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Concierge Medicine and the “Zombie” Medical Practices

Continued Growth of Boutique Medical Practices Today

[By Dr. David Edward Marcinko; MBA CMP™]dem2

The boutique, or direct reimbursement, or cash based medicine, or concierge medical practice business model requires an annual fee for personalized treatment that includes amenities far beyond those offered in the typical practice, or suggested by physician medical unions. Patients pay annual out-of-pocket fees for top tier service, but also use traditional health insurance to cover allowable expenses, such as inpatient hospital stays, outpatient diagnostics and care, and basic tests and physician exams. Typical annual fees can range from $1,500 to $ 5,000 per patient, to family fees that top $25,000 a year, or more. The concept, initially developed for busy corporate executives, has now made its way to others desiring such service.

A Higher Level of Care

Medical providers get to provide a much higher level of care and get to know their patients as they enjoy the incentive to spend appropriate time with them, and over time, get to know them within their unique social/cultural context as well (hence the house calls become important). Patients enjoy the access, the attentiveness, and are willing to spend cash to have the type of unhurried, contemplative time with physicians that is required to develop a trusted relationship and deliver high quality care. The financial remuneration potential is compelling as well.

Now, let us compare and contrast various parameters of traditional medical practice [third party reimbursement] with the same parameters of  so-called “new-wave” concierge medicine. Then, let the next-generation of doctors decide.

Current Traditional Model

  • patients seen at 15-20 min increments
  • 2,000 – 3,000 patients
  • Paperwork, administrative burdens, frustrations, and lack coordinated care
  • Impersonal experience (long waits, un-intelligible interactions with health care system)
  • Average Salary = $150,000-250,000

Concierge Practice Model Potential

  • direct relationship with patients
  • 300-500 patients
  • $1,500 – $3,000 access/retainer fee
  • Reduced overhead, positive interactions, care coordination and increased quality
  • Personalized experience (reduced headaches and paperwork with transparent pricing)
  • 24/7 access, same day appointments with multiple other amenities
  • Average Salary = $100,000 – $500,000

Enter the Franchisors

Concierge medical practices can be developed organically, or use a franchise business model [personal communication, Suzanne R. Dewey, Forté Partners, LLC, Williamstown, MA]. Examples of franchisors include:

Opponents and Pessimists

There have been plenty of opponents, within medicine and outside, to the idea of concierge practices almost from the first day.  For example,

The state of Washington’s insurance commissioner attacked the concept of practices offering all the primary care patients needed for a prepaid fee or retainer, arguing that such practices amounted to the business of underwriting health insurance. He said that the practices would have to meet all the regulatory requirements for such an insurance business, including establishing capital reserves and maintaining loss reserves for the payment of claims. It didn’t work, and besides, few concierge practices offer free traditional medical care once retainers are paid–most concierge physician’s bill insurance plans for all the services covered under their patients’ coverage.  The Medicare folks chimed in and managed to drive one physician out of business, arguing that he had tried to charge Medicare patients an extra $600 a year for services already covered by Medicare, hence he was guilty of illegal “balance billing.” Rather than fight Medicare over the issue, the doctor gave up and closed his practice. [C. Davis, “Big Problems for Medicare and Concierge Medicine,” Sierra Sacramento Valley Medicine, 55:3, May/June, 2004 (www.ssvms.org)]” 

Attacking ME?

Objections to concierge medicine focus on both its causes and its effects, and some critics have even attack me, personally. For example, just look what “they” said in the online journal: “Health Care Strategic Management.”

Many critics argue that concierge medicine merely reflects physician greed and unconcern over the needs of the community. Indeed, a recent book by David Marcinko, Business of Medical Practice [Advanced Profit Maximization Techniques for Savvy Doctors], includes a chapter on “The Case for Concierge Medicine” (Ch. 24) as one of the ways ‘savvy’ physicians can maximize their profit, as if that is what medicine is all about. While the image of physicians may retain some Marcus Welby elements of their rushing to the hospital or a patient’s home in the middle of the night, most physicians would rather stay home and leave the job to someone else, it is argued”.

