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Concierge Medical Practice Fee-Setting

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Pricing Decisions for Medical Providers

Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

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Professional fee-setting and related pricing decisions for a concierge medical practice, like most businesses rather than most medical-entities, is complex and will significantly affect the doctor’s profits.

New Markets

When a concierge medical practice is first introduced into a local market, the physician-executive must make a choice between charging higher fees in order to recoup practice launch and development costs quickly; or charging lower fees and/or annual retainer subscriptions and extending his/her losses into the growth stage of the practice’s life-cycle. 

This is why consultants and franchisor’s suggest that it may be better to convert an existing practice in-situ, to a concierge model; than start the concierge practice from de-novo, scratch. Nevertheless, the choice should be a conscious one; rather than automatically made by default.

And, the decision will depend upon how target patients are expected to view the practice and its carefully selected medical services. 

Premium Pricing Strategy

If there is “premium-status or swagger” attached to concierge medical practice ownership, then a “price-skimming” approach might be used.  Price skimming, by definition, means setting initial professional fees high in order to achieve profits sooner; and then lowering them as the practice matures. Doctors who use this strategy will experience profits during the introductory stage of the concierge practice’s life cycle, and then reap organizational and operational economies of scale, down-line.

Early Adopter Strategy

If status is not an issue, the doctor may decide to charge lower fees in an attempt to achieve more rapid market local penetration and faster movement into the more profitable early-adopter stage.

A word of warning! If you set initial fees much lower than a price you can maintain and still make a profit, or have adequate working-capital set aside, it is imperative that you make the patient-subscriber aware of the fact that this initial low price is a special promotion that will be increased when over. Patients do not react very positively to unexpected large price increases and may believe the doctor is simply engaging in gouging activity.

Competition

If a doctor has competitors in the local marketplace, s/he can price services above, equal to, or below them.

Fees above one’s competitors implies that services are superior and deserve higher fees; while pricing below the competition level can imply the doctor is proving extra-value to patients in terms of cost-savings.

Pricing at the competitive level is the hardest strategy to follow for any concierge medical practice, but is the only appropriate one in an environment of pure competition. This is typically not yet the case for CM in most areas, to-date.

Assessment

Before settling on a specific fee schedule for your practice, make sure that you know the type of competitive environment that surrounds you and whether demand for your concierge medical services is elastic or inelastic.

Conclusion

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6 Responses

  1. Concierge Medicine

    A discussion of the fees charged in a concierge practice often leads to a debate about the elitism of such a practice. Fees typically range from $,1000 per year for an individual up to $25,000 for a family. Many patients choose to pay $4 daily for a latte – or a pack of cigarettes. The fee charged in CM is often comparable to a good cell phone plan, or a monthly cable bill.

    For those who still think that this practice model is elitist and that it shuts the door on those most in need of affordable care, consider the practice of Dr. Michael Kloess and Dr. Anne Volk Johnson in Madison, Wisconsin. These physicians started Our Lady of Hope Clinic http://www.ourladyofhopeclinic.org

    While following the traditional CM model of same-day appointments, extended visit times, and 24/7 access to a personal physician, this practice also includes free care for those in need. These doctors represent a wonderful new twist on the concierge model – they are re-taking control of the practice of medicine, and they are following their moral beliefs at the same time! They have a great website that shows the details about their practice.

    Brian J. Knabe; MD CMP™

    Like

  2. A Hybrid Medical Practice Business Model

    Dear Dr. Marcinko and Dr. Knabe,

    Did you know that some physicians are looking for the steady income and slower pace of concierge medicine but still do not want to give up their traditional practice? And, they may have found a new solution in a “hybrid practice” model that lets them devote a small percentage to the retainer side while keeping their roster of traditional patients.

    So far, the full concierge model has not proven to be very popular. Researchers determined that only about 750 physicians have gone to such retainer-only practices. The hybrid model is being promoted as an alternative by Concierge Choice Physicians.

    http://inews.idsk.com/viewer/story.php?CLIENT=INFOMAILER&NEWSID=imn092820101325259866

    Your thoughts are appreciated.
    Clinton

    Like

  3. Routine Medical Care

    http://www.OutOfPocket.com

    This is a directory for consumers to look up and compare true prices for routine health care services. Be sure to check it out!

    Christine

    Like

  4. On CM,

    In his book, The New Financial Order: [Risk in the 21st Century], Yale University economist Robert J Shiller, PhD and father of the term “irrational exuberance”, states that today’s insurance companies do not protect us from the biggest financial risks we doctors face.

    He warns that the risk for choosing the wrong profession might render physicians and other professionals obsolete by technological change, managed care systems or fiscally unsound demographics, as demonstrated by reduced Medicare reimbursement and the SGR problem. This prompted former AMA president Richard Corlin, MD, to opine “these are circumstances that cannot continue because we are going to see medical groups disappearing”.

    No wonder then, why a growing number of doctors are abandoning traditional medicine to start “concierge medicine” or “boutique” medical practices that are restricted to patients who pay an annual retainer of $1,500 and up for preferred services and special attention.

    Franchises for the model are also available.

    Dr. David Edward Marcinko MBA
    http://www.CertifiedMedicalPlanner.org

    Like

  5. Direct Primary Care Model

    The last obstacle facing expansion of the DPC practice model is their misclassification as an “insurance” product rather than a “healthcare” entity. Legislation, known as the Primary Care Enhancement Act, already exists to repair this mistake and has 29 cosponsors. H.R. 365/ S.R.1358 would allow for two things:

    1. Taxpayers participating in a DPC arrangement may qualify for an HSA plan and 2. HSA funds could be used for monthly fees for a DPC arrangement.

    Dr. David Edward Marcinko MBA

    Like

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