Practicing medicine without payers

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Carmela Mancini, DO, worked long days as a hospitalist for almost three years after residency. She became frustrated early on, feeling that the doctor and patient were not the most important factors to the hospital and healthcare system. 

“I became disheartened,” she says. “I did not go to medical school to do billing and write notes the majority of the day.”

Mancini thought she was going to have to quit practicing medicine, but began talking with one of her hospital’s admitting physicians, Jeffery Gold, MD, who ran a direct primary care (DPC) practice in Marblehead, Mass. His practice accepts no insurance plans; instead, his patients pay a monthly fee for their primary care needs. They get an annual physical, wellness and sick visits, same or next-day appointments. Other minor in-office procedures are included, like wart removals, skin biopsies and osteopathic manipulative treatments. 

Mancini rented space in Gold’s office in 2015, and hasn’t looked back. With insurance billing and insurance documentation requirements considered some one of the most frustrating parts of practicing medicine, physicians like Mancini are finding ways to practice off of the insurance treadmill. Besides DPC, a number of alternative payment models exist, including concierge medicine and fee-for-service self-payment. But transforming to an alternate model can be a challenging endeavor. 

Who is a good fit for DPC?

While practices like Mancini’s started with no patients, it’s easier to make the leap if the physician already has a full practice of patients to draw from. Physicians can run a hybrid practice, accepting insurance and DPC payments from different patients, during the transition. 

This model can increase the practice complexity. The physician may want to consult legal with counsel to ensure that the business structure is appropriate to accept both kinds of payments, and that the billing staff is clear on what patients can be billed. The scheduler also needs to track which patients are in which model, to schedule the right amount of time for each visit, and to leave time in the schedule for same day or next day appointments for the DPC patients. 

Patient panels in traditional insurance settings generally include about 2,500 patients, according to the American Academy of Family Physicians (AAFP); DPC panels are smaller, often with 600-800 patients, according to the AAFP. 

It’s also easier for independently employed physicians to start a DPC practice. If employed, the physician would have to break away and start a separate practice, or the whole group needs to move to the model. The physician also must ensure there is no non-compete or non-solicitation agreement.

There are financial risks with alternative payment models. “There’s no guarantee that you’ll hang up your shingle and people will come,” says Jennifer Pollard, MD, an internist in Austin, TX. “People are spending money out of pocket.”

Pollard runs an integrative medicine practice, using a fee-for-service model, but paid directly by patients. In lieu of rolling labs and imaging into the services package for patients, as some all-inclusive DPC providers offer, Pollard says she provides more face-to-face time and direct attention at visits. 

Staffing and financials

Monthly membership prices are often based on what the local market will bear. A study in the Journal of the American Board of Family Medicine, notes a $77 average monthly DPC membership payment. Mancini’s practice charges $40-$135 a month, depending on patient age. Some practices have a family rate. 

Physicians in DPC models find that their overhead decreases, compared to the insurance reimbursement-based model, and the study found a 40 percent overhead reduction for DPC practices. The main reason is they need fewer staff members because they don’t bill insurance. But they also use fewer to no mid-level professionals, as the physician takes on the entire clinical role. 

Mancini shares a receptionist with Gold, and handles her own billing. She has no nurse, does her own triaging and calls patients directly with lab or imaging results. She spends 20-25 percent of her time on administrative work, including writing notes, billing patients, and getting prior authorizations for imaging tests, which in most practices is handled by a staff member. She says that in an insurance-based practice, about 50 percent of the physician’s time is spent documenting what she says is extraneous information on the history and physical, so that insurance would pay for the visit. 

Pollard has lower overhead than when she was in a traditional practice, but also finds that the insurance-free model simplifies the office infrastructure. She takes the patient’s vital signs and asks about their medications, allergies, and complaints, which elsewhere is done by a nurse or medical assistant. Not all physicians want to do that, Pollard says. 

When starting any practice from scratch, there may be additional costs to rent, buy or outfit the office. Pollard says she doesn’t have a lot of equipment, which decreased her start-up cost.

It can take time for physicians in DPC practices to earn a salary equivalent to their traditional practice days, though. Pollard says she broke even her first year. 

