Should I drop insurance panels and go direct-pay?

Dropping insurance panels is a one-way gate. You can leave the insurance system; returning is possible but slow, expensive, and not guaranteed. If you’re an NP in an insurance-based practice – employed or independent – and considering a move to direct-pay or direct primary care (DPC), the decision warrants more analysis than the DPC advocacy community usually provides.

The short version: DPC works well for NPs with an established patient base willing to follow them, in states with clear DPC legislation, with enough working capital to survive 12–18 months of panel ramp-up. It works poorly for NPs with a heavily Medicare/Medicaid panel, in states with unfavorable DPC regulation, or without savings to cover the gap between panel membership revenue and practice costs.

This guide gives you the framework for deciding.

The financial math

Insurance-based practice revenue

The typical insurance-based primary care NP in an independent or small group practice bills at the following rates (Medicare physician fee schedule, non-facility, approximate):

• Level 3 established patient visit (99213): ~$85–95
• Level 4 established patient visit (99214): ~$130–155
• Annual wellness visit (G0438/G0439): ~$170–200

One adjustment applies to NPs and does not apply to physicians: under 42 CFR 414.56, Medicare pays services billed under an NP’s own NPI at 85% of the physician fee schedule amount. Where an incident-to arrangement is available and its conditions are met, the service bills at 100% under the physician’s NPI – an option that disappears the moment you are practicing without a physician to bill under. Model your Medicare revenue at 85% of the rates above unless you have confirmed incident-to eligibility, because the 15% haircut compounds across a full Medicare panel.

Billing 20–22 visits per day, 4 days per week, 48 weeks per year:

• Gross revenue at average mix: ~$400,000–500,000
• Collection rate after denials, write-offs: 75–80%
• Net revenue: ~$300,000–400,000
• Overhead (billing, staff, EHR, rent, supplies, malpractice): 35–50%
• NP take-home (independent practice): $150,000–260,000

Employed NPs receive $110,000–145,000 base salary and skip the overhead calculation – the health system absorbs it.

DPC revenue model

Direct primary care charges patients a flat monthly membership fee. Typical rate in 2026: $50–120/month for adults, with variations by age tier and geography.

At $75/month per adult patient:

• 300 members: $270,000/year gross
• 400 members: $360,000/year gross
• 500 members: $450,000/year gross

DPC practices target panels of 400–600 patients – much smaller than the 1,500–2,500 patients required in insurance-based primary care, because the per-patient revenue is higher and the administrative overhead is dramatically lower.

Overhead in a DPC practice runs 30–40% – no billing department, no insurance credentialing, no prior authorization staff. A solo NP DPC practice can function with part-time administrative support and a low-cost EHR.

The math at scale is favorable to DPC. The math during ramp-up is the risk.

Patient attrition: the critical variable

The transition from insurance-based to DPC does not preserve your existing panel. Patients covered by insurance cannot use their insurance at your DPC practice – they must pay the membership fee out of pocket. Most patients on Medicare or Medicaid cannot legally enroll in a DPC practice at all under current regulations (with some limited exceptions for Medicaid in innovation waiver states).

Realistically, you can expect 15–40% of an insurance-based panel to follow you into a DPC model. The patients most likely to follow:

• Privately insured patients with high-deductible health plans (for whom your membership fee is less than their typical annual deductible)
• Self-employed individuals and business owners who control their own insurance decisions
• Patients who are strongly attached to you personally and can afford the membership
• Patients in areas with poor primary care access who value guaranteed same-day access

Patients unlikely to follow:

• Medicare beneficiaries (significant legal restrictions on DPC enrollment for Medicare patients under current CMS rules – the Medicare DPC pilot is limited in scope)
• Medicaid patients (generally cannot participate in standard DPC models)
• Patients living paycheck to paycheck for whom a $75/month membership is not possible regardless of what they think of you

If your current panel skews toward Medicare, Medicaid, or lower-income patients, the DPC model may be structurally inaccessible regardless of clinical quality or patient loyalty.

State DPC laws

DPC practices exist in a legal gray zone in some states. The core issue: regulators in some states have argued that a monthly membership fee for unlimited primary care constitutes the business of insurance, which would require DPC practices to be licensed as HMOs – an impossible compliance burden.

Most states have addressed this by passing explicit DPC legislation that exempts DPC membership agreements from insurance regulation. As of 2026, approximately 35 states have enacted DPC-specific legislation or regulatory guidance.

States without clear DPC protection: check directly with your state insurance commissioner and an attorney before launching. The practical legal risk here is regulatory rather than criminal – the state may force you to restructure the membership model or obtain insurance licensure, either of which can make the practice unworkable after you have already committed capital to it.

HSA/FSA compatibility: As of January 2026, HSA funds can be used for DPC memberships up to $150/month individual ($300/month family), following a change in IRS guidance. This meaningfully improves DPC’s value proposition for patients with high-deductible health plans and employer-funded HSAs. IRS Notice 2026-5 includes nurse practitioners in the definition of “primary care practitioner,” so an NP-owned practice qualifies. The same notice excludes prescription drugs other than vaccines, general-anesthesia procedures, and labs not typically run in an ambulatory primary care setting from what a qualifying membership can cover, and it requires the fixed fee to be the sole compensation – so a membership that bills separately for anything loses the treatment.

