Published in Healthcare IT News, Healthcare Finance News, and Medical Practice Insider
Whether looking to draw attention to their practices, experiment with new technology or simply have a bit of fun with their otherwise dreary financial operations, several American medical professionals are now accepting bitcoins, the Web-based virtual currency, in addition to dollars.
Bitcoin, a peer-to-peer, open-source digital currency network that was first launched five years ago, has been getting a lot of media attention lately – sometimes for dark stories such as those spotlighting its role as the currency of choice for Silk Road, an online black market for illegal drugs that was shut down by the FBI this past October.
But it's also getting strong positive attention, especially from Internet thought leaders, because the Bitcoin system, which depends on no centralized authority but rather a loosely affiliated community of techies, offers some key breakthroughs in the areas of information exchange – particularly between parties unknown to each other – and digital cryptography.
The legal status of this so-called cryptocurrency is in flux worldwide, as various policymakers, monetary bodies and tax agencies get up to speed on its true ramifications.
In the meantime, curious people can still educate themselves and explore this new payment alternative without fear and in relative safety.
Doctors who have taken bitcoins have found that doing so is both simple and relatively "unmagical," as San Francisco physician Paul Abramson, MD, put it.
Abramson, founder of My Doctor Medical Group, is a former software programmer and trained electrical engineer with a significant personal interest in privacy.
It was privacy that drew him to learn more about bitcoins. Early assessments of the technology suggested the bitcoin exchange system had significant anonymity protections that could augment existing medical privacy laws and allow patients who sought the ultimate discretion a nearly invisible form of payment.
"It's important for people to be able to maintain their privacy" about all things, but particularly medical issues, Abramson said.
However, as bitcoin use has expanded, further exploration of its privacy protections has shown that, while it does take some effort to uncover a bitcoin user's identity, it is possible.
"As I've learned more about it," said Abramson, "I'm less excited about the anonymous possibility."
In any case, patients in his office seeking medical attention can't very well protect their identity from him – which removes one possible benefit of using bitcoins: the anonymity between buyer and seller.
Despite the media hype and controversy surrounding this new currency, Abramson is almost blasé about the fact that he accepts bitcoins.
"It's actually not that big a deal," he said.
But the benefits do exist. For instance, taking transactions out of the hands of credit card companies can preserve patient privacy, as those organizations can legally access certain protected health information for the purposes of verifying the transactions.
And, as a business practice, accepting bitcoins has real potential to save Abramson money.
He uses a fairly simple setup, where he has a merchant account with a company that handles bitcoins; when he receives bitcoins, that company handles converting them into U.S. dollars. The company charges a 1 percent fee – which is less than the typical 2 or 3 percent transaction processing fee charged by credit card companies.
This method is in fact in common use throughout the bitcoin community: People contemplating a purchase buy bitcoins with dollars, and then, in exchange for goods or services, send them to a vendor, which then immediately converts the bitcoins back into dollars.
But it's only in the conversions where fees arise.
As John Gomez, MD, owner and medical director of RapidMed Urgent Care Center in Lewisville, Texas, points out, to transfer bitcoins from one person to another, there are "zero transaction fees. Zero. It's beautiful."
And there were no startup costs, because his office already had an iPad for other purposes. (One possible problem may arise there, as Apple has recently been removing bitcoin-related programs from its app store.)
Gomez's office manager, Barbie Fiorendino, says no patients have yet used bitcoins to pay for service, but customers are expressing curiosity and interest in the prospect – especially since a local television station did a story about the clinic and bitcoins in January. The clinic distributes printed literature with explanations, and also has a bitcoin section on its website.
Unlike Abramson, Gomez is not planning to convert his payments out of bitcoins. His accountant, who was "very open-minded" about him accepting bitcoins, said he should book his revenue as dollars according to the bitcoin exchange rate at the time of the transaction – and keep records for future years, when he might convert the bitcoins he received back into dollars.
At that time, he would have to calculate capital gains or losses for tax purposes.
His decision to keep his holdings in bitcoins is "a personal belief," he added. "I consider myself a future rich man" because of bitcoins' value prospects, he said.
"There will be ups and downs and there will be potential manipulations," said Gomez, but "in the long run, I think that it's a smart play."
Gomez is more enthusiastic about bitcoins than Abramson – perhaps even qualifying as somewhat of an evangelist.
