Episode 43: Cutting Out the Middlemen

Anybody coming to the healthcare planning table with a solution that can cut out the middlemen while providing quality care has the opportunity to both be very profitable and good for the patient, according to Dr. Kendrick Johnson, founder and medical director of Ark Family Health, the first Direct Primary Care clinic in Phoenix, AZ. In his own medical training, Dr. Johnson sought out a business model that would incentivize him to prevent illness, not just treat it. In his practice, he works with employer-based health insurance plans to provide full-service primary care as an employee benefit. Learn how he works to incentivize employers to keep employees healthy, and how the Free Market Medical Association is achieving its mission of eliminating wasteful spending.

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Full Transcript

Announcer: It’s time to think differently about healthcare but how do we keep up? The days of yesterday’s medicine are long gone and we’re left trying to figure out where to go from here. With all the talk about politics and technology, it can be easy to forget that healthcare is still all about humans. And many of those humans have unbelievable stories to tell. Here, we leave the policy debates to the other guys and focus instead on the people and ideas that are changing the way we address our health. It’s time to navigate the new landscape of healthcare together and here are some amazing stories along the way. Ready for a breath of fresh air? It’s time for your “Paradigm Shift.”

Michael: Welcome to the “Paradigm Shift of Healthcare,” and thank you for listening. I’m Michael Roberts here today with my co-hosts Jared Johnson and Scott Zeitzer. On today’s episode, we’re talking with Dr. Kendrick Johnson, founder and medical director of Ark Family Health, the first direct primary health clinic in Phoenix, Arizona. Welcome, Dr. Johnson, and thanks for coming on the show.

Dr. Johnson: Hey, thank you so much. I’m excited.

Michael: We’re looking forward to it. So tell us a story about how you decided on direct primary care in your training instead of other specialties or other business models that you could’ve gone with.

Dr. Johnson: Sure. And how long is this program again?

Michael: We’ll shoot for less than a day. We’ll shoot for that.

Dr. Johnson: All right. I’ll give you the sped-up version. But I can tell you that I always wanted to be a physician. I always knew that I could help people in a significant way through medicine. And coming into medical school, I was all excited about this idea of preventing disease and suffering. And then when the classes started, there was no talk about preventing disease. There just really isn’t much in medical school about how we prevent disease and it made me wonder, you know, is disease not preventable? Are we as physicians just kind of trying to soften the blow of disease? And so I looked outside of the medical curriculum and found plenty of research that says disease is indeed preventable. You know, most of the diseases that we deal with as a nation are preventable diseases. So then I’m wondering why are we not talking about preventing it.

And then I’m getting into the hospitals and seeing that we have all of these patients in the hospitals with strokes, and diabetic complications, and heart attacks, and all of these diseases that are on the preventable disease list. So I’m thinking, “Why are we in America, one of the, you know, resource-rich nations of the world, why are we failing to prevent all of these diseases that are, according to the CDC and the World Health Organization, 80% preventable diseases?” And the answer, I believe, I found out later was that nobody’s getting paid to prevent disease. There’s no money in taking away diabetes or making sure that heart attacks don’t happen.

And I’m not suggesting that it’s a big conspiracy or anything. I’m just saying if nobody’s getting paid to do it, nobody’s gonna do it. And so you gotta look at how our health system is structured. There is very little incentive for anyone in the system to keep people well and for that matter, also to keep costs down. So I was desperate, honestly, to find a different way of doing medicine. I had this life’s work that was supposed to be done where I was gonna prevent disease, help people be healthy and happy, and I was finding that that just wasn’t happening all that much in medicine. Who your doctor is has a fairly slim impact on your health in most circumstances.

And so I didn’t wanna just have to just talk to a bunch of people and have minimal effect on their lives. I wanted to find a way to really help them be healthier and happier. And I was desperate to find a model that would help me to do that. And that’s when I started looking around and finding there are people who are doing different things. And direct primary care was the model that gave me the opportunity to spend more time with the patients and to have my own personal incentives in the right places to help them be well.

Michael: That’s awesome. You talked about like kinda looking around and seeing these different models. I mean, it sounds like this was like a really cool way for you to be able to kind of align that life’s work with what you actually wanted to do and to be able to get paid for it. Do you think this is the best pathway for healthcare professionals right now? Like, this is the way that you can align those incentives with preventing sickness?

