Cash-only looks good to doctors

One small, but growing, trend in healthcare is the movement of providers dropping from the roles of managed care and taking only cash-paying patients. Experts say that cash-only practices are a workable business model when done the right way, but it may be disruptive to others in the market.

The number of physicians making the change is hard to pin down, but a 2008 report from the Center for Studying Health System Change approximated that 12.4 percent of physicians no longer accept insurance in the practice.

Daniel Goldberg, president of Free Market Health Group, said primary care providers have been moving to a concierge, cash-only practice traditionally, but what he is seeing now is a movement for specialists to opt out of the managed care system as well.

One driver is the ability to work with self-funded employers like Wal-Mart and General Electric. However, those sorts of contract are hard to get so most specialists are focusing on individuals who would otherwise leave the country or travel for surgery, he said.

Other drivers for this change to cash-only include lowered reimbursements, billing and collection challenges and bureaucracy, he said.

There are a handful of components needed to make cash-only, or mostly cash, practices successful, said Jennifer Searfoss, CEO of Searfoss Consulting Group. Marketing is crucial. Physicians have to know their market and expose their services to the correct patient population.

The practices also have to be competitive in terms of cost and quality with their peers. Alisa LeSueur, who runs the price transparency website, doccost.com, said many patients of cash-only practices are those with high-deductible plans or self-funded employer groups. Both are searching for low-cost, high-quality care.

One successful physician that posts on her site is a doctor in Austin who doesn’t take insurance and has no office staff. Because he was able to cut so many costs, he offers office visits for $30.

Another factor is transparency.

“Those that want to do it without being transparent likely won’t work,” Searfoss said. “They have to identify episodes of care and what the rate is going to be. People are armed with quality, patient satisfaction and cost data; what we have now are educated consumers, they are no longer patients.”

Maybe the most important concept that can make or break these practices is the expectations of the physicians. Searfoss said one group of physicians that made the move to a cash-only practice has reduced their patient panel from 8,000 to 1,000. One of the doctors in the group told her he is no longer just a doctor, but acts as social worker as well, dealing with patients’ mental health issues, divorce and family troubles.

“To be successful, there has to be movement toward a concierge kind of practice,” Searfoss said. “Physicians that have bought into the concept and embraced it and changed how their practice runs – toward more personalized medicine – are the most successful.”

There are some disruptive effects of moving to a cash-only model. Goldberg said it can cause physicians to tighten their belts, which can ripple to vendors, who will need to be more cost-competitive. It could also drive healthcare costs down in markets that have a higher concentration of practitioners not taking managed care. Physicians also may have to get rid of privileges at hospitals that require doctors to take Medicare or Medicaid.