By Michael Walerstein
A well conceived and managed cash based subspeciality (CBS) can add thousands of dollars a year in income to your bottom line.
By definition, a “CBS offers a desirable service that will attract the patient who will pay you in cash for your service.” As alien as that might sound in today’s world of third party paid income, cash programs, when properly conceived and managed, can be profitable.
Today, attracting the cash paying patient is more important than ever, especially when you consider cash is not discounted, has no collection expense, and you don’t have to wait for your money. Doctors who deal in cash reduce practice overhead while increasing net income.
A CBS can be as simple as adding a desirable product line dispensed from your practice. Today, many dermatologists earn extra cash by dispensing various therapeutic creams and lotions to their patients. On the other hand, other doctors convert a large part of their practice to cash subspecialties by promoting and offering services and products in areas such as pain relief, weight loss, cosmetic procedures, natural health, and life extension, just to name a few.
One doctor of 24 years had the external trappings generally associated with successful health care practice. He grossed over $1,000,000 dollars a year, employed 15 people, and had a large devoted patient base. However he was totally dissatisfied with his professional life. Net income was down and he felt the practice was controlling him. He admitted that 95 percent of his income came from insurance, Medicare and HMO patients. He was highly skeptical that patients would indeed pay him cash for a service, a common error of the mindset within the profession today, but was willing to try a low entry cost fee for service program.
Once a skeptic, now a CBS convert, he has added several more cash programs and has reduced his third party payer reliance to under 35 percent. His gross income has increased by 40 percent and his personal net income by $80,000 and growing. In essence, he has eliminated the middlemen in the industry and now deals directly with the cash patient.
Virtually every doctor can use additional cash income. However, the doctor who bills 50 percent or more to a third party should seriously consider incorporating a CBS into his/her practice.
A well rounded CBS program should include:
• Patient demand for the service or product.
• Low entry cost (the program should expand from earned profits and not necessarily from a large initial cash investment).
• Little if any marketing costs.
• The use of existing or new moderate income trained employees to help administer the program.
• A solid program protocol and operational plan.
When creating or adapting a subspecialty, one should consider the following guidelines:
Self analysis and commitment level. Consider where you are now and where you would like to be in the future. Take the time and examine your practice’s cash flow, accounts receivable, staff capabilities, practice overhead and what you are prepared to commit as far as time and financial resources. Over the last few years many doctors have bitten the bullet and continued their education in fee for service fields such as cosmetic surgery, natural or alternative health care, preventive medicine, or have invested in equipment to perform procedures that deal exclusively in cash. However, most doctors are not prepared to invest a considerable amount of time and loss of income that may be required for the total and drastic commitment needed in a new primary specialty. This is where a well managed and structured CBS can work for you. Even a small cash subspeciality that only nets an additional $20K to $40K annually can make a big difference in the long term.
Is this what the public wants? As a business person, the doctor who desires to make the move to increase cash income must consider public appeal, trends, motivation, price and demand. Pain relief, weight control, cosmetic or patient personal improvement have always had mass appeal and might be a good place to start.
When you start thinking in a new direction, ask yourself these questions: Will this be accepted in my community? What percentage of the population will be willing to pay cash for this service? Does it have public appeal? Does this subspecialty fit my personality? And finally, How well with this be integrated into my existing practice and demographics without increasing overhead? Not every program will work well for all doctors!
Often you can create you own CBS. Doctor G.P., a cardiologist, was not happy with the recent Medicare and insurance cutbacks in reimbursements. He read an article about a physician who developed a natural series of supplements that helped clean, rebuild and maintain the arterial system. After researching the product, he discovered this program worked extremely well and incorporated this into his practice. He hired a public relations firm that had experience in dealing with the medical profession and received some positive press. Today, virtually every one of his bypass patients are on this supplement program, his reoccurrence of repeat operations are far below the national average and the doctor is enjoying increased net income as a result.
How am I going to attract the new cash patient and convert my existing patients to paying cash? Direct patient marketing isn’t always the answer. For example, a doctor in California who opened a new subspeciality office and published a few ads was doing well. He ran the same ads, followed the same procedures but did not receive the expected patient response. I suggested that he initially concentrate on harvesting his own patients first and build an internal following before spending more media dollars. With a little reorganization, he has built a strong patient following and today, is flourishing from patient-to-patient referrals.
You must consider the complete program, from marketing to the patient management. Ask yourself, Do you have a sufficient existing patient flow already, or will you have to market directly to the public? Once selected, the subspeciality may work well with either a simple advertising program or by retaining a public relations firm to promote this service.
Select from an expanding menu. If you have made the decision to incorporate a fee for service program, there are many companies offering a variety of services. They range from franchises to custom designed and supported programs. Complete your due diligence and educate yourself as to the available options. Once you are convinced that the program is ethical and offers the patient a good result, integrate it into your practice in stages and plan your growth from your success.
What is my competition? Try not to be a follower. Normally, the doctors who establish themselves early in their market with a desirable cash subspeciality are the ones who reap the most long term benefit. When considering a program, take a look at how many of your peers will be offering the same program. If you are purchasing a program, insist on knowing exactly how much competition you will have in your market.
Time management. As a physician, time is your most vital asset. You can only do so much physically without diminishing the quality of the service you provide. Some of the best structured programs include the use of existing employees who, when trained, will interact directly with the patient as your consultant and CBS manager, leaving you free to perform your normal duties.
Gradual progress works well. For most doctors, their dependence upon insurance income has been a gradual process which did not happen overnight. Don’t try to change your life in one day. Set a realistic, achievable goal. Many doctors test programs on a small scale initially, before committing more resources and time. It shouldn’t take long to notice progress. Increasing your cash income by 10 percent to 20 percent a year is a good start. With this method, it won’t take long to reap the rewards of your investment: your financial independence.
Making the right selection. Shop around, ask questions, and keep an open mind. If you are providing the right service or product, at the right price and at the right time, you’ll attract new patients and increase your overall profits.
Michael Walerstein is currently Managing Director of Anti-Aging Associates, Inc. in Pompano Beach, FL.