Dr. Johnson: There’s a lot more work to be done. So that would be a big question for me to answer. I can tell you that prioritizing primary care is not a debatable pathway forward in healthcare. There’s plenty of evidence from all of the major medical journals and any organization studying healthcare can tell you that we need to invest in primary care. The problem is that most people are not incentivized to do it. There’s not somebody who’s making more money by investing in primary care. 

And in that aspect, yes. I think that the pathway forward is an investment in primary care. And direct primary care specifically is an example of a model that puts incentives in the right places where in a direct primary care model I get paid the same whether people are well or healthy. So if I wanna maximize my time and my dollar, then I need to help people be healthy. And so, in that aspect, you know, my incentives are aligned with my patients’ incentives and with the better good, the greater good of the nation by keeping healthcare costs low and helping people be well and active participants in society.

Scott: I’m really impressed with the whole concept. I know we’ve kind of played around on this with some other primary care providers who are trying to come up with a way to attack this issue. To your point, if you’re not eating well, if you’re not taking good care of yourself, I think it’s critical that somebody intercede and let them know that, “Hey, with some minor changes to what you’re doing, you can really have a much better life.” I remember…I think I was in my mid-30s and I had a primary care provider who was much older than me and he’s since passed away, honestly. Great guy.

And he looked at my numbers. I was like 32 or 33 and he goes, “You know, you’re doing a great job.” And I went, “Really?” And he goes, “No. No, you’re doing a great job if you wanna become a diabetic is what you’re becoming. That’s what you’re doing.” And I was like, “Really?” And he goes, “Yeah. Look at this, man.” And he kinda showed me the stuff and he basically taught me how to take better care of…like just from an eating perspective. It wasn’t like I had to go, you know, on some major diet or run 4,000 miles. It was like just some alteration. So kinda walk me through what this is. You know what I mean? Like how do you get paid? What’s the employer’s involvement? Let’s just start with that so that people truly understand what the model is.

Dr. Johnson: Yeah, so let’s say what is direct primary care. And direct primary care is a model where a primary care provider gets paid a set amount each month by either the individual themselves or by an employer to take care of all the primary care needs. And so what that might look like from an individual standpoint is they find out about this strange new type of medical practice where they can come in and get access directly to the provider through phone, text, email and where all of the appointments are included. There’s no copays. So that might look like you on a Thursday evening thinking, “Oh, I was meaning to ask my doctor this.” And you email me a question about nutrition, about a supplement you are thinking about taking which I’m probably gonna say you won’t need but…so that’s one way that it looks. It’s you reaching out to a medical provider in a way that you never had the ability to before unless you had a doctor in the family.

Then the next way that it looks is you come in for an appointment and instead of waiting two or three weeks to be able to get in for an appointment, you can be scheduled the next day if you have something urgent or the same day if you have something urgent. And you come in for the visit and you don’t sit down in the waiting room because the office staff usually just ushers you right into the room, or I myself come out and take you straight into the room and take your vitals. And then we have 30 minutes, maybe even an hour if we need it to really try and get to the bottom of your health. And where that goes most of the time when we try and get to the bottom of things is just where you just mentioned, it goes back to what are my habits? What do I eat? How much exercise am I getting? How much sleep am I getting? And what are the stressors and the way that I cope with stressors that are affecting my health? And it almost doesn’t matter what you come in with, it usually gets down to those things, you know.

Scott: It really does.

Dr. Johnson: If you’ve got knee pain, if you’ve got back pain, if you’ve got diabetes or high blood pressure, there is very few things that don’t come back to how do I live each day? And even the things that are not determined entirely by our lifestyle are still profoundly influenced by it. And so that’s what it looks like is we cover getting through the diagnosis, finding, you know, the appropriate medical treatment, but then we talk about, “Okay. How could we have prevented this? How can we reverse it with nutrition, lifestyle, and sleep, and emotional wellness practices?”

