This week, I received an insightful email from a medical student who’s interested in starting and growing a direct primary care practice of her own. This is super exciting - I love hearing about medical students who are looking to create fulfilling, successful independent practices. Here’s the first part of the note I received from this eager student, followed by their further questions:
So, I have a finance and small business administration background, so I'm really interested in the nuts and bolts of how things are working or not working for direct primary care doctors like yourself right now. I have a few questions for you:
What works well financially for a direct primary care practice?
What is working well financially for you right now?
Our direct primary care practice is working well for us financially at this time. We currently have 680 or more patients between two doctors. Because of our membership model, we have a guaranteed revenue stream from our patients as long as we continue to give excellent service to our patients.
I think we set our prices just right at the outset of starting our practice because we have roughly 30 new members enrolling in our service each month. That tells me that it’s not too cheap so that a deluge of people are enrolling, but it’s not so expensive that the cost of the membership is prohibitive for people looking for this type of service. Rather, we’ve hit a sweet spot in the marketplace where we’re financially successful at a relatively low price point.
We’ve kept our overhead low and supplemented our clinic revenue with Botox services and Osteopathic Manual Therapy services. I also earn revenue from consulting with doctors who are starting and growing their direct primary care practices and through course sales via this website. These earnings are modest relative to the revenue earned through my clinic, but it’s worth mentioning.
Should Your Direct Primary Care Practice Have a Scaled Membership Fee Structure?
Is the scaled membership fee you have working well for you?
At our practice in Detroit, Plum Health DPC, we have relatively low price points. Our membership is $10 each month for children and starts at $49 each month for young adults. Keep in mind that Detroit has an average household income of around $26,249, so our price points are intentionally low to accommodate all members of our community. Even with relatively low membership price points, we are able to earn a comfortable living by keeping our overhead low and by being judicious with our collections.
At our Plum Health DPC clinic in Detroit, we have relatively low price points that respect the relatively low incomes of our neighbors. The median household income in Detroit is roughly $26,249. Despite these low prices, we are able to make a comfortable living with our direct primary care practice and we’re able to pay our medical assistant a living wage.
The scaled membership works really well because it right-sizes the cost of primary care services for our individual members. For a single mom, $69 each month fits for her and her two children under the age of 18. For the 30 year old restaurant worker without any other form of insurance, the $49 monthly fits for his budget and lifestyle. For the 50 year old truck driver with high blood pressure and hypothyroidism, the $69 monthly as well as the convenient access for appointments when “just passing through” makes the service very valuable for him.
And this is super important and something that doctors can lose sight of when starting and growing their direct primary care practices: you must provide a tremendous amount of value to your patients in order to have a successful direct primary care practice. If you don’t provide a lot of value for your patients’ healthcare dollars, you will struggle in this venture.
Notably, to be viable in a direct primary care practice, your collection rate should be at or above 90%, meaning that you need to collect 90% or more of all of your charges. If you fall below this threshold, it becomes much harder to build a sustainable practice. I mention this here because if you’re providing a valuable and useful service, your patients are more likely to engage with your services, use your offerings, and pay for your membership.
What Would You Have Done Differently in Starting and Growing Your Direct Primary Care Practice?
Now that you're a few years in, what would you have done differently at the outset?
I met with another provider here in Richmond who keeps a pharmacy for her patients. She says it's a TON of work, but she wants to do it (for now). She also mentioned that she was a little TOO available at the outset and she wishes she hadn't done that.)
I have very few regrets about how I’ve started and grown my direct primary care practice. I started my journey by taking small business courses, which were tremendously helpful in helping me transition from Residency to a Small Business owner. I graduated from Residency in June 2016 and took those small biz classes from July through November of 2016. I took two separate classes that ran pretty much consecutively.
I won $7,500 in grant money from the second small business course and I launched my practice in November 2016 with about 7 patients. It took me about 2.5 years to get full, and then I was able to hire a medical assistant and a second doctor. Hiring a second doctor allowed me to grow in so many different ways, and I’ve also gained a trusted colleague and a great friend.
Next, I’ve been able to build a dream practice for myself in a historic location in Detroit’s Corktown neighborhood. Our practice sits on the former site of the Tiger Stadium, where baseball greats played, like Babe Ruth and Ty Cobb.
Looking back over the past three and a half years, I’ve worked really hard to create a thriving business, and I wouldn’t really change anything. I love dispensing meds out of our office because I love saving my neighbors loads of money on the costs of the prescriptions.