"I am, generally speaking, an early adopter of technology," Gomez said. Beyond that, "I have certain, I guess you would say politically libertarian leanings," he said.
He is among the many bitcoin enthusiasts who are particularly excited about the existence of a relatively secure currency that is not controlled by a government or other central authority.
Rather, the Bitcoin system is managed by software and mathematical principles, and is made possible by a peer-to-peer network that shares the burden of tracking bitcoins to ensure nobody counterfeits any, or spends the same bitcoin twice.
"It is an abstract concept at first," Gomez admitted – but said that's really no less foreign than the idea that swiping a credit card is a functional stand-in for exchanging dollar bills.
Meanwhile, government regulators are paying close attention, with several countries, the U.S. included, studying how to track – and tax – bitcoin transactions. How those regulations shape up will likely determine the degree to which bitcoins become more widespread, Abramson said.
It's not always easy to use bitcoins, as Wall Street Journal writer Anne Kadet found when visiting various New York City businesses that take them.
"This took some doing," she wrote in January. At one point, using bitcoins was so technologically "cumbersome" that it was "looking like the worst currency ever."
But Gregory Levitin, MD, a Manhattan physician and assistant clinical professor of otolaryngology at the New York Eye and Ear Infirmary, believes bitcoins can help people improve access to medical care.
Levitin, who has patients around the world, was in India and not available for an interview. But in a December press release announcing his acceptance of bitcoins, he said he hoped the move "will open doors to treatment options and follow up care for patients the world over," by allowing them to use "a universal or virtual currency."
One area where Gomez and Abramson agree is the fact that bitcoins are not particularly useful when it comes to their business operations.
Gomez said he wishes more vendors and suppliers took bitcoins. (He has convinced the person who cuts his hair to accept them in payment, however, and he's also ordered items from Tiger Direct, an online retailer that accepts bitcoins.)
Likewise, Abramson says he has nobody with whom he can really do business in bitcoins. His landlord won't take them, and he has asked his employees if they want to be paid in bitcoins, but they have all declined.
There is, however, a cupcake store near his office that accepts them.
Further thoughts on bitcoin
Dos and don'ts
If you're not sure about setting up your practice to accept bitcoins, consider the following suggestions:
"If you don't believe in bitcoin, don't bother," Gomez said. Abramson echoes this, suggesting people not accept bitcoins "unless you understand the potential ramifications," including keeping your bitcoin account information secure (if it's lost, your bitcoins are gone forever, with no way to recover them), as well as exchange-rate fluctuations and government regulatory moves. And it's important to follow new developments in this rapidly changing community.
If you do accept them, Gomez suggested holding them, reflecting his belief that bitcoins will appreciate in value over time. Abramson said just the opposite, calling people who hang onto bitcoins "gamblers" playing a market that has fluctuated wildly, hitting highs of over $1200 per bitcoin in early December to around $600 right now.
That said, "it's easy to take bitcoin," Abramson said. "As a technology I think it's very interesting." He suggests accepting bitcoin "for amusement value," or perhaps as "a marketing move."
Paul Abramson, MD, of My Doctor Medical Group in San Francisco offers addiction treatment as one of his services, and has found that accepting bitcoins brought him some unexpected business.
"I had some patients who had been buying drugs with bitcoins on Silk Road," an illegal-drug marketplace website that only handled transactions in bitcoins, but was shut down by the FBI in October 2013. "They had been buying heroin with bitcoins."
When they were no longer able to buy high-quality heroin, they decided to seek help from him instead.
As he observed, "you could buy both drugs or drug treatment with bitcoins." But then, "the same is true of hundred-dollar bills, so it's really not that novel."
CoinMD, a website where users can ask medical questions from a group of anonymous people who claim to be doctors – paying for their advice in bitcoins, has been called "the absolute worst place on Earth to spend your bitcoins," by Wired.
While many of the site's advice givers may be well-intentioned and knowledgeable, and its convenience when it comes to diagnosing minor ailments may seem obvious, Wired points out that "no legitimate licensed physician" would take part in a project like this because they "they would risk losing their license." CoinMD doesn't define how it tracks its contributors or vets their credentials.
So while the idea behind the site might be great in theory, as Iltifat Husain, MD, a practicing emergency physician the editor-in-chief of iMedicalApps, explained to Wired, there's a "tremendous" risk of getting poor advice or a wrong diagnosis. "I would never recommend this site to a patient," he said.