Scott: Yeah. It’s kind of interesting. So I’m an employer of about 15 people, give or take. And I provide healthcare for them. Thank you, BlueCross and BlueShield of Louisiana. And, you know, I pay that fee but it’s an old-style model and, you know, on the positive side, we’ve got a few people who are having babies. We have a few people who fall down and trip. We have a few people who, you know, need medical care. Okay, great. And I’ll tell you, every one of them needs to see someone for preventative care before they even get there. We all agree with that. So is there some sort of like additional fee that I would pay? Because obviously, if somebody falls down and has a wrist fracture, a Colles’ fracture, hey, there’s only so much you’re gonna be able to do for them. I’m sure you know how to set a Colles’ fracture. With that being said, you’re probably gonna say, “Okay, you need to see the orthopod and get an x-ray.” So how would that work, you know, for me as an employer? Would there be some sort of extra fee for that or something like that?

Dr. Johnson: So for you and a small business where you’re not in a position to take on the full risk of your employee’s healthcare, and that’s why you’re using an insurance product like BlueCross BlueShield. If you had 100 employees, then it would be…probably make more sense for you to take more of the risk of your employees. And so you would be more invested at that point because whether you’re in a self-insured or partially self-insured plan, then each dollar, each Colles’ fracture that goes to the orthopedist actually comes out of your pocket. But in the smaller groups where people aren’t taking on as much of that risk…and there are likely ways that you could reduce your cost by taking on more of that risk potentially without taking on too much risk. But that’s a longer conversation about insurance products that I’m not the expert in. But many smaller employees will also use us as a way of providing kind of a premium benefit.

So one of the big things that we’ve heard from employees as we talk to them is that they are frustrated by the fact that they are spending a bunch of money for benefits that their employees don’t use and don’t appreciate. And when they do have to use the healthcare system, it’s coming out of the employee’s pocket and that’s frustrating. So they add on a direct primary care like ours which, you know, may increase your monthly costs by 65 bucks a person or something like that, but may also drastically improve the enjoyment of the benefits and be great for retention, etc. And then some employers will also…who are not providing benefits at all, they will use us as their only benefit. If they can’t afford to do insurance, they might add direct primary care as a way of at least giving them access to good healthcare. And then the risk they can determine themselves. They can find a catastrophic product of some kind to cover the big events.

Scott: So do you find, Doc, that…or is it a spread? So for your particular practice, are you working on the employer level with larger groups or smaller groups or a little bit of both?

Dr. Johnson: It’s definitely a spread. And right now it’s a polarized spread because the small employers, the 20 to 30, they will often not be as generous as you or just not have the means to provide a full benefits package. And so many of them are coming to us as their only benefit. And so it’s an inexpensive way for them to provide a meaningful benefit. And then you get bigger into the 50 employees plus, they are required to have insurance but they are not big enough that they’re likely to start taking on more of the risk and going into a self-insured model. So they’re less invested in how much the healthcare is actually costing and they’re less invested in the quality of care. They’re more just required to provide a benefit. And so I don’t have any employers in that range right now.

Scott: Makes sense. But then you move up the ladder to the very large group.

Dr. Johnson: Yeah. And then it really makes sense because…

Scott: It really does.

Dr. Johnson: That’s coming out of their pocket anyway. They might as well have a primary care who can help prevent disease, also help to make sure that people are getting to the right specialist, and creating a system around both improved care and lowered costs.

Scott: Yeah, you know, that’s an interesting point you bring up. So for people who are listening and they’re not…they’re trying to get a feel for this and where this fits, I worked a long time ago in a galaxy far, far away for Johnson & Johnson and they were self-insured. And so they hired a company to manage people’s health costs, but they really paid for it out of their pocket. And man, they would be so active about trying to get you to go see the doctor on an annual basis, to stop smoking, to walk more for obvious reasons, you know. One, they…I mean, if you’re Johnson & Johnson and you’re just sitting in the HR department running statistics, you’re like, “You know, we have healthier people. They’re in the office more. They’re actually doing work and happy. Here’s a thought.” And then just bean counters across the aisle, they’re going, “Yeah. And here’s another thing, man. It’s a lot less money to tell them to eat better food in the cafeteria than to have a ton of people with diabetic issues and/or stroke and/or cardio etc., etc.”

