Direct Primary Care: 7 Essential Questions to Answer Before You Convert

Direct primary care is a membership model in which patients pay your practice a recurring fee, usually monthly, for a defined set of primary care services, instead of your practice billing insurance for those visits. For a practice owner the appeal is obvious: predictable revenue, a much smaller panel, and far less billing overhead. The trade is just as real. You give up fee-for-service reimbursement, you rebuild your revenue from the ground up, and you take on a new set of compliance questions around Medicare and state law.

Whether direct primary care fits your practice comes down to arithmetic and risk tolerance rather than philosophy. The American Academy of Family Physicians reports that these memberships typically run $50 to $100 per month and that the average DPC panel is about 413 patients. Set that against a median panel of 2,263 patients found across US primary care studies, and the shape of the decision is clear. You will care for roughly one fifth as many people, so the membership fee has to do the work that five times the volume used to do.

This guide walks through the seven questions to answer before you convert, including the 2026 tax change that made the model materially easier to sell.

What is direct primary care?

Direct primary care is a practice and payment model in which patients pay the practice directly, through periodic payments, for a defined set of primary care services. The AAFP describes it as an alternative to fee-for-service insurance billing, typically structured as a monthly, quarterly, or annual fee under a contract.

Three features define the model:

• The fee replaces insurance billing for primary care. AAFP notes that DPC practices rely on patient fees and generally do not accept insurance or participate in government programs.
• The panel is small on purpose. A smaller panel is what pays for longer visits and open access. AAFP reports that roughly 99% of DPC practices offer same-day appointments.
• It is not insurance and it is not comprehensive coverage. Patients are generally advised to carry a wrap-around high-deductible policy for hospitalization, specialty care, and emergencies.

That last point matters legally as much as practically, which is question three below.

How does direct primary care differ from concierge medicine?

The two terms get used interchangeably, and they are not the same thing. The distinction that matters to your P&L is simple: do you keep billing insurance?

If you keep billing insurance and add a fee on top, you have a concierge practice, and you keep your billing operation, your payer contracts, and your credentialing obligations. If you stop billing insurance, you have direct primary care, and you take on every question below.

What changed for direct primary care in 2026?

The biggest recent change is tax treatment, and it works in your favor. Beginning January 1, 2026, the IRS states that an otherwise eligible individual enrolled in certain direct primary care service arrangements may contribute to a health savings account, and may use HSA funds tax-free to pay periodic DPC fees. Before this, being in a DPC arrangement was treated as disqualifying coverage for HSA purposes, which forced patients to choose between the two. The guidance is IRS Notice 2026-05.

There are limits, and they shape your pricing decision:

• The arrangement qualifies only up to $150 per month where it covers one individual, and $300 per month where it covers more than one individual.
• The arrangement must provide solely primary care services. It cannot include procedures requiring general anesthesia, prescription drugs other than vaccines, or laboratory services not typically administered in an ambulatory primary care setting.

Why this matters commercially: a patient with a high-deductible plan and an HSA can now pay your membership fee with pre-tax dollars, and an employer can steer employees toward your practice without breaking their HSA eligibility. That removes a real objection from your sales conversation. It also means that if you price above the cap, or bundle in services outside the definition, you may put that treatment at risk for your patients. Confirm your specific arrangement with a tax advisor before you build marketing around it.

7 questions to answer before converting to direct primary care

1. Does the panel math actually work?

This is the whole decision, and most of the rest is detail. Membership revenue is panel size times fee times twelve. Using the AAFP’s typical fee range, the arithmetic looks like this:

Two cautions. Compare the result against what you actually collect today, not against your gross charges, and compare it against your overhead after conversion rather than your overhead now. If you are not certain of either number, fix your reporting before you touch your business model. Our guide to medical practice KPIs covers the metrics worth trusting.

2. What happens to your Medicare patients?

This is the question that catches people. If you want to see a Medicare patient under a private contract for services Medicare would otherwise cover, you generally have to opt out of Medicare. The mechanics matter:

• Opting out is done by the individual physician or practitioner. Clinics and groups do not opt out as entities.
• It is all or nothing. You cannot opt out for some beneficiaries or some services and stay in for others.
• You file an affidavit with your Medicare Administrative Contractor, and you use a private contract with each Medicare patient you treat.
• Under MACRA, opt-outs filed on or after June 17, 2015 renew automatically every two years until you revoke them, and revocation only happens in defined windows.
• Opting out does not stop you from ordering tests, prescribing, or referring patients to participating specialists.

The alternative is to stay in Medicare and bill fee-for-service for those patients rather than charging them a membership fee. Plenty of practices run a hybrid for exactly this reason. This is a regulatory decision with real penalties attached, so make it with healthcare counsel rather than from an article.

3. Does your state treat your agreement as insurance?

A recurring fee paid today for medical services delivered later can look a great deal like insurance to a state regulator. Many states have enacted statutes that expressly place direct primary care agreements outside state insurance regulation, and those laws frequently require specific contract terms, such as clear cancellation and refund provisions. The number of states changes with each legislative session and varies depending on what counts as enabling legislation, so verify your own state’s current statute and draft your agreement to it rather than to a template you found online.

