Cash-based services are when a patient pays out-of-pocket for a service. This is also often referred to as private pay or self-pay. Patients pay at the time of care and no third parties such as insurance companies, are involved, and no negotiating rates with insurance companies.[i] The cash-based model can benefit both private practices and patients.[ii] Adding cash-based services to your practice can help combat declining insurance reimbursements, return focus to patient care, and differentiate your practice.
Declining Insurance Reimbursements
As insurance reimbursements decline, many private practices have tried to combat this challenge by increasing patient volume. However, this can often result in less time per patient and a slight decrease in quality of care.[iii]
Cash-based services allow practices to diversify their income without compromising quality of care.[iv] By cutting out the insurance company, providers can lower billing and administrative costs, spend less time on insurance paperwork and more time with patients.[v] Offering cash-based services also reduces time spent negotiating rates with insurance companies and there is no waiting for prior authorization or insurance reimbursements to arrive.[vi]
Patients’ Willingness to Pay
A common hesitation for physicians in considering cash-based services is patients may be unwilling to pay out of pocket. However, in specialties such as podiatry, physical therapy, and chiropractic medicine where the cash-based services model is well established, data shows patients are willing to pay.[vii] A recent survey by AKASA found that 57% of respondents would pay more for higher quality of care. When compared to getting an appointment quicker and working with a hospital of their choice, quality of care is the only category that the majority of respondents answered they would be willing to pay more to receive.[viii] Laser therapy is a cash-based service that allows private practices to diversify their income by improving cash flow and differentiating their practice.[ix]
In some circumstances, out of pocket services could be more cost effective than more traditional services paid for by insurance.[x] There are a few reasons why cash-based can be cheaper for patients. Cash-based options could be more cost effective due to newer state and federal laws designed to protect uninsured patients from price gouging, which also benefits insured patients who actively choose not to use insurance. High deductible plans could also mean patients have higher out-of-pocket payments when using insurance than if they don’t use insurance. For example, one patient with a high deductible discovered that an x-ray would cost $600 using her high deductible plan or just $70 if she paid upfront without using insurance.[xi] Another women who used her insurance reported paying $766 for an echocardiogram, the women later learned that the same procedure would have cost approximately $400 without using insurance.[xii] The one drawback for patients is that most insurance companies will not count out-of-pocket payments toward a deductible.[xiii]
Return Focus to Patient Care
Offering cash-based services puts the focus back on the patient experience and allows the physician to focus on quality of care. This permits private practices to have longer and more meaningful sessions with patients, establish a niche and reduce time spent doing paperwork.[xiv] This can lead to a better patient and physician experience.
Physician burnout continues to be a large challenge facing the healthcare industry. Burnout can include depersonalization, feelings of decreased personal achievement and emotional exhaustion.[xv] Cash-based services can help deter some of these symptoms of burnout. First, Cash-based therapies reduce burnout occurring from high quantities of insurance paperwork. In addition, cash-based services allow physicians to have more face time with patients with a focus on quality of care.[xvi]
Differentiate Your Practice
Cash-based services can help to differentiate your practice by diversifying services offered to patients.[xvii] In an increasingly competitive industry, specialization continues to be a crucial way to attract new patients by differentiating your practice.[xviii] One way to differentiate your practice is by integrating new technology into your practice. In a post-pandemic world, there is a renewed focus on revenue generation and revenue resiliency in the healthcare industry.[xix] New technology can differentiate your practice from competitors while also attracting new patients and revenue.[xx] Offering newer cash-based services such as laser therapy for example, can help to differentiate your practice from competitors in your industry who do not offer laser therapy.[xii]