Seattle Docs, Via Qliance, Aim to Revolutionize Health Care By Freezing Out Insurance

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it’s available at wholesale cost from Qliance, on-site. If a patient is believed to have something serious like a brain tumor, he or she gets referred to a specialist. That’s when the patient’s health insurance plan, for catastrophic coverage, ought to kick in, Wu says. (To get an idea of whether this works for you, here’s a list of what’s included and what’s not.)

“We’re not talking about catastrophic illnesses that can bankrupt you,” Wu says. “That’s what insurance is for.”

I’m sure that Hanauer was right when he said insurance companies hate Qliance, because they see practices like it as a mortal threat to their market share. Wu acknowledged some of this, but tried to downplay it. He said Qliance encourages customers to get catastrophic health insurance plans, with high deductibles, in case they need emergency care for being in a car accident, cancer, or something life-threatening beyond the scope of what they can provide. These plans have lower premiums to customers, which should save the individual, and his or her employer, a lot of money, Wu says.

This company got its start with a $3.5 million Series A funding round in late 2006 from Second Avenue Partners (where Hanauer is a partner) and angel investors, Wu says. The founders are Wu, an entrepreneur who formerly led Emeryville, CA-based Avantos Performance Systems, and Garrison Bliss, a Seattle-based primary care physician with 30 years of experience. Bliss has a long history of circumventing the health insurance system—in 1997, he helped form Seattle Medical Associates into one of the nation’s first practices to offer a direct monthly-fee based primary care model to patients.

“He and his colleagues found they were working harder and harder, and getting paid less and less,” Wu says.

Those forces have conspired to turn primary care into a dying breed of medicine, Wu says. This actually matters for society. He has a whole slide of the benefits of primary care. One study in 1996 found insurers had a 53 percent lower costs for 24 different forms of illness if the patient saw a primary care doctor first, instead of going to the emergency room or a specialist. The same publication, the Journal of Family Practice, published a study two years later that found annual health care costs drop by a third for people who see primary care docs instead of specialists.

What’s particularly intriguing to me about this approach is that Qliance’s fees are low enough that it’s accessible to middle-class, or low-wage workers. It’s not like one of those “concierge” services that cater strictly to the wealthy, who put doctors on monthly retainers that cost thousands of dollars, and in return get house calls, all in their quest to rid themselves of the red-tape laden insurance system.

The Qliance “direct practice” plan isn’t designed get Microsofties to switch from their “soup-to-nuts” health insurance program, Wu says. The people most motivated to buy the Qliance service in combination with catastrophic coverage are self-employed individuals and small businesses struggling with their health insurance premiums, he says. He contends that employers can save 15 to 35 percent of their total health care costs by switching to Qliance plus catastrophic insurance. That ought to help Qliance remain appealing, even in a recession, when companies are looking to cut costs, he says.

So far, Wu says he’s encouraged by the company’s growth. Qliance has been open for 16 months, and has 2,000 patients signed up in Seattle, which represents about 50 percent growth over the summer, he says. The company has 16 employees.

The next step for Qliance is a planned expansion to Kent, WA. In seven weeks of work, an insurance broker there has signed up 15 employers to offer the Qliance service to 1,500 otherwise uninsured employees, Wu says. Those employers have been persuaded that the costs of the Qliance plan are reasonable, and that by offering primary care service, they can decrease absenteeism, decrease turnover, and lower their worker compensation costs, Wu says. He hopes to open that clinic by April.

From there, who knows where this will go. Qliance is scouting the regulatory landscape in other states to see how easy it will be to set up shop. “We believe the potential for this model is enormous,” Wu says. Some 250 million people in America need good primary care services; at $50 a month, that’s about as big a market potential as I can imagine. “Our growth will not be limited by market potential, but by our ability to execute,” Wu says.

The latest round of health care reform proposals could pose a threat to Qliance, though. Just recently, Wu met with aides to U.S. Sen. Ted Kennedy, the Massachusetts Democrat who is a longtime leader for reform on Capitol Hill. Wu is trying to make the case that universal health insurance mandates, if passed into law, shouldn’t squeeze out innovative “direct practice” models like Qliance.

The investors in this company certainly see the potential for big returns, Wu says, but they also got motivated to invest because they think the model has potential to do something good for society. “They believe the health care system is broken and in bad need of reform, and there are very few innovative solutions out there,” Wu says. “This is one.”

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6 responses to “Seattle Docs, Via Qliance, Aim to Revolutionize Health Care By Freezing Out Insurance”

  1. ensemble says:

    Great article Luke. You have touched on a very sensitive, and what will become in the coming years, a very contentious and debated topic… The Top-down or bottom-up delivery of healthcare services. It’s a classic “which one of these” situations… like the famous line spoken by Jack Nicholson in the 1985 Movie Prizzi’s Honor when as Charley Partanna the mafia hit-man who has fallen in love with his female hit-person counterpart Irene Walker (played by Kathleen Turner) when he finds out he has to kill her for a hit says begrudgingly, “Do I ‘Ice Her’ or ‘Marry Her’… Which One of These ?” Great line.

