The concept of cash-only practices is appealing to many physicians -- more time with each patient, fewer administrative issues, no dependence on insurers. But not every practice can make this arrangement work successfully.
If you're considering a cash-only practice, first examine these factors to see whether such a model is right for you.
1. Demographics
Does your area have the right kind of patients to support a cash-only practice? To find out, you need to know the population density; the number of competing local doctors; and the number of potential patients who lack health insurance, are underinsured, or are unemployed.
You should also know how many local companies offer their employees a combination of health savings accounts and catastrophic insurance, rather than policies with first-dollar coverage -- in short, patients who have no choice but to pay cash.
Kathryn Moghadas, RN, CHBC, principal of Associated Healthcare Advisors, Winter Springs, Florida, notes that municipal Websites are good sources of demographic data about your region, as are local realtors and physician marketing groups. To assess the competition, she also recommends the Little Blue Book, which covers 147 metro area directories of physicians and other healthcare providers, including their specialties, primary office locations, and health plan acceptance. Physician organizations, such as the American Academy of Family Physicians, can be troves of useful information on doctors in your area and on cash-only models as well.
2. Rates
Nonconcierge cash-only practices strive to charge affordable, fair rates, but "affordable" and "fair" are subjective. Once you stop taking insurance, you can charge whatever you please.
However, it is easy to determine what the market will bear. Cash-only practices are generally committed to price transparency. Search the Internet for their Websites, where their rates are commonly posted. Comparing several sets of rates in your area or a similar area should give you a sense of what to charge locally.
Both SimpleCare, a national organization that matches patients with cash-only local doctors, and Forrest Direct Pay, which helps physicians set up cash-only practices, offer guidance on rates and suggestions for "coding" in the absence of Current Procedural Terminology codes, which you will no longer need. In both cases, however, you will need to pay a membership fee to get details.
For example, here is what SimpleCare advises prospective physician members: "You establish the SimpleCare price that is fair for you and your patients. By eliminating administrative costs associated with activities such as billing, producing insurance claim forms, coding diagnoses and procedures, referrals, authorizations, payment delays, EOB reviews, claim denials, re-submissions, collection risks, and other 'managed care' costs, you provide patients a fair price for services without the administrative hassles and bureaucracy. Many physicians reduce their standard billed charges 30% to 50% for SimpleCare patients and benefit financially, but your SimpleCare price is your decision."
3. Medicare and Medicaid Patients
If you want to treat patients who have Medicare or Medicaid, you will need to contact the Centers for Medicare & Medicaid Services (CMS) and opt out of either or both programs for 2 years, after which you will need to formally opt out again. You cannot treat either type of patient selectively. If you see one Medicare patient on a cash-only basis, you must see all on the same basis.
You will also need to draw up a contract between you and the patient clearly stating that you are not a Medicare or Medicaid provider, and that patients who elect to pay you in cash at your going rate will not be able to seek reimbursement from CMS. Both SimpleCare and Forrest Direct Pay can provide you with sample contracts.
But why would Medicare patients opt to pay cash? "Our rates represent about an 85% saving over an insurance-based practice," Forrest explains, who estimates that 15% of his panel is Medicare patients. "The typical Medicare patient has a 20% copay. So he or she can save about 5% by coming here, paying cash, and not using Medicare.
"This is what fascinates a lot of politicians. I didn't send any bills to Medicare in 10 years -- ever. If we accepted insurance, we could probably send Medicare $800,000 in bills per year. If more doctors start to accept only cash, it will save Medicare a ton of money."
Forrest didn't even realize that he had any Medicaid patients until he went to a local pharmacy and asked to see insurance data on his patients. He was shocked at what he learned. "I was seeing 3 times as many Medicaid patients as local doctors who took Medicaid!" he discovered. "I asked these patients: 'Why are you coming here you could go across the street to a community health center and be seen for free?'"
They said, "Dr. Forrest, when we go to a practice like that, we wait for an hour and they only see us for 5 minutes. We feel like we get the worst care on the planet. We can pay you $25 a month and come here and get the best care on the planet.' I'm not going to turn those people away. If they want to come here and pay $25 a month, that's great."
4. Quality of Life, Quality of Care
The Forrest Direct Pay Website features a practice transition calculator, similar to retirement savings calculators on financial Websites. This interactive Web application lets you design your practice's optimal business model.
Plug in your variables for desired quality of life (eg, how many hours you want to work per day, how many days you want to work per week, and how many weeks of vacation you want per year) and your desired quality of care (eg, how many patients you ideally want to see per day, desired mix of scheduled/continuity and walk-in/acute care patients, and how much time you want to spend with each scheduled patient), among other factors, and the calculator predicts how your direct-pay practice will perform financially and how long your transition will take. To access the calculator, you will need to purchase a membership for $79 per month.
5. Personality and Salesmanship Skills
Perhaps the most underrated factor in the success in a cash-only practice is the personality of the doctor.
"The biggest fear for doctors is that they have to be relatively good," reflects Vern S. Cherewatenko, MD, who founded SimpleCare. "A doctor can't have a horrible bedside manner and not give good care. Patients won't come back. I tell prospective SimpleCare doctors, 'You should only join if you're a good doctor. If you're just run of the mill, status quo, and don't really care about your patients, you probably shouldn't."
"You not only need to be personable," Moghadas says. "You need to be a seller: someone who's in the market to sell his services." Most doctors, in her experience, lack these skills because they never needed to develop them. "Maybe you went to Harvard or Johns Hopkins," she says. "But if you're dry as toast, you won't attract and keep patients."
6. Marketing
Doctors who are employees in a group practice generally have little or no experience with marketing the practice, Moghadas observes. For a direct-pay practice to succeed, effective marketing is essential -- and it can be daunting.
You need a good Website. It needs search engine optimization so that Web surfers in your area who are potential patients can find you online. You need to advertise. You need to attract local media coverage. You need signage. And you need to establish relationships with local employers and schools.
"You need to know what you're selling," Moghadas says. "Are you selling ease? Convenience? Accuracy? Doctors often think, 'I'm a great doctor. I'll just open my door and patients will come. That's not the way it works."
7. Going Cold Turkey
Once you make the decision to switch from an insurance-based to a cash-only practice, should you do it in one fell swoop?
"In most cases, we recommend against putting all one's eggs in a single basket," says Jeffrey J. Denning, a principal of the Practice Performance Group in La Jolla, California. "We advocate withdrawal from discounted plan participation 1 or 2 plans at a time, starting with the lowest-paying or low-volume payers, while you test the willingness of patients to continue on an out-of-plan basis."
8. Getting Expert Help
"Always use a practice management consultant," Moghadas says. "You want an expert to vet the viability of a move of this magnitude in your area. A consultant will help you determine whether this is something you really want to do."
A consultant will analyze your prospects for success locally; advise you on how to set up a cash-only business; help you establish a marketing program; and perform the education necessary for both you and your staff, which needs to be a lot more customer-friendly than many practices are used to, to successfully transition from an insurance-based to a direct-pay model.
(Authored by Neil Chesanow)
