The year was 2016. I was going into the second year of my MBA at Mays Business School, Texas A&M University. MBA students are required to do Capstone project during the second year in order to apply the tools learned during the course.
With my Electrical engineering background, I wanted to do Capstone on a finance topic since that was what I felt I lacked knowledge in. My first proposal was the valuation of Alcoa (AA), a steel company. The company was not split up yet at the time.
After graduating from her residency from Lonestar family medicine program, Conroe, Dr. Rao was employed as a hospitalist at a major health system. After about 8 years of working as employed primary care physician, there was a general burn out. It is a very common problem among employed physicians.
Dr. Rao was considering various options for the future. During that time, Dr. Rao was reading about a new membership model of primary care called Direct Primary Care, that was gaining traction in the country. It also happened that a physician she used to refer at the Hospital, Dr. Stringfellow, had started her own practice at the time.
Capstone Begins
My Alcoa valuation proposal was shot down by my Capstone committee because it did not have enough material for a year long project. I had to quickly make an alternative proposal. I did not want to do anything related to my corporate job at Hewlett Packard Enterprise (HPE).
Dr. Rao happened to mention about the new membership model and she wanted to see if I could do a feasibility study as part of my Capstone. My criteria was the project should have a year worth of work. Initial research was promising and I decided to take it on. Little did I realize what was to come!
Health Insurance Blackhole
My first assignment was to crunch the numbers for our own insurance plan that I had through work. Until then, for over 16 years, the annual health insurance ritual was to just choose lower deductible PPO plan on the last day when it was due. Never crunched the numbers and never ever really bothered to remember my co-pays, deductibles and co-insurance.
This time I had to dig through the plans for the Capstone. The overall cost of the plan, as I remember it now, was about $18,000+. We hardly used it. I was slowly understanding how foolish I was to pay 10x more in premiums just to have false security of a low deductible plan.
Researching DPC model
To familiarize with the healthcare issues, I started reading articles and some great books on the topic. One of the best books I found was Catastrophic Care by David Goldhill. There were a couple of undisputed facts borne by research –
- Primary care was structured to be the core of the healthcare system. Primary care was the guide to patients in the healthcare system since they knew the whole individual rather than just a part of an individual like specialist do or care about
- Maximizing primary care leads to minimizing cost of care and better health outcomes
- Using primary care proactively for both sick care and preventive wellness care led to the best possible outcomes at the lowest overall cost
It was quite obvious, more usage of primary care was needed but people did not do so. why!? The third party insurance system did not create incentives to do so. Insurance was really a barrier to care because of the unnecessary complexity. Primary care is the most inexpensive part of healthcare, why use insurance and create a barrier to its usage? Made a lot of sense.
The Idea Takes Shape
My capstone had a couple of goals –
- Is membership model of primary care valuable?
- What are the overhead costs for the practice?
- How to start lean and grow the practice?
In 2016, there were only a 150+ membership practices around the country. I was able to pick the brains of many of these pioneers to get the numbers to run the best and worst care revenue scenarios based on the feedback I got from them. It was really a no-brainer.
The Journey Begins
Around early 2017, I was putting all the information into my reports and also had the business plan for a lean DPC startup ready. Looking through the spreadsheet simulations for the worst case and best case scenarios, opening the clinic as soon as possible seemed a reasonable thing to do. We never had the idea of opening a clinic that early.
When I shared my findings to Dr. Rao, she was quite excited to start a new journey. It was a model that nobody really knew or understood but we were very convinced we were getting in on the ground-floor of something big in healthcare.
The clinic opened on May 1, 2017 and I graduated mid-May a few weeks later!!