NP-specific considerations: In states with restricted NP scope of practice, operating an independent DPC practice requires a collaborative practice agreement with a physician. That agreement must be secured before launch, and the collaborating physician’s willingness to support a direct-pay model (rather than an insurance-based one) should be confirmed explicitly.

How to notify patients and insurers

Notifying patients

Patient notification should happen 60–90 days before your final day on insurance panels. Earlier is better – patients need time to either enroll in your DPC practice or establish care elsewhere.

The notification letter should:

• Explain what DPC is and what the membership includes
• State your membership fee and how to enroll
• Acknowledge that patients who cannot or choose not to enroll will need a new primary care provider
• Provide a timeline for when you will no longer accept insurance
• Offer to transfer records to any provider the patient chooses, at no cost

Avoid language that pressures patients or implies they will lose care abruptly. Regulatory bodies take patient abandonment seriously, and managing the transition with adequate notice is both ethically required and legally protective.

Notifying payers

Review your contracts with each insurance panel for termination provisions. Most require 60–90 days written notice of termination. Some include provisions about continuity of care for patients mid-treatment – you may be obligated to continue seeing certain patients (maternity, active cancer treatment) through an episode of care even after panel termination.

Send formal written termination letters to each payer by certified mail. Keep copies. Confirm in writing with each payer what your last effective date is on panel.

Medicare opt-out: if you have Medicare patients you would like to see outside Medicare (in a cash-pay arrangement), you must formally opt out of Medicare using Form CMS-855O. This is a two-year commitment – you cannot see any Medicare patients in a Medicare-covered service during the opt-out period unless you re-enroll. Opting out of Medicare is not required to run a DPC practice, but it is required if you want to charge Medicare patients directly (rather than simply not seeing them).

The transition timeline

A realistic DPC transition from an insurance-based practice:

The typical capital requirement for riding out the ramp-up period: 12–18 months of personal living expenses plus practice fixed costs (rent, EHR, malpractice, basic staff). For a solo NP practice with modest overhead, that is $80,000–150,000 in accessible savings or a line of credit. Do not launch a DPC practice assuming your current patient base will sustain you immediately – it will not.

Who this model is right for – and who it isn’t

DPC suits NPs who:

• Have an established patient base with private insurance or self-pay capacity
• Practice in a state with clear DPC legislation
• Have 12–18 months of financial runway
• Want to reduce administrative burden and see fewer patients at higher quality
• Have an entrepreneurial tolerance for income variability during build-up
• Are in a full-practice-authority state, or have a reliable collaborating physician willing to support the model

DPC is a poor fit for NPs who:

• Serve predominantly Medicare or Medicaid populations
• Are employed and cannot or do not want to run an independent business
• Need income stability – base salary protects against the ramp-up risk that DPC does not
• Are in states with unclear DPC regulation
• Have restricted scope of practice and no clear collaborative physician

The DPC model is not inherently better medicine – it is a different business model with different tradeoffs. The NPs who succeed in DPC tend to be those who were already chafing against high-volume, insurance-driven practice and were willing to accept real financial risk for more clinical autonomy. Those who struggle are those who underestimated the ramp-up period or overestimated patient follow-through.

For further context on NP business and financial decisions, see our guides on cash-pay vs. insurance practice for NPs, NP malpractice insurance, and NP panel size and burnout.

References

1. Internal Revenue Service, Notice 2026-5, “Expanded Availability of Health Savings Accounts under the One, Big, Beautiful Bill Act (OBBBA).” DPC aggregate fee limits of $150/month individual and $300/month family, applicable to months beginning after December 31, 2025, indexed for inflation after 2026; nurse practitioners are included in the definition of “primary care practitioner.” https://www.irs.gov/pub/irs-drop/n-26-05.pdf
2. U.S. Congress, “One Big Beautiful Bill Act,” Public Law 119-21, 2025. (Recognizes Direct Primary Care service arrangements as HSA-qualified medical expenses.)
3. Centers for Medicare & Medicaid Services, “Medicare Physician Fee Schedule,” CMS.gov, 2026. (Basis for established-patient E/M reimbursement estimates; 2026 conversion factor $33.4009.)
4. 42 CFR 414.56, “Payment for nurse practitioners’ and clinical nurse specialists’ services.” Payment at 85% of the physician fee schedule amount for services billed under the NP’s own NPI. https://www.ecfr.gov/current/title-42/section-414.56
5. Centers for Medicare & Medicaid Services, “Opting Out of Medicare (Form CMS-855O),” CMS.gov, 2025.
6. Direct Primary Care Coalition, “State DPC Laws and Legislation Tracker,” dpcare.org, 2025.
7. American Academy of Family Physicians, “Direct Primary Care,” AAFP.org, 2025.
8. U.S. Bureau of Labor Statistics, “Occupational Employment and Wage Statistics, Nurse Practitioners (SOC 29-1171), median annual wage $132,300,” May 2025.