health insurance companies

For seven years, 48-year-old Anne Akers-Smith of Annandale, Va., has been taking her family to a doctor who demands cash in full for service—no insurance. And she likes it that way. "It's a lot more practical and a lot less expensive," Akers-Smith says of DocTalker Family Medicine in Vienna, Va. The office is part of a growing movement toward cash-only medical practices, which do away with third-party billing and waiting for reimbursement and put responsibility for payment squarely on the patient. Cash-only, or direct-pay, medical practices cater to the uninsured and people like Akers-Smith with high-deductible health plans that kick in for major expenditures. Across the country, there are now 500 to 1,000 family medicine practices operating on a cash-only model, estimates Ted Epperly, president of the American Academy of Family Physicians.

With the unemployment rate above 9 percent and some 46 million Americans lacking insurance, the market for affordable healthcare is ripe. The cash-only model is based on the idea that rather than charging higher, so-called retail rates for uninsured patients while negotiating discounted rates with insurance companies for covered patients, it's fairer—and possible—to offer flat and reasonable rates to all. These practices "are actually very good at meeting the needs of those patients who have agreed to be a part of them," Epperly says. "For the patients that have the means to do this, it's an outstanding model of the patient-centered medical home."

On the doctors' part, what prompts entry into cash-only medicine is usually some combination of frustration with insurance reimbursement rates and the increasing cost of overhead associated with doing business. Direct-pay medicine can be a smart business model, says Vern Cherewatenko, director of functional medicine at the Amen Clinic Northwest in Tacoma, Wash. Cherewatenko founded SimpleCare, a patient and provider network that features the cash approach, in 1997. At the time, he and his partner estimated they were losing out on about $7 per patient, or $80,000 per month, by seeing people who participated in insurance plans of various types. This was in part because of the need to employ a billing staff that included six medical records clerks. By not participating in insurance plans, Cherewatenko was able to reduce the size of his staff.

Medical practices that participate in SimpleCare's network agree to charge no-hassle, discounted prices to the organization's members. Patients pay a predetermined fee based on whether their visit is minimal length (five minutes), brief (10 minutes), short (15 minutes), medium length (20 minutes), long (30 minutes), or extended (60 minutes). Fees vary depending on the medical practice, but a good rule of thumb is $50 for a minimal visit to $300 for an extended visit. Cherewatenko says he isn't advocating that people go without insurance; indeed, SimpleCare accepts practices into the network that use the flat-fee structure for members but also take patients with insurance. But he does think it's a good idea to choose a high-deductible health plan and seek routine care through direct-pay providers who charge discounted rates.

Typically, "it's a matter of patients coming in who either have no office-visit coverage or no insurance for the visit at all," says Robert Farrell, practice administrator at Internal Medicine of Northern Michigan, a SimpleCare participant located in Petoskey, Mich. As the nation's unemployment rate rises, offering such a service is becoming increasingly important for medical practices, Farrell says. "The whole intent is to get [people] to come into the office for proactive care," he says.

Byron Haney, a family physician in Ellensburg, Wash., decided to join SimpleCare—though his practice also accepts insurance plans—because of a "frustration that people who paid cash actually had the highest bills because they had no insurance-mandated discount." SimpleCare now has 1,200 members who are medical professionals and 40,000 patient members.

Some doctors have chosen to convert to a cash-only model—which typically allows payment by credit card or check—without joining a formal network like SimpleCare. Alan Dappen, founder of DocTalker Family Medicine, founded his direct-pay practice in 2002 and now has one partner and a nurse practitioner who also see patients. "We basically run a practice where people pay us for time," Dappen says. The practice has a "transparent pricing system" that he believes "creates the proper relationship a doctor is supposed to have with a patient." Patients at DocTalker pay for the exact amount of time it takes to solve a medical issue—in person, by phone, or via E-mail. A 15-minute problem would cost $66, for instance, while a 20-minute issue costs $90. Dappen also makes house calls at a cost of $200 to $300 per visit.