4. How will you fund the revenue gap?

Conversion is not a switch you flip, it is a trough you cross. Fee-for-service collections fall as you unwind, memberships build slowly, and your accounts receivable runs off on the payers’ timeline instead of yours. Model that gap month by month before you commit, then decide how you will cover it: cash reserves, a working capital facility, or one of the other medical practice financing options. Practices that fail at this rarely fail on the concept. They run out of runway partway across.

5. What happens to your payer contracts and credentialing?

Leaving is not the mirror image of joining. Read your participation agreements for notice periods and termination provisions before you announce anything publicly, and decide deliberately whether you are terminating outright or going non-participating. Think hard about reversibility: if there is a chance you will want back in, remaining credentialed is far easier than re-credentialing from scratch later. Our guides to payer contract negotiation and insurance credentialing cover what those agreements typically hold.

6. Can your systems actually bill and manage memberships?

A direct primary care practice runs on recurring billing, membership status, and patient communication. It does not run on claims. Many systems built around fee-for-service handle subscriptions poorly or not at all, so decide early what will manage enrollment, failed payments, cancellations, and renewals. If you are already rethinking your stack, our guide to choosing an EHR system is a reasonable starting point, and telehealth implementation often pairs naturally with a membership model.

7. What does your overhead look like the day after?

Dropping insurance billing removes a real chunk of administrative work. It does not remove it automatically. Staffing, space, and vendor contracts all have to be resized on purpose, and your compensation model probably has to change with them. Work through reducing practice overhead, staffing, and physician compensation models as one exercise rather than three.

Is direct primary care right for your practice?

The model tends to fit when most of the following are true:

• You are a primary care practice. The model, and the 2026 HSA definition, are both built around primary care services.
• Your panel is loyal enough that a meaningful share will pay to stay with you.
• You can fund and tolerate a transition measured in quarters, not weeks.
• Your market has high-deductible patients, HSA holders, or small employers who will engage.
• You would rather earn less per patient in exchange for more time with each one.

It tends not to fit when you are a procedural or specialty practice, when your economics depend on ancillaries or facility fees, when your panel skews heavily Medicare or Medicaid, or when you cannot fund the crossing. None of that makes direct primary care a bad model. It makes it the wrong model for that practice, which is a different and much cheaper thing to learn now.

If you are earlier than this and still building the practice itself, start with how to start a medical practice and what it costs to start one, both of which treat the low-overhead models as a live option from day one.

How Practice Management Consultancy helps

Practice Management Consultancy is consulting and capital for medical practices, and we are practice operators ourselves, not advisors who have only read about it. A direct primary care decision touches most of what we do:

• Consulting: compliance and credentialing questions raised by the switch, and the payer contracting work of unwinding what you already signed.
• Implementation: bookkeeping that tells you whether the membership math is holding, plus CRM and EHR setup so memberships are actually managed by something.
• Capital: funding the transition gap so the model gets a fair test instead of a cash-flow verdict.

What we are not is a law firm or a tax firm. Your Medicare opt-out decision, your DPC agreement, and the tax treatment of your fees should be reviewed by healthcare counsel and your own CPA. We will tell you which questions to put in front of them.

If you are weighing the model and want the arithmetic pressure-tested by people who run clinics, get in touch or email contact@practicemanagementconsultancy.com.

Frequently asked questions about direct primary care

What is direct primary care in simple terms?

Direct primary care is a membership model. Patients pay the practice a recurring fee, usually monthly, for a defined set of primary care services, and the practice does not bill insurance for that care. The AAFP describes it as an alternative to fee-for-service insurance billing.

Is direct primary care insurance?

No. A direct primary care agreement is a contract for primary care services, not an insurance product, and patients are generally advised to keep a wrap-around high-deductible policy for hospitalization, specialty care, and emergencies. Many states have passed laws that expressly place these agreements outside state insurance regulation, though the specifics vary by state.

Can a direct primary care practice see Medicare patients?

Yes, but the structure matters. To charge a Medicare patient a membership fee for services Medicare would otherwise cover, the physician generally has to opt out of Medicare and see that patient under a private contract. Opting out is done by the individual physician rather than the group, it applies to all Medicare patients and services rather than some, and it renews automatically every two years until revoked. The alternative is remaining in Medicare and billing fee-for-service for those patients.

Can HSA funds pay for direct primary care in 2026?

Yes, within limits. Beginning January 1, 2026, the IRS says an otherwise eligible individual in certain direct primary care service arrangements may contribute to an HSA and use HSA funds tax-free for periodic DPC fees, per Notice 2026-05. The arrangement must provide solely primary care services and is capped at $150 per month for one individual or $300 per month where more than one individual is covered.

How much do direct primary care practices charge?

The AAFP reports that memberships typically run $50 to $100 per month. Pricing above $150 per month for an individual would fall outside the 2026 HSA-compatible limit, which is a practical ceiling to weigh when you set fees.

This article is general information for practice owners and is not legal, tax, or accounting advice. Medicare opt-out, direct primary care agreements, state insurance law, and the tax treatment of membership fees should be reviewed with qualified healthcare counsel and your own tax advisor before you act. Sources: American Academy of Family Physicians and IRS.