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What to Charge at a Direct-pay Practice

February 5, 2014

Article

While the decision to change to a direct-pay practice can be the most difficult one a physician can make, there is a second decision that is nearly as difficult: What to charge for services.

While the decision to change to a direct-pay practice can be the most difficult one a physician can make, there is a second decision that is nearly as difficult: How to charge for services. This decision not only affects the bottom line of the practice, but can greatly affect the type of care that is given.

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The main issues to consider are:

1. Do you charge a monthly "subscription fee"? If so, how much do you charge?

2. Do you charge a copay for office visits (or simply charge for visits alone, if you don't do a subscription fee)?

3. Do you charge extra for labs, immunizations, and other services as an additional revenue source?

While I cannot expertly give all of the pros and cons of each of these options, I can explain how I decided on the route I took, as well as the consequences, good and bad.

1. Monthly fee

I charge a monthly subscription fee, ranging from $30 to $60 per month based on the age of the patient; that includes a $150 monthly maximum for families. I also have a one-time "registration fee" of $50 per person ($200 family maximum). I do not have any discount for people who pay for the year in advance, nor do I require people to commit to any more than a month at a time.

The main reason I chose this method was to keep it simple and affordable. I want it simple because I am a doctor who does not like accounting: I don't want to chase down money I am owed, nor do I want to refund patients should I somehow not be able to provide the services they have paid for â for example, if my office burns down or I get sick. The amount I charge is aimed at keeping my services affordable for my patients.

The consequences of this: This has really worked quite well. I have a reliable income that has grown each month I've been in practice. The growth of my practice, however, has not been too rapid, nor have I been overwhelmed with workload (so I think the price is not too low). Very few people have left the practice for financial reasons.

2. Copay

I do not charge a copay for visits. When I did the math, the difference between what even a substantial copay would contribute vs. no copay at all was quite small. The vast bulk of my income comes from monthly payments â regardless of copays. I also felt that charging a copay would make my patients avoid care they needed, which sabotages my "high access" model.

The consequences of this: I was afraid that patients would abuse the no additional cost, open access, but currently (at 400 patients and growing) that has not been the case. The reality is that most people try to avoid going to the doctor, and the majority of their problems can be managed via telephone or secure messaging, so my office is often empty. Because of the monthly fees, I earn just as much with an empty office as I do with a full one. That's a very welcome change.

3. Additional fees

I do everything possible to give services at, or near, cost to my patients. Immunizations, labs, office tests, and procedures are not marked up. I do this partly because, in the big picture, the income from them would be insignificant; but more importantly, I want to give my patients services they can't get elsewhere. I want to raise the cost for them to leave my practice â so they will keep paying me their monthly payment.

The consequences of this: The largest benefit is that my patients trust me much more than they did in my old practice. They know I am not going to "nickel and dime" them for every little additional service. Plus, the drop-out rate in my practice has been very low; indicating that I am giving my patients enough value to keep them paying me each month.

While I am still not certain of exact numbers, I am very optimistic about the straight, monthly fee-payment model I've chosen. I have a predictable monthly income (regardless of my patient volume). And more importantly, I am no longer dependent on sickness or clinical problems to get paid. I can now focus on treating patient problems when they are small and using education to help my patients spend their time where they want to be: away from the doctor's office.

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