I was reading an article in Wall Street Journal online (via Ed Cone) about how Aetna is getting ready to publish the prices it has negotiated for physician services in the Cincinatti area on its website and I came across this sentence:

The negotiated fees typically are discounted from
the list prices that doctors charge uninsured patients, and are
available only to Aetna and its plan members.

This is literally stupid.  Aetna’s customers, and those from other insurers, are going to cost the doctors more than the uninsured patients and it will take the doctors much longer to get paid.  Doctors literally have to employ people to do the paperwork required by the insurance companies, and then they have to handle disputed claims and wait forever to get paid.  An uninsured, or "cash" patient walks in the door, is seen, pays his bill and walks out.  Hmm, I wonder which patient offers a higher profit margin even at the same billing rate?

Now maybe the doctors are afraid to lower their "list" rates for fear that they will lose bargaining room with the insurance companies.  Fine, then offer the cash patients discounts and incentives. The doctors would look like they were giving the patients a bargain AND they would have higher profit margins to boot.

In the doctors’ defense until recently they haven’t had much of an incentive to behave like they were running a business.  A huge proportion of their patients came from the insurance companies, and if someone was uninsured they probably couldn’t afford to pay anyway.  Well, times are a-changing with the advent of consumer driven health plans like Health Savings Accounts, and doctors better adjust, quickly.

Here’s my recommendation:

• Keep list prices the same but set up a pricing schedule specifically for "cash" customers.  Factor in which run-of-the-mill services offer the greatest retun on time (investment) and use incentives for those services in your marketing efforts.
• Oh yeah, start marketing.
• Offer discounts for multiple family members.  For instance a pediatrician could offer lower rates on physicals for siblings if all the siblings came in at one time.
• Institute a customer service plan.  Follow up with patients and find out how they felt about their appointment.  Survey the patients to find out what they think of the office, if they had to wait too long, etc. 
• Get used to the idea that patients will begin to "shop" you, but also be aware that patients are savvy.  They won’t choose a doctor on price alone, but they also won’t pay top dollar for a doctor they perceive as "Wal-Mart" if they can get a "Macys" doctor for the same price.

Actually the best advice I can give is for any doctor to check out my dentist’s operation.  The folks at Kingery & Kingery have it figured out, and as a cash customer I speak from personal experience.

First, they do a great job marketing themselves (that’s how we found them).  Second they have a very professional and friendly staff.  Third, the doctors actually listen. 

A perfect example of this came earlier this month when I was in for a cleaning. Dr. Kingery was telling me about all kinds of nifty things he could do to improve my smile and I said, "Listen, I have three kids going into braces in the next three years.  I don’t want to spend a dime that isn’t necessary on my own mouth, so just tell me what you think is absolutely necessary."  And he did.

Last, they have a follow up system in place to make sure that their customers are happy.  As part of that process they worked with us on pricing out all the different things we were going to have done.  With three kids with questionable brushing skills and two middle-aged parents who need to get old fillings repaired my family is literally a cash cow for them, and so they are making every effort to keep us around. If they don’t we can just go down the road, and they know it.

Are you listening doctors?  This is your future.