By Emily Margosian, content specialist

Dealing with insurance would likely be at the bottom of any physician’s list of the fulfilling aspects of their job. And while cash-only care has historically been considered a niche practice model (and less than 1% of dermatologists report that 100% of their patients self-pay), in recent years direct-pay has begun to move into the mainstream. “People are definitely opting out of insurance. If you look at primary care, this has been going on for years, where physicians have looked to a cash model to supplement their income,” says W. Patrick Davey, MD, MBA, former chair of the Academy’s Practice Management Committee. However, while opting out has proven popular with primary care and cosmetic-heavy specialties such as plastic surgery, how feasible is such a transition for the average dermatologist?

Furthermore, what will it mean for patients if a growing number of physicians are no longer covered by their insurance plans? While its critics question the impact direct-pay has on the poorest and most vulnerable patients in the health care system, its supporters argue that the model gives power back to patients and their physicians in a landscape of declining reimbursement and skyrocketing deductibles. Paying cash for medical services as per a fee schedule set by the physician — rather than the insurance company — may become the preferred option for many patients paying out of pocket, suggests a 2017 TIME Magazine article. “Sometimes called direct pay, and closely related to concierge care, this sort of business model was once seen as the perquisite of rich folks and medical tourists from foreign lands. But nowadays many of the people seeking cash-based care are middle-class Americans with high-deductible insurance plans.”

As interest regarding direct-pay dermatology practice gains momentum, Dermatology World consults with industry professionals and dermatologists on both sides of the trend to give a complete picture on:

• What prompts physicians to opt out?

• What factors make a practice a good fit for going cash-only?

• What are the ethical implications of direct-pay for dermatology — and for health care? 

Why direct pay?

For many dermatologists who opt to go cash-only, regulatory burden is one of the biggest, if not the preeminent driving factor. “Down on the ground that’s what we experience everyday: more and more rules,” says Kathleen Brown, MD, a dermatologist from Coos Bay, Oregon, who runs a direct-pay practice. “They make your life harder, and I ultimately feel that they harm care rather than improve it. You get boxed in to a certain point where you have to do something.”

A New York-based dermatologist who has dropped all but one of her payers, Doris Day, MD, agrees. “The problem for me was partly the amount of work it took to collect payments consistently. Even worse was the amount of pushback for the care and treatment plan I thought was best for my patient. I’ve gone through 12 years of training between medical school and residency. I pass my boards, do CME, do MOC, do all this extra nonsense that I’m required to do — then have to go through some prior authorization rat race for an acne medication or treatment. It’s insulting, time-consuming, and creates a roadblock to proper patient care.”

Beyond dermatology, these pressures have begun to cause a ripple effect throughout health care, as physicians across specialties weigh the consequences of opting out of insurance — or burning out entirely. “I’m seeing a direct correlation between reduced payer reimbursement and increasing burnout in segments of almost every specialty,” says Glenn Morley, senior consultant, plastic surgery and dermatology at BSM Consulting.

Getting started: what should you know?

For dermatologists feeling the pinch, a robust look at one’s patient base, location, mix of services, and financial history is prerequisite. “If there is an ideal it may be a practice in a large urban area such as New York City, with 50% or more cosmetic dermatology, and very strong patient satisfaction,” advises Morley, who notes that even dermatologists who seemingly meet all these criteria may not ultimately take the plunge. “I recently had this conversation with a dermatologist who met all of these initial measures. The one tipping point that kept him from moving forward was our examination of his patient demographic — which skewed 55 and older,” she says. “When we started examining the number of existing Medicare patients, the number of patients who were going to go onto Medicare or have Medicare benefits available in the next five to 10 years, and his collections for this group over that period of time, it became a simple decision for him, of ‘I can’t walk away from these patients.’” (For a complete checklist of factors to consider prior to opting out, see sidebar.)

According to Dr. Brown, however, there is no perfect mix of factors that makes a particular practice a shoe-in — or destined for failure — when it comes to going cash-only. “In big cities there’s demand from very affluent people for access, time, and Neiman Marcus-style service. There’s that market,” she explains. “In smaller towns sometimes people just simply need care, and they value it enough to pay for it if the price is reasonable. I had a married couple come down from Portland yesterday to see me. They traveled four hours from a city where there are literally over a hundred dermatologists to come to see me, because I had posted prices.”

Dr. Brown structures her fee schedule around time increments of five-minute multiples, with pricing initially set for growth. “You want people coming in the door — that’s the scariest thing of all — so we initially priced on the lower end,” she says. Striking a balance between prices that “feel” fair to patients — while making sure that the practice stays in the black — is critical. “You want to have a positive bottom line. Once you start filling up your schedule and people start having a harder time booking appointments, then you have to look at a price increase,” she explains.

Morley recommends that dermatologists tread lightly when constructing their fee schedules for direct-pay practice, making sure that prices are not a shock to their patient base — or a liability for their reputations. “I’m sure you’ve seen the New York Times headlines about practices sending out-of-network statements that are just crazy, possibly because their fee schedule had been set as a multiple of Medicare’s fee schedule,” she says. “If you choose to enter the direct pay world, you’re not negotiating with insurance companies anymore, you’re in conversation with your own patients.”

As far as patients, dermatologists should also be prepared to handle a range of reactions after announcing a shift to cash-only care. “I was required by law to send out a letter notifying patients, and there was a grace period between when that was sent and when I had fully stopped accepting Medicare,” says Dr. Day. “Some just found other doctors, some stayed with me without question and cheered me on, and a few were understandably unhappy. A few Medicare patients in particular were very angry at me when they found out I was no longer accepting it. I was happy to have a discussion with them about my reasoning. Once I explained my side of the story — that it was actually costing me money to see those patients because of my overhead costs and the amount of staffing it required — they became more sympathetic to my point of view and most of these patients stayed with me.”

