By Anthony S. Diecidue, MS, OD
Across the US, there is a movement gaining momentum among healthcare providers to free themselves from the shackles of third-party payers. More doctors are making the choice to stop accepting third-party payers, and instead, provide direct patient care.
Doctors are fed up with the hassles of filing claims, waiting for payment, denials, insurance company oversight, interference with patient care, the increase in overhead necessary to collect payments, and reduced reimbursements that may not even cover chair costs.
Believe it or not, patients are also fed up with waiting weeks for appointments, having only a few minutes with the doctor, having to undergo unnecessary tests and having their prescriptions changed because the insurance company doesn’t want to pay for the prescribed meds. Patients are sometimes saddled with inferior quality lenses or frames due to insurance restrictions, and may be denied payment for certain tests deemed necessary for proper diagnosis or treatment.
Three factors are cited most often by doctors when discussing insurance hassles: patient care, money and freedom.
Patient Care: Without the oversight of insurance, doctors are free to treat their patients as they see fit. There are no pre-authorizations, no letters justifying the need for a particular test or procedure and, in many cases, the doctor can spend more quality time with patients.
Money: By not accepting insurance, practitioners will be able to charge less and lower overhead because they will not need extra staff to file and follow up on claims submitted to the insurance company. Overhead can eat up as much as 60 percent of a practice’s revenue and force doctors to see more patients to generate more income. Some estimates show that practices can spend up to 30 percent more of their time and money collecting insurance payments. Practices also will not need to wait for their money and will not be forced to accept reduced payments.
Freedom: Most, if not all, insurance companies have their own rules and regulations that govern how and what they will cover. These policies can tie the hands of doctors and dictate how a doctor can treat a patient to get reimbursed. This can and has led to delayed treatment and treatment with inferior meds or procedures.
The alternative that many doctors are starting to adopt is being termed direct patient care (DPC), boutique or concierge medicine. DPC is a membership model that requires patients to make monthly, quarterly or yearly payments to the practitioner for greater access and longer appointment times. Doctors are accessible by phone, e-mail, after hours, and some even make house calls. Patients are usually given a generous number of “free” appointments while some offices include unlimited appointments for the term of the membership.
Routine tests and procedures are included with membership while more specific and specialized tests can be heavily discounted. More medical offices are increasing their revenue stream by incorporating pharmaceutical sales into their model by purchasing meds from wholesalers or distributors. We can also do that in addition to discounting our materials sales to members.
On average, a physician can see about one-third or fewer the number of patients in a DPC practice vs. one that relies primarily on third-party payers. This leaves more time for doctor-patient interaction and less time filling out forms and “chasing the money.”
So, can we make this work for us? Many doctors are understandably afraid to go into a model like this cold turkey, and some are opting for a hybrid version where they slowly make the transition. One such doctor opened 200 patient slots the first year and only to families (about 60). These new members were given priority appointments, unlimited access to the doctors and discounts on non-standard testing. That office hopes to keep growing the membership each year.
Another doctor charges between $50 and $75 per month for adults and $10 for children. He discounts advanced testing and sells pharmaceuticals out of his office.
It can be a tough sell to many patients because they will still need catastrophic insurance for large hospital bills and with $25 co-pays; it’s hard to justify $50-$75/month unless they are high utilizers. But offering the right services, discounts, and including family members at lower rates, will attract some and hopefully start a trend.
Lets look at some numbers to evaluate the reality of switching to a DPC model. Assume a single doctor practice grosses $600,000 per year, based on seeing 2,000 patients with gross revenue per patient of $300. With fees of $50/month for an adult and $15 for children, a family of four with two adults and two children would generate $130/month or $1,560/year.
At that rate we would need only 385 families or 1,540 people to make our $600,000 gross, and that would not include revenue we would generate from materials sales (contact lenses and glasses), advanced testing or pharmaceutical sales. In addition, we could lower overhead by one or two staff members simply because they won’t be needed any longer. That additional revenue could go right to the doctor’s net income putting it higher than the 25-30 percent average.
So, by adopting a DPC model in our practice we would be making more money and seeing about a 25 percent reduction in the number of patients! Of course this is a fictitious practice with made-up numbers. You can insert your own numbers to see if it makes sense for you and your practice.
Healthcare in this country is a moving target and continues to change every day. The practices that survive will be the ones that can change along with it. DPC is just one way some practices will adapt.
Would you consider eliminating acceptance of third-party payers from your practice? Why? What do you think are the benefits and dangers of doing so?