Contracting with third party payers and dealing with government regulations isn’t getting easier. It may seem like every time your practice adjusts to new demands, another change is handed down. These changes deliver a hit to your practice in administrative costs and often with little to no financial reward.
Physicians often express a feeling of loss of control over their businesses even though they bear all the responsibility of a physician-owned practice. Many dermatologists have found a solution in adopting new, alternative practice models.
One such model is commonly known as direct pay, which is a term sometimes used for a retainer-based payment model, most often when referring to direct primary care (DPC). Otherwise known as cash-based practices.
This is neither a concierge (annual fee) nor retainer-based (typically a monthly fee) care model, but a model in which a practice simply declines to contract with insurance and is paid directly by patients (except Medicare, typically).
Not many specialties, if any, are better positioned for this kind of model than dermatology.
The direct-pay model
In a direct-pay model, patients pay for their services directly and then seek reimbursement from their insurance for covered services. Typically the practice continues to assist patients with insurance by submitting claims for patients who are seeking reimbursement or credit toward their high deductible plans, however they are relieved of the burdensome chase for practice reimbursement by third-party payers.
This arrangement can save your practice thousands of dollars in administrative and insurance billing costs and dramatically improve your revenue cycle. Even though your practice likely has a good handle on patient collections for elective services, keep in mind that when adopting such a drastic policy change, clear and upfront communication with patients regarding payment or payment plans is extremely important to ensure prompt payment and positive patient relations.
Transitioning away from an insurance-based practice takes thoughtful planning to safeguard practice health and success in both the immediate and distant future.
Preparing to shift
If your practice already has a robust aesthetic patient mix, line of services, procedures and products than it may be a strong candidate for this model. If this is not the case, consider how you can increase that revenue stream and patient demographic as you continue to explore shifting to direct pay.
Adequately research and prepare to move toward a direct-pay model by speaking with your top referral sources. Find out how you might continue to procure those referrals should you stop contracting with their patients’ insurance providers. In other words what can you and your practice offer that is of equal value and how can you make it easy for those practices and their patients to utilize your practice? Understanding your community, it’s willingness to pay directly for services and who the big players are in town —competitive factors like medi-spas and other practices offering dermatology services, as well as big employers and the insurance plans they offer will give you a more realistic and complete picture as you consider the feasibility of making the leap to a cash-only practice.
Accept that you will have attrition should you change your practice model, but do your best to find out how drastic that might be, how you can mitigate it and how you will compensate in order to attract new patients and referral sources to replenish those who’ve left while attracting the ideal patient for your new model.
Walking away from the insurance-based practice model means no longer being on provider lists, an often-undervalued referral source.
Planning for success
A solid marketing plan that takes into consideration all of the above factors and includes a SWOT analysis (identifying strengths, weaknesses, opportunities and threats) and maps out short term and long term actions/goals in response to this data is crucial. If you’re going to require patients to pay up front for services, and want to continue seeing medical dermatology patients, you’re going to have to offer them something in exchange for the inconvenience, you need to woo them with everything they like but could get elsewhere and something they don’t get elsewhere.
For example, you need to offer stellar customer service, communication, fast scheduling, low wait times and medical excellence — but in addition you need that something extra. This could be an incredible location or facility, convenient weekend and/or evening hours, specials and events throughout the year, a VIP program that patients can earn rewards with, or all of the above!
A strong marketing plan and dedicated staff or outside hired help is necessary to educate potential and existing patients and referral sources in the benefits and services your practice offers. Whether or not a practice is committed to clear, consistent patient communication and on-going marketing are often key differences between struggling practices and successful ones.
There’s much to consider when deciding whether or not to change your practice model. Many dermatologists have taken the plunge and regained a sense of control over their practices and futures. Others haven’t been so successful, often due to a lack of in-depth research, planning and commitment.
The important thing is that you choose what works for you, your practice and your community, and you understand your reasons after weighing all factors. That empowerment is often enough to change how physicians feel about their work even if nothing appears to be “business as usual”.
Direct pay is not the only practice model. Discerning among the many varietions can be challenging and your resulting choice may mean big changes. Here are some resources to help you learn more on this subject.
- Read more on how dermatologists still can thrive in small private practices amid the changing healthcare environment.
- The American Academy of Dermatology offers members a toolkit to help assess viable practice models.
- View a physician’s letter to patients announcing the practice is going to a direct pay model (disclaimer: the author/consultant does not recommend discontinuing Medicare services).
- Read more to better understand the difference between Direct Primary Care (DPC) and Concierge or Private Medicine practices.
- More from this author on “5 Things to Consider When Looking at Alternative Payment Models”.