The Disconnect Between Patients, Insurance, Incentives, And Cash

The phrase "cash-based practice" has become a hot topic and trendy phrase lately. Many physical therapists have headed in this direction. My clinical practice has been cash-based since 2004.

There is a strange perception in health care that third party payment (via insurance) and cash-based practices are inherently different. Perhaps it is because of the perceived "skin in the game" that the patient has when they hand you cash (or a credit card) directly upon receipt of services rendered.

What is forgotten is that no matter how you cut it, both are cash-based. Worse yet, both are built upon a foundation of misguided incentives.

Both sides of this coin are cash-based. The difference is in the degree of transparency involved. On the cash practice side, the consumer can see the direct cash flow from one hand to another. Costs are typically transparent. On the third party payer side, the consumer (or their employer) has already made the cash investment (or part of it) in an insurance plan. The consumer then receives some level of benefits, along with typically paying a copay out of pocket. Costs are rarely transparent, except for the copay.

But either way, they are both cash-based. It is just a question of actually seeing the cash flow, and the transparency of costs involved.

Another disconnect that they both share is one of misguided incentives. As a clinician, even if you attempt to provide the best services at the best cost, there is always an inherent underlying premise that exists: the more visits the patient attends, the more money the clinician makes. No matter how outcome-driven you are as a clinician, there is always that element lurking in the background. If you are working with third party payers, the clinician will oftentimes use whatever visits are available to them given the episode of care and the patient's benefits.

Either way, the incentives are structured poorly. They are built upon procedures and visits and not on outcome or value.

Patients have been lead to believe that cash-based practices are inherently more expensive. In fact, they aren't. Once you calculate time in the office, travel, copay or a percentage pay, and a myriad of factors, it all comes out pretty even. The net dollar value out of pocket may actually be lower.

Once again, we need to compare the world of health care - and the disconnects that exist - to any other consumer market. Most markets, generally speaking, are transparent with costs because consumers demand it. They are based on the receipt of a quality service that meets or exceeds the consumer's expectations. They are all founded upon the consumer's view of quality and value, and not that of the company providing the service.

Don't be fooled though. Within our deeply-flawed health care paradigm, it is all cash-based either way. Consumers just don't demand the same principles in their health care that they do when buying a house. That is the real disconnect.

Note: Ann Wendel (@pranapt on Twitter) and I were recently interviewed by Karen Litzy (@karenlitzyNYC on Twitter) for her radio show "Healthy, Wealthy, And Smart" on the topic of "cash-based practices". You can listen to the interview here.

Photo credits: pwbaker

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