5 Legal Considerations for Direct Care Providers

Are you considering launching a Direct Primary Care practice?

The decision to set off down the Direct Care (DC) path is an exciting one. The Direct Care model offers today’s provider the opportunity to shift the focus of their practice away from insurance companies and back to patients.

By reducing the administrative burdens of insurance compliance and reimbursement, DC providers are often able to maintain significantly smaller patient panels and make themselves more available to their patients through longer office visits and telemedicine.  

While it’s easy to focus your energy on writing your business plan, establishing your pricing, and deciding what services to offer patients, it’s important to understand the legal landscape surrounding DC. 

Philip Eskew, a legal expert who has spent years researching Direct Care models, shared this list of the top 5 legal considerations to make before diving into Direct Care. 
1) Minimize Your Insurance Risk

Many providers make the switch to Direct Care to avoid having to deal with insurance companies. They celebrate, perhaps jump for joy, at the thought of never again having to look up another procedure code or wait to get reimbursed. 

And while it’s exciting to break ties with insurance companies, Eskew notes that it’s important that your contract clarifies that the monthly fee you charge your patients is for ongoing primary care. If patients or the state insurance commissioner were to think that the agreement took on too much risk, you could face criminal charges for the unlawful sale of insurance. 

Initial steps to reduce your risk include defining the scope of your primary care services, defining limits on the number of visits per patient and the size of the patient panel, and specifically stating in the DC contract that the agreement is NOT insurance. 
2) Break Traditional Insurance Ties
In addition to making sure your patient contract clearly defines your scope of services, Eskew thinks it’s critical for Direct Care providers to appropriately “opt out” of Medicare. According to him, failure to do this and avoid standard Medicaid and third party insurance contracts can have serious legal implications for your practice. 

Medicare participating physicians are prohibited from charging Medicare patients outside of the standard third party fee for service system, which includes things like membership fees. Most private contracts take the same approach, and insurance companies have filed suit against Direct Care physicians alleging breach of contract when those physician billed patients on a membership basis rather than via the standard fee for service terms of the contract. 

3) Follow Applicable State Direct Care Regulations
According to Eskew, eight states now have laws that directly address Direct Care practices. If you practice in Washington, West Virginia, Oregon, Utah, Arizona, Louisiana, Oklahoma or Michigan look to your state requirements when designing your Direct Care practice.  Some states offer greater autonomy and protections, while others have onerous registration and reporting requirements. 
4) Monitor In-Office Dispensing Rules
Direct Care providers commonly dispense medications directly to patients. Eskew says this decision is popular among providers because it routinely allows for deep discounts on prescription medication costs, saves patients an additional trip to the pharmacy, and allows the provider to closely monitor patient adherence to prescribed therapies. But while it’s popular practice to further lower the cost of care, it’s important to know that Arkansas, Maryland, Massachusetts, Montana, New Jersey, New Mexico, New York, North Carolina, Oregon, Texas, and Utah prohibit providers from dispensing medications directly to patients from their office. 
5) HIPAA Still Applies to Your Practice
While you celebrate the anticipated freedom that comes from opting out of Medicare and other government programs, Eskew says it’s important to note that HIPAA still applies to practices that store health information in ANY electronic format. 

According to Eskew, even if your practice relies exclusively on paper charts and has no computer system, your decision to simply use a photocopier (which will temporarily store protected health information electronically) means that HIPAA applies to your practice. Make sure you are familiar with the “HIPAA Final Rule” and that your practice follows recommendations for remaining HIPAA compliant.  

As you prepare to launch your practice, it's important to invest some time in understanding how your state treats and regulates Direct Care practices. For many providers this means doing their own research and eventually talking to a legal professional who can help them navigate the process and understand how their business model fits within state and federal laws. 

About Phil Eskew: 

Phil is a one of the leading academic experts on the direct care industry with a unique blend of expertise that spans clinical, legal, and business perspectives. He is a regular and sought after speaker on direct care policy, compliance, and legal issues; serves as a consultant to numerous direct care entities; and will soon open his own direct care practice.

Phil is currently a third-year resident in family medicine at Heart of Lancaster Regional Medical Center, and is a member of the Kentucky Bar Association.