Tea Nguyen, DPM (00:54.594)

Why fee for service might be keeping you stuck. Doctors who leave insurance, most of us only know one thing, CPT codes. It's how we get paid. But if you have a practice now or thinking about having a direct care practice and you're focused on fee for service only, meaning what should I charge for services per service, each item, line by line. That's how we were trained.

But if you stay in that model where you're charging as a transaction each time a patient encounters you, you might be finding your situation financially stuck. So let me give you a backstory on this. When I opened my practice, it was insurance-based and getting paid meant having the right diagnosis code with the correct CPT code and modifiers. These codes were intended for the billers, but they don't really mean a lot for patient care.

It means that's how we get paid. And so that's the language we speak. However, when I started to opt out of insurance, I did the exact same thing. I took the model that we knew and I did a line item of my services, put a price tag on and just told people what things are going to cost them. When I did that, I thought it was a good idea to leave insurance and just tell people the price of stuff because people appreciated price transparency. There's people who want to be able to budget medical care.

There's people who don't have insurance. There's people who have insurance but a high deductible and so on. So it made logical sense to have a running list of what things are going to cost, right? It's like going to a restaurant. You want to see the menu or if you're traveling, you're using a hotel site. You want to be able to see the prices so that you can decide where you want to spend your money. In medical care though, in direct care.

we have to start looking at this a little bit differently and I'll tell you why. If you keep your practice fee for service, meaning you're only getting paid when the patient sees you, three things will happen. First, you're gonna keep yourself comparable to insurance options. And the question comes up as, so why would I pay more if that doctor over there is providing the exact same service over there and I can prove that because the CPT codes are the same.

Tea Nguyen, DPM (03:18.392)

Okay, the second thing that happens is when patients see you as a transaction, they may not fully commit to their treatment plan. Maybe halfway through, they feel good and they have an incompletion of their treatments. And then months later, they come back not fully healed because it's like taking an antibiotic. They didn't take the full course because they chose when they were gonna come in because it's for service. I'll come in when I wanna pay.

And the third thing that happens when you maintain a fee for service practice is that it makes you forgettable. You run your model the same way you ran your insurance model and patients may not see the differentiation of your practice from another. If you haven't worked on this, you don't have the right messaging, you don't have the right setup, you're still charging fee for service, meaning each time they come, they pay. It makes it really hard for you to stand out as well.

So then you don't get those referrals as consistently as you might want to. Now there are some specialists who want to stay fee for service because they don't want to provide long-term care or it doesn't make sense to provide long-term care. There are specialists who are episodic care. You need a surgery, the surgery should fix it. We really don't need to maintain this conversation for example. Or there are other specialists who maybe they don't know what their future holds. Maybe they don't know if they're going to live in the same place, in the same practice for the next few years. And so you don't want to keep people on a membership without that certainty. So it makes sense to charge patients as they come because it's non-committal and you're not held to the end of that contract. Or simply you just don't want to. 

So when I was shifting into a direct care practice, my question was the same as yours. How do I price my stuff? Back then we didn't have a lot of websites telling us what our stuff should cost. The only numbers we had to rely on was what insurance reimbursed us. And what I like to say about insurance is that they will pay the lowest rate tolerable. So if there's a doctor who accepts the low rate, they're gonna give you that lowest rate. And it's quite amazing as to what doctors are willing to accept.

Tea Nguyen, DPM (05:35.79)

So I was opting out of one insurance at a time and I started to create a running list of what my services were going to cost, not realizing this was actually more expensive to run. Because every single time I provided care, it would be a transactional relationship. The patient would come in, they would pay for the service and they would leave. And then they would have the freedom to not come back because there wasn't a clear plan. Sometimes the plan is come whenever you need me, right?

So every time you do that, you let the patient go, you don't give them a plan, you don't give them a roadmap. They're free to choose to come or not to come. And sometimes, most of the time, they don't come because they don't see the full picture. They don't realize they were supposed to stay the course of the antibiotic treatment, for example, or the service treatments that you offer in your practice. So if you have the kind of practice where several treatments are required to deliver the outcome, where there's longevity, there is a prevention plan,

or simply you just want to and you love solving problems creatively. This is where you get to play and experiment what's going to work and what's not going to work for your practice. If those things are true, then selling packages or memberships can work. And actually when you create packages and services, you create recurring revenue. If you're offering monthly payments, for example, you're also creating immediate cashflow.

For me, I like to charge patients in full upfront. I don't have a monthly membership plan yet because this is what's working for me. And you also get them to commit to continue care with you when you sell these packages or membership. Now I'm alternating the words membership versus packages. So let me backtrack a little bit. A membership traditionally known in direct care is related to direct primary care where they offer monthly payments for access to the doctor. So it's like going to the gym.

You pay this monthly fee and it's up to you, the consumers, the patients, if they use the services or not. It's just going to be there. And they limit the number of patients they see. It could be 300, it could be 500 patients a year where they cap it and then they close their patient panel. That's what's typically known as a membership in the direct primary care model. For specialists, we may not be offering stuff that the primary care doctors

Tea Nguyen, DPM (07:55.702)

are doing. And so we have to think about where in our specialty can we offer longevity that would make sense for both the practice and for the patient. For some of us, maybe we can't wrap our mind around 12 months of ongoing care. Maybe it's more like three months or six months, or we get them jump started into the treatment plan, get them some results early on. We know that there's a finite number of treatments that needs to be had in order for them to get the outcome. And so now we're selling packages. 

