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HMNo: The name of this practice says it all


By forgoing all types of insurance, an FP couple created a patient-centered practice based on the tenets of old-fashioned medicine.


The name of this practice says it all

By forgoing all types of insurance, an FP couple created a patient-centered practice based on the tenets of old-fashioned medicine.

By Suzanne Duke
Senior Associate Editor

HMNo, a family practice that operates without the interference of insurers, is the brainchild of Denver family physicians Jonathan Sheldon and Heather Sowell, a husband-and-wife team. It sprang from their desire for an independent practice based on mutual patient-physician respect. The FPs work for their patients, who in turn pay them for their time and expertise. No hidden financial incentives. No capitation agreements. No cookbook, population-based medicine.

Frustrated in a staff-model HMO in Montpelier, VT, Jonathan and Heather decided six years ago that they could no longer practice medicine according to managed care's edicts. "We knew that going to Vermont was a bad move soon after we arrived," Heather says. "We were just four months into our one-year contract, and we wanted to give notice."

Though they relished their relaxed lifestyle with their infant daughter in the Vermont capital, they knew they couldn't survive outside the HMO there, because the Green Mountain State has a small population. So in 1995, Jonathan and Heather moved back to the Denver area, where they had both done their residencies and still had many professional contacts. They bought a house on the edge of the city, and took locum tenens and urgent care work. Two years later, their son was born.

Step 1: Ditch the middleman

Though Jonathan and Heather knew what they wanted in a practice—independence, a pleasant atmosphere for patients, and a low-stress environment—they didn't act on the idea until the summer of 1997. When they did, they had high hopes: They thought that, with their connections in the medical community, they'd have 3,000 patients within six months of opening—even though Denver has one of the highest concentrations of managed care in the country. HMOs alone cover 42 percent of the population there.

Was this a carefully planned startup, replete with lots of market research? Hardly. The couple forged ahead with no financial or business plan, and came up with a ballpark launch cost of about $65,000 to cover start-up and three months' operating expenses. They then struck a deal with a local banker, who let them make interest-only payments on their 9.75 percent small-business loan of $72,000.

In developing their practice, Jonathan and Heather sought to remove the middleman from the doctor-patient relationship, thereby restoring the strong physician-patient bond that was common in medicine decades ago. Simply put, HMNo does not deal with managed care. Patients pay the FPs directly; there are no insurers or employers for the practice to contend with—or answer to. As HMO employees, Jonathan and Heather practiced to please the plan—an arrangement they considered hypocritical and distasteful. Now, having thrown off the HMO yoke, they're directly accountable to their patients.

As such, their pay formula is straightforward: They figured that the typical FP in their region nets about $150,000 annually, so the two of them calculated a charge based on one full-time-equivalent physician's earnings. Concluding that they'd need to gross about $480,000 to do that, they worked backward to calculate their hourly charge based on a 40-hour week: $240. That means that patients who come in, say, for a 10-minute follow-up visit pay $40.

Lab work and other tests are priced according to the materials used and the time it takes to interpret them. For example, a chemistry panel—time-consuming to interpret—costs more than a simple thyroid test. "Many offices see labs as a cash cow and mark them up horribly. We talked to one patient who just about fell out of his seat when we told him how much we charge for a PSA—$45. He'd been paying $110," says Jonathan.

Within six months after they decided to start the practice, Jonathan and Heather had found just the right space, written some promotional material, refurbished the office, and registered their name, HMNo, in the federal trademark office.

Then they recruited Marcie Carter, a psychiatric RN from Idaho. It didn't matter to the doctors that Marcie had never done family practice nursing, or even worked in a medical office. They hired her because she fit the bill for HMNo: smart, professional, and friendly. Signing her up was no easy task, however, considering that the competition was paying a lot more for experienced RNs. They couldn't offer Marcie a $1,000 signing bonus or other perks, but they gave her indemnity health coverage. Marcie earns a respectable salary, near the median for RNs in the West.

