Did you know that between 2018 and 2023, we saw the number of direct primary care (DPC), cash-based practices, and concierge practice sites grow by 83.1% and the number of clinicians participating in them by 78.4%?
Why are we seeing such a seismic shift towards these models? After all, 42% of physicians who go cash-pay earn less money in the first 2–3 years of operations. However, they also report higher satisfaction and clinical autonomy.
If you’re considering making the change, we’ll help you make an informed decision by providing a high-level roadmap to help you start a cash-based practice from scratch.
What Is a Cash-Based Practice?
Let’s first define our terms. You may hear certain practice types referred to as a cash-only medical practice, or cash-pay practice, or a direct-pay practice, or a private-pay practice. Are these terms interchangeable?
Broadly speaking, they all describe a practice that collects payment directly from patients rather than billing insurance.
This model often includes specialties such as:
- Physical therapy
- Functional medicine
- Integrative medicine
- Psychiatry
- Dermatology
- Chiropractic
- Medical spas
- Many others
However, there are a few important distinctions between these types of practices.
Fully Cash-Only (Direct Pay, No Insurance Involvement)
With this model, patients pay out of pocket at the time of service. The practice does not bill insurance at all, with no superbills and no reimbursement support.
Hybrid (Out-of-Network + Superbills)
With the hybrid model, the practice does not contract with insurance, but they do provide superbills that patients submit for reimbursement. Patients will pay upfront and may receive partial reimbursement.
Why Start a Cash-Based Practice?
Like any business venture, opening a cash-pay practice has its pros and cons. However, when properly run, they offer a classic win-win with benefits for both the practitioner and the patient.
Cash-Based Practice Benefits For Practitioners
Let’s start with the financials. You may earn less money in your first year of operations as you pay start-up costs and need some time to find your customer base. However, you will see higher profit margins with direct payment collection once you’ve built your business and your customer base.
Cash-pay practices:
- Get payment at the time of service, versus an insurance-based practice that can wait anywhere from 25–60 days, with patients in accounts receivable
- Have no claims processing, and no payer compliance overhead
- Could pay half the staffing costs by only needing 2-3 full-time staff members, compared to the 4-6 full-time staff members needed to manage billing and other admin-heavy tasks.
Besides the many cost savings of a cash-only practice, you will also enjoy more clinical autonomy. You now have the freedom to design treatment plans based on your patients’ needs instead of insurance codes.
This act alone will give you a higher level of satisfaction in your work, while you’ll also enjoy more work-life balance with fewer admin tasks on your plate every day.
Cash-Based Practice Benefits For Patients
More people are choosing cash-pay providers because they receive a higher level of care. Their physician is now able to give them more time and more attention with longer appointments. Appointments are typically 45–60 min, rather than the rushed 15–30 min you get with the insurance model.
Your would-be patients will also have immediate access to care, without referral requirements. And they will also appreciate the transparent pricing, no surprise bills.
How to Start a Cash-Based Practice: Step by Step
Step 1: Define Your Niche and Ideal Patient
You need an identity and a specialty. The business models for a cash-based functional medicine practice and a cash-based integrative medicine practice are similar; however, you will be marketing to slightly different demographics.
Maybe your specialty is in:
- Functional medicine
- Sports physical therapy
- Integrative psychiatry
- Medical aesthetics
- Concierge primary care
These are all high-demand areas that are well-suited to the cash-pay model.
Ensure There is Local Demand
At the very core, your specialty is still a product you’re trying to sell, and you need to ensure there is a good product-market fit (PMF).
You may suspect, or have anecdotal evidence, that there is demand in your area, but you need to prove it. Make data-driven decisions to validate demand by analyzing local competition for your ideal patient demographics. If there’s no competition, that doesn’t mean there’s no demand.
It could mean it’s an underserved area and ripe for your taking.
Step 2: Create a Business Plan
This is tragically often skipped in the process. Far too many DPC and cash-pay practices will launch without a formal business plan in place.