I love being available to our patients because I’ve saved countless members thousands of dollars each by preventing unnecessary Emergency Department visits. Here’s one ER visit we saved by sewing up a dog bite on a Sunday night:
How much money do you need to start a Direct primary Care practice?
Do you have any long term liabilities related to start up? Everything I hear says you probably want around 10-20k to startup, which sounds about right - how did you navigate the startup process and what were your best resources?
I wrote an entire blog post on this one question, here’s the full blog post on how much money you need to start a direct primary care practice and here’s an excerpt from that blog post:
This is a question I recently received from someone interested in the direct primary care movement. And, it's a good question. I'll start by saying that I've addressed this question in great detail in my course on Writing a Business Plan for your Direct Primary Care practice.
So, for a full answer to this question, please go to our Take Action page and check out the Business Plan course!
To answer the question more directly, a direct primary care practice can be started with $5,000 or with $50,000. It depends on how expensive your lease is, how many staff members you have, how much equipment you need to buy, and how resourceful you are.
For many doctors in the direct primary care movement, they know how important it is to keep their overhead low. A lower overhead leads to a lower price point for patients and therefore a more sustainable medical practice.
For me, I launched my practice with about $20,000 in the bank. I bought a $700 exam table, a $1,700 EKG machine, and a $700 pulmonary function test (PFT) machine. I spent about $600 each month on rent, $450 each month on my malpractice insurance, $300 monthly on the electronic medical record system, $500 monthly on medications, and $500 monthly on lab work. Those were the biggest expenses when I started, and my monthly expenses for the first few months of practice were in the $3,000 monthly range.
This low overhead made it easy to break even for operations, and I broke even for operations with around 85 patients or 85 members in my practice.
Looping back to your initial inquiry, I navigated the startup process by taking some small business courses from some excellent sources here in Detroit. One was via the Build Institute and another was through TechTown’s Retail Boot Camp. They were each 8 weeks long and walked me through forming a business entity, branding, marketing, public relations, raising money for your business, acquiring customers, creating a customer avatar, networking, negotiating lease documents, and building out retail spaces. These courses presented a ton of information over 16 weeks in total, and it was a huge time investment on my part, but it paid off as I was able to create a thriving business based off of these teachings.
I know not everyone has the time and the capacity to take in-person classes, so I’ve distilled much of what I’ve learned from those courses into these courses on our website and I’ve streamlined the material to focus on what doctors need to know. I really tried to focus time, energy, and attention in the courses to those natural blind spots that physicians have when starting a business.
I highly recommend taking these courses because they will accelerate your growth and help you skip over many mistakes and pitfalls along the way, which could in turn save you thousands, if not tens of thousands of dollars.
Should I hire a second doctor for my Direct primary care practice?
Last one: I see you have a partner in your practice! Do you find this has been financially advantageous for you practice compared to a solo practice?
There are so many tangible and intangible benefits to hiring a second doctor in your direct primary care practice. I mentioned this above, but by hiring a great physician in my practice, I’ve gained a trusted colleague and a great friend.
Direct primary care doctors often ask if they should hire a second doctor for their direct primary care practices and how to hire a second doctor for their DPC practices. I answer the first of these questions in this blog post. Above, Dr. Paul Thomas MD and Dr. Raquel Orlich DO of Plum Health DPC pose at their office in Detroit, Michigan.
Having a second doctor allows me to have someone to share an interesting case with, who can help me manage my patients better by teaching me things along the way. A second doctor also allows me to take a vacation in a relatively care-free way - I don’t have to close my clinic or not be available for my patients because the second doctor can absorb those urgent concerns in my absence.
For me, I didn’t hire a second doctor to make more money, but I did hire a second doctor to build a more sustainable practice. Eventually, as my colleague fills their panel with more patients, I will earn more money, but this was never a top priority.
My top priority has always been delivering excellent care and service to the people in my community, and my practice partner joined my practice to help me achieve this goal. And, that’s why we’re successful.
HOW CAN I LEARN MORE ABOUT STARTING A DIRECT PRIMARY CARE Practice?
If you enjoyed reading this blog post and if you want to learn more about starting and growing your direct primary care practice, look no further than our courses on how to start and grow your direct primary care practice. We at Startup DPC have begun compiling some of the best content available on this blog and in our courses.
The best place to start is to take our Direct Primary Care Business Plan course, available here. From there, you can learn how to attract new patients to your direct primary care practice and how to find the perfect location or build out the practice of your dreams.
Thanks for reading and watching, and best of luck in your direct primary care journey!
- Dr. Paul Thomas with Startup DPC