Q&A: Harbor Health’s Clay Johnston on Offering Employers Direct Primary Care
Austin, Texas-based Harbor Health, a startup primary and specialty clinic group, is now offering Central Texas employers a direct primary care option, which provides employees a full spectrum of primary care services for free. Harbor co-founder Clay Johnston, Ph.D., M.D., M.P.H., who previously served as the inaugural dean of the University of Texas at Austin Dell Medical School, recently spoke with Healthcare Innovation about Harbor Health’s ambitious plans for redesigning the health system from the ground up.
In January 2024, Harbor announced it had received $95.5 million in a funding round led by General Catalyst, bringing the total investment at that time to more than $128 million. The practice said its ultimate mission is to redesign the health system so that doctors and the team working with them truly get to know the people in their care.
The direct primary care solution, called Core by Harbor Health, bypasses insurance companies and makes it easy for members to build an ongoing relationship with their health team and reach their health goals without worrying about a fee-for-service payment structure, the company said.
Healthcare Innovation: Before we talk about the direct primary care offering, could you describe the origins of Harbor Health briefly for our readers who aren't familiar with it? Where did the idea come from and how did you put it together initially?
Johnston: In part, it came from what we were trying to achieve at the medical school — to re-envision what the healthcare system should look like and build it that way. But we did it condition by condition in specialty areas. My realization was that we weren't going to succeed that way, that the incumbents in the healthcare system were so powerful and so strongly motivated to keep everything in that the status quo that with one provider organization, it just wasn't going to work. We couldn't get the steerage. We couldn't get the contracts from carriers. We got a lot of interest from self-insured employers, and they bought some stuff directly from us. That helped us, but it wasn't enough to create a scalable system, and that's really what I was there to do.
The realization was that in order to make this work, we have to tear the whole thing down and rebuild it, not do a little remodeling. That is really what we're doing at Harbor, but we're doing it in a staged way. The first thing that you need if you're going to rebuild that system is a new system of first-touch care to replace primary care. What does that look like? How do you create it so that it really cares for individuals and their health and is motivated to keep them healthier and also to reduce waste?
The first stage is to build that clinical system, and then you layer on the specialty care. First off, you get a ton of knowledge about where good specialty care is happening. We've done that. We have a big data system, and we use machine learning to help us to identify who's doing things best. And then over time, we've brought in more and more specialists, and we'll continue to do that when we have trouble getting access to the quality that our people need. Then you layer on different payment plans. So initially, you’ve got to take whatever contracts you're given. You have no market influence. We take fee for service, but it’s not why we exist. And, in fact, we lose money on fee for service, but it's a bridge. And then more and more you try to get those contracts to look like capitated contracts or like you're taking full risk on people, and over time, you then can layer on your own insurance products. So Core is our first benefit product, and we plan to add more products in that space over time.
HCI: Is this direct primary care model becoming more common elsewhere? Are you seeing examples of provider groups working directly with employers and bypassing the insurance companies?
Johnston: Yes, there are more folks doing this now, and coming from all different areas. Some companies create on-site clinics, groups like Clover. And then others are coming from solid primary care groups who recognize that this gives them more freedom to care for people the way they should be cared for. And then it's coming from individual doctors as well, although the individual doctors really aren't necessarily selling to employers. They don't have enough bandwidth to do that.
HCI: How many clinic settings does Harbor Health have now?
Johnston: We have 11 physical clinics and two mobile clinics. We move around.
HCI: Are you already working with some employers in Central Texas? Or do you now have to line up the employers to work with?
Johnston: Now we have to line up the employers to work with. We already have lots of nibbles, so this will happen quickly.
Some employers are offering high-deductible plans. The problem with that is that any resistance to getting primary care is just a bad idea. It just means you're going to let things fester and get worse until they become expensive. So we fit nicely into those high-deductible plans because we make it free to get the right care.
HCI: In thinking about the types of employers this would appeal to, I was picturing high-tech companies who would offer this as a perk, but maybe not. Is it also for employers with lower-wage employees?
Johnston: It actually is both. One of the first ones that's already committed, is a venture capital firm. They want pretty easy access for their employees. But we've also heard from employers like the counties and school districts. This is really attractive to them because of their employees not getting primary care because of deductible issues. Ultimately, primary care ought to be free, right? It is in everybody's best interests to make it free. It's a dumb thing that we’ve made it expensive.
HCI: This is probably very attractive to the clinicians as a way to practice. But does it require a certain retraining to get out of that fee-for-service hamster wheel mindset? Is it a shift in how they interact with patients?
Johnston: What we're finding is this becomes pretty natural to folks, because it's more consistent with the way they think medicine should be practiced. They didn't go to med school to be on a hamster wheel. They went to med school to really care for people, and having the incentives align with that, it just feels right to them.
The other thing we've tried to do is to take some of the arduous tasks and have somebody else handle them. That gives us some more flexibility. We put the prior authorizations and things that clinicians are doing today onto other personnel, and we were pretty thoughtful about how we do that, so that the clinicians are really working at the top of their game and doing the things that they know are valuable, and we know are valuable, and that obviously makes them happier, too. We're not worried about billing for insurance all the time.
HCI: Does that change how they use the EHR?
Johnston: Great question. So today it does not. Most of our patients are still fee for service, where the EHR is a core component of what they touch,. But, you know, what I was describing about fixing the healthcare system — you can't do it with the current EHR, right? We're already getting them to interface with the EHR differently, but ultimately we're going to be where the EHR is not going to be relevant. It's really going to be us designing a system to match the model of care. That's a bigger lift, but it is one that we've already started to to initiate.
HCI: Is part of your business plan to scale this geographically beyond where you are in Texas?
Johnston: Yes. What we're trying to do is super hard. I mean, it probably sounds ridiculously ambitious, and it would be if we were trying to do it nationally at the same time.
We need this local penetration for a variety of things. It makes a lot of things easier. One is marketing. People know us now. Word of mouth is our primary source of marketing. Another is our relationships with partners such as specialty care organizations. We’re big enough in this town that people care about us. They want our referrals. They'll partner with us in a really collaborative way to try to improve their outcomes. Then we get better contracts with existing insurers because we're big enough, and we can meet the needs of employees across the metro. So for all those reasons, growing and really being good in a market is important.
We'll grow in Texas. But then, yes, we will grow beyond that. What we're trying to do is create the whole operating system. Currently, everything works on fee for service, and there's the RVU system that kind of drives clinician behavior, and there are copays, coinsurance, deductibles. What we're trying to do is rebuild all of that stuff to change the underlying incentive structures and operating system so that it then can become more easily exportable. So we wouldn't necessarily need to own the practices for them to practice in this different way. That's ultimately what we're thinking will allow more rapid scaling. Our ambitions do definitely go beyond Texas, but we're not going to do anything in that respect until we're quite confident that we have the model right, that it's highly successful here, and that it's ready to to scale.
HCI: What about alternative payment models focused on primary care that big insurers and CMS are experimenting with? Does that fit into what Harbor Health is doing?
Johnston: It does perfectly. We actually participate in ACO Reach, which is a fabulous program. It allows us to do all the things that I just described. We also participate in Medicare Advantage agreements with other insurers, but they are not as attractive to us. They hold on to a lot of the benefits that we produce in terms of improving outcomes. They hang on to that financial benefit, so it's it's harder for us to do all the things that we could in that system, but it's still helpful in this transition. We also have deals in commercial insurance that allow us to share some of the savings.
