Physician Medical Practice “Misrepresentation” Risks

BUSINESS FRAUD RISKS

True Case Report

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By Dr. David Edward Marcinko MBA CMP©

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A Medical Practice Misrepresentation Case Model

Let’s say a physician decided to sell his practice and move to another state. The value of the sale was based, in part, on the yearly gross of the practice. The physician accepted installment payment terms from the buyer and moved to the new state. The buyer began to practice medicine at his new office. Although he was busy, his gross never approached the gross of the prior physician.

Eventually the buyer defaulted on the loan. The selling physician sued for the deficit. The defaulting physician and his forensic consultants then performed an in-depth evaluation of the seller’s practice. The buyer and his team noticed some discrepancies in the billing patterns and practices of the seller. Considering these discrepancies to constitute Medicare and insurance billing fraud, the seller counter-sued the buyer on the grounds of misrepresentation, alleging the gross receipts of the practice purchase price, was grossly inflated.

Citation: https://www.r2library.com/Resource/Title/0826102549

ASSESSMENT: Therefore, the buyer determined that the seller had fraudulently misrepresented the potential of the practice. He also notified state and federal authorities and filed complaints of insurance fraud against the seller.

The seller thought that he would move to the good life in the new state, but his old practice kept him in constant legal trouble.

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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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