Cash-Only Medicine

Market-competition is the only form of organization which can afford a large measure of freedom to the individual.

Frank Hyneman Knight (1885-1974), Freedom and Reform (1947)

August 24, 2011 - One function of this blog is to focus attention to little known or under-appreciated phenomena is medical practices.

Here I shall talk briefly on cash-only practices.

The news media and government officials tend to be preoccupied with third party and entitlement programs, but cash-only or direct pay practices are proliferating right under their noses.

Cash-medicine is not new. It is well established in such fields as plastic surgery, Lasik eye corrections, most cosmetic treatments, dentistry, alternative medicine, Botox injections, laser applications, and any number of elective procedures.

An Urban Institute study indicates Baby Boomers spend $3300 a year for out-of-pocket expenses, and this will grow to $7800 by 2014. Medicare recipients spend roughly 20% for care outside the system. All in all, according to Pricedoc.com, there are 50,000 medical procedures available on a cash-only basis.

What has changed is that physicians are rapidly converting to cash-only practices to escape third party payments. About 1500 primary care practices across the country have changed to cash-only or direct pay. A similar number have converted to concierge medicine, where patients pay $1500 or so for the privileges of paying cash, being seen 24/7, given help navigating the system.

Walk-in, emergency, and retail clinics are quickly gaining traction, as employers and government raise deductibles and employers shift costs to employees.

Why the growing interest in cash-only practices among physicians?

• One, cutting out third parties lowers need for staff by as much as 50%. Practice overhead nosedives.

• Two, billing is simple, straightforward and understandable to doctors and patients. It is less expensive to administer, and reduces accounts receivable to near zero.

• Three, health care spending costs to the system are lower by 50% to 75% or more. No back office processing help and code interpretation is needed.

• Four, health savings accounts with high deductibles promotes out-of-pocket expenditures and price negotiation among patients.

• Five, doctors in cash-only and concierge practices say cash-only strengthens the doctor-patient relationship because of up-front understandings and lower fees.

• Six, doctors in these new practices claim most of their clients are uninsured and can afford lower fees.

• Seven, doctors can forego the sometimes humiliating experience of having to beg or negotiate to be paid to perform for doing a procedure.

This is not to say that cash-only practices lack controversy. Buyers must be aware.

They may be abused by the occasional unscrupulous practitioners.

But when the terms for engagement are clear cut, such as in the national network of Simplecare, which charges from $50 for a brief visit (10 minutes) to $300 for an extensive visit (60 minutes or more), misunderstandings are rare.

Cash-only practices evoke moral outrage among those who believe all health care provided for “free” by government and is a moral imperative for a civilized society.

Still, in a free society, many people want what they want when they want it, and they are willing to pay for it if they consider the terms to be right. For that privilege, the market has a place in health reform.