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Transitioning to a Direct-pay Medical Practice


Why one physician made the transition to direct pay and how he did it.

Imagine practicing medicine without dealing with each payer's set of rules, barriers, and protocols. No longer would you and your staff spend time verifying patient insurance and resolving questions about coverage, engaging in often fruitless fights over reimbursement rates, and waiting months for payments that sometimes never come.

For family physician Paul Dibble, that world is his reality. In August of 2011, he said so long to his fee-for-service practice in Grand Rapids, Mich., and moved to Magnolia, Texas. There he opened Simple Traditions Family Health PLLC, a solo direct-pay practice that does not accept insurance.

"I felt like we were spending so much time trying to meet the insurance requirements that we weren't able to provide good patient care," says Dibble of his prior fee-for-service practice. "You end up having to cut corners because you just can't spend as much time with patients."

His frustrations with the model, combined with the passage of the Affordable Care Act and the subsequent upholding of it by the Supreme Court, convinced him it was time to make a change. "I think it's going to be very difficult for a small private practice to compete ... they're going to have to join forces with the larger organizations, which I didn't want to do," says Dibble. "I didn't want to be just an employed physician in a large organization. I like the small private practice, I wanted to maintain that, but I didn't see that that was going to be possible in the traditional model. I saw with the direct-pay option that it was a way for a small private practice to survive in the new landscape, if you will."

Dibble is not alone in looking to direct pay as an alternative to traditional fee-for-service reimbursement. About half of the nearly 1,000 respondents to our 2012 Great American Physician Survey said direct pay might be worth a try if it made sense economically. Fourteen percent said they are considering it, have considered it, or already working in such a practice model. Here's how Dibble made the transition to direct pay and how it is affecting his practice style, his patients, and his revenue.

Setting down roots

Dibble's decision to transition was not a quick one. He spent a lot of time researching how such a model works, and researching how to start up a new practice in general. "Some of those details I hadn't done before and so I had to learn them as I went," says Dibble, noting that time spent talking with other physicians who had successfully transitioned to new practice models was particularly helpful.

While Dibble's decision to move to Texas was partly family related, he says he also felt it would be a great place to start his new venture because of the friendly practice and business environment the state offers. Within the state, Magnolia drew him in, in part, because of its relatively high percentage of uninsured individuals who would be attracted to a medical practice offering low-cost services. Dibble says he also felt certain characteristics of the population, such as a high number of individuals seeking alternative treatments, indicated many would be attracted to an alternative practice model. "It's a little hard to describe exactly what to look for specifically, but people who are looking for something different than the typical," he says.

Pricing it out

Dibble knew the fees he would charge patients for services would play a big role in determining whether enough of Magnolia's population would be attracted to his practice. So in addition to researching location, he spent a lot of time looking into fees charged at other direct-pay practices, in addition to calculating how much he would need to charge to keep his practice afloat. "With that research I was able to come to a pretty close price [for services] and I haven't really had to modify it much from the beginning," he says.

Here are some examples of what Dibble charges:

• $60 for an office visit;

• $30 for a sports physical;

• $65 for a tetanus shot; and

• $10 for strep test (an office visit or nurse visit is required).

Like most direct-pay practices, Dibble posts his fees on his website so they are accessible to patients. In addition, to show how competitive those prices are, he provides links to his competitor's fees.

Making it a reality

Despite competitive prices and the right location, it took some time for Dibble's practice to build up a sufficient patient population. That's because Dibble was building the practice from scratch, in addition to it being an alternative model. "I knew that the biggest way we would grow was by word of mouth, because in contrast to … the traditional model, we're not assigned by default," he says.

In other words, many patients select their practices because they are on their insurer's list of approved providers. Direct-pay practices, of course, are not on those lists. "People kind of have to actively choose to come here because they're paying out of pocket, so it takes a little while for people to realize, 'Hey, this is a better deal,'" says Dibble.

It didn't take long, however, for that realization to catch on. Since opening his practice, Dibble has gone from zero patients to about 800 patients, which he says is a "pretty good number," for a direct-pay practice.

Pleasing patients

A big reason for such rapid growth is because Dibble's patients recognize the value he provides, says Stacey Hartzell, Dibble's front-desk receptionist. "We have people that, even with insurance, will come here and pay out of pocket, because they know they're going to get to spend the quality time that they need to with the physician," she says, noting that Dibble's appointments typically last about 30 minutes, much longer than the 10- to 15-minute appointments in most traditional fee-for-service practices. "Here the doctor will spend time with them and go over whatever they need to go over."

Patients also appreciate the more personalized and smarter care they receive due to those longer visits, says Dibble. "We're not just quickly ordering lots of tests or prescribing medication, we're going through things a little more thoroughly and then deciding what's needed."

Reaping the rewards

It's hard to compare Dibble's practice revenue to a traditional fee-for-service practice because he is still dealing with the financial implications of opening a new business. Still he says, he's already noticing some positive effects.

For one thing, Dibble deals with almost no accounts receivable because his patients pay him at the point of care, which saves him time and resources. In addition, since he does not accept insurance, he can operate with fewer staff members. "In a typical practice they estimate three to four staff per full-time doctor, and I think you could operate with much less than that [in a direct-pay practice]," he says. In fact, he employs only one full-time receptionist and two part-time medical assistants.

Another financial upside? Continual payer reimbursement declines have no effect on his revenue. "I think it's definitely possible to be as successful, and I think, especially as this concept grows, even more successful than in the traditional practice," says Dibble.

Direct pay vs. Concierge

Before choosing to transition to a direct-pay practice model, family physician Paul Dibble looked into concierge practice. In the concierge model, patients typically pay an annual or yearly fee for services, rather than paying practices directly at the point of care for each service rendered, as they tend to do in direct-pay practices.

Ultimately, Dibble chose to go the direct-pay route for two reasons:

1. Cost concerns. By opening a direct-pay practice, Dibble felt he would serve a broader range of patients. "Part of what I was interested in doing was providing affordable care and really wanted to make it affordable to even relatively poor people especially who didn't have insurance," he says.

2. Transparency. Dibble appreciated the straightforward approach to fees found in direct-pay practices. "I saw it to be simpler and easier for people to understand the particular costs," says Dibble, whose practice posts fees for services on its website. "If [patients] call up and ask, 'How much does it cost for whatever?' we can tell them very straightforwardly," he says. "There's no kind of catch of, 'You have to be a member in order to get the deal,' or, 'You have to commit to signing up for membership.'"

Aubrey Westgate is an associate editor at Physicians Practice. She can be reached at aubrey.westgate@ubm.com.

This article originally appeared in the September 2013 issue of Physicians Practice.

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