The Big 3: Cash Pay Business Models
“Luck is not a business model.”
-Anthony Bourdain
What does cash pay even mean? Both doctors and patients are confused. It’s a wee bit difficult to run a cash pay clinic if you don’t know how such businesses work. Conveniently enough, there’s a Big 3 of cash pay business models. Then you will , if you’re a patient, 1) know what particular setup you want to join and, if you’re a doctor, 2) better explain said business model to patients. For this article’s purpose, we’ll focus on the operations and strategy of each model. The financial side have its own guide.
The TLDR—the Big 3 cash pay models
Cash Pay/Paygo —> Patients get their care a la carte. Hence the name, patients buy discrete services as they go, usually on per-visit basis
Retainer —> A custom arrangement (per patient) normally focusing on guaranteed access to routine and chronic healthcare
Concierge —> For a monthly or annual fee, patients get enhanced access to their doctor as well as unique services not covered by health plans
Cash pay/fee-for-service/paygo:
There’s a fee schedule with a line-by-line breakdown of services. For consistency, I’ll call it paygo. Patients then spend $X per visit or service/procedure.
Pros: Can be clear upfront with patients while shaping your services to their needs, leaves flexibility for custom quotes, allows simple revisions
Cons: deters the patients needing to visit the office frequently for homogenous or chronic services, adds risk of both under- and over-pricing
Here’s an example from our clinic’s 2020 fee ticket:
Retainer:
Retainers are normally tailored for each patient. That can involve a contract drafted for each person. This is NOT the same exact model as concierge. Think of how a rectangle is a square… but a square isn’t always a rectangle. Generally, patients buy access (i.e. can I reach my doctor when I need him/her for monitoring?) with a retainer. In fewer cases, patients can pay for time (i.e. everyone counts minutes). Either way, retainer models are malleable.
Pros: Delivers recurring income, offers customized reimbursement, most effective for patients with chronic issues or in need of consistent monitoring
Cons: May not be appropriate for many specialists, does not provide guarantee of customized care, adds risk of a bad marriage with a patient (you better have a good lawyer if something goes wrong)
Concierge:
Charge an annual/monthly amount for enhanced access as well as services not usually covered by insurance plans. This can also involve separate pricing for other items (e.g. complex procedures and specialized lab/genomic testing).
Pros: Produces recurring income, integrates time for personalized medicine, may reduce breakeven point (i.e. less patients needed per doctor to be profitable)
Cons: May price out certain demographics of patients you actually want to help, blurs the line between work and non-work (i.e. patients will expect 24/7 availability), demand for unique services can fall harder relative to the other care models
How do you choose these models?
You’re not buying milk here. Nailing this decision the first time is critical. In light of that, ask yourself a few questions:
What’s your specialty and patient load per provider? Do you see 10,000 patients a year? Do you want more or less?
Is there a service and/or procedure you do at a volume 50% greater than the next most-frequent item? Can you feasibly double down on that strength?
What can you perform that legitimately no other provider in a 20-30mi+ radius can also do?
Process of elimination is a great place to start. More likely than not, if you cannot perform a “unique” service, concierge medicine won’t be appropriate. Unique in this case means a service that no one else in your radius (e.g. within 20-30+ miles) can execute. This could be something along the lines of a specialized cosmetic procedure or genetic test. Concierge setups function best when services are way above and beyond what other professionals are doing and the work offered isn’t covered by insurance plans anyway. Avoid fitting a square peg in a round hole.
What if the work isn’t as unique as you think?
Setting a retainer on a patient-by-patient basis could be appropriate instead. In this scenario, you make yourself available to patients’ whims for routine and chronic care. This is great for patients if you can tolerate blurring work and non-work together. Retainers are ideal for specialties with nearly 100% consultative, repetitive work. For example, an internist with exclusive interest in diabetes reversal attracts a massive cohort of patients asking for help with such matters. Doing something like a neurological exam in this case would not be a priority. Health plans would cover these services, but a skilled and well-reputed doctor able to mould their bespoke care for chronic diseases can sidestep the reduced insurance reimbursement entirely. Retainers are less effective when seeing enough varying conditions to make a medical journal blush. Then you may be undercharging for the expertise. In some cases, retainer arrangements may contain paygo elements. You never know when a patient needs an expedited procedure within a tight period. Get compensated for that time above and beyond your ongoing rate.
If you cannot offer a unique service or your ordinary care varies too much…
…paygo is the last stop. That doesn’t mean it’s the worst choice on the menu. Far from it. Having flexibility on pricing (especially in the upward direction) is a great tool. Economic and inflationary conditions can change on a dime. I speak from experience here—the Covid pandemic took hold of the world three months after we transitioned to a paygo model. Covet the ability to adapt. With a retainer or concierge alignment, good luck revising your fees in the middle of a contracted arrangement. For paygo, there are two major styles to assume: billing per service or per time. Yes, these factors are related, but in practice there are nuances. Your speciality may best accommodate a fee-for-service type approach. Services like office visits, mole mapping, and biopsies would have their own discrete fees. But we all know (and love?) the patients who ask for help with a brand-new condition… at the end of their visit. This is where charging by time (e.g. 15 or 30-minute increments) may be more effective. Either way, be consistent.
Here’s a summary of each model on a table:
The eager doctor: “What if none of these models work for me?”
In reality, certain specialties cannot adopt cash pay setups. It’s hard for a neurosurgeon to go fully out of pocket. Accepting health plans is also a necessity for some disciplines. I’m not here to sugarcoat. This series reflects experiences and facts, not fairy tales. We’re making other guides for why your practice CAN’T accommodate cash-pay arrangements (and what it can do instead to be successful nonetheless). Either way, if you’re window shopping for cash pay business models, start in reverse:
What would the clinic look like as a concierge, retainer, or paygo model five to ten years from now? Then, how would the current practice build up to that?
How many patients does the clinic want to see? What patient panel size can be reasonably handled each month? Assume that patients can fill 100% utilization. It doesn’t matter if 1,000 patients or 100 patients are the max capacity today. Continue to work backwards.
What should the pricing be? Which levels make sense for each model given that patient panel? Are the target demographics legit? A future article will dive more into pricing.
If you’re on the fence about what cash pay models work best for your healthcare journey, reach me on Substack or @caretocash on x.com.