So I could see that polarization, you know, how that would be in effect. And I always tell the story in terms of preventative health. I have a friend of mine who’s a pediatrician up at Columbia Presbyterian. So the demographic is very poor and they would have a very high percentage of people from the Bronx who would come down with asthma, you know, kids with a lot of asthma. And it drove them crazy. They knew it was really because there was an infestation of bugs in a lot of the housing that the kids were running around in. Yeah. And they were like, “I don’t know how to take care of this.” And so what they did was they actually hired lawyers and the lawyers went after the landlords and said, “Hey, we’re gonna sue you unless you start doing this, this, and this.” And magically, within a year, the number of cases came down because it was just preventative medicine. I mean…

Dr. Johnson: Absolutely.

Scott: Vis-à-vis a lawyer. If anybody out there is listening and they don’t know or they don’t have access to, I really do. Go see your doctor once a year and don’t accept stuff like, “Yeah, you’re okay.” It’s like ask good questions. Look it up before you go in. You know, have a good plan. I can’t tell you how many people have told me stuff like, “I’m not eating red meat anymore but I love shrimp.” And I’m like, “Yeah, no. I don’t think you’re getting it, man, because shrimp’s got a lot of cholesterol.” And they’re like, “Really? It’s seafood.” And I’m like, “Yeah, it’s not the one you wanna eat, you know.” I really am excited by any of these models that kind of change the status quo. To your point, if you’re not on one of these things as a primary care provider, you’re just seeing people and trying to process people as quickly as possible, right? I mean, that’s the other end of this.

Dr. Johnson: Yeah. In fact, I had a gal in the office today who’s looking to work with a primary care provider and she has 25 patients on her schedule today, and 7 of those are annual wellness visits that she needs to do. And I mean, if you do the math on that, to see all those people and to do more work on charting than the actual time with the patient, there is very little time left for each patient in that day. And contrast that to my day today, I have four patients on the schedule today and, you know, I also am answering some emails and some phone calls and things like…that other providers wouldn’t have time for. But in terms of actual patient appointments, it’s drastically less. And that gives me the opportunity to focus on…

Scott: Take care of your patients.

Dr. Johnson: People who can’t do…yeah.

Jared: I’m really curious. I mean, this is one of those open-ended questions and it’s…I don’t think there’s one particular answer to it but…so what’s the provider’s role in helping the employer keep their employees, healthy? Right, Scott, you were just talking about, you know, as the employer, you know, what’s your role. So does a provider have a responsibility there at all? Like, what’s their role in helping employer keep employees healthy?

Dr. Johnson: I think we touched for a moment on the idea that a healthier employee is a more profitable employee. And that’s been studied in a few different ways but a couple of big ways that you can see are absenteeism and presenteeism. Absenteeism, of course, is when you’re not at work. Presenteeism is when you’re physically there and mentally not as much there because, you know, you’re at work but you’re not there working effectively. And the numbers that are estimated of the costs of absenteeism and presenteeism are staggering. We’re talking in the billions of dollars a year lost because of absenteeism and presenteeism due to health problems. So those ones are pretty easy to see that your employer has a role or has an incentive to have healthy employees.

And in terms of their responsibility, you know, that’s probably a bigger question. I have employees and they are like family to me. And so it’s probably a little easier for us with smaller employee groups to see how we have a responsibility to help people take care of themselves. I think that that gets lost as companies grow larger to some extent. But I love to see companies that have a commitment to their employees in that sense and that commitment also has been studied to produce better employees. You know, if an employee knows that they are safe, they can trust their employer, then their productivity goes way up. So I think we have both an obligation as employers who are in a position to do something that people are not likely to do for themselves. We have an obligation to look at that and see how we can help. But we also have an opportunity economically to have a more productive team.

Michael: I love the fact that you have found a way to do that and be incentivized and find a way to get paid to do that. That’s what we’re all looking for. Like you said, like, that was the missing piece in the practice model and in the business model itself. And so, to be able to see that there is a way to do that and for it to prosper, I mean, you have a very prospering practice going on. And so, like, it’s catching on. It’s something that as more people realize, they’re like, “Yeah, of course, that makes sense.” But to see it actually work, it just…it seems like there’s a lot of momentum there. And it does feel like there’s also some momentum in some of the other relationships and communities that you’ve been involved in and one of those is you have been involved in is the Free Market Medical Association and I’d love to hear more about that. Like, you’ve got a mission there going on. Like, what’s that all about?

