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Will a Cash Pay Structure Work for Your Practice?

Posted in The Top Line | Aug 2014 | Comments (1)

Tags: healthcare reformcash-based medical practice

The Affordable Care Act implementation has been one of the more confusing and difficult mandates in the modern era of medicine. Mixed in the confusion is the notion that more insured Americans will equate to more patients for specialists. It isn’t that simple, though.

First, many of the plans available on the Insurance Exchange have low reimbursement rates for procedures, meaning that many physicians will close their doors to these newly insured patients. Second, many of these plans have traded low premiums for high deductibles, some up to $6,000. Meeting these deductibles may be challenging for patients wishing to have procedures, and will leave them with high out of pocket costs.

A growing number of specialists and ASCs are taking a page from the Primary Care playbook and exploring a variation of the concierge medicine model, a reduced rate for cash pay patients and employers. These are global fees for service and include the professional, anesthesia and facility components in one bill.

For specialists exploring these payment structures, a significant amount of time and consideration must be taken to define the audience and price structure. Both individual patients and employers are in the market for reduced fees without reduced quality and outcomes.

Research
Although individuals in the market may want to explore the idea of cash medicine, the bulk of the business is generated by employers seeking to lower the cost of health expenditures. The cost of insuring employees is many employers’ largest expense. Those costs are expected to rise with the Employer Mandate, and businesses are scrambling to find ways to counteract these costs.

A growing model allows employers to pay medical claims directly to providers in an insurance structure known as self-funding insurance. Employers using this structure are ideal candidates for partnership.

This form of insurance saves employers money by lowering the cost of employees’ policies, as well as only having to spend money when procedures are needed as opposed to paying for care that is never used. Companies like Wal-Mart and GE were among the first to adopt this cost-savings model and have contracted with Johns Hopkins and the Mayo Clinic for hip and knee replacement surgery. Furthermore, this form of medicine allows an important thing the ACA prevents—crossing state lines to find the best care. Patients can travel to receive care without being denied by an insurer.

With self-funding, the employer “rents a network” from a larger carrier like Cigna or Blue Cross. This rental simply means that the employer will pay the same cost for procedures as guaranteed under Cigna’s network. However, instead of the insurer paying the claim, the employer pays the claim and acts similar to an insurer. Also, unlike most plan arrangements, the employer is not precluded from contracting with providers outside of the network for lower rates.

While determining if a cash pay system is a viable model for your practice, extensively research the number of employers in your state or region utilizing this form of insurance. In some instances, state websites will list the employers providing this form of insurance. In other instances, a search for brokers and third-party administrators administering these plans will also give you an idea of the number of potential partners.

Self-funding has grown exponentially over the last fifteen years, and many employers are transitioning to this model as a result of the tax benefits it affords. Since 1999, the percent of employers using this form of health benefit has risen from 44 percent to 61 percent of employers, according to investment firm Manning-Napier.



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Jason Brooks 08/25/2014 12:12 PM
Great article Daniel! I love in the Northeast and I am seeing a lot of interest in Private Practices to shift to one of these models or a hybrid of concierge service, cash pay, subscription, etc...I think with the dwindling reimbursement rates and the regulations a bit of a revolution is beginning to take hold. I also think that this is exactly what the practices, the staff, and the patients want! I'm a consultant who takes great pride in providing service to medical professionals, I truly believe that you all deserve better! Keep up the great work Dr!