How Physician Networks are Selling

By David Volz

A growing number of physicians are creating discount networks due to the anger they feel about their loss of professional autonomy and financial compensation to managed care. They are seeking a niche among patients who lack adequate health insurance coverage or are dissatisfied with their plans. To win patients, the physician networks are marketing services that are deeply discounted.

The health care environment has recently witnessed the emergence of a new form of physician organization that presents a significant marketing challenge. A growing number of physicians are creating physician networks in response to their loss of professional autonomy and financial compensation attributed to managed care. By offering deep discounts, they are seeking a niche among patients who lack adequate coverage or are dissatisfied with their existing health plans.

Some of these discount networks do not accept managed care payments at all. Participating physicians are willing and even eager to accept lower payments directly from patients in order to avoid the huge amount of paperwork associated with managed care. Many doctors believe they actually earn more money by discounting their fees for private pay patients because they do not have to spend time and staff resources dealing with managed care organizations. The fact that doctors do not have to compromise their professional autonomy to participate in these networks is another selling point.

Although the physician networks are operating with limited funds, they are using a variety of techniques to take their story to the general public. Networks around the country are pursuing public relations campaigns and have been featured in various articles. These organizations have been highlighted in the local business and medical press and even in the Wall Street Journal. They are also conducting local and national advertising campaigns. The doctors involved hope their reputations for providing low cost and affordable care will result in a positive image within their respective communities.

One example of a successful start-up …

Smuclovisky said his organization is somewhat limited in its advertising resources. Nevertheless, he sincerely believes public anger and frustration with managed care will cause growing numbers of people to support him and his network concept. People with no health insurance may not have a choice but to become involved with such a network. “It is time that we realize that health care resources are limited, and we must all take responsibility for our health,” he said. “I think it is important that people know the cost of their care and play a role in paying for it. The managed care industry can’t provide all our care.”

Doctors outside the network have been quite supportive of NAC. Ronnie Epstein, M.D., who practices in the Fort Lauderdale area, says the discount network is critical to restoring a strong doctor-patient relationship. In his own practice, he has found that patients are willing and able to pay the costs of his care. “My goal is to preserve good care,” Epstein said. “I am willing to work with patients who are having difficulties paying their bills and might not perform as many tests, especially if they are not really needed.”

Pieter De Wet, a family physician based in Athens, Texas, was instrumental in forming Simple Care. Simple Care is a loose network of doctors around the country who serve patients who are underinsured or lack health insurance coverage altogether. “I would say about 30% to 40% of the costs associated with health care goes to managed care paperwork and administrative costs,” said De Wet. All we do is discount the fee that would normally go to paperwork. We pass the savings along to the patients, many of whom have no insurance. Most of the doctors in our network are happy with this arrangement because they are paid sooner and don’t have to deal with managed care clerks.”

De Wet said the network has relied on local and national media to advertise the program. Press releases have been sent to business publications, a number of medical trade publications, and to television and radio stations as well. De Wet has found that many publications and broadcast outlets are eager to publish business stories on the discount concept. Doctors in Simple Care have established sites on the World Wide Web to provide information on the program. Patients throughout the nation with access to the Internet, either through a personal computer or a public library, can learn more about the network online.

Simple Care is also setting up new clinics around the nation. The most recent one has been established in Tyler, Texas, where the idea of discounted medical services will be pushed hard. There will be an increased effort to contact the news media to publicize the benefits of discounted medical services. De Wet hopes that medical costs can eventually be reduced by as much as 50%. In many cases, patients will be able to pay out-of-pocket for routine medical conditions.

In addition to Simple Care, De Wet and other doctors have established the American Association of Patients and Providers. It is an activist organization dedicated to re-establishing control of medicine by doctors and to fight for patient’s rights. “Insurance companies are getting worse and worse in their coverage,” De Wet said. “More people simply can not get the treatments they need for medical conditions. We are seeking to change that through our program and also through grassroots efforts.”

Vern Cherewatenko, M.D., has played a major role in the development of Simple Care and is a leader in the American Association of Patients and Providers. In addition to his medical degree, he has a master’s degree in education and counseling. Cherewatenko considers himself less a business executive and more a crusader in the health care arena. He is angry about the current trends in health care and wants to play a role in reversing the rapid development of managed care. Cherewatenko feels that, once the discount program becomes known, Americans will flock to it en masse.

“Let’s face it, more than 50 million Americans lack health insurance,” Cherewatenko said. “That is a huge number of people who simply can’t get the care they need. Even those with full-managed care coverage are often denied necessary medical care. The fact is, our present system just is not working and people are looking for sound alternatives. We are working to provide those alternatives through our network.”

Cherewatenko does not consider the discounted services he provides to be much of a financial loss. He has seen a steady drop in his income due to lower reimbursement from managed care organizations and a dramatic increase in the time and effort involved in processing paperwork. In many cases, more money can be earned by charging patients willing to pay out-of-pocket 50% of what he would charge a plan member.

“When I deal with managed care, I get about half of the money I bill for,” he said. “The bills are often delayed, and I have trouble paying for the increased overhead. With all the paperwork hassles created by managed care, I have to spend more on staff to make sure all billing procedures are handled properly. The problem is we are creating more and more administrative positions in the health care industry when we need to be doing more for patient care.”

Cherewatenko is also leading an effort to establish medical saving accounts that people could use to pay for major medical problems. People would pay a small amount of money each month into a plan that has a very high deductible ($2,000 for example).

“The vast majority of claims are far less than $2,000 a year,” he said. “Only about 5% of the population requires more than $2,000 of medical care a year, and much of the labor that goes into processing claims is a waste of time. With our program, a person would have to generate more than $2,000 in claims before the deductible would kick in.”

Cherewatenko has developed a number of Web sites to help spread the message of his program. This has proven to be very effective as growing numbers of people across the nation seek information via the Internet. He considers himself a leader in a grassroots effort to restore health care to the control of physicians. Cherewatenko has also worked with various media outlets, including business and trade publications and broadcast media.

Only time will tell how successful these networks will be. Doctors who are dissatisfied with managed care demands and limitations may be willing to practice for less with these organizations. People who either lack insurance or have inadequate coverage may be attracted to these networks for care not covered by their policies or in order to have a greater choice in physicians. In the meantime, much of the success of such networks will depend upon their ability to market themselves. <END>