Cash-based vs. insurance-based practice for chiropractors: Make the right choice

The decision to run a cash-based practice instead of an insurance-based model is significant

THE DECISION BETWEEN CASH-BASED AND INSURANCE-BASED CHIROPRACTIC PRACTICES INVOLVES CONSIDERABLE TRADE-OFFS. A cash model offers streamlined operations and predictable income, but might limit the patient base. On the other hand, insurance-based practice brings a larger patient pool and referrals, yet comes with delayed payments and potential fee reduction. Both systems have their merits and drawbacks.

The pros and cons

For years, both new graduates and seasoned chiropractors with more than two decades of experience have shared the same frustration with me. They are weary of the burden of regulations and bureaucratic red tape, feeling forced to choose between delivering quality patient care and spending hours on paperwork to remain compliant. Who wouldn’t want more lenient documentation requirements, the ability to avoid audit risks, the chance to see more patients and the freedom to set their own prices? Choosing between a cash-based practice and an insurance-based model is a significant decision. By understanding the pros and cons of each, chiropractors can select the model that best aligns with their vision, values and business goals.

In a cash-based practice, patients pay out-of-pocket for services and may later seek reimbursement from their insurance company. The chiropractor has no direct dealings with insurance carriers. Remember even if you are cash-based, you should provide receipts for the patient, including the proper CPT and ICD-11 codes and charges, so they may seek reimbursement. Most state boards require proper coding in their rules and regulations. In an insurance-based practice, the chiropractor bills insurance companies directly for services, and patients may be responsible for co-pays, deductibles or services not covered by their insurance.

Advantages of a cash-based practice

Streamlined operations: With no need to navigate insurance claims, administrative tasks are reduced.

Predictable income: Fees are set by the chiropractor, with immediate payment after services are provided.

Direct patient relationships: Without insurance intermediaries, chiropractors can focus on patient needs rather than insurance coverage constraints.

Pricing transparency: Patients know the cost upfront, fostering trust and avoiding unexpected expenses.

Challenges of a cash-based practice

Potentially smaller patient base: The practice is limited to those who can pay out-of-pocket. As of 2021, 92% of the population had health insurance. (Statista Research Department, 2023)

In-network vs. out-of-network choices: In a survey we conducted, more than 80% of patients with insurance said they would choose an in-network provider over an out-of-network provider.

Increased marketing needs: Attracting and retaining patients may require more robust marketing efforts.

Inability to see federally insured patients: Six major government programs provide health care to about a third of Americans. Medicare alone has 60 million beneficiaries, expected to rise to over 80 million by 2030. (MedPac, 2015)

Advantages of an insurance-based practice

Larger patient base: Many patients rely on insurance for health care and seek in-network providers.

Steady stream of referrals: Insurance companies often refer patients to in-network providers.

Perceived legitimacy: Accepting insurance may be viewed as more credible.

Challenges of an insurance-based practice

Delayed payments: Insurance payments can take weeks or even months.

Reduced fee-for-service: Insurance companies often negotiate lower rates.

Potential for denied claims: You risk unpaid services due to denied claims.

It’s essential to note having a cash-based practice doesn’t exempt chiropractors from proper patient visit documentation. Most boards of examiners have rules requiring appropriate documentation regardless of the payment model. Failure to provide adequate documentation can result in penalties. For example, a chiropractor who had her license suspended for two years provided unwarranted services without proper documentation, which led to severe consequences.

One common misconception about cash-based practices is their reimbursements are as good as or better than what insurance companies allow. Despite declining reimbursements, many chiropractors are undercharging. About 80% of consultants we work with have stated their clients charge less than insurance would allow, losing thousands of dollars a month. One chiropractor even found he was losing $10 per visit after neglecting to adjust his fees for more than 10 years. With the cost of living increasing by 25% over the past decade, it’s essential to reassess fees regularly to cover expenses and charge market value.

I contemplated switching to a cash-based model many times in my 38+ years of practice. However, I realized much of my revenue came from insurance patients who later became cash patients. Accepting insurance can be a gateway to more new patients. While it can work for some, eliminating insurance entirely is not for everyone. Insurance coverage is diminishing, especially for high-deductible patients, but most chiropractors need a steady flow of potential new patients. Being upfront about not accepting or filing insurance might deter patients from even scheduling an appointment. A comprehensive financial report of findings can educate patients on their insurance coverage and present affordable care options while keeping the practice compliant. It’s about finding the right balance.

In conclusion, the choice between a cash-based or insurance-based practice, or a combination of both, depends on personal preferences, the local market and business capabilities. Both models have their merits. Assessing the benefits and challenges of each and aligning the decision with the practice’s goals and values is essential. Regardless of the choice, patient care should remain the central focus.

RAY FOXWORTH, DC, FICC, is founder and CEO of ChiroHealthUSA. For more than 35 years, he worked ‘in the trenches’ facing challenges with billing, coding, documentation and compliance. He is a former medical compliance specialist and currently serves as chairman of the Chiropractic Summit, an at-large board member of the Chiropractic Future Strategic Plan Committee, a board member of the Cleveland College Foundation and an executive board member of the Foundation for Chiropractic Progress (F4CP). He is a former staff chiropractor at the GV Sonny Montgomery VA Medical Center and past chairman of the Mississippi Department of Health.