Pricing an Employer DPC Contract: PMPM Models and What to Charge

PMPM — per member per month — is a flat monthly fee an employer pays for each enrolled employee or dependent, regardless of how much care that member uses. Enroll 40 employees at a $100 PMPM rate and the invoice is $4,000 a month. It is the standard pricing unit for employer DPC contracts because it gives the employer a predictable line item to budget and gives your practice stable recurring revenue.

Setting the PMPM number is where most practices struggle. Quote too high and the deal stalls; quote too low and you have signed up to lose money every month for a year. This guide covers the main pricing structures, how to build your rate from your own cost floor rather than guesswork, when a discount off your individual rate is justified, and the contract clauses that keep the price you set from eroding. For the broader deal — what employers evaluate and how to get financially ready to pitch — see our financial playbook for winning employer contracts.

What is PMPM pricing?

Per-member-per-month (PMPM) pricing means the employer pays one fixed fee each month for every person enrolled in the DPC benefit — whether that member visits weekly or never comes in at all. You will also see the term PEPM (per employee per month) when the contract covers employees only; PMPM is the broader term that includes spouses and dependents.

The model works because both sides are trading away variability. The employer gives up the chance that light usage would have cost less, in exchange for a number they can put in a budget and never be surprised by. The practice gives up per-visit revenue upside, in exchange for recurring income that does not depend on visit volume. That exchange only stays fair if the rate is set correctly — which is why everything else in this guide flows from the PMPM number.

For context on where rates land: employer PMPM rates for DPC are commonly discussed in ranges well below the per-employee cost of a traditional health plan, and usually at or modestly below the practice's individual membership rate. The exact figure is driven by geography, scope of included services, and — most importantly — your own cost structure, which we build up below.

The main employer pricing structures

Four structures cover nearly every employer DPC contract in the market. Each allocates risk between you and the employer differently.

Flat PMPM

One rate for every enrolled member, billed monthly. This is the default structure and the right starting point for most practices: it is the easiest for an employer to budget and compare, the simplest to invoice, and the cleanest to administer. The risk you carry is utilization — if the group uses far more care than you modeled, your effective hourly economics suffer. You manage that risk through the rate itself and through the panel capacity math, not through the structure.

Tiered by employee count

A rate schedule that steps down as the group gets larger — one rate for groups under 25, a lower rate for 25 to 50, lower again above 50. Tiering formalizes your volume discount so you are not negotiating from scratch with every prospect, and it gives growing employers a visible incentive to enroll more of their workforce. The discipline it requires: every tier must still clear your cost floor. A tier table built by shaving percentages off the top rate, without checking the bottom tier against per-member cost, is how practices accidentally publish a losing price.

Hybrid: base PMPM plus utilization

A lower base PMPM that covers access and a defined visit allowance, with per-visit or per-service fees beyond it. Hybrids shift utilization risk back toward the employer, which can make sense for groups whose usage is hard to predict — a first-time employer group with an older workforce, for example. The costs are real, though: your revenue becomes lumpier, invoices need reconciliation, and the employer loses some of the budget predictability that attracted them to DPC in the first place. Use a hybrid when utilization risk genuinely threatens the deal, not as a default.

Family vs. individual rates

When the contract extends to spouses and dependents, most practices split the rate: an adult rate, a lower child rate, and sometimes a flat household cap. Children generally cost less to serve; spouses cost about the same as employees. The trap is quoting a blended family rate without modeling the group's actual household mix — a dependent-heavy group at an underpriced child rate can quietly drag the whole contract's margin down. Ask for a census (ages and household sizes) before quoting family tiers.

How to build your price from your cost floor

Your cost floor is the per-member-per-month cost of running your practice, and it — not a competitor's rate or a number from a conference talk — is where your employer price starts. The calculation takes an afternoon with clean financials and goes like this:

• Step 1: Total your real monthly operating costs. Rent, staff wages and benefits, clinical supplies, labs you absorb, software and EMR, malpractice and business insurance, marketing, professional services — and your own target compensation. Owner pay belongs in the cost base. A price that only works if you underpay yourself is not a sustainable price.
• Step 2: Divide by your realistic panel size. Not your aspirational maximum — the panel you can serve at the access level you promise, calculated the way we describe in the financial playbook. Total monthly cost divided by realistic panel equals your cost per member per month. That is your floor.
• Step 3: Add margin for risk and growth. Employer groups can utilize heavily in year one as employees surface deferred care. Your rate needs enough cushion above the floor to absorb a heavy-utilization group, fund reinvestment, and leave actual profit. How much cushion is a judgment call that depends on your scope of included services and risk tolerance — but zero is the wrong answer.
• Step 4: Sanity-check against the market and your individual rate. Market context tells you whether your number is sellable; your individual membership rate tells you what each employer slot displaces. If your cost-built rate comes out above what employers in your area will pay, the fix is usually on the cost or capacity side — not quietly quoting below your floor.

This is the same discipline behind individual membership pricing — our guide to pricing for membership medicine walks through that version — applied with higher stakes, because an employer contract locks the number in for at least a year across dozens of members at once.

Discounting vs. individual memberships: when volume justifies it

Employers will expect a rate below your individual membership price, and some discount is usually defensible. The question is why and how much — and the answer comes from what the group actually gives you:

• Near-zero acquisition cost. Individual members arrive one at a time through marketing you pay for. An employer group arrives in bulk from a single negotiation. The acquisition savings are real and can honestly fund a portion of the discount.
• One reliable invoice. Fifty members on a single employer-paid, net-30 invoice is cheaper to collect than fifty individual card payments with the failed charges and involuntary churn they bring.
• A committed term. A 12-month minimum with a minimum enrollment floor is worth something. Month-to-month individual members can leave at any time; a contracted group cannot.

