopher Habig. He’s the co-founder and CEO of Freedom Healthworks. Today’s KevinMD article is “Health care’s hidden problem: hospital primary care losses.” Christopher, as always, we’ll end with some of your take-home messages to the KevinMD audience.

Christopher Habig: I think everybody can have a part in changing health care. I tell people all over the place that, it’s a very big problem to help change health care, but I say, when you go see a doctor, ask them what the price is. And if that doctor doesn’t know, but they keep getting asked that question, they’re going to go find out, because they don’t like to be the person in the room without an answer.

And if you’re a physician who is referring to colleagues in the hospital system, and you don’t know the prices of the things that you’re referring and the things you’re recommending, just dig a little bit, it’s out there. And then you’ll see, not just taking good care of the patient’s physical body but also their wallet.

Bankruptcy due to medical debt is a huge problem right now in America. And I read about a month ago that over half of bankruptcies for medical debt are those that are actually insured. And so that is just a scary, scary statistic, and one of the drivers of why I say that the status quo is not sustainable by any means. So we need real solutions, and we need doctors to take back control of health care.

Kevin Pho: Christopher, thank you so much for sharing your perspective and insight, and thanks again for coming on the show.

Christopher Habig: I appreciate you having me. Thanks for everything you do.