You need one, and your cash-based practice business plan will look completely different than a traditional one.
It will need to include some combination of:
- Executive Summary: Who are you? What is your mission and vision? What are your objectives?
- Company Description: What is your model? All-cash? Hybrid? DPC membership?
- Market Analysis & Research: Data to prove that the demand for your services exists and is strong enough to sustain you over the long term
- Products/ Services: What specific services/specialties will you offer?
- Marketing & Sales Strategy: How will you find your target customers and position yourself in front of them?
- Management & Organization: Who is involved and what is their role? You may start as a sole proprietor.
- Operations Plan: Describe your workflows, processes, and logistics. Who are your possible suppliers, and what are your physical requirements?
- Financial Projections: In most cases, this is your Model patient volume × session rate × frequency
- Appendices: This may include permits, legal documents, or market research data.
Taking the time to create a thoughtful business plan can save thousands of dollars, or even save you from a failed venture by asking the right questions and flagging the right potential issues before you have to pay for them.
Step 3: Legal and Regulatory Requirements
This is another area that should be covered in your business plan, because the list of a cash-based practice’s legal requirements is long, with zero room for errors.
On the business side of things, you’re going to need to form an LLC or an appropriate legal entity to separate yourself from the business and insulate you from risk.
Next, your state will have its own requirements for business licenses and other certifications. You’re going to have to register with your state’s professional licensing board, as well as any other states you intend to operate in.
It’s also very important to insure yourself by purchasing:
- Professional Liability (Malpractice) Insurance
- Commercial General Liability (CGL) Insurance
- Cyber Liability & Data Breach Insurance
- Commercial Property Insurance
You’re also going to need a firm understanding of Medicare opt-out rules (if applicable), as well as everything you need to do to remain in HIPAA compliance at all times.
Step 4: Set Your Pricing
There are no strict guidelines around how much to charge cash-pay patients. It’s more about what your target market is willing/expecting to pay.
Research competitor pricing in your area and specialty, but don’t build your business by undercutting them and making that your only competitive advantage.
How To Set Prices For a Cash Practice
Cash-based practice pricing should always factor in your:
- Overhead and recurring costs
- Desired income
- Patient volume capacity
Your pricing plan should also include your billing model. Will you offer superbills for out-of-network reimbursement? Are you going to adopt a membership or subscription model to create recurring revenue?
Transparency is key because nobody’s target market likes to see hidden costs. Be sure to publish prices on your website and be upfront about every aspect.
Step 5: Choose the Right Technology Stack
This is an absolutely crucial business that can make or break your practice. Too many start-up practices try to save money by going with a barebones cash-based practice EHR, then add a series of free or cheap bolt-on programs to keep costs down. They end up with a Frankenstack that weighs their operations down with inefficient double-entry and costly mistakes.
First and foremost, your functional medicine EHR needs to support cash-based workflows, with no insurance modules you’ll never use or need.
Some of the EHR features you’re also going to need:
- Integrated payment processing: That is PCI-compliant, supports credit cards, and recurring payments from subscription models
- A secure patient portal: Today’s customers expect online scheduling, secure messaging, and form intake
- Telemedicine: This can really help you expand your reach to underserved patients
Simply put, you need more than just a simple cash practice billing software – you need an operating system for your whole practice. This is what Cerbo provides. It is purpose-built for cash-based practices with integrated payments, charting, a secure patient portal, and lab integrations.
Step 6: Build Your Brand and Online Presence
You’re opening a practice because you have a specialty, not because you have a degree in cash-based practice marketing. That’s okay, you don’t need one.
The first thing you’ll need is a website. It doesn’t need to be enterprise-level, but it does have to be secure and professional-looking. Include clear messaging about who you are and why your cash-pay model is ideal for meeting people’s needs.
Don’t forget to claim and set up your Google Business Profile. This is completely free and one of the most important aspects of ranking locally.
