CASH-ONLY PRACTICES: Doctors Group Shuns Insurance
Faced with financial problems partly related to changes in managed-care reimbursement, Dr. Vern Cherewatenko and two other Seattle physicians created SimpleCare, a cash-only practice that Cherewatenko is marketing as the cure-all to the health care system's ailments, the Seattle Times reports. Cherewatenko found that on a $79 office visit, he lost $7 dollars per patient under a managed care contract. The patient's insurance company would reimburse him only $43, while Cherewatenko spent $20 in administrative expenses and $30 in overhead. But with patients paying cash, he could eliminate the added cost of a billing staff and equipment for bill mailings. "This whole administrative garbage is not only very expensive, but limits choice and care," he said. Now he charges patients only $35 and makes a $5 profit. To start, Cherewatenko had to close four clinics and drop 35 of his 40 physicians and 110 of 120 other employees. But so far his system has been effective: After about three months, Cherewatenko was making $10,000 a month and now the SimpleCare network includes thousands of patients and 120 physicians and other providers. About 30-40% of his practice is cash only, and Cherewatenko plans to sever ties with remaining insurers soon. To participate in the system, individual patients pay $20 and families pay $35 in annual membership fees. For $35, providers are listed and linked to Cherewatenko's Web sites. Based on his local success, Cherewatenko plans to market his system nationally and has started the American Association of Patients and Providers.
While Cherewatenko estimates that only 3-5% of patients need to spend more than $2,000 a year on health care, critics charge that for those who do, his system will not work. For emergency care or operations, critics say patients under SimpleCare will have to pay cash or will end up "being paid for, indirectly, by people who have insurance." Regence BlueShield spokesperson Chris Bruzzo said, "If one of (Cherewatenko's) patients who is paying cash has a condition they can't afford to pay for, they'll end up in another part of the health care system -- in the emergency room or at the hospital." But others, including Mike Corne, vice president of Golden Rule Insurance, commended Cherewatenko for his idea. Corne said, "If you go for a $50 doctor-office visit, why in the world do you want to spend $5 to $10 for the insurance company to handle the paper transaction." Dr. Bruce Stowe, another Seattle-area physician, said he likes what Cherewatenko is doing and believes it works. He added, "He's right: Why is this percentage of the health-care dollar going into insurance companies?" (Ostrom, Seattle Times, 11/23).