Zocdoc's New Per-Patient Fee Hits a Nerve With Some Physicians

Alicia Ault

April 26, 2019

Editor's note: This article has been updated with new information.

New York City–based allergist Gary Stadtmauer, MD, read the new pricing terms from Zocdoc and was puzzled. Then he was angry.

The new plan "feels like a shakedown," said Stadtmauer.

Online appointment service Zocdoc has angered not only Stadtmauer but also some of its other physician subscribers — especially in New York — with a new pricing policy in certain areas that will charge a fee each time a new patient makes an appointment through the service.

The company, founded in 2007, previously charged physicians a $3000 annual flat fee, no matter how many patients booked an appointment through their service. Zocdoc also provided administrative support and a portal for patients to post reviews under that plan.

Under the new model, which went into effect on April 1, physicians pay $299 annually for the administrative services for up to five physicians (which then increases based on the size of the practice), plus an adjustable per-patient fee depending on the type of medical practice, levied any time a new patient books through the Zocdoc portal or app. Patients who already have an established relationship with a physician are also included in the licensing fee.

In 2018, the company put the new per-patient pricing plan in effect in Colorado, Connecticut, Georgia, Pennsylvania, and Washington. It will be instituted in New Jersey on May 1.

Some physicians who were contacted by Medscape Medical News, especially outside of New York, said they've been pleased with the new pricing model.

But other physicians who use the service already are crying foul — loudly.

"If you ask me, it's a ludicrous amount to pay for an 'advertising' fee," said Rosemary Desloge, MD, an otolaryngologist in private practice in Manhattan.

Zocdoc had to delay its first attempt at putting the new fee into place in New York last year, owing to vigorous pushback from the medical community, according to the Medical Society of the State of New York.

Jessica Aptman, a company spokeswoman, told Medscape Medical News that physicians who have expressed concerns about the pricing are the "vocal minority."

Illegal Referrals?

The New York medical society did question the new pricing model. Its lawyers met with the state's health department in March. Regulators confirmed that the new pricing does not constitute fee-splitting under the New York code, the society told its members.

But the new pricing model also raises questions about whether the fees constitute illegal referrals — or kickbacks — under Medicare and Medicaid statutes.

"Arguably, it sounds like a prototypical patient recruitment–type scheme," Matthew Fisher, a Boston-based health lawyer, told Medscape Medical News.

He points out, however, that the majority of states also have laws that prohibit kickbacks in commercial insurance markets.

Zocdoc was concerned that the federal government could construe the fee as a kickback, so it won't let Medicare or Medicaid patients use the service in markets where it has rolled out the per-patient fee. The company is currently seeking more clarity on this regulation. The statute, written in 1972, is "unclear for a modern platform like ZocDoc," Aptman said.

Zocdoc spokeswoman Allison Morgan also told Medscape Medical News that "before implementing our new pricing model, we have met with relevant state regulators or elected officials to proactively preview our new model and allow time for discussion to address any state-specific questions or concerns."

Despite what regulators have said, Adam Banks, chief operating officer of New York–based Mindful Urgent Care, told Medscape Medical News that he still believes there are indications that pricing structure is a fee-splitting scheme. Zocdoc is basing the fee on the value of a patient, with more profitable specialties paying a higher rate, Banks said.

Indeed, Zocdoc engaged a third-party valuation firm to determine the fair-market value range of the per-booking fees by state and specialty.

"With pricing discrimination like that, it seems hard to argue that they are not seeking a split of the medical fee," Banks said.

A Fairer Fee?

Zocdoc has said it is changing from the flat fee to a per-patient fee to make the service more equitable to all participants, which, in turn, could bring in new users outside of its primary market of metropolitan areas. Under the old plan, doctors who were getting a high volume of new patients weren't paying any more per year than those who had few new patients, said Zocdoc's Aptman.

"We estimate that roughly half our existing customers will pay the same or less" in total fees, she said.

The per-patient fee "is intended to lower the barrier to entry and enable more providers to join our marketplace," she said.

Aptman claimed that a New York dermatology practice that paid $30,000 a year under the flat fee system — covering 10 doctors — valued the service at $50,000 a week, or $2.6 million a year.

She said that of the five states with the new model, "the vast majority of Zocdoc's existing provider clients opted in to our new pricing" and that some physicians and dentists who had previously sat on the sidelines had now signed up.

Just a Marketing Service?

Zocdoc is one of the biggest physician rating and online booking services in the United States. Aptman said Zocdoc operates in 40 states and covers 60% of the US population. The company — which bills itself as a marketing services platform — is backed by some big-name Silicon Valley investors, including Khosla Ventures and Amazon founder Jeff Bezos' Bezos Expeditions.

As part of its pitch to solicit new physicians, Zocdoc promises to fill last-minute appointments, diversify the payer mix, recruit new patients, and strengthen a doctor's reputation.

New York City was the company's first market and may be where it swings the most weight.

Zocdoc is well known in New York, where its ads cover subway cars and the service is "ingrained in the culture," Banks pointed out.

Company founder and CEO Oliver Kharraz, MD, in a letter to New York subscribers announcing the coming change, said, "In New York today, we estimate that one in five new patient-doctor relationships is established through Zocdoc. That's because thousands of providers — across independent practices and leading health systems alike — participate in Zocdoc's Marketplace. Together, we've helped millions of New Yorkers access care."

The company would not disclose how many New York physicians use its service. That number "is a direct path to revenue and we are a private company and do not share revenue publicly," said Aptman.

But the new fees — which can amount to a significant proportion of reimbursement — have some providers suggesting that Zocdoc has moved beyond just marketing.

"I don't know any advertising company that would say you owe 50% of the collections," said Desloge

Bargain or Bust?

