Hello and welcome to the Cash Practice Solution Podcast. I’m your host, Dr. J.
Today we’re going to deep-dive into pricing, specifically the pricing mistakes I made when I first opened my cash practice. So, if you’re eager to escape the constraints of third-party interference and embrace the freedom of a cash-based model, you’re going to want to stick around.
These lessons could save you time and money (and frankly – headaches, heartburn, and any other bad physiological outcomes). If you don’t know that you’re suffocating from third-party interference, you’re not paying attention. Let’s start with a fundamental concept in economics, which, for medical practices and doctors, is revolutionary.
Imagine you have a choice between a Porsche or a Kia (and they’re both at the same price). No brainer, right? Quality and style matter. Like cars (or any product or service), healthcare quality varies from one encounter to the next. The physician’s experience, skill, and passion make a difference. For instance, a physician with 40 years of experience, and an obsession with staying current with the craft is obviously going to provide more value than a new grad who has been stuck in the classroom with only time to study what is in front of them. Porsche or Kia, right? Patients know this. They can sense it in every interaction. A knowledgeable, committed physician is worth way more than the RVUs, which is, for those who don’t know (having experienced the pain of Medicare jargon), Relative Value Units – assigned by some bureaucrat in a far-off city.
Medicare decides (guesses) on pricing based on where you live, your geographic location, the intensity of the work they think you do, and practice expenses like malpractice and rent. But this [methodology] doesn’t consider any of the quality measures that matter to the patient, …How the patient feels, how they experience care. RVU’s have nothing to do with helping the patient. But, because the patient’s desire is to have quality measures.
So as long as the basic standard of care is met, the physician is regarded by third-party payers as a widget. They’re all the same. He/She’s a generic cog in the machine.
An experienced physician can wring out more efficiency, for a while. Eventually, the physicians will be squeezed so hard that their quality is going to suffer – even the very best doctors (with the best intentions), because of the way that payment works. And eventually, the gap between “good” and “really excellent” becomes just this huge, yawning abyss. There’s, just no way that you can do your best work under the constraints of the RVU insurance payment system.
No practice can justify it. Pricing needs to reflect the quality of the service, or care is going to suffer. Ultimately the quality of the patient experience should be the whole point of health care.
So, what are patients looking for that escapes third-party payment logic? Attention and compassion – and Medicare currently does not pay for that. They’re not in the business of improving quality of life. In other words, the patient who comes in and says, “Man, I feel so good.” – That’s not a metric that’s used – nope! How about cutting down on medications with lifestyle and nutrition plans? The new patients I see generally have this gigantic list of medications that have just been going on, and on, and on – with no one paying attention because it’s not within the metric. There are tons of things that Medicare just doesn’t (and can’t possibly) significantly appraise… they can’t and don’t know.
So what’s the solution? Ignore Medicare’s one-size-fits-all payment model, and base your pricing on meeting your patients’ needs, and their willingness to pay for the quality. Payment that matches quality is simple economics – Kia or Porsche, right? Uncoupled from government price controls (which always create shortages), being able to set your own price structure is going to work, and it works for us.
An Example of Money Well Spent
(This is really a way to look at how much you should be paid, based on how things really work (versus the widget mentality)). We have a young lady come to the practice – 21 years old. She’s been taking Semaglutide since January, about half a year. She’s got nausea, increasing constipation, and she’s weak. Her parents searching for answers do the best they can and get her into a round of specialists. She sees many doctors – 11 in total. She receives a week of inpatient care (racks up $90,000 in medical expenses for treatment), and she’s not a bit better. They call our office and we do a new patient intake and provide them with our pricing. During this conversation find out that she is now bedbound and has withdrawn from college for a semester. In our practice, we accentuate the quality before the patient even comes in, we have them do a symptom assessment. We use AI and symptom assessment technology to do it so that we can have an excellent idea of what to do before the patient comes in, and the path we are going to take. We looked at her assessment and it was clear that she had some enzyme problems with digestion. The constipation was slow transit time. She had anxiety, of course, because she thought she was going to probably die (and with good reason). After having that assessment completed, we scheduled an extended appointment (so we could listen to her story from her perspective). I had the data on her symptoms; now, I wanted to hear her story. We did a