Direct Primary Care

Neel V -

Hello everyone,

I hope you’re all doing well. This week, I had the opportunity to dive deep into my research on Direct Primary Care (DPC) and its growing significance in the healthcare industry, particularly within the realm of private equity investing.

DPC, often considered an under-the-radar category in PE investing, has been gaining traction due to its innovative approach to delivering primary care services. My research uncovered that while there are a handful of established platforms and high-growth disruptors in the DPC space, there has been relatively little new platform creation in recent years. However, the landscape is shifting, with DPC emerging as a likely growth area for PE investment in 2024 and beyond.

One notable development in Q4 2023 was the sizable platform deal involving Shore Capital Partners’ acquisition of Nextera Healthcare (who had a national clinic footprint concentrated in several states across the U.S.)

In understanding the basics of DPC, I learned that it builds upon traditional occupational healthcare by offering concierge-style primary care, along with low-acuity (conditions that aren’t severe or urgent to treat) specialty add-ons such as physical therapy, mental health services, labs, and more. The current trend in the industry is towards building near-site clinics that can serve employees from multiple employers, while also being able to cater to their families. 

Medium to large-size employers, typically self-insured, are the primary clientele. These employers are increasingly turning to DPC providers to offer comprehensive, integrated services, including virtual care, to support distributed workforces and meet the evolving needs of their employees.

One interesting aspect of DPC is its potential to reduce healthcare costs for employers through innovative payment models such as per-employee-per-month (PEPM) rates and cost-plus pricing. Additionally, DPC providers are exploring risk-based contracts to incentivize ongoing care model improvement and better align incentives with employers.

Despite the significant opportunities presented by DPC, there are also challenges, particularly for new entrants seeking to reach scale profitably. Market selection, clinical hiring, and competition from alternative care providers are among the hurdles faced by smaller platforms. However, there is optimism surrounding consolidation opportunities, with midsize platforms seeking to rival incumbents’ scale through strategic acquisitions and market expansion efforts.

My research on DPC has highlighted its potential to transform the healthcare delivery landscape and its increasing relevance in the context of private equity investing. I’m excited to learn more in the coming months. 

Thank you for reading, and I look forward to sharing more updates soon!

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    Hi Neel, great research! And what an interesting concept. I am interested in hearing about the pros and cons of Direct Primary Care. For example, it sounds like this option could cut patient and employer costs, and also increase access to primary care. But what about when someone needs to see a specialist? Would additional supplemental insurance coverage be needed?
    Thanks for your question! Additional insurance coverage may be needed for those specialty services but many practices offer discounted rates for referrals so that could lessen the cost. The decision to use this model depends on individual healthcare needs and financial considerations. Cost savings may need to be weighed against the potential limitations of the services.

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