The fees in New York will range from $35 to $110, depending on the specialty, according to Aptman. Doctors have to pay even if the patient cancels the appointment or does not show up. Patients might not even be aware that their doctors pay a fee to get them into their practice.

Stadtmauer, the New York City allergist, also wonders if the new model will interfere in the doctor-patient relationship and encourage bad behavior.

The per-patient fee is high enough in some cases that physicians may decide to find a way to keep patients with lower-paying insurance plans from coming in for an appointment, he said. Another concern: That doctors may pad bills to make up for the money lost with the Zocdoc per-patient fee.

Zocdoc said it wouldn't stand for such behavior.

"If we discover providers are providing unnecessary procedures for their financial gain, we will take appropriate action consistent with our user agreement with those providers, including terminating them from our service and cooperating with the appropriate authorities," Aptman told Medscape Medical News.

Some New York physicians who were contacted for this story would not go on the record with any criticism of Zocdoc. Others — like Stadtmauer — said they'd keep the service for now, while some said they would not continue.

An online petition begun by New York dermatologist Peter Chien, MD, calling on Zocdoc to stop the new pricing has garnered more than 600 signatures.

A perusal of social media finds other New York–area physicians expressing dissatisfaction with the new model. Jeffrey Weinberg, MD, who owns New York–based Infinity Dermatology, estimated in a Facebook post on January 29 that it would cost his practice $30,000 a year to keep participating, and urged other providers to stop using the service.

But physicians in Georgia — where the model was first launched in April 2018 — have done well, said Zocdoc. The company said on its website that overall provider participation has grown by more than 80% in the state; available appointments have grown by 31%; and the average cost for Georgia clinicians has declined by 45%.

"Crushes" the Competition

Stephen Badger, chief administrative officer for the Atlanta-based WellStar Medical Group, told Medscape Medical News the new model has made good economic sense for his practice. Previously, at $3000 a doctor, it wasn't feasible to have all 800 of the practice's physicians participating, as some did not have excess capacity, he said. A $3000 fee might mean no new patients.

WellStar has a $100 per-new-patient fee under the new model; it has now put all of its doctors on the service. Badger said the practice is not having problems with patient no-shows and is not concerned about Medicare and Medicaid patients being shut out, because patients have other ways of finding clinicians in its huge multisite practice.

Zocdoc's Aptman clarified that the company has since adjusted the new patient booking fee for health system clients to $110 per new patient.

"When we look at the cost of Zocdoc, and paying the fee that we are paying, we are very comfortable that it is a good investment from a health system perspective," Badger said.

But the practice is not dependent on Zocdoc. "This is just a new channel — and I will say it's a small channel — that helps us bring in people that are not connected to the system," especially those who might be new to the area and who don't have an established relationship with a doctor, Badger said. He estimated that of the 2.3 million patient encounters at the practice each year, only about 6000 come through Zocdoc.

Another satisfied customer, Zak Barron, operator of Barron Family Dental in Thornton, Colorado, where his wife Jessica is the practicing dentist, said he's been pleased with Zocdoc, which he began using right after the practice opened in 2016. (Zocdoc provided Barron's name to Medscape Medical News for an interview, but he received no financial compensation.) He said the return on investment has been 150% to 200% — and they now pay $99 per new patient booking.

"Zocdoc is the cheapest acquisition tool in my tool box — it crushes Google ads, it destroys direct mail, which we don't even do anymore," Barron told Medscape Medical News.

"Losing Proposition"

But Desloge said the $80 she will pay for each new patient won't be worth it. "I can tell you with no question I won't stick with Zocdoc," she said.

Desloge, who started practicing in 2005, hesitated to join Zocdoc initially because she was worried about which patients might use the service. After a few years, however, she said, "I would say the caliber of patients I get through Zocdoc is fairly good and is from a good payer mix."

She gets 20 to 30 new patients a month — including some Medicare patients — through the Zocdoc booking platform, but not all of her patients find her through the service. Desloge treats many people, and they talk to each other, she said.

Recently, she received $165 for a new patient who underwent an in-office procedure. If $80 goes to Zocdoc, "it's a losing proposition," she said. "I can replace what Zocdoc is doing with much less costly services."

Banks said his practice could end up paying Zocdoc $35,000 a month for the 500 patients that book through the service. "That's more money than the doctor makes," he said.

The service was attractive because it has been effective and "basically, so cheap," said Banks.

But the new pricing model could potentially put the practice out of business, he said. As a psychiatry practice, it has a lot of no-shows, which will end up being costly.

In addition, "we think it's very unethical," said Banks, referring to the pricing model. He plans to go back to more traditional means of recruiting patients.

"A Piece of the Action"

Stadtmauer said he may be too dependent on Zocdoc to give it up just yet. He will keep using the platform, but may stop accepting some insurance plans, and he may start charging no-show fees to patients who book through Zocdoc, he said.

The company noted that this would only be allowed under its contract if a practice charges all patients the same no-show fee, not just those using Zocdoc to book their appointments.

Stadtmauer estimates that a third of his new patients in the past year booked through Zocdoc. He also hesitated to use the service when it was first offered, but changed his mind within a few years, as he decided he needed to do something different for his solo practice.

Zocdoc "did provide what turned out to be a good service for doctors and patients — and it worked," he said. In an era when so many people use smartphones, tablets, or laptops to access services instead of a phone call, Zocdoc "has become an increasing source of new patient referrals," he said.

But patients don't always come back for repeat visits with an allergist, said Stadtmauer. He will pay $60 per patient under the new model, which is half the reimbursement for individuals who have the Group Health Insurance plan, used by small businesses and city workers, for instance, he said.

Harking back to his "shakedown" statement, Stadtmauer emphasized his displeasure: Zocdoc "literally wants a piece of the action," he said.

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