HMNo becomes a reality

In January 1998, Jonathan and Heather moved into a professional building in Englewood, a middle- to upper-middle-class suburb just south of Denver. The building is in a residential and commercial neighborhood and is handicapped-accessible. The main reason the doctors chose the office, though, was that it had the right layout: two exam rooms, a consultation room with floor-to-ceiling windows (and an unobstructed view of the Rockies), a lab, and two business offices (one for Marcie, one for the doctors) for $1,750 a month.

Heather picked the carpeting, fixtures, and wall hangings with patients' comfort in mind. While many offices get by with institutional furnishings, she opted for maple chart holders to line the small hallway, and selected posters with tranquil, woodsy scenes for the exam rooms. "I chose these water-nature pictures," she explains, "so people could daydream and transport themselves to some really great hike or vacation they've taken. Then, if they're having stitches, say, their minds can wander to a more peaceful place. You can't do that with a Norman Rockwell print." The work paid off. The office has soft lighting, warm, pleasing tones, and a homelike interior filled with lush green plants.

In February 1998, the couple inaugurated the new practice with an open house for local physicians. Despite favorable coverage in the Denver newspapers, however, patients didn't exactly pour through the door. "We naively thought they'd stream in here. We had this Field of Dreams mentality: 'If we build it, they will come,'" admits Heather.

The reality has been sobering. Though they netted $3,500 in January, the couple lost money in 1998 and 1999. During the lean years they relied on savings, and until July 1999 Jonathan worked as a locum tenens.

Unlike managed care doctors, who draw patients simply by being on the physician roster, Jonathan and Heather have had to market themselves. To help create and maintain a high profile for HMNo, Heather writes a monthly newsletter, House Call, which the practice mails to patients. And Jonathan keeps their Web site,, up to date with fresh content.

The two are no strangers to the media. They've appeared on local and national television and radio, and unabashedly call the press and say, "Hey, you should do a story on us." They've also resorted to distributing irreverent press releases with headlines like, "Some Patients Prefer Swallowing Hot Wax to HMO Care."

Early on, the couple spent nearly $2,000 a month on marketing, including T-shirts, refrigerator magnets, and Welcome Wagon ads. But they pared that figure to $600 a month when they realized that word-of-mouth was attracting only three or four new patients per week. That figure jumped to four per day after Jonathan and Heather appeared on CBS's The Early Show in December 1999.

A few months ago, Jonathan became a private-citizen member of the state legislature's Subcommittee on Health Insurance and Catastrophic Coverage, which meets monthly in the Denver statehouse. His immediate goal: a law requiring insurers and physicians to tell patients how doctors are incentivized and paid. This effort earns him positive mention in the Denver papers from time to time.

Who are HMNo's patients?

"Our patients really run the gamut," says Jonathan. "Some wouldn't think twice about chartering a plane to visit us, and others are unemployed." Mostly, though, HMNo's clients are people in their 40s and 50s, 70 percent of whom have some insurance. Uninsured patients have told Jonathan that it's often less expensive—and far less aggravating—to visit HMNo than the local emergency room or urgent care center.

Despite the potentially large out-of-pocket expense for a comprehensive initial exam, no patient ever balks at the practice's fees. After patients' initial 60-minute visit, the doctors know them well enough that subsequent appointments generally take 10 to 20 minutes. Patients are always told about charges up front, so there aren't any surprises when the bill arrives. Those who have insurance receive two copies of the doctors' Superbill, with CPT codes for office procedures and labs. Patients submit the bills to their insurers and keep the spare for reference. "So far, there have been no complaints from patients who submit bills to their insurers. And if a patient can't afford to pay in full, we try to work out a payment schedule," says Heather.

Since the HMNo doctors don't do inpatient hospital work, they often face continuity-of-care issues. They deal with this by making every attempt to refer to specialists who share their practice philosophy. And when a patient insists on going to her HMO for specialty care, Jonathan and Heather scan the plan's roster for a doctor who will do right by her.

