Blog | Thursday, April 25, 2013

Trickle-up economics and a new health care model

It's been a month since I started my new practice. We are up to nearly 150 patients now, and aside from the cost to renovate my building, our revenue has already surpassed our spending. The reason this is possible is that a cash-pay practice in which 100% of income is paid up front has an incredibly low overhead. My admitted ineptitude at financial complexity has forced me to simplify our finances as much as possible. This means that the accounting is "so simple even a doctor can do it," which means I don't need any front-office support staff. I don't send out bills because nobody owes me anything. It's just me and my nurse, focusing our energy on jury-rigging a computerized record so we can give good care.

Our attention to care has not gone unnoticed. Yesterday I got a call from a local TV news reporter who wanted to do a story on what I am doing. Apparently she heard rumor "from someone who was in the hospital." I was the talk of the newsroom, yet I've hardly done any marketing; in fact, I am trying to limit the rate of our growth so I can focus on building a system that won't collapse under a higher patient volume. I explained this to the disappointed reporter why I was not interested in the interview by telling her that I left my old practice because I needed to get off of the hamster wheel of health care; the last thing I want to do now is to build my own hamster wheel.

I've also gotten interest from a place I didn't expect: local specialists. I always thought what I am doing applies only to primary care, as it is hard to do a monthly fee for the procedure-oriented specialties. But as the enthusiasm for my new type of practice grows in the community, it may spur a boom in cash-paying patients.

Why? One of the provisions in the Accountable Care Act (ACA) is that small businesses (with over 50 employees) who want to avoid the penalty for not having insurance can opt to contract with a direct-care physician like myself in conjunction with a high-deductible health care plan. Even though I have made no effort to attract such interest, I've already been approached by two businesses of 100 employees to make such an arrangement. Again, I turned the offer down for now, saying I am quite interested, but would only do so when my practice was ready. But the fact that this happened while I am doing my best to avoid attracting such attention suggests to me that the desire for this is very intense in the small business community. This makes sense, as they don't want to pay the fines, but also don't want to pay the exorbitant cost of standard insurance, and so would jump at any other option.

The end result is a potentially large influx of patients who are basically self-pay. The specialists, who see me lowering my overhead significantly by taking cash payment up-front, see the same opportunity for their practices. The hitch for them is that they are not allowed to give discounts to self-pay patients that they are not also giving to Medicare patients.

Yes, it is illegal for a Medicare provider to give a discount to non-Medicare patients who cannot afford the cost. There are ways around this rule, and I hope to work out something for my specialist colleagues so they can give significant discounts in exchange for cash up front (which is, by the way, the same logic that the labs use to give the enormous discounts I am offering to my patients on lab services). I have had multiple specialists show very high interest in such an arrangement. I'll fill you in as this develops.

This seems quite ironic to me, a sort of "trickle-up economics," where I am spreading the benefit of offering discounted care in exchange for cash to the higher-paid specialists. It is a win-win-win arrangement, though, as the specialists benefit from reducing their overhead while getting guaranteed payment, I benefit by increasing the value of my type of practice even more to my patients, and the patient benefits by getting cheaper care. This, of course, raises the likelihood that more businesses will opt for this payment model, and the movement gains momentum.

Who loses? The "increased overhead" comes in the form of the front-office staff doing billing, coding, and collections. This is the staff my simple-minded approach to finances has heretofore avoided, and hopes to continue avoiding.

I may be completely wrong in this, as it may not consider other factors (which wouldn't surprise me), but I am not wrong about the intense interest I see in what I am doing. It is palpable. When I spoke at HIMSS over the weekend (ironically as keynote for a pre-conference targeted at large health systems building ACOs), the reception was remarkably positive. My message of simplicity is falling, apparently, on very fertile soil. Did they realize the implication of "cost savings" is the need for less employees and the result to downsize their business? I took great pains to emphasize the point, yet the reception was vigorously positive.

I suppose little should surprise me, in a world where the have-lesses could have their abundance trickle up to the have-mores. Who knows, maybe people will even pay attention to the economic wisdom of a doctor with an accounting impediment.

Nah. That's ridiculous.

After taking a year-long hiatus from blogging, Rob Lamberts, MD, ACP Member, returned with "volume 2" of his personal musings about medicine, life, armadillos and Sasquatch at More Musings (of a Distractible Kind), where this post originally appeared.