Seattle Docs, Via Qliance, Aim to Revolutionize Health Care By Freezing Out Insurance
One of the simplest—and most disruptive—business ideas I’ve heard for U.S. health care reform is gaining momentum in downtown Seattle. It’s with a small group of primary care doctors at a company called Qliance, who don’t accept health insurance payments of any kind.
I made a beeline over to the Qliance office after hearing about this in a story Greg wrote a few weeks ago about Nick Hanauer, one of the early investors in Amazon. Hanauer, an investor in Qliance, said health insurance companies despise this idea, and he loves it. So naturally, I had to learn more about what this startup is trying to accomplish from its CEO, Norman Wu.
Here’s the problem they are trying to solve: American insurance companies gobble up about 40 cents of every dollar spent on health care for all the red-tape claims processing that goes on, and for their profits, Wu says. If primary care doctors decide to play ball in this system, the numbers tell an ugly story. They generally need to have a roster of patients 2,500 to 3,500 deep, whip through 25 to 30 appointments with patients each day, allocate less than 15 minutes for each patient, refer them unnecessarily to specialists, and move so fast they can barely remember anyone’s name.
Too much time, and staff energy, is wasted on haggling with insurance companies, and too little time doctoring properly, Wu says. About 90 percent of medical issues can be handled simply by a primary care doc, but these insurance hassles have turned this into a dying form of medicine.
“It’s akin to using your car insurance to pay for a new battery or a set of tires,” Wu says. “It doesn’t make sense.”
Instead, Qliance has set up what it calls “direct practice” which essentially freezes out the health insurers and deals directly with the patients. The patient hands over a credit card to get a recurring monthly membership fee sent to Qliance, for $39 to $79 a month. In return, the patient gets unrestricted use of the primary care service like a customer would get at a health club. If the patient has a fever and cough to get checked out, he or she simply calls to make an appointment, and gets in to see the doctor the same day, for 30 to 60 minutes. The doctor isn’t in such a hurry. He or she only has a roster of 800 patients, and generally books 10 to 12 appointments a day, while also being available for e-mail and phone consultations. The place has unrestricted, 7-day a week access to its physicians.
One thing most people don’t realize is how radically this changes the doctors’ perspective on medicine. The current insurance-based system encourages doctors to run all kinds of procedures and prescribe all kinds of drugs, because that’s how they get paid by insurers. When they get paid directly by the patient, regardless of what they do, the doctors’ perspective on what needs to be done suddenly changes, Wu says.
“They have to order up some procedure so they can justify having spent some time with you,” Wu says of the existing insurance-driven model. “They do unnecessary procedures, order up unnecessary repeat visits, or refer you to specialists. The cost just goes up and up, and the quality goes down.” He adds, “We don’t want to provide an incentive to push things on patients they don’t need. Our customer is the patient, not the insurance company.”
This being health care delivery, there are a lot of complex moving parts. Quite a few tests and procedures, like X-rays, EKG’s, or stitches are included in the Qliance monthly membership, but if a more complex treatment is needed, it can be added as an extra cost. If the patient needs a prescription, 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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