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Opening a Multi-physician Direct-pay Practice

Opening a Multi-physician Direct-pay Practice

Making a big change is always scary, but it's a little less daunting if you don't have to make it alone. In April 2013, all four of family physician Jacob Liston's partners joined him in making the shift from a traditional, fee-for-service reimbursement model to a direct-pay practice.

"When it came time for the transition, we were all kind of gung ho about it," says Liston, noting that one of his partners had recently written a book about the "broken" insurance system and had become a big proponent of direct pay, a model in which patients pay directly for services and practices no longer contract with insurers. "If we had any dissenters, I don't know if we all could have made the change."

While scary, Liston says he and his partners felt that they had no choice but to opt-out of fee-for-service reimbursement. His practice, Southdale Internal Medicine, was one of the last remaining independent internal medicine groups in the Edina, Minn.-area, and the partners didn't think it could stay that way much longer. "We could see the writing on the wall about remaining independent under our insurance reimbursement model, and we just didn't think that we would survive," says Liston, noting that the practice had no "negotiating clout" with payers. "... We figured that this would be the best way to maintain our independence."

Liston and his partners are not the only physicians who see direct pay as a way to escape reimbursement declines, complicated payer requirements, and the associated time constraints placed on patient visits. According to findings from Physicians Practice's 2014 Great American Physician Survey, Sponsored by Kareo, nearly 45 percent of the more than 1,300 physician respondents are considering direct-pay practice, and 8 percent are already practicing in one (click here for more results from our Great American Physician survey).

But while more physicians may be considering direct pay, opening such a practice is not easy. Here's more on how Liston and his colleagues did it, and Liston's advice for other physicians about to embark on the same journey.

Confronting the fears

While many physicians that transition to direct pay hire a consulting firm, Liston and his partners decided to go it alone. One of the biggest reasons was that many of the consulting options would have required the practice to become part of a larger direct-pay franchise, says practice administrator Cami Swanson. "We wanted our own brand, and we just couldn’t find [a firm] that would help us develop our own brand versus, 'Here's how those that buy into our franchise do it,'" she says.

Swanson, who took a leading role in planning for the shift, says one of her first tasks was informing the 11 staff members that the practice's payment model was changing. She and the physicians broke the news at a staff meeting. "It was very, very nerve wracking for the staff," says Swanson, adding that a top concern was job security. "Even for me, I could sit at the office sometimes and think, 'Yep, I've got a solid plan and this is going to be OK,' and then I would go home at night and think it through from the insurance side, the way we're all taught to think, and I would think, 'Oh my word, this is never going to work.' I think that's what gets a lot of the staff."

To help ease her staff's fears, Swanson had an open-door policy so that they could express their concerns at any time. She and the physicians also emphasized that they believed transitioning was their only option. "We did not want to sell out, and if we did sell out, or were absorbed by a larger group, everything would be out of our control and we couldn't guarantee jobs, etc.," says Swanson. "This was the best effort we had."

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