    In my opinion, this is where the real Health 3.0 service innovations are going to occur and where the separate technology and services battlegrounds of Web 3.0, Social Networks 3.0, and Mobile 3.0 are going to converge. It’s the “perfect storm” playing field of technologies, politics, and economics rolling out in front of us.

    This market development has been around now for the last 4-5 years and is also know as “Concierge Care” or “Concierge Medicine” or “Retainer Medicine” or “Boutique Medicine”. Some even call them “Executive Health Programs” or “Platinum Practices”. What ever label you call it the end result is that it’s going to be a major topic this next year as the entire Healthcare services marketplace is undergoing a radical upheaval and shakeout as both top-down and bottom-up models for providing and paying for healthcare services is going to be tested marketed and promoted.

    In the past these services have always been linked to “preferential patients” who have the ability to pay, (like what MD-VIP has been doing for years):

    However, through the innovation of internet social networking and client management, crowd sourcing, and the power of membership models, companies like Qliance will have the ability to bring this high-end model to the middle class, and there will be more to come.

    In today’s world where physicians’ incomes are being squeezed from many angles (lower reimbursements from insurance payors, higher operating costs – like malpractice premiums, greater administrative costs, delayed payments and claims processing hassles, etc.), many physicians are looking for ways to improve their income levels and reduce their workloads.

    As a result, many physicians have been compelled to try and put in more hours to see more patients in an attempt to stabilize their practice’s economics. Unfortunately, many find there is just not enough hours in a day to do this and the sad fact is their economic condition continues to worsen.

    Now, a growing number of physicians have responded in a different way. In what many would consider to be a drastic move, a pioneering group of physicians have decided to drop out of all third party payor programs (including Medicare and private insurers). Instead, these practitioners are now offering a limited number of patients the opportunity to pay a fixed annual fee in exchange for “healthcare services and amenities.” with the promise of immediate scheduling and more detailed care.

    This movement is flying directly in the face of the top-down government-led and controlled centralized healthcare model that Washington is trying to create, but will in fact create a larger base of potential business and innovation at the local level because there is going to be an entire healthcare IT services “eco-system” that is going to be developed to support this new grassroots models and relationship between Patients, Physician’s and their Pharmacists because they are going to distance themselves from Payors, Providers, and Pharmaceutical Companies. This is going to help widen the economic reality “gap” between the two sides of this six-sided healthcare rubic cube. Patients in collaboration with their Physicians and Pharmacists that will move away from institutionalized healthcare providers, (with large budgets and overhead), insurance providers (with their high-cost and compliance requirements), and pharmaceutical companies (who keep pushing “designer drugs” and their high costs) on a growing suspicious consumer.

    As an entrepreneur developing a new mobile social networking and digital data acquisition and control solution for managing disease populations, (through my company HubNetworks Solutions) I welcome the developments of this grass roots care model and look forward to working with companies like Qliance in the future.

  2. ensemble says:

    As a follow-up to my previous post above… below are some URL resources for both pro and con viewpoints and perspectives on Concierge Care:

    This is a somewhat dated article (2005) that lays out the playing field for a layman, but has a somewhat negative recommendation for the US market that is somewhat outdated (from The JAOA • Vol 105 • No 11 • November 2005 • 515-520)

    A perspective from a physician who “had reached the end of his own rope…” from a Houston Press Article from 2007 about Dr. Shannon Ray Schrader who was a noted AIDS doctor that had to cut back his practice and his patients, (using a MD-VIP Model)

    Another Physician perspective from a March 2008 Wall Street Journal article by By Dr. Benjamin Brewer, M.D. who details the “hard facts” about how 47 million medically uninsured Americans are going to obtain care from a Primary Care supply side industry that needs to add 140,000 more physicians…

    And an interesting third party viewpoint from a first year law student at Harvard on a blog where he attempted to “de-construct” the concierge care marketplace for better understanding by the Reader. Read through the full blog post and be sure to read the comment by Dr. Steven D. Knope, M.D. who started one of the first Concierge Care clinics 8 years ago and recently wrote a book on the topic.

    M. Schmidt
    Ensemble Ventures, LLC

  3. Saumitra says:

    Best article on healthcare ever – am sure Insurance companies will try hard to kill this model. Just like Gas companies killed electric car , GM killed Pacific rail road… Hope Qliance survives.

  4. I am a Primary Care Doctor and a concierge physician in New York – Dr. Marina Gafanovich MD, 1550 York Ave New York NY 10028, (212) 249-6218. Despite common belief, the insurance companies do not strictly oppose the rise of the concierge aka “boutique” aka “retainer” practices. First of all, the market share is very insignificant. Next, the market itself is a little different. The vast majority of Americans will always prefer to be insured, period. Then, most concierge physician accept the cash patients on top of their regular patient base who are swiping the insurance cards. Finally, even the concierge patients (other than the ones who desire and pay for a true white-glove service) pay cash premium for value-added service and not for the servcies rendered.

    I don’t predict the end of insurance companies any time soon.