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Why Practitioners Should Consider A Cash-Based Practice 

Updated on
March 27, 2023
in
Practice Management Tips
cash based practice

It doesn’t matter if you’re a PT, OT, massage therapist or run a clinic, getting reimbursed by a third-party takes time and money. That impacts the treatment you’re able to provide, and how much you get paid for your time. 

What if it didn’t have to be like this?  What if you could run a cash-based practice instead?

In this article, we will cover the ins and outs of a cash-based practice, pros and cons, and provide a step by step guide on how to painlessly make the switch to going cash-based.

What is a Cash-Based Practice?

A cash-based practice does not have contracts with insurance companies. They are out-of-network providers. They charge patients directly for their services. This eliminates the need for medical billing. Providers get paid upfront, and patients have the option to submit a claim to their insurance to request reimbursement.

Cash-based practices don’t have as many restrictions on what services they can offer. There isn’t a third-party payer who has a say in what treatment patients receive. This gives providers more potential streams of revenue, and patients more comprehensive care.

Who Should Consider A Cash-Based Practice?

Many PTs, OTs, massage therapists, and multi-disciplinary practices use the cash-based practice model. Cash-based practices save money on staffing by eliminating the time-consuming task of insurance billing. It's a practical model for practitioners to spend more hands-on time with patients and offer a wider variety of treatment options. 

Kristin Thomas,PT, DPT and owner of Core Wellness Physical Therapy, said when she worked at traditional clinics, it was cost prohibitive to take your time with patients. Reimbursement rates didn’t allow therapists to spend as much hands-on time with patients as they needed. When she opened her own practice, she wanted to do things differently. So, she went cash-based.


Reimbursement rates don’t allow therapists to spend as much hands-on time with patients
- Kristin Thomas, PT, DPT

Practitioners who want to take their time and provide more comprehensive care, while earning their full rate, may benefit from adopting a cash-based model. 

Cash-based practices are cost-effective for clinic owners because they don’t require additional staff for medical billing. This model ensures practitioners get paid in full for their services, at the time of service. It’s a viable option for practitioners who don’t want to pay a $40-$60k salary to someone to handle billing and insurance claims.

What Are The Benefits Of Running A Cash-Based Practice?

The main benefits of running a cash-based practice are making more money and better patient care. With a cash-based practice you get paid your full rate upfront. Without the interference of insurance companies, providers can treat patients as they see fit and offer a wider range of services.

benefits of a cash based practice

Documentation is Streamlined

Less paperwork allows for a more streamlined system of documenting patient care. Charting, reporting, and billing are linear processes, with no need to do anything twice.

Drastically Decrease Billing & Claims Issues 

When you bill the patient directly, most billing issues disappear. You set up a treatment plan and a fee structure. You present it to the patient before treatment begins. They pay it at time of service or on an agreed upon schedule. It’s all simple and straightforward.

With medical billing, you have to wait for insurance companies to accept your claim and reimburse you for services rendered. Even when insurance providers pay, there’s often a remaining balance that you have to collect from the patient. That can be a full time job, and there’s no guarantees you’ll get that money.

Fewer Staff Required

When you eliminate medical billing and balance billing, you don’t need as many employees. There’s no need to hire someone who understands CPT codes and modifiers. Out-of-network practices have significantly less administrative tasks to complete than in-network providers.

Lower Overhead

Less staff means lower overhead. You don't have to pay someone a full-time salary to handle medical billing with a cash-based practice. You also won’t have to pay someone to chase down patients with remaining balances. The money you’d spend on that as an in-network-provider becomes profit as an out-of-network provider.

More Practice Management Software Solutions

Every clinic needs software to run their practice. Cash-based practices have a wider array of practice management software solutions available to them. Clinic owners can choose software that handles all their business needs in one place, without restrictions.

Diversified Income

With fewer restrictions, you can offer a wider variety of services that aren’t traditionally covered by health insurance. Offering cash-pay services is a great way to create multiple revenue streams. It’s also an opportunity to create a niche for yourself. Offering fitness instruction, nutrition counseling, or other wellness services keeps patients coming back, even after their initial treatment ends.

How Does Cash-Based Billing Work?

In a cash-based billing model, patients pay the full cost of their treatment upfront. The provider doesn't bill insurance and is free to set their own fees. Patients who choose a cash-based practice often get more personalized care and more control over their treatment plan.

As an out-of-network provider, practitioners can set their own prices. Patients are responsible for paying those fees directly. This eliminates insurance claims and associated administrative tasks.

Cashed-based practices have the freedom to offer a wider range of services, such as wellness programs and group classes, which may not be covered by insurance. This provides an opportunity to expand the scope of their practice and diversify revenue streams.

What Are The Cons of Cash-Based Billing?

The biggest con of cash-based billing is that not everyone is able to afford it. Patients may have higher out-of-pocket costs when seeing an out-of-network provider. Therefore, choosing a niche and marketing your services to people who need and can pay for your services is essential.

Cash-based billing isn’t a sustainable business model for all practices. It’s important to consider your goals. What do you want your clinic to look like? Who do you want to treat? What services do you want to offer? How do you want it to operate? 