Dr. Johnson: Yeah, the Free Market Medical Association is really just a group that is dedicated to connecting the buyers of healthcare to the sellers of healthcare. And they’re very deliberate in using that language. We don’t usually talk about employers as the buyers of healthcare, and we often don’t like to talk about medical providers as sellers because, you know, that’s a naughty word in medicine to call…to say that you’re selling anything. But when we avoid using those words, when we call the insurance company the payer, which is inaccurate because they’re not actually…it’s not coming from them, it’s coming from the employers’ pocket. And then we call the medical providers healthcare providers which is, of course accurate, but in a business sense, we are also selling a product.

And in the Free Market Medical Association, in order to clarify the relationships, we try and eliminate middlemen like insurance companies when possible, and connect the person who needs to purchase healthcare with the person who can provide it which in my case, I’m providing the primary care portion of that. And so when we connect with employers, we are contracting directly with the employer, not through some other third-party, to provide that service for the employees of that company.

You would be amazed how many people got cut out when we did that. You know, we’re talking three or four steps in between where the employer before was paying somebody to pay somebody to pay somebody to pay me. Now the employer’s paying me directly and just think about all the money that was going to that other somebody and the other somebody along the way. The estimates are that there is a trillion dollars a year that is wasted in healthcare. And that waste is going to a few different places. One of them is excessive administrative costs. One of them is medical errors. One of them is overpriced medications. And then another chunk that’s not even being touched by that is the one that we mentioned earlier which is just the preventable disease.

So in that trillion dollars, that’s where the opportunity is. There is so much money there that is being wasted right now that anybody who’s coming to the table with a solution that can cut out middlemen and give quality care has the opportunity to both be very profitable and do something that is good for the patient and the company.

Scott: I absolutely agree with you. As you’re talking to me, I’m thinking, “Man, is there a way that I can find somebody locally here to help ameliorate some of that or at least just, you know, make sure everybody’s just a little bit healthier.” To your point, I know there are days…everybody has a bad day, everybody has a good day but, you know, you could have a couple of your employees that you really care about, you know, and they’re just not having a good time, you know, and it’s…it could be a really bad cold. It could be like they just can’t get out of this bad nutrition thing so that they’re not eating well and they don’t feel well, blah, blah, blah.

These are the kind of things that if we’re gonna improve healthcare in the United States, forget about the politics about single-payer versus multi-payer, blah, blah, blah because we try to avoid all that. At its core, there’s so much that we can do if you just saw your doctor, looked at your blood tests, ate a little healthier, got a little bit more sleep, weren’t so hard on yourself. You know, these things are…it’s a good way to get started. Unfortunately, most of the time we figure that out when we’re in our late 80s. And by then, it’s too late, you know.

Dr. Johnson: Yeah.

Scott: It’s one of my favorite stories. There was a guy that my great-grandfather played poker with and he was a 103. My great-grandfather at the time was the young guy in the group at 94. And he wanted another cup of chocolate ice-cream. And the nutritionist said, “Do you think that’s a good idea?” And the guy’s answer was the best and he goes, “What’s it gonna do? Kill me in the long run?”

Dr. Johnson: Nice.

Scott: That was a good answer. It’s just one of those things, right. I know that I’m healthier because I eat smarter, I exercise a little bit, and try not to take life as seriously as I used to. And it’s been very helpful. But, you know, I wish you the best of luck and anybody listening to this, go see your doctor. Before you go, have some questions ready for him and her. Excuse me. And eat healthy, everybody, and take an extra breath each day.

Michael: Yeah. Thanks, Dr. Johnson, for joining us. We have enjoyed this, so we definitely need to have you back on and dig into this a little bit more because there’s just a lot of power in how you’ve been able to get this to work and what’s going on from there. So thanks again for spending a few minutes with us.

Announcer: Thanks again for tuning in to the “Paradigm Shift of Healthcare.” This program is brought to you by P3Inbound, marketing for ortho, spine, and neuro practices. Subscribe in iTunes, Google Play, or anywhere you listen to podcasts