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Adopting a Direct-pay Practice


I am now nearly a year out from opening a direct-pay practice. I have not gone bankrupt or crazy. Here are some important things I've learned.

It has been an eventful year for me:

• September, 2012 - worked my last day at the practice I'd called home since 1994.

• January 1, 2013 - officially "opted out" of Medicare

• February 5, 2013 - opened my new direct, primary-care practice by doing house calls at the homes of two elderly couples.

I am now nearly a year out from opening the practice and have not gone bankrupt or crazy. I'm still standing, and the practice continues to grow. We are approaching 400 active patients, and I'm finally ready to hire a third employee to join me and my faithful nurse.

So, as a "survivor" of the transition to a direct-pay practice, as a person who has been in the trenches and has lived to tell about it, what advice would I give to people thinking about making the transition?

1. Commit to change

Even though it made things significantly harder, my decision to radically change my practice style was one I do not regret. I could have easily just continued a solo practice that accepted insurance, or perhaps follow a hybrid model, but I would have continued to be under all of the demands and pressures that drove me to a state of burnout. A person works for whoever pays them, and I used to work for insurance companies and government agencies; now I work for my patients and that has made an enormous difference in the way I can practice.

2. Start "lean"

One of the best pieces of advice I got early in the process was to read the book "The Lean Startup," by Eric Reis, which discusses a different way of approaching a new business. His advice is to eschew a complex business plan, instead putting out a "minimum viable product," and learning how your "customers" (patients) react to it. This means my success is no longer measured by adherence to a business plan, but instead, by my ability to build something my patients want to continue to pay for.

This was really important for me because I wanted to take an already radical practice model and push it even further away from mainstream. My goal was to build a shared patient record, to contract with businesses, and to give patients a detailed care plan outlining where their care should go over the next year. While my patients are OK with these things, the thing they value the most is that I answer their e-mails and talk to them on the phone. They put enormous value on my availability; so this became my top priority.

I do not accept insurance payment at all, instead charging a flat monthly fee ranging between $30 and $60.

3. Grow slowly, if you can

My practice has grown much slower than it could have, had I been more aggressive with marketing. The majority of my growth has come via word of mouth (and by my Facebook page). This has meant that we've had to tighten our belts at home, and I've had to dip into my retirement savings; but it has allowed me to avoid being overwhelmed and not compromise the quality of care and availability my patients so value.

I am trying to build something that will grow well and survive the long term. I was initially disappointed when the bank didn't loan me more money, so I could hire more staff and grow faster, but now I see this as a blessing. It gives me more time to build the practice right. By taking the slow approach we've been able to steadily grow, and maintain very high patient loyalty and satisfaction.

4. Raise the cost of leaving

A long time ago I got some advice on marketing I never forgot: raise the cost of leaving. Your customers (patients) will be far more loyal to you if they know they will lose quality, personalized care, if they leave your practice. This has been a huge factor in choices that I've made in my new practice. I earn the vast majority of my revenue from loyal patients paying monthly payments; and so my business thrives through things that keep them happy and loyal, and willing to pay me each month.

So whether it is by calling consultants personally, visiting patients in the hospital, or by offering goods and service at cost, I am always working to do things patients don't get from other practices. We charge $11 for flu shots, even though we could make a profit. Why? Because people are delighted to get a "bargain" in an unexpected place: from their doctor. Any new service is therefore added to maximize value, not profit, as ultimately, my profit is made through payment of monthly fees.

Robert Lamberts, MD, is board-certified in internal medicine and pediatrics, and practices in Augusta, Ga. In October, 2012, he left his "traditional" primary-care practice and opened a cash-only, "direct-pay" practice. Dr. Lamberts can be reached at rob.lamberts@gmail.com.

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