Physician. Author. Speaker. Coach.
By DPC Success Strategist Dr. Delicia Haynes MD Founder of Family First Health Center
While the billing for Direct Pay practices is much less complicated than our insurance-based fee for service counterparts, it is just as important to approach billing and collections systematically in order to have a financially sound practice.
Direct Primary Care (DPC) is one of the fastest growing movements in primary care in the U.S. Patients get comprehensive primary care for a flat recurring fee (monthly, quarterly, or annually). 80 percent of what takes most people to the doctor starts as a primary care complaint. Hypertension, atherosclerosis, diabetes, asthma, COPD, and more are issues primary care physicians diagnose and treat every day. Direct Primary Care cuts out the insurance middle man so patients can work directly with their doctor to get their primary care needs met. Direct Primary Care practices come in many forms and if you’ve seen one DPC practice, you’ve seen one DPC practice.
Some DPCs are Hybrid practices where a portion of the practice is membership based and another is still going through insurance. Many physicians including myself used a hybrid model as a transitioning tool and discontinue taking insurance once their DPC membership meets a certain revenue goal.
Some physicians choose to stay in a Hybrid model indefinitely. In a hybrid model the doctor is still billing insurance for the portion of the practice that is insurance based. Thus, they still have the overhead required for proper coding, billing and collections. For most offices the biller is among the highest paid employee so hybrid practices rarely see the full overhead reduction enjoyed by most pure DPC practices.
Patients and physicians in pure DPCs that do not take any insurance do not have to deal with the hassles of copays, deductibles, or insurance billing but they still must bill and collect payment. It is still essential that DPC practices have proper billing practices in place so they can make sure their practice stays viable.
Price setting is an important element of a successful DPC practice. If your price is too low potential patients may question if you are a good or real doctor. During my latest talk at the Annual National DPC Summit I used the example of a 99 cent Pizza place I saw on a recent trip to New York. I’m from Daytona Beach and a pizza slice costs more than 99 cents here. I was certain the overhead in New York was higher than Daytona Beach so I could not believe the pizza was quality. I wondered if the mozzarella was expired, if the meat was real. I thought about the impending gastroenteritis should I venture forward and eat a slice. Ultimately, I chose to go elsewhere and paid a little more. An important side of pricing is knowing your target patient’s expectations. There is an intersection between what you want/need and what your patients expect/are willing to pay. That intersection is what I refer to as the “Goldilocks Just Right Price.” In order to understand what your ideal patient’s expectations are, you will need to interact with them. I used to say
“I’m transitioning to offering same/next day appointments, longer 1:1 time with me, and virtual visits for a flat monthly rate…What would you expect that to run?”
It is important not to simply choose your pricing based on what another DPC practice is charging. Overhead in California is different than Kentucky. Those market differences would be expected to be reflected in the price.
When I asked the above question, the response I received was significantly higher than what I initially planned to charge and that difference helped put me into financial stability faster than if I had stuck with my lower fees. When I was transitioning my insurance-based practice in 2015, I was clinically depressed and had what I now refer to as “Martyr Mentality.” I was sacrificing my health to take care of others and that sacrificial spirit showed up in my initial pricing. Most primary care physicians didn’t go into it to become rich. Often, we have strong backgrounds of service and volunteerism. These are all beautiful qualities but as my business mentor once warned me “don’t confuse your business with your charity.” That comment stung the first time I heard it, but I realized in order to support the causes that were close to my heart, and to be able to offer special rates to those truly in need, I had to make sure I was charging and collecting appropriately. This became especially important in 2017 when I had a life changing auto accident that left me recovering from a brain injury. I was out for 3 weeks and came back part time. I still do not practice the same hours I did prior to the accident. Because my business was financially stable, I was able to pay doctors to cover my clinic and take the time I needed to heal. If I had priced too low, I wouldn’t have had the cushion to make it through life’s unforeseen circumstances. It is important to run a lean business, but you need a financial cushion. (Side note If you haven’t looked at your auto insurance coverage, make sure you increase it as your income increases. I had totally overlooked that area).
Conversely, If your price is too high it could adversely affect clinic growth because your patients may feel they can’t afford you. Many concierge practices that typically have much higher rates than DPC and still bill insurance, experience slow growth at the outset. Your pricing must be in line with the population you wish to serve so it is important to identify your target patients so you can effectively connect with them.
Pricing can be determined in many ways. One important element is what income you want and need. Dr. Julie Gunther, Dr. Ryan Neuhofel, and Dr. Josh Umbehr often mention helpful calculations that help to get to the best price.