Eventually, you will want to consider some form of content marketing, such as blogs or white papers, to educate your customers about the importance of your services. And finally, you’re going to need a social media presence. This can include Facebook, Instagram, or answering common patient questions on TikTok.
You may also want to experiment with local targeting for Facebook, Instagram, and Google PPC ads.
Step 7: Develop a Patient Acquisition Strategy
As helpful as online channels are for acquiring patients, we need to remember that your number one driver will be referrals and word of mouth. This means your patient experience is your competitive advantage and your number one marketing tool.
You will also want to build a physician referral network by building relationships with other providers and referring patients back and forth. Obviously, only do this with physicians you trust, because they are now an extension of your brand.
Consider hosting community events, such as workshops or health talks. This can be a great way to build local connections and partnerships, without hardcore selling.
And finally, make sure your staff is properly trained in confident messaging when discussing your price structure and the value you bring to a patient’s everyday life. They are your front-line brand ambassadors and the most important part of cash-practice patient retention.
Step 8: Launch and Learn
If you took the time to prepare a business plan, or prepare for that plan to change over the first two years.
You might consider a soft launch with a lower number of patients. This can help you find the kinks in your workflow and iron them out as you collect feedback along the way.
Data-driven decisions will be incredibly important during these early years. Make sure to track your:
- Patient acquisition cost
- Retention rate
- Revenue per visit
- Patient satisfaction
Expect these numbers to be relatively low in your first couple of years, but you should definitely see the potential to scale relatively quickly.
Common Mistakes to Avoid
Avoid these practice killers in the early stages:
Underpricing
Remember. Your price is not your competitive advantage. Your value is.
Skipping marketing
Relying on word-of-mouth does not mean ignoring traditional marketing
Not training staff to discuss payment
This is a truly underrated part of your operations. Provide scripts and role-playing exercises.
Choosing the wrong EHR software
A bloated EHR designed for insurance billing is almost as bad as no EHR at all.
Ignoring superbills
These expand your addressable market significantly.
Not planning for the financial dip.
Expect 12–24 months of lower revenue.
Cash-Based Practice FAQs
How Much Does It Cost to Start a Cash-Based Practice?
Your startup costs can range anywhere from $10,000 for basic primary care setups to $150,000 for more equipment-focused specialties.
Can You Run a Cash-Based Practice Without Accepting Any Insurance?
Yes. Fully cash-only practices exist across specialties. You can also offer superbills so patients can submit for out-of-network reimbursement on their own.
What’s the Difference Between a Cash-Based Practice and Concierge Medicine?
Concierge medicine typically charges a retainer/membership fee for enhanced access and may still bill insurance for services. Cash-based practices collect payment directly per visit without insurance involvement.
Do Cash-Based Practices Need an EHR?
Yes! An EHR for cash-based practices streamlines charting, scheduling, payment collection, and patient communication. The key is choosing one designed for cash-pay workflows, not one built for insurance billing.
How Do I Transition an Existing Practice to a Cash-Based Model?
Start with a transition plan (6–12 months). Notify patients, credential out of insurance panels gradually, set pricing, and invest in marketing the new model.
How Cerbo Helps You Start a Cash-Based Practice
As mentioned earlier, you need an EHR that was built with cash-based practices in mind. Cerbo is purpose-built for cash-based care models such as DPC, functional medicine, integrative medicine, and medical spas
Our cash-pay EHR’s features include:
- Integrated payment processing that collects payments at the time of service, while also helping you manage subscriptions
- Flexible charting with Chart Parts templating for rapid customization
- A secure Patient portal for scheduling, messaging, forms, and payment management
- Specialty lab integrations with Genova, Doctors’ Data, Quest, LabCorp, and more
- Supplement and inventory management for functional/integrative practices
- No insurance-billing bloat. Everything is streamlined for how cash practices actually work.
Are you ready to see what it can do for you?