So packages to me, just simply means a shorter duration of care. So you wanna start thinking about how can you bundle your services in a way that gets them the end result? Because patients don't necessarily know what they need to get better. That's why they came to you. But maybe you know that for them to get out of their chronic pain situation, for example, they're going to need a diet plan, they're going to need a health coach, maybe some laser treatments. If you're a podiatrist, we're talking orthotics.

injections and so on. Maybe you can think about your service package as a way of what do they actually need to get better? What have I been doing that has worked for a lot of people and I can just create a bigger ticket item so that they commit to the plan so that you can have cash flow so that you can focus on those few patients who invested well in their health and in you.

and you can devote your time to taking care of them. Instead of having to charge people for very little and then now you're running a volume-based practice, which have a high turnover, and now you have to bargain to more people, which ends up costing a lot more money. So here's the hidden cost of running a fee-for-service type of practice, whether you take insurance or you're a direct care practice, but you're only charging by the visit. There's an article here from Dear Doc that says it can cost up to five times more to attract new patients

than to retain an existing one. Meaning, if you have a membership, you'll have recurring revenue because they're paying every month. Or if you have a package, you sell the package and have them pay in full for a small discount, now you've got cash flow. But if you don't have either of these and you're just charging per visit, they come in and they leave and there's nothing to really retain them. There's really no reason for them to come back over and over again. You're going to have to replace that patient with a new patient.

Tea Nguyen, DPM (10:20.578)

So your marketing has to work harder and it needs to be more ongoing in order for your practice to hit a certain revenue. Whereas a membership based practice or one that sells big packages can achieve their financial goals a lot faster with fewer patients and less effort. And let's not forget, you deserve a vacation. You need some time off. And sometimes there's a slow week, there's a slow season, a holiday, maybe a streak of cancellations.

And if that happens and you don't have recurring revenue or you're not selling a high ticket item or service package, your cash flow will reflect that. It takes a hit because you won't have pre-committed patients. So what happens in a fee-for-service type of practice, it often signals that you're pretty much the same as insurance and therefore comparable to insurance and therefore people can shop around. 

So people can comparison shopping. If you angle your marketing in a way that speaks about dollars and you're saying I'm a cheaper option to the alternatives, you're now competing on price. And what's to say that they won't leave you when somebody else shows up to be cheaper? That's not a relationship. That's not something that I do. I don't tell people my stuff is cheaper because it attracts the wrong kind of person. If they want to shop around, they absolutely can. It's their right to. But I have a recipe. I made my cake this specific way.

It's been working and the more that I've provided results for people, the more demand there is for my services and basic economics, I can raise my prices because more people want it and my time is limited. So that perfect recipe that I've created took time and you're gonna have to think about what's gonna work for your specialty in order for you to make more money with less effort. I would say our best patients in a direct care practice are those who are motivated,

they will follow through and are actually looking for a clear path. They're tired of wasting money, wasting time, playing the guessing game, going online and finding wrong information. They want somebody with expertise to shorten that time from their pain point, from their pain problem to the solution. So people are paying for us to shortcut that path for them. And people know that specialists can do that.

Tea Nguyen, DPM (12:37.442)

because it requires that level of expertise. So we're not selling our time as much as we are selling our expertise and how we can shorten the time to get better with our secret recipe, our package services, or our membership. So instead of asking, how do I charge for this service, which is actually a really good question to start with, but I want you to really think about what does this patient actually need to get the result? If they have pain,

It's not just a prescription, right? It's not just a narcotic or opioid. It probably comes with physical therapy, probably comes with some kind of brace, maybe some educational videos, maybe an injection. Whatever you've done in your past that has worked, bundle them so that you reduce the decision fatigue for the patient so they're not guessing what products you recommend. You just build it into your package. It comes with it. It makes life easy for them.

and then you put a price tag on it. It's like delivering a gift basket. It's all just there for you, for the patients to see, to understand, and to take in exchange for money. So when you create the structure, it gives patients peace of mind that they're on the right path, that they feel good in investing in this. When you tell them without a structure and you tell them, me when you need me. Well, guess what? Most people don't want to be in the doctor's office no matter how likable you are. 

So you want to make it very clear to them what the plan is and why the package makes the most sense so that the patient gets the outcome they're looking for, but also for you to stay financially viable to continue to help people. You're not viable if your door's closed, right? If you can't pay your bills, if you're under pricing, if patients don't know the plan, they're choosing to see you when they have the money, right? That doesn't provide financial stability. Packages do.

memberships do. And a lot of direct care practices were unaffected by the pandemic. We had memberships, had packages, we had relationships. And financially, we were sustaining ourselves. So it's that important. When I say you have to think differently when you lead the insurance model and create your own direct care practice. So what's working in my practice right now is that I have both. have select services that are fee for service and I don't focus a whole lot on marketing those things.

Tea Nguyen, DPM (15:04.504)

because what's actually keeping me sustainable long-term are the memberships, the ones that require long-term care. And these are patients who have been with me since the beginning of my practice. When I went from insurance and I opted out, a few of them did stay. And that has been well over eight years now. Individuals that I've been seeing month after month and likely for the rest of their lifetime. So for the doctor who is thinking about direct care or you have a direct care practice and you're only offering fee for service,

I want to invite you to think about different ways to build packages and memberships so that you maintain financial sustainability. If this is something that you need help in making the shift, I'm opening the Launch Lab, which is an eight week program where I guide you weekly on how to do this right for long-term financial sustainability. I'll put the information down in the show notes. Thank you so much for being here with me today. I'll catch you next week.