Price = Desired income + Overhead x 1.3 = total revenue needed/12= monthly revenue needed/panel size
In order to properly use the equation, one must know a lot of their overhead costs. I discourage physicians from pricing until they have taken an in depth look at their overhead (lease, ideal staffing (i.e. not staying solo solo forever unless that is what you want), equipment, software, utilities, the unknown unknowns…. Etc. This equation also requires you to project the panel size you’ll feel comfortable taking care of.
Projecting a panel size is tricky because the composition of your panel is what truly determines how many people you feel comfortable taking care of. It is hard to predict your composition up front. A panel of 900 healthy empowered patients may require the equivalent amount of time as a panel of 300 enabled patients with multiple comorbidities.
Marketing plays an integral part in composition. You want to be sure you are marketing to your ideal patient not just anyone with a pulse and a purse. I recommend if you are going to use the equation, go with a lower patient panel size than you think you can handle.
Time is another factor to weigh in. if you’re doing home visits you must account for the drive time between patients. If you have a high amount of functional medicine patients, understand those visits take longer than traditional primary care and you will need to schedule fewer patients. As you grow, analyze your practice growth and composition. The best predictor of the future is the past. Once you have that data you can analyze it and make some projections. You may find that you priced it well, or that you need to make adjustments. Most clinics at some point will need to adjust their rates. Usually because they priced too low to meet their personal financial needs or expanding business needs.
On the collection side, platforms to automate collecting recurring payments are helpful. There are several platforms that assist with membership management. Hint and Twin Oaks, are membership management platforms that often have displays at the two largest DPC conferences (The National DPC Summit and the Nuts and Bolts Conference sponsored by the Docs 4 Patient Care Foundation). Hint integrates with several other systems including Electronic Health Records like Elation.
In addition to supporting DPC, Twin Oaks has its roots supporting gyms with their membership management. Dr. Brian Forrest has been an avid supporter of this platform.
Additionally, there are Electronic Health Records that incorporate membership management directly into their system. Atlas MD owned and operated by Dr. Josh Umbuhr is an example. Bagel is a newcomer that is garnering a lot of attention.
Due to the nature of recurring billing it is helpful to have a system that automatically bills on a recurring date so you do not have to keep up with it. Several early adopters did not have such software and missed collecting thousands of dollars. Atlas MD allows users to decide to bill on the 1st, 5th, 15th, or 25th of the month. Many doctors prefer to have all their patients billed on the same day regardless of when they sign up, so they can easily see their monthly revenue. Some platforms like Hint default to having the bill date be the date the patient was set up in the system but it is possible to override and change that to a specific date.
Most membership management platforms will attempt billing a certain number of times and then send the patient a notice to update their payment on file while also notifying the practice that they need to check into the account. In today’s environment of frequent credit card identity thefts resulting in new credit cards being issued, it is helpful to have software that automatically alerts you of declined payments. Accepting credit cards is convenient, but also carries a number of associated fees. Some practices exclusively allow recurrent payments through Automated Clearing House (ACH) electronic fund transfer directly from the bank. ACH fees are much lower than credit card fees. I recommend not having any barriers to people paying you, but taking those fees into account when you’re setting your prices. They are part of overhead/operating costs. I have been a happy Hint user since 2014. I had purchased an EHR when I started my practice in 2009 and my ongoing fees with that EHR were reasonable so I just needed the membership management aspect. The best thing about the Technology platforms who have been in the DPC community for several years, is how supportive they are of new practices. As with any new movement there are technology platforms that come and go, but the ones who you see year after year have succeeded in helping practices thrive. I am deeply grateful to the HINT team for the support they gave especially during my early phase and I know users of other platforms echo these thanks. This is no to discourage you from trying the new technology. As DPC becomes more mainstream, there will be more technology products to support DPC practices. Talk to other DPC physicians about the pros and cons of their systems and demo them yourself. You will be looking at that screen most days of the week so make sure you like what you see.
So you have your rates, your platform to bill, and a few of your patients are still not paying as agreed! Now what!?!
In every DPC practice there are patients who gladly pay their monthly rate to invest in their health and others who require encouragement and follow up. Follow up is essential. Your membership management software will help identify past due accounts, but at some point there are those who need a human touch.
In my practice we work with anyone who will work with us on a payment program. Typically, we require they at least try to meet us half way. Our process involves 2 phone calls, followed by a compassionate warning letter, followed by a discharge letter through certified mail. Non-payment is a justifiable reason to discharge a member patient. If you haven’t formally discharged the patient pursuant to your state law, then you could face patient abandonment issues. Let’s face it, some patients think all doctors are rich and that you won’t miss their monthly payment. Others like to test the system, and many changed their credit card and just forgot to update it. Having a process helps ensure that the members of your patient are active and paid. Some practices will send patients to collections for non-payment. I’ve personally found that this is an unnecessary energy expenditure that could be better used attracting patients who value your service. If you are following a process that includes promptly discharging patients who repeatedly decide not to pay for their membership, then you won’t lose too much revenue from their non-payment, and they will know they need to find another physician. Do not keep these patients in limbo. Transparency and communication are important tenants in Direct Primary Care.