Much depends on how many patients the practice can recruit, and the amount charged per month. Before starting a practice, it’s a good idea to think about the eventual patient panel size, how much time to allocate per visit, how many days and hours providers will spend seeing patients in the office, and then anticipate overhead expenses including office space, insurance, office supplies, and programs such as EHRs. 

Running some cost scenarios on a spreadsheet should give an idea of the anticipated salary with a full patient panel, and the amounts brought in for various numbers of patients. 

“As a hospitalist, I made much more money,” says Mancini, who has recruited about 250 patients to her practice. She doesn’t want to go above 300, as she has chosen to keep her panel small in order to enjoy more family time and decrease her stress level. “Most direct primary care physicians make at least as much money as in their prior practice. My wellbeing was more important to me than how much I was making.”

Manage the transition

Some doctors launch a DPC program while continuing to see patients with insurance, a hybrid model. A 2018 survey of AAFP physicians using a DPC model showed that those who achieved their ideal practice size did so in an average of 20 months. However only 17 percent of those practices had reached their target panel numbers. That concurrent period allows revenue from the new model to kick in, while the traditional practice winds down. Physicians should be prepared financially if coming from a salaried position, as salary is not guaranteed with this model. Physicians often supplement their income by working at other practices or hospitals as they continue to market and build their practice.

“When you have zero patients, it’s risky and scary,” Mancini says, and it can take a few years to reach the enrollment goal.

Ashley Maltz, MD, is still ramping up her self-pay practice, with more than three years in business. The internist and preventive medicine physician shares space with Pollard, and works part time for another clinic. She is considering converting to the DPC model, as it offers a continual stream of revenue, versus fee-for-service patient payments. To transition, she’ll need to rework her forms, website and payment system. 

“Patients have to know what they’re signing up for,” she says. 

Before talking with patients, the physician must set up the infrastructure and work out all logistics, with a business plan and timeline in place. The physician should have all the legal and financial paperwork drawn up, including brochures and patient contracts. The physician needs a website and other electronic programs, including electronic health records, membership management software, a secure patient communication portal, and possibly telehealth access if offered. Some physicians broker discount agreements with labs and imaging centers, and dispense discounted medication from their office as well.

It can be time consuming to tell patients about the new model, and physicians who are transitioning their practice will want to spend several months before it begins, explaining it to each patient at the beginning of the visit. 

Marketing to find patients

Whether starting from scratch or with a full patient base in a traditional practice, the physician and office staff must have a clear elevator speech about the new model, including the benefits to the patients, says Pollard. In a DPC practice, the office staff may just include a receptionist, which may be shared with other physicians in the office. If transitioning a practice, all office staff members should understand the new model well enough to explain its benefits clearly.

“You have to really train whoever is answering the phone to explain what the practice is about and the benefits you may get,” she says. 

Physicians need to network and market, and that may put them outside their comfort zone, says Mancini. Since transitioning her practice, she has attended chamber of commerce meetings, held open houses, gave healthcare speeches at senior centers, and joined a networking organization. Once she had 100 patients, word of mouth referrals increased, and she did not need to network as vigorously. 

“You have to be willing to be a business person,” Mancini says. 

Maltz also started with in-person networking, and now concentrates more on social media. She formed a group called the Austin Wellness Collaborative, which she says has been a great source of patient referrals. The Collaborative includes a variety of wellness professionals who network with each other.

Physicians can also network with employee benefits companies, insurance brokers, local banks, and financial planners, to incorporate DPC into a financial or benefits plans. Patients may find it worthwhile financially to change to a less expensive high deductible plan, and join a DPC practice. Some DPC physicians work with employers to enroll employees as well.

Go it alone or with help

With growing interest in DPC, many physicians are willing to help other physicians for free. “I wouldn’t recommend someone paying a company to help them get started. There’s so much free advice out there,” says Mancini. “Doctors who do this type of practice want to help this movement grow and are happy to talk to doctors thinking about going this route.”

Those who want high-touch professional help can consult with companies like Paragon, though these companies focus mostly on concierge practices. The AAFP publishes information on its website, and sells a toolkit to get started with DCP, as well.

“I’ve never been happier in a job,” says Mancini. “I’ll never go back to working for a hospital-based system.”