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Should Your Practice Adopt Direct Pay?

By: DoctorLogic Employee

In the health care industry, prior authorization requirements haven't improved. According to a recent poll of 644 medical practices, 79% reported that prior authorization requirements rose.

Should Your Practice Adopt Direct Pay?

In the health care industry, prior authorization requirements haven’t improved. According to a recent poll of 644 medical practices, 79% reported that prior authorization requirements rose. It’s still a top regulatory challenge for medical practices, even when compared to COVID-19 reporting requirements and work mandates. Healthcare practices often have to deal with insurance companies and third-party payers, leading to care delays and large amounts of unnecessary administrative work.

One alternative that can help is transforming insurance-based care into direct pay practices. Using a direct pay model, you can improve payment efficiency and avoid prior authorization headaches.

What is direct pay in healthcare?

The Direct Primary Care model, or DPC, is a practice and payment model that enables patients to pay their practices or primary care physicians directly. They can do so by making periodic payments for certain primary care services, usually in the form of an annual or monthly fee.

Three types of direct pay practices may use the DPC model. These could include:

Membership Fee-Only

This model uses membership fees that patients pay to receive lab and clinical care along with extended visits. Patients with a membership can also receive comprehensive care management, which involves working with a team of doctors and specialists. Some of the benefits of membership fee-only DPC include consultative services, unlimited office visits, personalized care coordination, email or phone access to healthcare services, comprehensive care management, after-hours availability, and clinical and lab services.

Fee for Service-Only

Instead of a membership fee, this model charges a retainer-based fee for services. This is a pay-as-you-go system that enables patients to see their physician as needed. The fixed monthly retainer fee covers care services, lab work, and office visits. Unlike membership fee-only systems, service-only DPC doesn’t typically come with other perks like comprehensive care management or unlimited office visits.

Hybrid Direct Pay Model

This DPC payment model combines membership and retainer fee-based direct pay care models. Patients will pay a membership fee every year along with fixed rates for certain care services.

Is concierge medicine the same as direct pay?

Direct pay medicine is different from concierge medicine, although people often confuse the two. The reason for this confusion is that some medical practices work with various models, not strictly direct pay or concierge medicine.

There are a few key ways to discern a direct pay care practice from one that uses a concierge medicine model. The first is whether the practice accepts insurance—if the practice doesn’t accept insurance, it’s a DPC practice. Meanwhile, practices that charge membership fees might be direct pay, concierge medicine, or VIP medicine practices.

Why is direct pay better for doctors?

The direct pay model offers multiple benefits for doctors who work in these practices, such as:

  • No need to hire billing staff — By offering direct pay care, healthcare practices don’t need to hire staff to deal with third-party insurance. As a result, they can benefit from reduced operating rates as they don’t need dedicated staff for reviewing, organizing, filing, and managing payments when working with insurers.
  • A simplified revenue structure — Doctors also benefit from regular monthly revenue that’s simpler and potentially more profitable than conventional fee-for-service billing through insurers.
  • Reduced administrative burden — Direct pay helps eliminate a lot of mundane tasks pertaining to billing and handling payments through insurance companies. Staff can instead focus on meeting patients’ needs and securing the best outcome for them rather than spending time on billing and coding.
  • Better work-life balance — With the help of simplified administrative tasks and billing, direct pay care physicians and other staff benefit from an improved work-life balance.
  • Improved physician satisfaction — Seeing as staff needs to spend less time on billing and coding, they can spend more time with their practice’s patients. Various assessments and evaluations have found that there is a connection between the duration of patient visits and doctor satisfaction.

Why is direct pay better for patients?

DPC practices also offer several unique benefits for patients, which can help with healthcare lead generation when marketing a DPC practice. These may include the following:

  • Know ahead of time what primary healthcare will cost — Patients don’t have to worry about any unpleasant surprises when it comes to the cost of their care with DPC. They’ll know what they’re paying based on either a membership or service fee, giving them more peace of mind when seeking healthcare services.
  • Extended appointment availability — With the direct pay model, patients can access extended appointment availability. They’ll be able to see their physicians as needed, and they may be able to receive visits at home or consult via virtual or over-the-phone appointments. This helps further ensure that patients seek and receive the care they need when they need it.
  • Freedom to discuss multiple health issues per visit — Physicians can spend more time with patients, and patients can pay a fixed rate for various services, enabling patients to discuss more than one health issue during their visit. In turn, physicians can give their patients more extensive care and achieve even better outcomes for patients.

What are the downsides of direct primary care?

While the direct pay care model comes with many benefits for both patients and physicians, there are some potential challenges that a DPC practice may face, such as:

  • Small patient panel — DPC physicians may be able to spend more time with their patients, which can increase both patient and physician satisfaction. However, this can come at the cost of a smaller patient panel than what you would see with traditional care. DPC practices may see up to 600 to 800 patients, whereas traditional care practices tend to have around 2,000 to 2,500.
  • Possible lower income at the start — Physicians operating on a DPC model may benefit from more predictable monthly income in the long term, but they may see a reduction in revenue at the start. This is due to some patients leaving during the transition.
  • More difficult to build a patient base — Because of the dropping number of existing patients and the difficulty of promoting DPC, it can be more challenging to acquire new patients. Despite this, you’ll be able to increase the loyalty of existing patients to help compensate for a smaller patient base. Also, stellar marketing can help with patient acquisition, including paid advertising campaigns and healthcare content marketing.
  • Patients still need insurance for care needs beyond direct-care arrangements — Depending on the affordability of direct care services, patients may still need coverage for services such as hospitalization and specialty care.

Should you become a direct pay practice?

If you’re considering becoming a DPC practice, there are some items to keep in mind that can help you decide if this is the right move. First, you need to be able to survive a temporary decrease in income as you transition. This is because not all of your patients will stay with you during the switch. As a general rule of thumb, you can expect around 10% of patients to follow you.

The ability to retain patients will depend a lot on your patients and the strength of your marketing efforts. Understand that direct pay isn’t as well-understood, which can make it harder to pitch. Considering it’s harder to build your patient base through direct pay models, you need to make sure your marketing is geared for growth. Your ability to recover financially will depend largely on how much you can invest each month in marketing.

Ultimately, offering a direct pay model offers many advantages that make it worthwhile. You can give patients the care they need at prices they can afford while reducing administrative burden and increasing overall physician satisfaction.