thorough physical. I actually put my stethoscope on her abdomen and she said that in the entire time that she had seen doctors, nobody put a stethoscope on her belly. Can you imagine? The chief complaint is the inability to eat and not one doctor bothered to listen to her gut sounds. (It doesn’t meet the metric). She had constipation and belly pain, for half a year. And doctors were not doing basic care. Trained as an osteopath, we did a structural assessment and checked out how her physical structure was working. e treated her based on all that information, in an hour-long appointment, we were able to gather all t the information and provide treatment I listened. and I learned her story. Our treatment was nutritional support with digestive enzymes plus some magnesium and adrenal support. Because we have a cash practice, we can treat the patient with what we think they need in a single appointment. We don’t have to schedule them for several appointments to come back because the insurer won’t pay for separate procedures on the same day. We included acupuncture and some hands-on therapy to address the autonomic switches that make her belly not work. At the two-week follow-up, she was completely recovered. One visit! She returned to school, a normal appetite. In contrast, price-wise – no benefit, lots of stuff, tremendous hassles, half a year of her life, missing school – $90,000. For us to achieve a complete recovery in one visit and a follow-up, the total cost (lab, nutraceuticals, treatment), everything, $1,900. So, while some may believe that’s a ton of money, I don’t know. What is it? $88,000 difference, and, and no benefit. Quality matters. So the patient is not going to be quiet about this, She’s going to have lots of good things to say about us. And will market our practice based on her healing story. We have many more because we have the time to take the time, to hear their story and join them on their healing journey. Let’s explore the pricing mistakes I made before this beautiful thing happened. Basically, having reversed these, we can do these things for patients. So this young lady with gastroparesis, we can help get her better. We can do it in one treatment. We can do it because we’ve developed all of the things that a cash practice can do that you cannot do under a third-party payment structure. You can’t do it. They won’t pay for it. They make the patient come back again and again and again. You lose the momentum for the patient. You lose the opportunity.MISTAKE 1 – Setting Practice Prices Based on Competitors
My first mistake was setting my pricing based on competitors, I looked at what nearby practices were charging and I tried to set my prices kind of like that. Huge mistake. It led me to undervalue what I was doing. Instead of looking at others, you should look at your skills, experience, and results. In doing that, you will bring the payment structure more in-line with your skill set. You will begin to understand the value of what you do and has the potential to result in much higher payment. Several years ago I worked with a doctor locally who needed to leave his practice. He needed a little break and he was charging $19 a visit, which was very inexpensive and even at the time – way under normal rates. I thought, “Man, we can probably do better. We can charge $29 a visit.” When I did that, the patients were so mad – for $29 a visit? So, pricing is not something that you can do based on somebody else’s experience. You have to base [pricing] on what you’re providing, and that’s your Unique Selling Proposition (called a USP in business). You can not base it on doing the work of someone else and just increasing the pricing. Be in a position to sell your skill set, What do you do that’s special? What kind of special training did you do? What do you love doing? When you do that, when you are doing what you love, patients are going to understand that they’re paying for something very valuable. And when you don’t communicate that value (like I didn’t – I could have communicated my value much better, and I didn’t), then as far as the patient is aware – you are not offering anything special, so they should go to the corner ready-med and pay less (or nothing at all).MISTAKE 2 – Not Communicating Value to Your Patients
Patients need to understand what they’re paying for. You have to take the time to explain your approach, the benefits they’re going to get, and how it differs from a traditional model. This is a HUGE move in health care now. Transparency is key. Transparent pricing, of course, is on the menu for everybody. But, even more than that, transparency in terms of treatment that they’re going to receive (What are you going to be able to provide them that’s different?). Our front office desk communicates this really, really well. Patients know that they’re going to get a really good symptom assessment. They’re going to get a very good thorough visit. They will receive all sorts of treatment that may not be available elsewhere. I’ve been able to develop these skills and treatments because I have a cash practice and I can do these treatments in a single visit (and get paid for all of them, as opposed to a third-party system where you can’t). I also have time to study new methods and cutting-edge treatments because I am not spending my time on pre-authorizations or trying to pay two extra employees to manage billing.MISTAKE 3 – Ignoring Patient Feedback.
