Physician Patient

The Direct Pay (DP) Psychiatric Practice Model

A key question for psychiatrists (and other physicians): How will we and can we select a model of payment for our services to enhance quality psychiatry (medical practice) as defined by our profession and our patients?
In 2014, the prevalence of psychiatrists doing Direct Pay or cash practices is the highest among US all physicians. A recent survey by Tara Bishop et al reports as many as 45% of solo and small group psychiatric practices nationwide are now Direct Pay (Ref .1). This is in response to growing patient and family demand for quality psychiatric services. Clearly, psychiatrists who want to do clinical practice have many options for arranging their venues of practice, including Direct Pay independent office practice.
Doing outpatient office-based psychiatry is a time-dependent, bio-psycho-social medical practice model well suited to direct pay from patients. Given increasing deductibles for health care insurance, patients and families engaged in the health care value conversation are asking pertinent questions: how much will their care cost and how much and for what are their doctors paid? Patients like the idea of directing pay to their doctors.
There are four reasons why independent psychiatrists are going to Direct Pay and are increasingly declining contracts with insurance companies, Medicare, and Medicaid. These are:
1. Low pay. Medicare, Medicaid, and private health care insurance payments are insufficient to provide both a decent living for the doctor and needed staff and appropriate practice venues to do quality patient care.
2. Restrictive scope of psychiatric practice. In most managed care settings in Minnesota, scant time is allowed for patient and family encounters with psychiatrists. Clinics frequently assign psychiatrists to doing brief, infrequent patient visits involving predominantly medication evaluations and prescriptions. Often the psychiatrist’s boss or administrative authority does not view a doctor-patient relationship as the organization’s priority to do quality patient care, and burdens of electronic medical record (EMR) documentation override contact and interaction with patients. Today, the clinic, insurance company or government, rather than the physician and medical profession, define the psychiatrist’s scope of medical practice with patients.
3. Data privacy and confidentiality. This is a big concern for psychiatrists and their patients. What information goes on the clinic’s electronic medical record (EMR), who has access to it, for what purposes, and for how long? Moreover, from the psychiatrist’s standpoint, how does posting a patient’s sensitive clinical data on an EMR affect the doctor’s stance towards the patient? And, DSM 5 psychiatric diagnoses are frequently stigmatizing to patients. So, a good share of our clinical data needs to remain personal if psychiatric treatment is to be respectful, patient-centered and effective. Most practicing psychiatrists believe that doctors and patients should be in charge of when and how this information is used or conveyed to others, and patients (and families) want to and need to trust their psychiatrist and other mental health professionals involved in their care — as do those referring patients to psychiatric consultation or care. Yet, many patients do not know if or who the psychiatrist is on their case, and despite HIPAA privacy rules, patients and families don’t trust the “System” — be this a large clinic, insurance company, or government program — to safeguard their privacy and confidentiality when seeking or obtaining psychiatric care (Ref. 2)
4. Access to psychiatrists. Patients and families are often told by the insurance plan or Medicaid that there are no psychiatrists available to see them in their HMO, VA clinic, or insurance network, or that they must wait weeks or months for an appointment to see a psychiatrist. DP psychiatrists are frequently contacted by dissatisfied patients and families looking for a timely psychiatric consultation and/or ongoing care by a psychiatrist. Also physicians and mental health professionals in the community are very frustrated when looking for psychiatric consultation and referrals.
Outpatient psychiatry is a time-dependent, bio-psycho-social medical practice which is well suited to a Direct Pay payment model. A cardinal principle of doing quality psychiatry is the expectation that both patient and physician are accountable to each other within a professional, doctor-patient relationship framed and guided by Hippocratic ethics.
Due to high insurance deductibles and co-payments, patients want and need to know how much their care will cost them in insurance premiums and out-of-pocket, and they are increasingly interested in how, for what, and how much their doctor is paid.
Switching to a cash-based outpatient psychiatry practice can be done in doable steps (Ref. 3 Beecher, 4 Parnell). The Association of American Physicians and Surgeons (AAPS) provides useful information on how to establish a Direct Pay medical practice and opt out of Medicare and insurance contracts. (Ref. 5).
Lee H. Beecher, MD
References (internet links):
Lee H. Beecher, MD is president of the Minnesota Physician-Patient Alliance (MPPA), a health care think tank founded in 1997 as a 501 (c) 3 charitable non-profit organization in Minnesota (, an adjunct professor of psychiatry at the University of Minnesota, past-president of the Minnesota Psychiatric Society, distinguished life fellow of the American Psychiatric Association, fellow of the American Society of Addiction Medicine, ABPN certified in psychiatry and addiction psychiatry, and a member of the editorial advisory board of Clinical Psychiatry News.
Teaching Objectives: Participants will:
  • Realize that the prevalence of outpatient solo and small group Direct Pay (cash) psychiatric practices nationwide is now very high and growing, 45% in a 2012 survey by Tara Bishop et al (
  • Understand from the perspectives of patients, families, and doctors why outpatient psychiatry has the highest percentage of cash practices among all medical specialties.
  • See how Direct Pay outpatient psychiatry and addiction medicine services are well suited to Direct Pay — in terms of patient motivation, satisfaction, physician flexibility, and patient-centeredness.
  • Inform policymakers that health care savings accounts (HSAs) and health care cash accounts for both for private and public insurance enrollees coupled with high deductible health care coverage will improve access to psychiatrists.
  • In the Medicare and Medicaid programs, permit defined $ contribution directed by patients to physicians of their choice.


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