PART 1. The Fee For Non-Covered Services Model
By Michael Tetreault, Editor
APRIL 10, 2014 – Many doctors have chosen to partner with large franchise concierge medicine businesses to help with the startup and transition needs necessary to open their concierge medicine practice. However, more than half of all concierge physicians have opted to use accountants, attorney’s, practice managers and business consultants to navigate their way into the new practice model. As more and more doctors begin to analyze and potentially move into concierge medical practices, independent physicians choosing not to be a part of a large franchise operation instead are transitioning with a smaller consultant should examine their fee structure and price them competitively.
“I perform a thorough analysis of the practice and determine areas where expenses will be reduced,” said Mike Permenter, a private consultant specializing in Direct Primary Care models. “After a survey of the physicians patients, we conduct a 12-16 week conversion. Our fees are collected during the transition only. Once a successful conversion has been completed, we help train the physician staff to provide membership services. If customer service is maintained, we know the practice will continue growing without a need for further services.”
Most doctors currently practicing concierge medicine as a career choice fall into one of two intelligence-gathering categories when they first opened. First, they used a franchise concierge company to help them with the details or they opted to do it themselves and surround themselves with a local team that would provide counsel in starting this practice model.
The Concierge Medicine Research Collective (“The Collective”) found over the past four years that concierge doctors operating under the direction of a large franchise concierge company or consultancy will price services, on average, between $1,200 and $1,800 per patient and opening with a patient load between 300-750 patients. This helps the practice compete with local retail clinics, pharmacy chains, primary care doc-in-a-box practices and attract, en masse, the demographic that practice needs in order to succeed in their local market. The Collective also found that many independent concierge doctors who chose not to operate under the guidance of a franchise business model were charging much more for their services, between $2,500 – $5,000 per patient, and opening with a patient load of 75-180 patients under their care.
The premise of most franchise concierge medicine business models, termed “Fee For Non-Covered Services Model,” reduces the size of a medical practice to a more manageable patient load and these patients agree to pay a fee for more time with their physician, an annual physical, and more personalized access and service. Emphasis is on a healthier lifestyle, both for the members and the physician. According to a national poll of concierge doctors from 2010-2012 by Concierge Medicine Today (CMT), approximately 80% of these practices accept most major insurance plans and participate in Medicare.
The “Fee For Non-Covered Services Model” allows for Medicare and private insurance to be billed by the physician for routine visits and procedures. To date, this model comprises the largest segment of the market, approximately 46 states, although Direct Primary Care (Fee For Care Model), is rapidly catching up in select markets, according to The Collective.
Distinct advantages for selecting the “FNCS” model are:
- Physicians who are looking to slow down without affecting their current income levels will find this model attractive. These types of models offer an enhanced physical (or some enhanced procedure or procedures not covered by Medicare), on an annual basis, which is the basis for the entire fee. Fees for these models usually range from $1,200 – $2,000. It is critical that physician converting to this business model are able to reduce expenses to accommodate this type of practice.
- There is typically a maximum number of patients allowed to join the practice, usually around 600. Industry sources tell CMT that they have not seen too many of these concierge medicine practices reach the 600 patient-member level, but that most are satisfied at the 400 patient-member level.
- Contrary to what people think, this model is not just for the rich as the vast majority of patients make less than $100K, according to industry surveys. The concierge medicine industry has been touted by the media and television for years as an expensive way to see the doctor you’ve known for years. At the inception of the movement in the early to mid-’90’s, this was factually true. What’s not truthful is that nearly two decades later, the majority of concierge medicine and direct primary care clinics cost their patients between $50 – $135 per month.
- Family Practice Physicians typically offer a family plan where dependent children up to a certain age are covered free. Internal Medicine Physicians may offer a similar program but typically for dependent children between the ages of 16 and 25. Therefore there are many single moms joining these practices.
- There are many development teams and implementation companies that are helping physicians to convert to these more price transparent business models. They have every base covered with regards to ensuring a successful launch. There is nobody in this industry that does it better. There is a very high failure rate for physicians trying to transition to this type of model on their own. The conversion process is intense and every transition has its own unique challenges.
Distinct disadvantages for selecting the “FNCS” model are:
- The FNCS business model works very well when implemented appropriately. Although a medical practice is considerably smaller and much easier to manage, there are still existing issues with regards to billing Medicare and insurance companies, collecting co-pays, checking patients in and out, etc. This not only increases operational costs, but most of the problems surround billing insurance. Alternatively, in other concierge and direct primary business models, operational costs are much lower because the physicians/practice do not participate in Medicare or insurance plans. We will write more about the pros and cons of this in Part 2 of our follow-up article:
- FNCS Business Models require that the services paid for by members are not Medicare covered services. Accordingly, it is critical to have legal input with regard to structuring this model. Because Medicare regulations are likely to change frequently, especially with the ACA, ongoing legal monitoring is necessary in this type of model.
According to a recent 2013 Physicians Practice Survey (2013 Staff Salary Survey) respondents in practices of six-to-10 physicians reported practicing in a concierge/membership practice. Here are some more specific findings from the survey:
- Solo practices: 2 percent are in concierge/membership practices.
- Two- to five-physician practices: 2 percent are in concierge/membership practices.
- Six- to 10-physician practices: 5 percent are in concierge/membership practices.
- 11- to 20-physician practices: No respondents are concierge/membership practices.
- 20-plus physician practices: 1 percent of respondents are concierge/membership practices.
It’s likely that more physicians, especially physicians in smaller practices, will begin transitioning to concierge, membership, and even direct care practices in the coming years. Physicians who favor independent practice will likely view these alternative reimbursement models as a way to retain their independence, spend more time with patients, and combat declining reimbursement.
In Part 2 of “Concierge/DPC Practice Models: What Model Is Best For Me?” we will look at the pros and cons of converting to a Hybrid or Segmented Business Model and in Part 3, look at the pros and cons of operating a Direct Primary Care practice.
Look for Part Two of “Concierge/DPC Practice Models: What Model Is Best For Me?” at DirectPrimaryCare.com in early Fall 2013.