Though Jonathan and Heather don't yet have a full patient roster—it hovers around 750—the practice continues to gain momentum. Last August, nearly a year and a half after its inception, HMNo hosted a "We're still here" party—a sly send-up of the naysayers who'd predicted their fee-for-service family practice wouldn't survive a year. And in December, the practice welcomed two additional RNs, one of whom will job-share with Marcie.

Jonathan and Heather aren't inclined to measure success in terms of dollars, however. They're more gratified by the intangible rewards that HMNo affords them. "How many of today's doctors can say they really like their work?" asks Heather. She and Jonathan relish their freedom and the patients who've made it possible for them to practice independently of managed care.

Putting patients first

Jonathan and Heather defied the odds by creating a pure FFS practice in a heavily entrenched managed care market, and they encourage others to do likewise. But how practical is this maverick strategy?

To be sure, it takes considerable entrepreneurial and marketing savvy. For example, HMNo offers free 15-minute "meet the doctor" visits to prospective patients. "I call it test-driving our personalities," says Heather. "You get to test-drive a car, but a relationship with a physician is much more complex."

And within HMNo, "patient-centered" isn't just a buzzword. The practice provides several extra patient services, such as printing drug information handouts, phoning a prescription to a pharmacy so sick patients needn't linger there, and arranging discounts with specialists for patients who need extensive diagnostic workups. In addition, both doctors perform hypnosis—a great help for phobic patients and those trying to lose weight or break a nicotine habit, and an excellent practice builder.

Jonathan and Heather don't use their waiting room as a boutique for vitamins and other health-related merchandise. Nor do they distribute pharmaceutical freebies. "We're a trash-free zone," says Jonathan. "No posters, no pens, no Zithromax clock, no Ceftin wallets. We buy our own pens, our own sticky notes, our own everything. We keep the entire place tasteful."

In exchange for their cash payments, HMNo patients expect a bit more from their doctors—and they get it. There are no long waits, for instance, because the physicians don't overbook their schedules. And there's no sign-in sheet, because they value their patients' privacy.

Jonathan and Heather are both in the office on Wednesdays, and each works alone two days a week; between them, they see patients 48 hours a week. But that's not all. They're available 24 hours a day, every day, so continuity inside the practice isn't a problem. If one takes call, the other stays home with the children, now 5 and 2. There's no answering service to contend with, in terms of added expense or frustration. The practice number rings on the doctors' cell phones after hours.

Just as they split the child care responsibility, the two divide the office work according to their abilities. Heather does the financial planning, benefits administration, billing, records, and fee calculations. Jonathan does the computer work, designing macros and tickler systems on the practice's two networked Macs. His computer expertise has enabled him to use inexpensive, off-the-shelf software, which he has customized for the practice.

The doctors' billing software, MYOB, sells for about $200. And with FileMaker, which also costs about $200, Jonathan is developing a database that lets him do countless things, including keep tabs on all patients who are taking specific drugs or have similar ailments, and call up all specialists to whom they refer. In addition, Jonathan has created some shortcuts for Dragon NaturallySpeaking, the practice's voice-recognition software; it costs $700, but saves the doctors about $1,000 a month in dictation costs.

The HMNo doctors are frugal on the domestic front as well. Heather makes the kids' clothing. Their home, about five miles from the practice, is modest. They drive 9-year-old cars and stick to a vegetarian diet. And since they've opened the practice, their vacations have been nothing more than extended weekend trips to either coast for family visits.

Though it's too soon to declare the practice a success, Jonathan and Heather don't expect it to capsize. "It'll take time and a financial and emotional commitment," Jonathan says "but we'll make it. In the meantime, we're raising our children ourselves. I'm home with them half the time; Heather's there half the time. And I'm working with my wife."



Suzanne Duke. HMNo: The name of this practice says it all.

Medical Economics


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