No cash? No insurance? No problem: Dermatologists barter for business

June 6, 2008

National report - Dermatologists are using third-party bartering agencies to trade their services for services and products - from car repair to advertising.

National report

- Dermatologists who barter their services say the old-fashioned business practice allows them to receive valuable products and services, such as advertising, in return - while tapping patients who might not otherwise be able to afford access to the medical specialty.

All the while, third-party bartering companies are helping to keep the moneyless transfers legitimate.

When dermatologist Howard Donsky, M.D., opened his Rochester, N.Y., practice some 15 years ago, he not only conducted business the traditional way (through insurance and by exchanging U.S. dollars), but also bartered."I thought it would be good for business … and I would reach people who might not otherwise come in," Dr. Donsky says. "As time went by, I met very nice people and have enjoyed it, so I have stayed with it."

Dr. Donsky, an associate professor of medicine/dermatology at the University of Toronto, Canada, and member of the teaching faculty, department of dermatology, University of Rochester, Rochester, N.Y., says he offers cosmetic services in exchanged for myriad products and services in the International Monetary Systems (IMS) barter exchange.

In business for 23 years, IMS is a nationwide network, offering barter networks in 50 markets and 18 to 20 states. Like other exchanges, IMS creates the network and manages the administration of its members’ transactions.

The barter business swings upward in bad economic times, says IMS President and CEO Don Mardak.

"A barter system, like IMS, creates a secondary currency," he says.

However, Mardak says that while doctors of all kinds have always been part of the IMS system, he has not noticed an increase in physicians signing up with the network.


The way it works

In essence, dermatology practices and other businesses join networks in which they trade with one another using "barter" dollars instead of U.S. dollars. A patient who is part of IMS might make an appointment with Dr. Donsky for tattoo removal, which is worth $300 in barter dollars.

Dr. Donsky performs the procedure, as he would for any patient, and the patient pays by signing a $300 barter dollar credit for Dr. Donsky’s barter account. Dr. Donsky’s office then submits the credit slip to IMS, which processes the transaction, so that it is treated as income and is IRS taxable.

Dr. Donsky can then use his $300 in barter dollars to purchase within the IMS community - whether it is at a member’s car repair shop, a restaurant, or another place of business.

Omeed Memar, M.D., Ph.D., dermatologist, assistant professor, department of dermatology at Northwestern University, Chicago, says the bulk of his barter dollars go to pay for practice advertising. And when he held an open house, he used barter dollars to pay for flowers.

"You can use it for a number of things, like setting up a Web site. It is like money, but you have to (use it) within the network," he says.


Benefits, drawbacks

While both dermatologists say that bartering represents only a small portion of their practice revenue, they agree that it taps a market of patients who might not have insurance or could not otherwise afford their services.

Dr. Donsky says he only uses the barter system for the cosmetic side of his practice, because he believes that medical services are not cut and dried enough for bartering. Cosmetic services represent patient choice, whereas medical services are dependent on a physician’s findings and could require additional services.

The good news, he says, is that many of the people who come in for cosmetic work often become general dermatology patients and refer others to the practice.

Dr. Memar, who has been using the bartering approach for more than six years, offers both medical and cosmetic services for barter and says he has never had a problem.

"If someone comes in and has a mole removed, they can pay in trade dollars, so their account is transferred to our account," Dr. Memar says. "(Bartering) does not work with insurance, so it is good for someone who does not have insurance or (who) wants to barter" for the amount of their deductible.

Doctors benefit from bartering, according to Mardak, because they basically trade empty time slots when they do not have patients in their offices.

"You have all this excess capacity - the times when you don’t have a patient, or when the airlines do not have a seat filled. And that excess capacity can be turned into a liquid asset immediately by being part of the barter system," Mardak says.

The other major benefit, according to Mardak, is that businesses in the network trade at full price at their cost. In other words, if the wholesale cost of a dress is 50 percent of list price, the business bartering the dress is effectively buying that service or product at half price, he says.

Dermatologists who go into bartering should charge in barter dollars what they charge in U.S. dollars, according to the IMS Web site. Working with bartering exchange companies is not free. For the first six months of service, IMS, for example, charges a monthly cash transaction fee of 7.5 percent on all trade dollars utilized on purchases and 7.5 percent on all trade dollars earned on sales.

After the initial six months, members further agree to pay IMS $15 cash and $15 trade per month as an account maintenance fee, according to the IMS Web site.

Another tip: Dermatologists should check out the network of the exchange that they want to use. The more extensive the network, the better for the user.

Dr. Memar says the barter exchange surcharge is minimal and worth the service and having access to the other businesses in the group. Still, he has assigned a member of his office staff to make sure all barter transactions have been transferred correctly.

Though Dr. Donsky admits that he has more bartering dollars than he uses, he says, cashing in can be fun.

"I find that when I do go out, you feel like you’re not spending money - it is more like a treat when I am going out," he says. "They have very nice places in this barter community."

For information on taxes and barter exchanges, see this page in the IRS Web site: www.irs.gov.

For more information about bartering and lists of bartering exchange companies, go to the National Association of Trade Exchanges at:www.nate.org.