Published in Nashville Medical News 1/01

SimpleCare Offers Discounts for Paying Cash

by John Carroll

Two years ago, Vern Cherewatenko, MD, and his partner, David MacDonald, DO, found that they were running a thriving practice. Located in bustling Renton, Wash., the doctors had a steady stream of patients coming to their offices. Some were executives at Starbucks or nearby Boeing.

There was just one thing wrong: they managed to lose money on almost every patient visit. Managed care plans were dictating reimbursement rates on office visits’ rates that often failed to meet their overhead.

“We were going bankrupt,” says Dr. MacDonald simply. “Managed care was killing us.”At the same time, he adds, the doctors were frustrated that the people who needed the best rates for care – the uninsured – were getting hit with the biggest bills as they didn’t qualify for the deep discounts demanded by health plans.

Out of that twin set of frustrations was born SimpleCare, one of several new programs that allow medical practices around the country to offer their healthcare services at a discount for cash.

“If we just charge a fair price, most patients are willing to pay for it,” says Dr. MacDonald. And doctors don’t have to play these reimbursement games. SimpleCare prides itself on keeping it simple. Practices join up and set their own fees. An operation that might cost $2,500 on an open rate and be reimbursed at $800 to $1,200 by a health plan may be available to the cash-paying public for about $1,500.

For those with no cash, the West Coast doctors have their own private program that allows those in need to trade for their services, volunteering to do so many hours of community service in exchange for their medical care.

Says MacDonald: “They come in with a statement that shows they worked it off for the community, their pride and dignity maintained.”

For the doctors around the country that are signing up, SimpleCare provides the structure needed to extend discounts without violating their agreements with managed care companies.

“I wanted somehow to give the cash-paying patients a discount,” says Dr. Fernando Carreno, who practices medicine in Corpus Christi, Texas. “I don’t think it’s fair that these stupid insurance companies get all the breaks. This is a way of helping out what they call the uninsured of America.”

Dr. Carreno was also worried that if he simply acted unilaterally and handed out discounts to individual patients, the arrangement would put him in violation of his contracts with medical plans.

Says Dr. Carreno: “If you offer him (the cash-paying patient) a discount, you have to offer that to the plans.” And if he did that with every managed care company, he adds, he would go broke.

By joining SimpleCare’s program, a “quasi-insurance company,” he was able to put those concerns aside.

Like most members, Dr. Carreno wants to offer a fair pricing method, without turning the service into a charity. “There has to be a reasonable way to see patients and charge them a reasonable fee and not be in breach of contract,” says Dr. MacDonald.

Financial survival is another driving force behind SimpleCare.

“Vern and I knew we were drowning in managed care,” says Dr. MacDonald. And he is quick to add that most doctors aren’t doing well under the present system, citing recent studies that show almost a third of medical practices in some states have been forced to take loans just to stay in business.

The system works best for those patients with a Medical Savings Account, which Congress created about three years ago. Individuals are allowed to set aside money in a tax-free medical account and withdraw the money as needed for medical services. They are also able to take out a low-rate insurance policy to cover catastrophic illnesses. For patients whose doctor is in SimpleCare, they can also take advantage of a relatively low rate for cash.

Physicians pay $50 to join the program and sign a statement that they’ll provide their “best rates” for cash-paying patients. Those rates often translate into a 30 percent to 50 percent discount for most services. Orthopedists, says Dr. MacDonald, typically discount by half.

There’s no red tape under the program. Patients pay between $20 and $35 for an office visit. Families pay $35 a year to be members. And the practice has a menu of services for everything from X-rays to vasectomies with a clearly outlined set of relatively low fees.

Each practice that joins SimpleCare is encouraged to carefully evaluate the ratio of paid vs. managed care patients they see. By keeping their paid clientele at about 30 percent of the overall patient base, says Dr. MacDonald, they were able to free three employees for other work. Other practices are likely to see back office personnel freed for other work if they begin to find ways to serve cash-paying consumers.

As the program expands, MacDonald and Cherewatenko hope to add new services to the programs, such as dental and eye care.

Dr. MacDonald insists the program works for everyone, including the chronically ill. And even some employers might like to shift their workers to SimpleCare.