Member services are for members only so if the patient decides not to keep their membership active, honor their decision by formally discharging them from the practice so everyone knows where they stand. When I started, I did not have this in place and I would have patients who had not paid their membership for over 3 months calling to get refills on their medications. Since I hadn’t formally discharged them it put me in an uncomfortable position. Communication of expectations is key.
We’ve talked a lot about cost, but what’s attractive about DPC is the VALUE. Imagine the peace of mind of being able to communicate directly with your physician, having unrushed appointments to thoroughly discuss your health concerns, having next day appointments with minimal wait times without the hassle of co-pays or insurance.
As my colleague Dr. Felecia Sumner stated “Don’t be afraid to sell yourself, You are offering an invaluable service. You can’t afford to be your towns best kept secret.” The most attractive aspect of Direct Primary Care is the value to the patient. You as the physician are the expert at what you do. The patient is the expert at what they want. The question to answer for your patient is “What’s In It For ME?” In order to effectively answer that you must determine what your ideal patient wants and what is going to be included/excluded in the membership.
Each DPC must determine what services are included and which there may be a nominal fee for. Most practices negotiate client pay pricing with labs and get steep discounts on lab costs. Those savings are passed on to their member patients. Some practices fully cover the cost of labs in their membership, others offer wholesale. Vaccines is especially important for practices with large pediatric populations. If the patient is insured, often the vaccine is covered and the supply can be billed by the pharmacy, while your office performs the injection. For members who do not have insurance the health department is another resource. Several pharmacies allow you to send your vaccine prescriptions over to them, they handle billing insurance, and will allow you to pick them up or will deliver them in bulk. Dr. Amber Price a concierge style Direct Primary Care pediatrician specializing in newborns takes this approach with her local Walgreens to the vaccine dilemma. “Walgreens bills the patient’s insurance. No copay for the patient and I don’t have the overhead of vaccines. Win, win!”
Some practices suture, splint, or perform simple procedures included in the membership. Others charge a nominal fee for them. Neither approach is wrong although Phil Eskew JD may have an opinion about it worth considering. (He is the DPC community’s premier legal scholar and operates the helpful online resource www.dpcfrontier.com). Either way it is important to clearly communicate what the service covers. Are you including inpatient care? Is it outpatient only? Do you do home visits? Is that Included in the membership fee? Many practices like my own, have different levels of memberships to meet the varying needs of patients. If you go the route of offering different levels be sure to clearly describe what is included with each level of investment.
In addition to what is included in the recurring membership fee, several practices sell medications and other products. All of those are paid immediately at the time of supply or service. At Family First Health Center in addition to our direct primary care service, we offer on-site lab draws, some medications, supplements, and aesthetic services including botox and dermal fillers at special rates for members.
While billing and collections in DPC is much more straight forward than insurance based clinics, having a systematic approach to it is just as important. Several doctors don’t feel comfortable handling money or talking to patients about it. Financial health is one component of overall wellbeing. If you are a physician who shies away from discussing the price or wants the receptionist alone to handle payment arrangements, it is important to explore where that comes from. As Susie Carder says “Money is a dignified conversation.” Address any financial baggage that you need to overcome. Often the biggest impediment to our success is us.
Dr. Delicia Haynes is a board-certified family medicine and obesity medicine physician and the founder and CEO of Family First Health Center, an integrative membership-based family medicine clinic in Daytona Beach, Florida. She is revolutionizing America’s healthcare system within the Direct Primary Care movement, transitioning her medical practice into the first DPC clinic in Volusia County in 2015. Dr. Haynes strives to make an impact in her field, she is past president of the Volusia County Medical Society. Dr. Haynes is passionate about ending the pattern of depression and suicide in the medical community. She speaks widely about the risk factors, advocating an integrative approach to treating depression. Dr. Haynes is on a mission to create a world where no one feels the need to write a suicide note and no one has to read one. She is the Author of “The Dawn: A Med Student’s Roadmap to Finding A Light In Their Darkest Hour.” She is also the creator of “DPC Rx For Success” a six-week live online coaching program helping stressed physicians transition to DPC with grace and ease so they can practice medicine with the values that took them to medical school in the first place. Learn more at www.drdeliciamd.co