Nicht Schadenfreude

Just think! My mother always feared I’d be a no-body. Good publicity – bad publicity – just spell the name correctly. Schadenfreude may be defined as a “largely unanticipated delight in the suffering of another which is cognized as trivial “ and I take no delight in the slow collapse of traditional medical practice models; or the economic, professional or personal pain of colleagues. But, I also often tell my critics – and clients – that although it’s awfully nice to be altruistic; I am always mindful of the competitive business adage: “no margin-no mission.” And, in as much as this attack was written in July 2005, I can only wonder if I was prescient, or just lucky? With all due respect, I believe it was the former, rather than the later. Why so? Well, just consider how fast www.ChoiceMed.com is growing. This stuff is not rocket-science.

www.MedicalBusinessAdvisors.combiz-book1

About Concierge Choice Physicians

Concierge Choice Physicians: http://choice.md  is a national organization offering a hybrid business model. Physicians divide their practice between a traditional practice and a retainer practice. The retainer practice is limited to approximately 150 patients. A typical concierge practitioner may have 300-500 patients, while the norm for a traditionalist is about 2,000-3,000 patients.

Assessment – Whither the “Zombies”

I, also ruefully wonder how many “zombie” medical practices [practitioners] are out there? You know the kind – a medical practice with neither a good/bad balance sheet. One with only subsistence level operating performance; a practice that is not growing organically or thru merger activity. It is just barely existing as the doctor-in-charge slowly, agonizingly, milks it to death; or retires, whichever comes first.

Conclusion

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11 Responses

  1. Concierge Medicine

    The concierge medical practice is destined to be part of the future of medicine. Critics of this model point to inappropriate motivations on the part of the practicing physicians, as well as the “elitist” nature of the practice. In both regards, I find these criticisms to be invalid. The doctors who choose to practice in this manner are embracing the type of service that many doctors provided a generation ago. Before the pressures of managed care, insurance companies, and oppressive regulation, doctors were able to spend more time with patients. They could get to know their patients better and provide a higher level of service. Regarding the claims of “elitism”, concierge practices are often priced to be affordable to average patients. A monthly membership fee may be similar to the price one might pay for cable television service or for membership at a health club. Concierge Medicine results in a higher level of satisfaction for physicians, nurses, and patients alike.

    Doctors are finding a wide range of resources to help make the transition to the concierge model. Those with an entrepreneurial spirit may choose to build their own practice, but franchise arrangements are now available as well. MDVIP, for example, can help a doctor with the business aspects of a concierge practice.
    As long as there are patients requesting this increased level of service and access, and there are physicians interested in providing the service, concierge medicine will continue to flourish.

    Brian Knabe; MD

    Like

  2. Dr. Knabe and Marcinko,

    Well written post and comment … The original was even more germane back in 2005, than in 2009 and beyond. Nevertheless, the question today is: Can you separate the businessman from the doctor? And unfortunately, I am not so sure, anymore.

    Read this interesting article on same, and opine:

    http://www.kevinmd.com/blog/2009/07/can-you-separate-the-businessman-from-the-doctor.html

    Fraternally
    Stewart

    Like

  3. ME-P Readers

    Also, take a look at his website: http://www.Choice.MD

    Many thanks for this interesting ME-P.

    Sharon

    Like

  4. Defending CM,

    The article in “Health Care Strategic Management” on CM noted above is not named; coward!

    Dr. Marcinko clearly writes in the Afterword of his book:

    “And, although the multi-degreed experts of this textbook may have a particular business expertise, we should never loose sight of the fact that, above all else, medical care should be delivered in a personal and humane manner, with patient interest, rather than self interest, as our guiding standard. Omnia pro aegroto, or “all for the patient.”

    Apparently, the cowardly author of the un-named byline didn’t read that far!

    Rex

    Like

  5. Some More on Concierge Medicine and Econoomics

    http://www.kevinmd.com/blog/2011/01/growth-retainer-medicine-simple-economic-principles.html

    The rapid growth of retainer medicine follows one basic economic principle; reduce office overhead costs. This is also known as a micro-medical practice business model.

    Grant

    Like

  6. Concierge Medicine

    I believe that the growing number of concierge medicine practices demonstrates the desire by patients to have a more personalized relationship with their physician.

    This means the ability to have a face-to-face conversation with the doctor about their health without interruption. While this relationship is often supplemented with online communication, patient tools and access to information, the personal relationship remains one of the most attractive elements in this type of practice to both the patient and physician

    Dr. Symour

    Like

  7. Groupons For Medical Services on the Rise

    Daily deal sites like Groupon and LivingSocial are increasingly moving beyond little luxuries like facials and vacations and offering deals that are helping some people fill holes in their health insurance coverage.

