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Are cash-only doctors better for consumers?

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A lot of people consider health insurance to be a necessary evil.

Yes, it can be expensive and frustrating to use. But when patients need medical care, they're generally glad they're insured.

Some doctors, though, are bypassing insurance all together.

These physicians are setting up cash-only offices with the goals, they say, of regaining financial control over their practices and spending more time with their patients.

"Medicine can become so much more accommodating to the consumer when you get all of the strange effects of the way the payer system works out of the way," says Tom Blue, chief strategy officer for the American Academy of Private Physicians, the professional society for cash-only doctors.

What is a cash-only office?

This model comes in several names and forms. It's sometimes known as concierge medicine or direct primary care. It's most common among primary care doctors, but some specialists are going this way, too.

It works in different ways: At some offices, people pay a membership fee, which covers any services that the doctor provides that are not covered by insurance. Meanwhile, some doctors are separating from insurance altogether and establishing a retainer-type relationship with their patients.

What's in it for doctors?

Blue says doctors are bucking the traditional insurance-based payment model for various reasons.

Some grow tired of dealing with the bureaucracy of insurance. As an example, Blue points to the transition to ICD-10, which NPR describes as "a vast new set of alphanumeric codes for describing diseases and injuries in unprecedented detail." The change, which occurred last week and was mandated by the federal government, "represents a disruptive administrative hassle," Blue says.

Here's another big reason: Some primary care providers see insurance payments for patient visits as being low, while operating costs are high. He says that's forcing some doctors to feel as if they need to work faster and see more patients, to the point that they worry they might be compromising the quality of the care they're providing.

"I could not do my job in the old system," says Dr. Marcy Zwelling, an internist who's run a cash-based practice in Los Alamitos since 2004. "It had nothing to do with money; it had to do with being able to perform my job adequately."

"No doctor, no person with the expertise of being a physician, can take care of all of a patient's needs in seven minutes or less," says Zwelling, who charges her patients a flat fee of $2,000 a year.

Dr. Robert Hamilton, a pediatrician in Santa Monica, says he needed to see 60 to 70 patients a day to pay his bills, given what insurance companies reimbursed him per visit.

He was so tired of billing insurance companies for his services that he switched to a system in which his patients paid him the full amount upfront. He would then bill the insurance company on the patients' behalf. That way his patients would be the ones waiting for the insurance check.

While "taking no insurance was clean and easy," Hamilton says, it was also overly complicated and confusing for some of his patients. So many started leaving his practice that he describes the situation as one in which he was "hemorrhaging" patients. He estimates that 50 percent of his patients left his practice during the four years he was cash-only.

"Ultimately," says Hamilton, "I had to go back on insurance simply because I was going broke."

Today, Hamilton takes insurance, but also tacks on an annual "administration fee." It's based on the number of children in a family and ranges from $325 for one kid to $425 for three or more kids.

So is this a trend?

The American Academy of Private Physicians estimates there are about 6,000 doctors in the country who contract directly with their patients. That's less than 1 percent of the more than 900,000 licensed doctors in the U.S., according to a study of 2014 national data. While acknowledging the number of cash-only physicians is small, Blue says their numbers have been growing by 25 percent a year over the past four years.

He points out that a significant proportion of those doctors are here in California. In parts of Orange County, and in cities like Santa Monica and Menlo Park, physicians who don't take insurance are "incredibly common – almost more the norm than the exception," he says.

Experts at a number of organizations that study health care – including The Commonwealth Fund and the RAND Corporation – said they could not verify Blue's statistics, because they know of no national research on the prevalence of cash-based physicians. "But a quick and dirty answer is, 'not many,'" RAND's Mark Friedberg says in an e-mail.

Is it a good bet for patients?

Blue argues that seeing cash-only primary care doctors can be a good investment, even for patients with insurance.

He says primary care providers can address the majority of patients' health problems. For people with high deductibles, he says, it can make financial sense to pay a predictable amount for personalized preventive care, and only utilize insurance coverage in an emergency.

Among cash-only doctors who charge by the month, the average membership fee is $135, Blue says.

"This is something that really is satisfying a growing appetite among consumers – those who are under 65 and not on Medicare – to just know what things cost and have some consumer transparency, like we have in every other area of our purchasing lives," Blue says.

But Nadereh Pourat, a UCLA Fielding School of Public Health professor, says insurance companies play another important role, besides paying for care: She says they also provide a level of accountability.

Payers – whether they're public or private – are doing more monitoring of whether physicians practice evidence-based medicine or follow clinical care guidelines, she says. Some, she says, are tying payment to improved outcomes for patients.

"From a public health perspective, there are definitely drawbacks to not having that kind of oversight," Pourat says. Without insurance, she adds, the only forms of oversight for private physicians come via licensure and malpractice suits.

Blue responds that physicians who don't take insurance are held accountable by their patients, who can make the decision each month to stay with their doctor or find a new one.

Do you or someone you know see a cash-only physician? Did your physician recently transition to a cash-only office? Please share your stories in the comments section below or e-mail me at Impatient@scpr.org.

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