At one point, I didn’t really look for what patients had to say about pricing. I had one gentleman (he’s a banker), who said, “If I knew all the pricing before I came in, I’d be much more comfortable”. So, we’ve developed that, and now we have our prices transparently posted. If they have any questions, they can ask staff before they start. We also try to do our best[ to inform] the patient of pricing if we are adding on any services that day that they may have not been prepared for. If they have any questions of me, I know what I’m charging and I can tell them. I can give them a ballpark figure. Ask them what they value most and what they’d be willing to pay for. You’d be shocked. Patients are so willing to pay for something that gives them convenience and results. We do cryosurgery with a little freeze gun. Patients don’t want to have to go to a dermatologist 11 times to get 11 lesions taken off. They’d much rather have these services during their consultation with us.- When they ask, “Could you also do…?” Of course we will! We’ll do the cryo – we’re happy to. There are multiple procedures that the patient needs with this kind of insight. Asking the patient, “What would you like?, “What would work for you?”, and having the time and resources to handle them makes it better for everyone. And, patients will tell you. They’re happy to let you know the things that bother them about the other environments. As a cash practice, you have the ability to say, “Well, you won’t be bothered by that here. We’ll take care of that for you”, and you can. Like in mistake three, with all the things you can possibly offer (and add-ons to a visit), this may increase your bottom line, but will be a burden on the patient. Sometimes payment can be a little tough. My mistake at first was I said, “Just pay for all of it.”, without giving a lot of flexibility. Eventually, after listening to patients’ feedback (see Mistake #2), I decided – if patients were going to be offered extra services, then I’d know the wholesale and retail cost (which would allow me to be flexible with their payment). We can let them pay out over a few months, and we give a ton of discounts. We just gift a lot of services because it’s a really nice service. It’s a really nice gift to give to the patients. It’s good for business, and it’s kind. And because, again – I am not paying two extra staff members to manage insurance billing (and all that goes with that), we have the margin to be able to provide discounts or even 100% write-offs to patients in need.A Lesson in Medical Practice Branding
I’m not sure that this qualifies as a mistake (or just something I have learned over time) but you need to consider branding. I’m your host, “Dr. J”, and that’s also my brand for the practice, Dr. J. Regenerative Medicine. Your brand is your promise to your patients. When Dr. J. Regenerative Medicine provides a service, I’ve promised the patient they’re going to get the quality that is promised by my brand. When I see somebody out in town, they call me “Dr. J.” At first, I didn’t really embrace the idea of being branded, but it’s a huge benefit because patients will be able to say, “I see Dr. J. Dr. J provides these services,” and they’re willing to pay way more for something that they know has a high quality that’s associated with an individual. So in your practice, if you haven’t branded yourself personally, think about it. It’s pretty amazing what a difference it can make. You might ask yourself the question, “How do I do this simply?”, “ How do I set my prices effectively?”. Here is a quick list:- Evaluate your skills and experience. If you did a fellowship in dermatology, that should be on your list. You should be able to say, “Based on that skill level and my experience with it, I should be able to charge more than a GP who’s not really studied it, ”. Third-party payment does not take into consideration the time you have spent educating yourself to become skilled in the field. Evaluate your skills and experience.
- Research the market. Understand what “similar” practices charge. Dr. J Regenerative Medicine provides a very, very high level of service. We provide lots of time with the patient. So if your practice does the same, your prices should reflect this. We provide lots of customer support, as opposed to an urgent care center where patients roll through and roll out. That’s a similar practice for a real quick GP practice, but not for ours. A similar practice for ours is much more of a med spa level or something where patients have lots of attention, and lots of care. So, look at similar practices, look what they charge. Don’t mock their charges, Don’t follow their charges precisely, but know that that’s going to be the range [probably] that the market will bear.
- Listen to your patients. Ask them for feedback. If they’re struggling with your prices and you’re curious about it, you can play with your prices. Move them up and down. See what needs to be done to make your practice successful.
- Be transparent. Transparency is the holy ground right now with third-party payers, of course, but also for us in cash practice. You want to be transparent. Just communicate your prices clearly. People are not happy with being shocked. They’re very happy to pay $1,900 instead of $90,000, to receive the desired result. They also are willing to pay the $1,900 one time as opposed to $190 ten times. It’s not just about price – it’s about quality of care and respecting the patient’s time. Getting results, and knowing that they’re going to receive those benefits and transparency – they’re overjoyed.
- Offer flexibility. I think that that’s really important. There is always the concern about people who don’t have the means to pay for cash treatment.? A cash practice model allows you the ability to give your services away. We give 20 percent of our services away, and we’re happy to do it. We also make payment options available to people who have the ability to pay over time, who maybe can’t pay for a service in full at the time of their service. Remember, pricing isn’t just about numbers. It’s about the value you’re providing and how you communicate that to your patient. They’ve got to know it. They’ve got to perceive it. It’s like – they need to know that you are on their team.