Dermatologists should also be aware that while opting out of insurance does not have to be a permanent decision, it can be difficult to re-establish contracts with insurers should the model prove to be the wrong fit. “I worked with a dermatologist who did not do adequate research prior to opting out, and within six months, she was working to re-negotiate contracts with insurers,” warns Morley. “Her top plan did not allow her back in for over a year, and the strain that put on both patients and the practice was monumental.”

Lastly, many dermatologists and their staff must embrace a culture shift in terms of both customer service and comfort with discussing financial matters directly with patients. “When asking patients to write a check or pay by personal credit card, the service level becomes of paramount importance, because an insurance plan is no longer driving patients to your door. This can be a dramatic cultural shift in some practices and unfortunately some staff members cannot adapt to the changing need for concierge-level customer service. In the direct-pay world every patient touch point is critical, from the receptionist, to the person rooming the patient, medical assistants, nurses, everyone needs to place both excellent clinical care and the patient experience first.”

The ethics of opting out

As more providers both in and outside of dermatology seriously assess the viability of opting out of insurance, where does this leave health care’s most vulnerable patients? “One problem with a free-market, cash-based system of health care is that...without safeguards, it threatens to marginalize the poorest and sickest among us, who could not possibly afford, say, a $19,000 knee replacement without help from an employer, the government, or a charity. While Americans tend to accept certain inequities as a reality of capitalism...we are less comfortable with them when it comes to health care,” notes the TIME article.

Jane Grant-Kels, MD, professor of dermatology, pathology, and pediatrics at University of Connecticut Health Center, and editor of JAAD’s “Dermatoethics Consultations,” shares these concerns. “When we all graduate medical school, we recite the Hippocratic oath, and here we’re basically allowing financial remuneration to alter the way we practice. We’re obviously not going to be available to patients who can’t afford to pay the fee. There’s already a huge access problem for patients who have dermatologic need. This is going to reduce access even more.”

Dr. Grant-Kels notes that even if dermatologists in direct-pay practices adopt mitigating strategies to accommodate their more financially vulnerable patients, they are still locking out those patient populations from seeking care from them in the future — and shifting the burden to other clinicians. “They’re not taking any new Medicare patients. I’m sure that they’re not seeing any Medicaid patients. So it doesn’t reduce the strain it puts on other providers who are willing to see those patients going forward, the responsibility of which is falling more and more on academic departments. Ultimately it’s not a long-term solution to a sick health care system. If everyone did this, it would be a crisis for medicine and for the Medicare and Medicaid population. I would prefer for people to stay within the system and fight the system for all of us, but some people are not inclined to do that.”

Dr. Day acknowledges that the choice to stop accepting insurance — while attractive — can be difficult personally and professionally. “My Medicare and other insurance patients, many of whom had been with me for years, were not happy, I think partly because they found out that other doctors they were seeing were also doing the same thing. That can be scary when the providers you’re comfortable with stop taking insurance,” she says. “It was a very difficult decision for me. I prided myself in being able to take care of patients with any insurance, and even if they didn’t have it. When I’m in the room with a patient I don’t know what insurance they have or anything about them on a financial level, my only goal is to offer the best care possible. But when it started to create an issue of calls to the office over insurance issues overwhelming my staff and affecting the ability of other patients to get through to make appointments, and insurance barriers getting in the way of the care I wanted to provide, I had to make some changes.”

“Access to insurance is not access to care,” says Dr. Brown, who notes that she sees patients with $10 or $20 appointment fees on a monthly basis. “The simple answer is that there are people falling through the cracks, and one size doesn’t fit all. My practice is an alternative for me, because of how I practice. I’m not willing to herd people through faster and faster; I’m just not made that way.”

Dr. Grant-Kels agrees that the absence of increased regulation imposed by insurance allows dermatologists extra breathing room to better connect with their patients. “The upside for the dermatologist is that they don’t have the paperwork, and all the bureaucratic quality testing,and they can spend more time with each patient — which is fun. It’s much more fun to get to know your patients than to have to see a high volume in a short amount of time. So there’s this tension between physician autonomy and what’s good socially for the community and for patients,” she says. “I think that the worst thing that can happen to a doctor is complete burnout, where they’re not practicing at all. No one can tell another person what they should or shouldn’t do, and I’m sure that many people who make this decision have good reasons for why they do, and feel they’re providing good care for their patients. I just think as this grows, it becomes a problem for the specialty.”

For patients with high-deductible plans, the distinction between providers who accept insurance and those who don’t may be increasingly moot. “Data from 2017 Employer Health Benefits Survey, released on September 19 by the non-partisan Kaiser Family Foundation and Health Research & Educational Trust (HRET), are alarming. For instance, since 2007, the average family premium has increased 55% and the average worker contribution toward the premium has increased 74%. In terms of the impact on patients, the average annual premiums this year are $6,690 for single coverage and $18,764 for family coverage,” says Morley. “And, many who are now in high-deductible plans, are realizing they will be paying for the majority of their own care out of pocket whether their provider is participating or not, because their deductible is so high.”

For Dr. Brown, excellent patient care has always been the priority. “It feels a lot nicer being paid for a service that somebody values, than being the insurance lackey stuck in between. It’s a wonderful option for me, but it’s not for everybody,” she says. “How you practice medicine has to be the first thing. If you’re specializing in really rare, expensive diseases, then you should probably stay in academia. What am I trying to accomplish? What do I feel good about? If you put that first it makes it easier to decide.”