    But, visitors to these sites are finding a growing number of markdowns on health care services such as teeth cleanings, eye exams, chiropractic care and even medical checkups. And, are discounts from sites helping some people fill holes in their health insurance coverage?

    http://www.msnbc.msn.com/id/45827794/ns/health-health_care/%22%20%5Cl%20%22.TwXFECOkGnm#.TwcRkE_M7wx

    Remmy

    Like

  8. Beware of the legal traps when setting up your Concierge Medicine practice

    The number of concierge medicine physicians has doubled in the past two years according to the American Academy of Private Physicians (aapp.org) to a few thousand today. Concierge medicine (also called “retainer-based”, “direct care” and “direct reimbursement” medicine) is a trend that is likely to continue. The rationale for setting up a CM practice is simple: primary-care doctors, who receive far lower insurance reimbursements than specialists, are able to see fewer patients without hurting their income.

    As a relatively new trend, pioneering physicians that opt for setting up a CM practice need to be aware of some of the legal barriers that may arise. Here are just a few:

    • Charging for services covered by Medicare
    • Having their membership fees misconstrued as “insurance premiums” which would violate some state’s health insurance regulations.
    • Having CM advertising/inducements that promote patient referrals misinterpreted as kickbacks under the anti-kickback statues.
    • Licensure issues could develop in states such as California that require physicians to have an HMO license when undertaking health care services on a prepaid charge. Likewise some CMs are structured so that the retainer is characterized as a flat fee for specific services.
    • States banning “balance billing” create a challenge for a CM practice to make significant efforts to understand the application of the hold harmless rules and work with their patients to avoid violations.
    • How the CM practice handles refunds (if a patient for example terminates after a partial year and doesn’t receive an annual physical) could cause legal concerns.
    • Disclosure concerns could arise for the CM practice, such as “Was the patient improperly induced to accept the CM agreement with a promise of higher quality health care?”

    The good news is that the concierge medicine crusade has overcome some very weighty obstacles recently from insurers, the government (both State and Federal) and the media. Those physicians that don’t want to brave it alone can join an existing concierge medicine company that has already fine tuned the business model. An example here is MDVIP, a CM company that was formed in 2000 and acquired 100% by Procter & Gamble (NYSE: PG) in 2009.

    MDVIP now serves 180,000 patients with 450 affiliated physicians in 38 states. With numbers like these and backers like PG (#7 in market cap on the S&P 500) maybe CM is here to stay.

    David K. Luke MIM
    [Financial Advisor]
    http://www.networthadvice.com

    Like

  9. CM

    We Need a New Word. We Can Do Better Than “Concierge Medicine” Can’t We?
    An essay by Leslie Kernisan MD.

    http://thehealthcareblog.com/blog/2013/12/16/directwe-can-do-better-than-concierge-medicine/

    Ann Miller RN MHA

    Like

  10. McCarran-Ferguson – the Zombie that just won’t die.

    As long as the McCarran-Ferguson Act of 1945 continues to shield insurers from the FTC, price-fixing among insurers will never stop and insurance will never be cheaper.

    “New: ECLECTIC RANT: ObamaCare and the McCarran-Ferguson Act’s Exemption from the Antitrust Laws,” by Ralph E. Stone – A column posted in The Berkeley Daily Planet, April 01, 2014.

    http://www.berkeleydailyplanet.com/issue/2014-03-28/article/41971?headline=ECLECTIC-RANT-ObamaCare-and-the-McCarran-Ferguson-Act-s-Exemption-from-the-Antitrust-Laws–By-Ralph-E.-Stone

    “Why do we need a repeal of the McCarran-Ferguson Act exemption to the antitrust laws? According to Forbes since the passage of ObamaCare in 2010, the public health insurance companies have dramatically raised their premiums, especially on small business, multiplied their profits and sent the value of their common stocks up by 200-300 percent. One of the reasons for such high profits is the growing lack of competition in the private health insurance industry, which has led to near monopoly conditions in many markets. Any comparative analysis of health care systems indicates that the greater the role of private, for-profit health insurance companies in the delivery of health care, the higher the cost.”

    Darrell K. Pruitt DDS

    Like

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