At some point, usually in the midst of struggling with third-party payers over meager reimbursement and oppressive bureaucracy, most physicians fantasize about chucking it all and just dealing directly with patients on a cash basis. It’s only a dream for most doctors, but one general surgeon in Las Vegas has found a way to make it work.
Five years ago, Kevin Petersen, MD, founded a practice called No Insurance Surgery to offer surgeries to the under- and uninsured for a heavily discounted, all-inclusive, one-time fee. Petersen, who was board certified in 1986 and has performed more than 15,000 surgeries throughout his 25-year career, has opted out of the managed care system and no longer accepts new patients with insurance. He recently performed his 900th insurance-free surgery.
Petersen says his decision to opt out of the system by dropping all contracts with insurance companies is a direct reflection of the troubled state of the healthcare and insurance industries and the growing number of patients without insurance or with too little insurance.
“I simply stopped renewing contracts and they all expired over a period of one to two years,” he says. “During that time I did not accept new patients with insurance. I kept all my established patients with insurance, but through attrition and the contracts expiring, now nearly 100% of my practice is cash pay.”
Petersen says the move has dramatically changed his practice. “I make as much or more than I made when I was the busiest with insured patients but I’m working half as much.”
Decreasing the bureaucratic nightmare was a large part of Petersen’s motivation. According to a recent report from the Health Economics Institute, physicians’ offices spend between $23 billion and $32 billion per year in administrative overhead trying to get paid by insurance companies.
“The success of No Insurance Surgery has proven itself a sustainable business model and a significantly more patient-centric model of healthcare delivery,” says Petersen, who earns roughly the same fee performing surgery without insurance as he does when he performs an insurance-covered surgery. “No one outside of the profession tells me how I much time I should be spending with a patient.”
Petersen is also able to significantly reduce his overhead by eliminating staff previously dedicated to filing insurance claims and paperwork. At the height of his insurance practice, 80% of his staff’s time was devoted to dealing with insurance companies, Petersen says.
The cost of a no-insurance surgery performed by the practice is 50%–70% less than fees quoted by other physicians who provide insurance-funded surgeries, he says. Patients are offered a discounted, all-inclusive surgery package that includes pre- and postoperative care, laboratory testing, operating room fees, the surgical procedure, and anesthesiologist care. The initial consultation is free.
Petersen and his staff pre-negotiate all fees with medical facilities, anesthesiologists, and all other healthcare providers involved in a given surgery, he says.
The largest demographic of Petersen’s patients are early retirees in their 50s who are too young for Medicare and young adults in their 20s who are uninsured, either because their jobs don’t provide insurance or they can’t afford or don’t qualify for coverage.
But if this strategy works so well, why don’t all physicians employ it? Petersen says there are some good reasons. First, insurance practice does not mix well with cash practice, which means that going only halfway isn’t really feasible, he says. The physician has to commit to completely converting to cash only, which can be a big change for most practices. When you try to mix the two, the insurance part of the practice takes too much of the staff’s time and they end up resenting those patients, Petersen says.
“Another reason that many doctors won’t go to cash only is that they think the liability is higher because the patient may not have the money to pay if their treatment becomes more complicated than you expected,” he says. “If you don’t do what is needed because they can’t pay, then you didn’t deliver the standard of care and you’re going to be sued.”
That fear is overblown, Petersen says. In an emergency, the patient would be hospitalized and the care would be covered; the patient can then be referred to other providers for treatment that will be covered by Medicare or Medicaid.
Petersen notes that the demographics of your practice also are important when considering this strategy. If your patients are mostly employed full time and have plenty of insurance coverage, they may not be attracted to a cash-only practice. That would mean either switching the focus of your practice or risking the loss of much of your patient base, he says.
Based on the success of the practice’s focus on hernia and gallbladder surgery, Petersen has expanded his practice by recruiting other qualified surgeons to treat patients in need of eye, hand/arm, and spine surgery as well as those with gynecological problems in need of hysterectomies and surgeries to treat uterine fibroids, adenomyosis, and endometriosis.
Since Petersen began offering No Insurance Surgery in 2006, he has treated patients from every state, plus Canada and 13 other countries. The practice has more than 25,000 patients needing care in its database, and its website has logged more than 1 million visits.
“I have zero regrets about shifting away from insurance because my relationship is much better with my patients,” Petersen says.
This piece is adapted from Managed Care Contracting & Reimbursement Advisor, August 2011.