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Mary Kay Balluff’s plan to run a bare-bones, cash-only psychiatric practice from a home office sure is idealistic. But is it naive?
Physicians Practice loves doctors like Mary Kay Balluff, and fortunately there are a lot of them out there: big-hearted and willing to make that entrepreneurial leap. We want to help her - and others - avoid problems, so this month The Great Practice Makeover is doing something a little different: We’ll address potential pitfalls before they present themselves, as Balluff’s new private practice gets off the ground.
She envisions a bare-bones, cash-only practice housed in a quiet room of her home, with no one to second-guess her clinical judgment and no malpractice insurance to choke her bottom line. And best of all, none of the “ugly things between HMOs and physicians” she’s seen occurring in her managed-care-heavy market of southern Michigan. “People I know are saying, ‘Don’t do it! Why don’t you just go get a job somewhere?’” she laughs. But Balluff believes “it’s important for physicians to be able to go out on their own.” She wants to serve as a positive example.
Sounds like a dream many docs are having these days. But just how wise is this plan? And what exactly does Balluff mean by “cash only”?
Let’s be clear: There’s a world of difference between setting up a part-time, cash-only office as a means of dipping your toe in the waters of private practice and opening a truly streamlined, simplified office that circumvents the current system’s barriers to physician autonomy. The former scenario isn’t likely to produce a business that will remain viable - and able to serve patients - over the long haul. Our advice if you’re going to undertake this? Jump in with both feet, by all means, but with your eyes wide open as well.
After beginning medical school at age 32, Balluff went into pediatrics. Now, at 56, having lived through the hospital-employment frenzy and its collapse, she’s embarking on a second medical career in psychiatry. She doubts she needs a business plan because she’s not borrowing any money to start up her practice. But she knows she’ll have to undertake some intensive educational efforts to make potential patients in her area aware of both her existence and her integrative treatment approach. And for that, she’ll require cash.
Loan or not, Balluff definitely needs a strategic plan. Setting down a clear plan will keep the risk inherent in her practice’s business operations from encroaching on her personal life - and finances. For instance, Balluff has thought in clinical terms about the kinds of patients she’d like to see (women only, those who are not critically ill), but she hasn’t nailed down the demographic characteristics that would help inform her marketing on a more basic level. Should her practice focus on the region’s large blue-collar population or on the more affluent areas nearby, where business professionals might appreciate the enhanced confidentiality of bypassing their insurance for payment? And how much should she charge, anyway?
Many physicians going the cash-only route use a rough resource-allocation plan to inform their fee-setting. For example, they’ll divide their time among indigent patients, “average” patients, and the most demanding of patients - those who’d fall into the premium, all-hours-access service level at a concierge practice. Several cash-only physicians we know structure their services like this and admit that it’s something of a hassle, but it’s one good way to direct your pricing while staying mindful of your nonfinancial goals. If you want to provide a certain level of uncompensated care or really don’t want patients calling you at all hours, be honest with yourself and factor that into your plan.
Balluff isn’t out to make a killing, and realistically that’s probably a good thing. Still, rising copayments and deductibles are making conservatively priced office visits at cash-only practices seem even more reasonable by comparison. Balluff’s made a detailed list of who’s paying what in the area. Not a bad place to start, although your charges needn’t align with third-party payments, but rather with your own comfort level - assuming, of course, that you’re covering your costs and that your target demographic can afford it. In addition to income needs and desired patient volume, your fees should reflect your ideal patient’s ability and willingness to pay.
As for billing, skip the issue altogether by collecting payment at the time of service for every visit - even in advance if possible. Take every standard form of payment, including credit cards and personal checks. It’s simple to start a merchant account with a bank and get set up with a check-guarantee service. To address large bills, set down a financial policy that covers as many likely scenarios as possible and provides for payment agreements; make this policy and insurance philosophy clear before treating anyone. Post the information on your Web site, and make sure it’s featured on all your promotional materials in some way. Also, although you may take heat from other physicians, list your fees and any money-back guarantees you might offer. This might sound distasteful, but it’s one point of comparison the long-anticipated new breed of healthcare consumer will find useful as he shops around.
