Revenue-based vs. Subscription: Which RPM model is most profitable to your practice?

Choosing the right RPM pricing model can distinguish between a significant increase in profitability and a detrimental impact on the business. The two main types of pricing that health practitioners can employ today are revenue-based partnerships and fixed subscription pricing, which have their own advantages based on the size of a practice, the number of patients, and the risk profile of a practice.

Revenue-Based Models: Sharing and the Sharing of Success and Risk

Revenue-based RPM pricing can account for up to 50 percent of all RPM-related reimbursements in any given fiscal year because it makes your costs directly dependent on your collections. In this model, should your practice collect $150 per patient a month via Medicare billing, you would owe your RPM vendor $45-75, leaving $75-105 in net revenue.

This pricing model offers significant advantages, especially for smaller practices or those that are new to RPMs. You avoid upfront technology costs and investments and reduce financial risks by incurring expenses only after earning income. The vendors will be true partners in your success, providing greater support in billing streamlining, patient engagement, and clinical workflows.

The downside is quickly evident as your program matures and the volume augments. A thriving 500-patient practice with 75K per month of revenue could spend 22.5K-37.5K on the vendor fees, which can be more expensive than fixed subscription programs in high-volume practices.

Fixed Subscription Models: Cost Certainty, More Control

The pricing structure of subscription-based work is provided on a flat monthly basis, usually between $30 and $60 per patient a month, with no account as to how well you collect. The model has cost predictability and may be used to deliver more profit margins to efficient practices.

A practice charging subscribers $45 PPPM, but with a collection rate of $150 PPPM, retains a net of 105 PPPM, which is substantially higher than revenue-sharing arrangements. This model, however, completely assigns collection risk to your practice. Inefficient billing procedures or low reimbursement rates have a direct effect on the profitability of the business directly.

The subscription models suit best where a particular practice already has a proven billing capability, a reliable patient base, and regular activity. They are more expensive to commit to upfront, but they have more potential profitability in the long run.

Hybrid Models: The Hybrid Choice

Current vendors of progressive RPM systems provide a combination of both the models. These may have lower minimum base subscription charges ($20-30 PPPM) as well as smaller revenue sharing (15-25%) and would create predictability in costs along with vendor alignment to your success.

The hybrid models are often leveraged with performance tiers attached to subscriptions, where the cost lessens as your patient volume or collection rates flex higher, rewarding efficiencies and growth.

Consideration on Grade Practice Size

Small Practices (50-200 RPM patients): Revenue-based models generally offer the best starting point. The costs of programs are often higher in the long term, but lower financial risk and support by the vendors in developing the program tend to outweigh the cost.

Medium Practices (200-500 patients) Hybrid models offer the safest balance between growth flexibility and financial risk exposure, enabling practice expansion in medium-sized practices.

Large Practices (500+ patients): Subscription models are optimal in terms of profitability with robust internal billing and well-established RPM workflow.

Decision Factors are key

Besides the size of practices, you should also consider several factors when deciding which models to implement. Determine the level of expertise of your current billing staff with RPM codes and documentation needs. Revenue-based partners can also offer specialized billing support that can yield a higher collection rate than internal teams.

Take into account your patient population demographics and patient engagement model. Patient populations with high engagement and consistent data transmission would be compatible with either model, whereas difficult-to-engage patients may require the extra support services that are inherently provided in revenue-based partnerships.

Financial Forecasts and Break-Even statements

Model how you are likely to perform under each of the situations. The rate of patient enrollment, the expected level of their engagement, and the efficiency of collection are all influenced. Most practices are cash-flow positive with revenue-based models, whereas subscription models take 3-6 months to break even because of up-front costs with purchasing a device and setting-up costs.

The question then becomes why to sell.

The best pricing model suits your practices' operational abilities, financial objectives, and projections. Revenue-based models are especially effective in practices wishing to foray into RPM on a lower-risk basis, with additional support provided by the vendor. Subscription models penalize established practices that are able to bill more and more frequently.

RPM is a natural evolution of revenue-based partnerships, so start here to build capabilities and later shift to subscription models as volumes grow and your program matures. Most vendors can handle such transitions so that you can maximize profitability as your capabilities change.

Ready to evaluate RPM costs for your practice? Contact Healtharc for a personalized cost analysis and ROI projection tailored to your patient population and practice size. Schedule your free consultation today to discover how RPM can transform your patient care while generating sustainable revenue.

Unsure which pricing model fits your practice best? Healtharc experts can analyze your patient demographics and billing capabilities to recommend the optimal pricing structure. Download our free pricing model comparison tool or schedule a consultation to maximize your RPM profitability.