Against those savings, weigh the cost that practices most often ignore: every employer member occupies a panel slot that could have gone to a full-rate individual member. If your panel has abundant open capacity, that opportunity cost is low and a deeper discount can make sense to fill it. If you are within sight of capacity, each discounted slot directly displaces full-rate revenue, and the justified discount shrinks toward zero.

Two practical rules fall out of this. First, size the discount to the commitment: a larger group, a longer term, and a higher minimum enrollment earn a better rate; a small group on a thin commitment does not. Second, never let the discounted rate touch your cost floor. A discount funded by acquisition savings is strategy; a discount funded by your margin is a slow leak you signed up for voluntarily. Our guide to landing group DPC deals covers how the discount conversation plays out in actual negotiations.

Contract clauses that protect the price

A well-built rate can still be eroded by a poorly built contract. Three clauses do most of the protective work:

• Annual escalators. Your costs — wages, rent, supplies — rise every year. A contract that locks the PMPM flat across a multi-year term is a silent annual discount. Build in either a fixed annual escalator (a stated percentage increase each renewal) or a defined renegotiation window before each term. Employers accept escalators routinely; they live with them in every other benefits contract they hold.
• True-ups. A true-up clause reconciles your invoice to the employer's actual roster on a set cadence — monthly is cleanest. Hires get added, departures get removed, dependent changes get captured. Without it, headcount drift means you are either serving unpaid members or billing for ghosts, and either one poisons the renewal conversation.
• Minimum enrollment. You price a group deal on expected volume and reserve panel capacity for it. If the employer projects 60 enrollees and 20 show up, the volume that justified the discount never materialized. A minimum enrollment commitment — a floor on billable members regardless of actual sign-ups, or a rate that adjusts upward if enrollment falls below a threshold — keeps the price and the volume connected.

Alongside those three, keep the fundamentals from any employer agreement: employer-paid monthly invoicing (billed in advance where you can get it), a 12-month minimum term, clear scope language separating included services from add-ons, and termination provisions with adequate notice. And have a healthcare attorney review the template before the first signature — pricing clauses interact with state DPC regulations in ways worth paying a professional to check.

The bottom line

Pricing an employer DPC contract is a cost problem before it is a market problem. Know your cost per member per month from your actual overhead and realistic panel, add genuine margin, and let volume discounts be funded by the real savings a group delivers — not by hope. Choose flat PMPM unless utilization risk specifically argues for a hybrid, tier deliberately, and price family rates off a census rather than a guess.

Then protect the number you built: escalators so it keeps pace with your costs, true-ups so it tracks actual enrollment, and minimum commitments so the volume that justified the discount actually arrives. A practice that prices this way can defend its rate in any employer negotiation — and more importantly, can still be glad it won the deal in month eleven. If you want help building the model for your direct care practice, that is exactly the work we do.

Frequently asked questions

Q: What does PMPM mean in DPC employer contracts?

A: PMPM stands for per member per month. It is a flat monthly fee the employer pays for each enrolled employee or dependent, regardless of how many visits that member uses. If an employer enrolls 40 employees at a $100 PMPM rate, the monthly invoice is $4,000. PMPM is the standard pricing unit for employer DPC contracts because it gives the employer a predictable, budgetable cost and gives the practice stable recurring revenue.

Q: How do I calculate what to charge an employer per member per month?

A: Start from your cost floor, not from a competitor's rate. Add up your practice's total monthly operating costs including your own target compensation, divide by your realistic panel size to get your cost per member per month, then add the margin you need to absorb utilization swings and fund growth. The employer rate should sit above that floor even after any volume discount. Market context matters for positioning, but your own economics set the minimum.

Q: Should employer PMPM rates be lower than individual membership rates?

A: Often, but not automatically. A discount off your individual rate can be justified because an employer group arrives in bulk with near-zero acquisition cost, pays on a single reliable invoice, and commits to a 12-month term. But every employer member also occupies a panel slot you could have filled at full individual rate, so the discount should be sized to the volume and commitment you actually receive. Many practices cap employer discounts at a modest percentage and hold firm below that.

Q: What is a true-up clause in a DPC employer contract?

A: A true-up clause is a provision that reconciles the monthly invoice to the employer's actual enrollment. The employer provides an updated member roster each month or quarter, and billing is adjusted for hires, departures, and dependent changes. Without a true-up, the practice either serves members it is not paid for or bills for employees who have left. True-up clauses are usually paired with a minimum enrollment commitment that protects the capacity the practice reserved for the group.

Q: Should I charge different PMPM rates for dependents or family members?

A: Most practices do. Children typically cost less to serve than adults, and a blended family rate can make the benefit more attractive for the employer to extend to households. Common approaches include a separate lower child rate, a spouse rate near the adult rate, or a flat family tier. Whichever structure you choose, model the expected household mix before quoting, because a family-heavy group at an underpriced dependent rate can quietly erode the margin of the whole contract.

This article is for informational purposes only and does not constitute legal, tax, or financial advice. Osprey CFO is not a tax firm and does not provide tax preparation or tax advisory services. Illustrative figures are examples of the calculation mechanics, not market benchmarks. Consult with qualified professionals — including a healthcare attorney and benefits consultant — for guidance specific to your practice, state, and situation.