I realize I spend a lot of time here explaining the who, the what, the where, and the how of getting affordable health care as a self-pay patient, describing things like telemedicine providers, pharmaceutical discount cards, health care sharing ministries, and cash-only doctors, and listing a large number of providers, companies, sites, or organizations that provide healthcare services.
Usually though I don’t spend much time on the why, explaining just how it is that these providers are able to offer service at a lower price than what insurers pay. At best, I typically include a sentence or two along the lines of ‘less bureaucratic costs,’ before moving on to telling you where you can find these low-cost providers. Or it might be embedded in the middle of something I’ve cut & pasted from their web site.
Today I ran across a direct primary care practice doctor writing about his practice at the web site PrimaryCarePractice.org, and explaining exactly how it is that he can offer prices to self-pay patients that are less than what other doctors charge to the insured. I thought it might be helpful to share this with you, explaining the why of just how it is that being a self-pay patient can be so less expensive than getting care through an insurance company.
By Brian Forrest, M.D.
“You’re crazy! That’ll never work!” is what many people said when I told them my plan to try a new practice model in which I would have no contracts or billing with insurance companies…
It used to be that when you called a doctor’s office, the first thing they asked was, “Why do you need to see the doctor?” Now when you call a physician’s office, the first thing they ask is the name of your insurance provider. What an indictment on what has happened to our profession. Maybe this is why, according to a recent study in Medical Economics, 34% of physicians are planning to leave medicine in the next 10 years.
But you don’t have to leave. There are ways to put the patient-doctor relationship first. Billing and filing claims should be our lowest priority.
In 1999, entering my second year of residency, I realized that I did not like the fact that certain patients were less welcome at doctors’ offices if they did not have the “right insurance.” I did not like the fact that the uninsured patients often had to pay a higher rate for the same service because language in physicians’ insurance contracts required that. I also was not crazy about the idea of an expectation that physicians see 30 or more patients per day. So rather than stay on the hamster wheel and accept the status quo – or, as we are seeing so many physicians do today, leave medicine all together – I decided to consider the practice of medicine from a new perspective. How could a practice be both financially viable for the physician and affordable for the patient while allowing ample time for visits? For me, the answer was to devise a new payment model, which I call the Access Healthcare Direct Payment Model.
The seeds for developing this model were planted before I even finished residency. I had customized an elective through which I observed office flow, billing, and collections in local primary care offices in North Carolina’s Triad region. What I discovered was eye-opening. In the large medical practices in the area, the overhead cost of collecting payments was as much as the payments themselves. The average amount that the practices collected per patient they saw was only $39, but the total overhead for some fiscal quarters was as high as $50 per patient visit. This is the basic equation that is making it so difficult to make a living in primary care. The traditional practice model requires an average of 4.5 full-time employees per physician, so a lot of revenue must be generated to pay for staff primarily dedicated to billing, coding, and working with payers to get reimbursement rather than actual patient care. My hypothesis was that if you did away with that part of the overhead, passed the savings along to the patient, and then spent more time with them since you no longer had to be so volume-driven, you could improve quality and reduce cost. A lot of people at the time thought it was insane not to take insurance, and crazier still to charge less, but it worked.
Over my first five years practicing this way, I discovered that I could charge 80% less than traditional offices, spend more time with patients, and actually have a net income that was much higher than I would have made in the traditional model. To give an idea, it was nearly double what one of my residency classmates was making at the same time in a traditional practice seeing 30 or more patients per day.
My overhead for my first year in practice was only around $50,000. This is 80% less than traditional overhead because my model required less than one full-time employee versus 4.5 in the traditional model. I could charge patients from a transparent à la carte services menu posted in the waiting room or have them pay a monthly fee of $25 to $39 per month and provide all of their primary care for a fraction of the typical fee-for-service cost. For example, a diabetic patient will get all his care for $39 per month plus a small per visit fee, which has ranged from $5 to $20 per visit over the years.
When I started Access Healthcare, a direct-pay practice almost 11 years ago, my reasons were simple: spend more time with my patients, provide better care, and live a better life. With the new requirements and regulations of the Affordable Care Act, and with physicians facing financial stress from reduced reimbursements and increasing Medicare recovery audits, interest in direct payment practice models is escalating.
I have helped hundreds of physicians around the country to move towards a direct primary care model. I am currently planning to expand a network to over 580 locations with practices in 48 states. Companies are coming to us asking to buy direct primary care plans, called Medical Home Memberships, for their employees. For under $50 per employee per month, I can provide full scope primary care with outcomes reporting to employers in areas like blood pressure control and hospitalization rates. We are in the top 5% nationally for control of hypertension, lipids, diabetes, and hospitalization rates based on an independent ongoing 3rd-party audit of our charts, which resulted in our being designated as one of 33 Cardiovascular Centers of Excellence in the US….
Dr. Forrest’s practice, Access Healthcare is in Apex, North Carolina , just outside of Raleigh.
One question I’ve been frequently asked is something along the lines of “but aren’t insurers able to negotiate better rates because they’re ‘buying in bulk’ by bringing so many patients to the doctor?” I’ve had this compared to Costco or Sam’s Club – because they buy 1 billion paper towel rolls each year, they’re able to sell each roll for half of what the corner grocer who might buy a few thousand a year sells it for. Shouldn’t the same apply to insurers who buy thousands of doctor’s office visits each year from a practice, ‘buying in bulk’?
The answer is no, for a very simple reason – the insurer isn’t buying thousands of doctor’s office visits in bulk. Instead they are buying thousands of doctor’s office visits one at a time, so there are no savings (and as Dr. Forrest explains so well, there are considerable costs).
The insurer generally doesn’t negotiate with the doctor and say ‘We’ll send 2,000 people your way in 2014 and give you $100,000 to cover that,’ and then write the $100,000 check out on January 1 and send patients to the doctor throughout the year, with the doctor’s office simply noting that the visit is prepaid and charged to the account of the insurer.
Instead, they set a schedule of fees, with hundreds or thousands of billing codes, and instruct the doctor to bill them according to that fee schedule, one at a time. The doctor’s office has to handle the paperwork on their end, as does the insurer, and that all costs money.
There are some exceptions, such as HMOs that have doctors on staff, like Kaiser Permanente. But for the most part, the ‘savings’ negotiated by insurers because of their ‘bulk buying’ power are largely illusory, and only appear to be real because so many doctors’ offices set unreasonably high ‘list’ prices to begin with so they can offer large ‘discounts’ to large insurers. Nobody actually pays the ‘list’ price, except of course for the unsuspecting self-pay patient!
The emergence of direct primary care practices over the past decade or so, as well as the number of previously existing cash-only practices, has demonstrated the financial superiority of self-pay healthcare. With any luck they will continue to grow, and self-pay patients will continue to enjoy great access to care at lower costs than most of the insured.