Rules and regs
Balluff’s practice will be truly cash only in the sense that she won’t bill any third-party payers, even for covered services. But she’s still considering whether she should offer patients coded superbills to submit for insurance payment on their own. In order to make this a true service to your patients, though, you’d be forced to stay on top of constantly morphing CPT rules and payer preferences. Worse, you could be accused of fraud if you coded something incorrectly, even if you didn’t submit the bill to a payer yourself. (Do continue to document and be diligent about obtaining previous medical records, of course.)
Based on her goals for the practice - a two-and-a-half-day workweek, with limited income requirements, and a care setting where patients can choose to avoid both the stigma of a specific diagnostic label and subsequent denial-of-coverage issues - it might make more sense for Balluff to really go all the way and opt out of Medicare. She should simply make sure all Medicare-eligible patients sign an agreement not to submit claims and keep her opted-out status current by filing an affidavit every two years. (The Association of American Physicians and Surgeons has examples of these forms online.)
Opting out is the only way to avoid signing up for a National Provider Identifier (NPI), and this might be a logical course given Balluff’s very real concerns over patient privacy issues. Billing Medicare just once, however, even if it’s on paper, nullifies this exemption.
Balluff won’t be conducting electronic transactions (credit card charges and patient communications don’t count), which means she’ll be considered a “noncovered entity” for HIPAA purposes. The “country-doctor” exemption for practices with fewer than 10 employees means Balluff can avoid another hassle in the form of potentially costly compliance regimens. A word of caution, though: Vigilance is crucial when it comes to both opting out and remaining a noncovered entity. If you slip up and accidentally transmit a bill electronically or if a patient submits a bill to Medicare (even without your knowledge), you’ve effectively agreed to abide by all the restrictions or face fines of up to $250,000 and prison time.
One move Balluff believes would complete her rat-race dropout is canceling her malpractice coverage - something that should be done only after taking a careful look at all possible ramifications. Assuming it’s legal to go bare in your state and assuming you can still get hospital privileges while bare (and that you need privileges), you could nevertheless be exposing insured colleagues to increased risk or to losing coverage for expenses associated with government audits. Also, going without malpractice coverage doesn’t mean you can’t be sued for malpractice. It simply means that you don’t have insurance to pay any settlements or judgments. It’s true that trial lawyers are less likely to take a case against a defendant if they don’t think they can collect, but plaintiffs’ lawyers won’t mind taking your personal assets, so you’d better have an excellent asset-protection strategy.
Moreover, those in high-risk specialties may need to purchase tail coverage, or extended reporting endorsement coverage, to keep the past from haunting them. Psychiatrists are sued less often than other specialists, but in an environment where a poor outcome could mean patient suicide - for which a high percentage of malpractice settlements are awarded - going bare may not be the best course, even for a doctor who attempts both to avoid the most critically ill patients and mitigate personal liability through litigation insurance.
When it comes to these regulatory details, enlist an attorney who specializes in helping doctors in private practice (not simply a more general healthcare attorney) to ensure you’re taking the best course.
We’re also unenthusiastic about Balluff’s home-office idea. Balluff herself acknowledges that setting boundaries can be a challenge in her specialty. We’re at a loss to see how inviting patients into her home will do anything but undermine those efforts. Your office need not be elaborate by any means, and space-sharing - an option Balluff has explored with limited success - remains an alternative worth considering.
It’s not clear to us that seeing only women will make her any safer, either. Even if they generally commit fewer violent acts, no woman is an island; many bring with them messy relationships - and potentially violent men. We’re also unsure of Balluff’s plan to use phone screening to determine who the sickest patients are. Professional judgment, experience, and intuition will surely steer you right in many, if not most, cases, but what about that one instance in which you’re off base?
Balluff naturally hopes to open her doors as soon as possible, but a lot of pretty big questions remain unanswered. A step back may be in order. She’s already waited a long time to fulfill her practice dream: “When I was a little girl, the doctor came to our house. My concept was you’d have a lot of freedom, be able to do what you want…” So that’s understandable. But why expose yourself to unnecessary risk to get there?
Laurie Hyland Robertson is a managing editor for Med-IQ, the parent company of Physicians Practice. She has been in the medical publishing field for nearly 10 years, working editorially on both clinical and management topics. She can be reached at email@example.com.
This article originally appeared in the March 2007 issue of Physicians Practice.