Cash-Only Practice: What You Need to Do to Succeed

Neil Chesanow


July 24, 2013

In This Article

Start-up Costs Can Be Significant

Doctors are drawn to concierge medicine for variety of reasons. Some see themselves as part of a movement to take back control of medicine. But others -- often older doctors who are in struggling practices -- and still others who are employed physicians with no patients of their own, may see direct pay as a quick, simple, low-cost way to start out fresh, see fewer patients, and earn good money.

They're dreaming.

"Some doctors who have been in practice for many years think that all they have to do is hang out a shingle and presto, there's a new practice: Dr. Smith, Concierge Medicine," Hadley says. "But there are sizable start-up costs. You need significant cash reserves just to open the door. I don't think many doctors anticipate that it's going to be quite as much as it turns out to be."

Hadley estimates that a minimum of $150,000-$250,000 is needed to carry a concierge practice until there are enough new patients to start paying the bills.

"You really have to plan that it is truly going to take you several months to a year to get up and running," adds Catherine Jordan, MSA, RN, LNCC, a legal nurse consultant who advises VantagePoint clients.

Hiring the expertise you need to succeed is costly too. A practice manager who not only knows her stuff but whom patients love is a must, as is a good accountant. You need a lawyer who understands the laws for direct-pay models of care in your state, not the tax lawyer you used way back when because she happens to be the only lawyer you know. Yet because doctors may contemplate a switch precisely because they are strapped for cash, they tend to economize in the wrong places.

"Many concierge practices fail because they try to do it on the cheap and do it themselves," says Roberta Greenspan, Founder of Chicago-based Specialdocs Consultants, which specializes in concierge practice management. "They don't know what they don't know."

"It's a long process," Hadley concedes. "A concierge practice probably takes as long to start as a regular medical practice."

Hybrid Models Can Be Tricky to Run

The term "concierge medicine" initially referred to highly affluent patients paying princely fees that were turning their personal physicians into overnight millionaires. But not many concierge doctors seem to have made that model work.

In any case, not every physician wants to limit a direct-pay practice to the top 1% of patients in the country. So, to attract middle-class patients, countless variations on the original model are now being tried.

In one variation, the doctor simply posts a list of prices for examinations and procedures in the office and possibly on a Website. Afterward, the patient pays in cash. The doctor doesn't take insurance, but patients with coverage can submit a claim for treatment by an out-of-network provider.

For many doctors, the primary appeal of concierge medicine is not having to deal with insurers. But even this isn't universally true. Specialdocs advises its concierge physician clients to continue to take Medicare as well as commercial insurance, if the insurers will allow it. In this model, their patients pay an additional fee for a high level of service and for noncovered services, such as wellness visits. Their regular insurance takes care of the rest.

In models that shun insurance, a common tack is to offer tiered pricing. Offering packages of services at different rates lets you appeal to the broadest range of patients, which many direct-pay practices either want to or need to do.

In a popular variation, Access Healthcare offers a silver membership plan for $100 per month, "suited for our patients with traditional insurance benefits but who desire an alternative to the traditional practice setting"; a gold plan for $150 per month, "for our patients who have...high-deductible health insurance policies supplemented by Healthcare Savings Accounts" and "for those that carry no insurance at all"; and a platinum plan for $200 per month, "designed for our patients who insist on a superior level of personalized care," which includes 24/7 cellphone access to the physician.

A Risky Business Model

Such "hybrid practices" are at the most risk, Greenspan believes. "Suppose you have 50 or 100 patients who are willing to pay $1500 a year for your services," she says. "That's a lot of additional revenue. Now you're working twice as hard, because you have to give top-notch service to those who are paying top dollar and still see all your other patients who are paying less, so your lifestyle not only doesn't change for the better, it gets worse."

Concierge doctors who accept commercial insurance and then charge patients an additional fee for a better standard of service may also create legal problems in some states. "A physician who elects to do that must be extraordinarily careful," Jordan warns. "If any services that the concierge physician provides are a duplication of those that are covered under the patient's insurance plan, that physician could be charged with fraud. It's a slippery slope."

Medicare patients can be especially tricky. If a concierge physician opts out of Medicare -- and in a recent survey, this was the primary reason that owners of traditional medical practices said that they were considering a switch to concierge medicine[1] -- Medicare-eligible patients who join the practice must sign a waiver agreeing not to seek reimbursement from the Centers for Medicare & Medicaid Services for services rendered by the concierge doctor.

If, however, you do take Medicare as a concierge doctor, you must be careful to avoid double billing for covered services.

Annual physicals are a case in point. "The Accountable Care Act now allows for annual physicals to be provided to Medicare recipients," Jordan points out. "Yet one of the big attractions of concierge medicine is that very extensive physicals will be provided to practice members."

But how do you differentiate what a Medicare recipient is entitled to receive vs what a concierge recipient will receive? "If it's not very carefully spelled out and then the patient bills Medicare, Medicare pays for those services, and the physician accepts that payment, that physician can be charged with inappropriately billing Medicare for covered services and could be penalized and excluded from the Medicare program," Jordan says.


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