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Free market health care: Paying cash for medical services

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Daniel Goldberg, founder of The Free Market Health Group.
Daniel Goldberg, founder of The Free Market Health Group. - ()

The Free Market Health Group, a Parsippany-based consulting firm, helps physician practices venture outside health insurance networks and contract directly with self-funded employers looking for affordable medical care for their employees.

Founder Daniel Goldberg launched the new company last fall, and said his clients are physicians in New Jersey and elsewhere in the country that want an alternative to the reimbursement rates and administrative paperwork that membership in an insurance network entails.

The idea for the new company grew out of his experience in the health care sector: Goldberg's 5-year-old company Gold Medical Marketing provides business development, marketing and public relations consulting to specialist physicians, primarily surgeons.

"We work with physicians who are opting to leave the insurance model, and we serve as consultants for them," Goldberg said. "We connect them to patients and employers who are looking to pay cash for medical services."

For example, among Goldberg's clients is a large ambulatory surgical center in New Jersey whose physicians cover a range of surgical specialties, including orthopedics and ophthalmology.

The Free Market Group helped this surgical center develop prices for their surgical procedures.

"We make sure their prices are in line with what others in the cash-pay field are charging, so they are competitively priced," he said. "We take these prices for all the procedures done in the surgery center and put them together, almost as a menu, and we bring them to the employer. We then set up direct contracts between the physician group or the surgery center and the employer."

Goldberg said besides self-funded employer groups looking for quality, lower-cost health care, his company also advises individual consumers who are paying cash out of pocket for surgical procedures. That's because high-deductible health plans are becoming more common — and since consumers are spending their own money for much of their care in these plans, they are motivated to go shopping for health care bargains.

"People who have high deductible plans, and employers who self-fund the health benefits of their employees — those are the biggest demographic that we focus on," Goldberg said.

Free Market Health Group also helps negotiate contracts between physician groups and third party administrators that manage health plans for employers.

"They can save their client money and that makes their client happy, which makes everyone happy," Goldberg said.

He said individuals who are looking to save money on health care include people who are uninsured; people with high deductible plans and people "who just don't want to stay within the confines of their insurance network."

And while it's certainly possible to find a range of prices for most surgical procedures, there are limits to what most people can afford to pay for out of pocket, Goldberg said.

"I have physicians who charge $5,000 for arthroscopic knee surgery," done as an outpatient procedure in an ambulatory surgery center; Goldberg said that's considerably less than most hospitals charge. "However if you needed spine surgery, that may cost $20,000 on a cash pay basis and not many people can afford that."

Goldberg pointed out that the ranks of the uninsured include those who are uninsured by choice: wealthy individuals "who will pay however much it costs for anything."

Goldberg, who is 29, said he is a prime example of an individual paying cash for health care.

His health insurance policy has a $6,350 deductible.

"The reason I bought this policy is because I will pay cash for everything," he said. "I just want to be covered if I have a heart attack or a stroke or I get wheeled into the ER."

He is scheduling a diagnostic procedure which will cost less than his deductible.

"So I'm going to be paying cash for it," he said. " I have to find somebody who takes cash, and if I'm paying for it, I'm looking for both price and quality. So if the hospital is going to charge me $5,500 but a surgery center will charge me $1,800 – that's where I'm going."

Free Market Health group is working with about 10 physicians groups, mostly surgeons, in New Jersey, New York, California, Florida and Texas. And the company works with about 70 employer groups that are shopping for health care providers.

Goldberg noted that exiting the health insurance network system is not an easy decision for doctors to make.

"There's a risk in leaving the insurance network," he said. "So as much as they malign the insurance network and how long it takes to get paid and all the administrative stuff they have to go through, they still know that they are going to be paid at some point."

Larry Downs, chief executive of the Medical Society of New Jersey, said that while most New Jersey doctors still participate in insurance company networks, a number are choosing to go out of network.

Doctors, he said, constantly re-evaluate whether the discounted reimbursements they get under their contracts with insurers are worth the effort to remain in that network.

"As payers ratchet down the amounts of money they want to pay for certain procedure, doctors continually reevaluate whether the amount of patient traffic they are getting from these insurance contracts is sufficient to support the discounts and the additional tasks that are required by the insurer," he said.

Downs said he's not familiar with the Free Market Health Group, but familiar with the concept.

"Direct to employer is certainly a new and emerging way for practices to align themselves to provide medical care without all of the bureaucracy and administrative costs that come with the traditional (insurance) contract," he said.

And he said that high deductible health plans could result in more out of pocket spending by consumers — and thus motivate them to shop for a health care provider they can afford.

"If someone has a $6,000 deductible, you could argue that that person is never going to touch their insurance and they're going to pay for all of their care out of pocket," Downs said. "So I could see people being very discriminating about cost and quality."

Downs, however, said there is a potential downside to this new movement toward consumer-driven health care: "They may avoid care for financial reasons, when they should be getting some regular care."

Downs said some doctors don't participate in networks because their specialty is in high demand, and they don't need the insurance network to steer patients to them.

Goldberg said some physicians are leaving the insurance networks because it's too much of a burden for them.

"There is too much administrative work, they've become more bill collectors than physicians," he said.

But Downs feels the primary reason doctors decide to leave insurance networks is compensation.

"The reimbursement haven't kept up with practice cost and they are not able to negotiate higher rates and therefore they go out of network," he said.

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