Why Per-Physician Pricing is Wrong

Software for healthcare has traditionally been priced using per-physician models, hurting new practices and misaligning incentives.

Posted by Sharud Agarwal on 2019-07-23

You take a look at any software created for doctors or healthcare providers and you'll see that the pricing is most likely based on the number of physicians at the practice or organization. Why do we keep accepting this as a smart pricing strategy. This hurts new practices, large established practices, and any doctor or provider trying to do a slightly different approach to their own pricing. We need to move to usage-based pricing, just as most other software companies do.

New practices have to make tough decisions

Physicians that are just starting a new practice and have a small patient panel are desperately trying to find the best software that will support and help them grow, but also not break the bank while they are in early stages. These per-physician fees, often $300/mo for an EHR, are too costly for any new business, let alone a doctor that has undertaken several other costs in order to get started. One of the great promises of software is how inexpensive it is to supply. There is no physical space or equipment or hardware that needs to be developed and sold. We are squandering this great advantage of software when we don't provide a usage-based pricing model.

When faced with this reality of a high cost regardless of usage, physicians at new practices will likely end up choosing software that is "cheaper" (has a lower per-physician price) but also won't be as good and won't support the doctor as their practice grows. If the doctor does choose the more costly solution, they often run out of money before they have the chance to become bigger and sustainable.

Large practices also suffer

One of the great innovations of DPC is the alignment of incentives between a patient and physician. Patients pay their doctor directly a fee that is completely transparent and they feel is worth it to them. When large practices use software that uses a per-physician fee, their software vendor suddenly no longer is incentivized to help their grow their practice. The vendor only makes money if you add more physicians, rather than more patients which is how the doctors make money. This is why you don't see telemedicine being a core feature of EHRs today. These virtual visits allow doctors to see more patients without the need for more physicians to handle the larger patient panel. By implementing a per-patient pricing model with an EHR, the software vendor is incentivized to help you see as many patients as possible.

Innovation is stifled

In the world of software, companies routinely charge based on usage. Cloud compute services such as AWS and Google Cloud have championed this approach. We often see prices such as a $0.005 (yes that is correct) per transaction. These prices allow entrepreneurs to start new companies at record pace with almost no startup costs. Only once these companies scale to be large does the cost become something that Amazon or Google profits off of. Because new companies can get started so cheaply, we are seeing record amounts of innovation and new ideas. We need to do this as well in healthcare, allowing doctors and healthcare providers that use our software to think outside the box and to innovate while also not having to worry about huge fixed costs for software that they barely use.

Per-patient per month

The solution is to move to a per-patient per month fee. By charging a small amount per patient, we are completely aligned with the doctor's incentives and we can support practices that have 0 patients all the way to large, established practices. We can also support micropractices that are looking to have sub-100 size patient panels or other forms of care such as mental health, where therapists often only see 20 clients actively.

If you have been looking to start a new practice, are feeling pinched by your costs, or feel that you want software that is more willing to be receptive to your needs, then I encourage you to take a look at options that utilize this pricing structure. Akute Health, an EHR built for direct care, charges a small per-patient per month fee and we are ready to support you from when you have 0 patients, to when you have 1000. Check it out and request a demo by emailing us at info@akutehealth.com.