How Does Insurance Billing Work?

Insurance billing involves submitting and following up on claims to receive payment for healthcare services. The process includes: verifying patient information, confirming insurance coverage, submitting claims, and following up on payment. Medical billers and coders play a key role in ensuring a smooth and efficient insurance billing process.

What Is Out-Of-Network Billing?

Out-of-network billing is when a healthcare provider bills a patient directly for services not covered by insurance. Payment is the patient’s responsibility, though they can submit a claim for reimbursement with their insurance provider. Out-of-network billing gives patients greater flexibility in choosing a healthcare provider and more treatment options.

How To Circumvent The Challenges Of Cash-Based Practices

Choose a niche that is willing to pay out-of-pocket. Keep in mind, a cash-based practice isn’t always more expensive than going to an in-network provider. Focus on creating value, results, and communicating the benefits. Specializing in something that patients can’t often get in traditional clinics is a good strategy.

Kristin Thomas, PT uses a cash-based model. Since she’s able to spend more hands-on time with patients and provide personalized care, she can often treat patients in fewer visits than traditional clinics. So, the out-of-pocket cost isn’t necessarily greater than seeing an in-network provider. 

Other ways to overcome challenges with billing patients directly are to offer a discount for upfront payments, implement a sliding fee scale, offer payment plans, or negotiate lower rates for select services.

what practice model is right for you?

How Can I Switch To A Cash-Based Practice?

You can follow these steps to switch to a cash-based practice. First, assess the legal and ethical requirements of a cash-based practice. Then, establish a pricing structure, market your services, and transition your current patients to the new payment model.

Does your business currently offer insurance based billing?
Follow these 9 steps to switch to a cash-based practice model.

  1. Research local laws and regulations regarding out-of-network providers and cash-based billing.
  2. Analyze your current patient base and services provided to determine if a cash-based model is feasible.
  3. Set your rates and develop a pricing structure.
  4. Notify your patients and insurance providers of your intent to switch to an out-of-network model.
  5. Develop a process for submitting claims to insurance providers on behalf of patients, even though you are no longer in-network.
  6. Provide patients a detailed invoice they can submit to their insurance provider for reimbursement.
  7. Implement a payment plan option for patients who can’t afford to pay the rate upfront.
  8. Consider partnering with other healthcare providers to expand your referral network.
  9. Evaluate the financial impact of the switch, and adjust your business plan as needed.

Specific steps may vary depending on your specialty, location, and individual circumstances. It’s wise to consult a healthcare attorney before switching to a cash-based practice model.

How Should I Tell my Patients I’m Going Cash-Based?

Communication is key: Give patients ample notice and explain the benefits of your new payment model. Be transparent and explain the reasoning for switching to a cash-based model. Emphasize that you’ll still provide high-quality care. Be prepared to give referrals to those who can’t afford the new pricing structure. 

Here’s an action plan for telling patients you’re switching to a cash-based practice:

  1. Notify patients 30-60 days in advance.
  2. Explain the reason for the switch and how it benefits both the patient and provider.
  3. Be helpful and provide resources and referrals to those who can’t afford the new pricing structure.
  4. Provide patients an itemized bill and a receipt for their visit.
  5. Explain how patients can submit claims to their insurance company for reimbursement, and offer to provide any documentation they need.
  6. Be available to answer any questions.

How Can I Market A Cash-Based Practice?

Cash-based practices market their specialty, individualized treatment plans, and their wide array of services to their niche. Whereas, in-network providers market to people with insurance. Word-of-mouth is the best kind of marketing for cash-based practices. Happy customers and impressive results is the best form of advertising.

There are many ways to promote your business and get more patients in your clinic. Choose practice management software that has built in marketing tools. Network with other healthcare providers to build up your referral network. Create a good killer website that showcases your services. Also, make it clear that patients may be able to get reimbursed by their insurance company.

Emphasize the value you provide by focusing on the benefits you provide patients. You can drive word-of-mouth marketing by creating a system for collecting reviews online and asking for referrals. Once the word is out, you might be surprised by how many people are willing to pay out-of-pocket.

Can I Still Use ClinicSense if I Do Not Operate A Cash-Based Practice?

Yes! ClinicSense allows patients to book online, practitioners to create SOAP notes, and clinic owners to market the practice.  You can even use ClinicSense to design a custom intake form to collect insurance information before clients come in for their appointments.

After that, the choice is yours if you want to manually submit for the patient, or provide them instructions on how to submit it themselves.

Typically submitting an insurance claim will take your patient around 5 minutes as most offer simple online claims and have apps. So it's easy for your patients to do it on their own. ClinicSense will provide your clients with their invoice, and practitioner license information, so they can simply submit the receipt and their claim will be accepted! (if their insurer covers the services rendered.) Alternatively, if you still wish to submit on behalf of certain clients each insurance company will have their own online portal where you can submit.


Now that you understand the benefits of running a cash-based business, why not take the plunge! ClinicSense can help you easily switch over to help you save money, time, and startmarketing your business to get in front of more people. Try the free trial today!

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