By CMT Staff Writer, and editorial contributions by Michael Tetreault, Editor
With contributions by Mike Permenter, CMT Contributing Writer, Roberta Greenspan of SpecialDocs, Richard Doughty of Cypress Concierge Medicine, Scott Borden of Direct Pay Consulting and Dr. Chris Ewin of 121MD in Fort Worth, TX
Last Updated: APRIL 12, 2018 | Originally Written May 25, 2015 – When you purchase a franchised business, you’re paying for two things. First, you’re paying for a proven system. You’re stepping into a business plan and a company that likely has been around awhile and has a proven track-record of financial success. The second thing a franchise offers is a national brand. For example, MDVIP is instantly recognizable in the concierge medicine and private-pay medical marketplace as one of those national brands.
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Franchises are a very popular method of entering the concierge medicine or direct primary care marketplace for some doctors. It allows physicians to change, start and even grow a unique medical practice while at the same time learning from the experts in place with a proven track record to help you. One of the biggest advantages of joining a franchise concierge medicine or direct-pay medical care group is that you have access to an established company’s brand name; meaning later on, you don’t have to spend additional resources to get your name and services out to patients.
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Generally speaking, franchising means opening additional outlets through the sale of franchise rights to independent physicians who will use the Company’s name and system of operations. A franchisee pays a franchisor an initial franchise fee in return for the rights to operate a practice under the franchise trademark and for training in how to operate the business. For many doctors, franchising can appear to be the ideal form of business expansion.
One of the most common questions physicians ask when exploring this private-pay medical marketplace for the first-time is ‘how much does it cost to transition my insurance-based medical practice to this new direct-pay or retainer-based business model?’
Franchise and consulting fees can move from five-figures and easily into the six figures. According to Concierge Medicine Today, they’ve found the average cost is between $150,000 – $250,000 over a period of two to five years and in some rare cases, even longer. Some consultants have even quoted figures less than $60,000. However, depending on your practice, it’s demographics, your bedside manner, patient surveys (very important), complexity of internal operations in a practice, a financial feasibility analysis, and many, many other variables, a concierge medicine or direct primary care (DPC) practice may or may not be the right option for you.
As with most of the companies operating in the concierge medical marketplace, a doctor (i.e. franchisee) will pay an ongoing periodic royalty fee. CMT has found this to be as low as 15% of each patient’s individual membership fee and in most cases, between 29% to 33% for a period of approximately 3 to 5 years. In some rare cases, up to 25% of your per patient fee for eight years has been reported to CMT by doctors considering a career in concierge medicine or DPC. These fees usually include continued support and training in advertising: marketing; sales; operational guidance; technology; legal; regulatory; financial and human resources consulting; and other services.
“Perhaps most important from a doctors perspective,” says industry consultant whose specialty is helping doctors enter into DPC, Mike Permenter, “is that a consulting company should typically furnish all of the capital required to start or modify your medical practice and assumes all risk for success of failure. Thus, the high fees. My fees are much different than the industry standard.”
Companies, like MDVIP, Specialdocs Consultants, Cypress Concierge Medicine and Concierge Choice continue to capture a significant portion of the market share.
Other successful companies operating in the marketplace: SpecialDocs; Cypress Concierge Medicine; Signature MD; Latady Physician Strategies and others, continue to innovate, offering differing models, competitive transition fees and personal service to a doctor’s practice to help them succeed. All of these companies have an edge in that they helped build the existing industry over the past several years. More and more consultants and franchise-like companies like these have now come along in the past three years and help to keep prices low and competitive for not just their physician clients but satisfied patients as well.
SpecialDocs with offices in Chicago, IL and Florida states that while we are often asked, ‘what is the optimum number of patients in a personalized care practice?’ the correct answer is that there is no “one size fits all” model. Each physician individually determines the appropriate number of patients in their practice based on their ability to deliver on the promises they made to their patients. A word of caution…even when an optimal patient panel size is achieved, attracting new patients will continue to be important to maintain this threshold and/or to grow the practice. Over the course of each year, all of our (ie SpecialDocs) physician-clients experience the loss of a small number of patients for a variety of reasons including relocation, financial setback or death. Therefore, whether you have just transitioned or have a more seasoned practice, it is important to focus on viable methods for practice growth.
SpecialDocs also adds … Over ten years of experience has led us to develop a “Prescription for Practice Growth.” These programs include initiatives in the following areas: Interactive, Educational, Proactive Wellness and Digital Marketing. A combination of several strategies and initiatives can be used to grow a practice. Each physician needs to find his/her “marketing comfort zone” as well as what is a good fit for the community and what will provide value to their patients.
“The key, whether you choose to use a franchise or do-it-yourself, is to go into this private-pay medical marketplace passionate about helping patients,” says Michael Tetreault, Editor of Concierge Medicine Today and The Direct Primary Care Journal. “Even if one type of business model is considered more low risk, remember that businesses close every day. Doctor’s tell us every day in their editorials and opinion articles that ‘… you’re going to put a lot of time and money into this endeavor over the next several months, so you need to make sure it’s something that you care about.’”
Many doctors startup a concierge medicine practice or pursue a satisfying career in direct-pay medicine for a multitude of reasons such as: spending more time with patients; a yearning to use their medical expertise more effectively; a more satisfying lifestyle; and more. Some doctors enter this field of medicine because their tired of hamster wheel healthcare and frustrated with treadmill medicine that has now become their day job.
“Business is tough,” says Dr. Chris Ewin of 121MD in Fort Worth, TX. “If you’re doing something just for the money, you’re never going to enjoy it. You will be the hardest boss you’ve ever had. So, find something you love and pursue it. Follow this advice and you’ll set yourself up for an enjoyable future in medicine.”
Currently, there’s a phenomenal opportunity for doctors to innovate and move into concierge medicine or direct primary care.
“Even after 10+ years in this still rather exclusive space,” says Roberta Greenspan of SpecialDocs, “I continue to have great enthusiasm for the successes and ongoing growth of the concierge model. Every day we hear another story from our physicians and their patients about how much this type of practice change has improved their lives.”
Are you considering a career in concierge medicine or direct primary care? Do you have family, friends, and patients telling you that you should look into joining one of these medical practice companies?
“It’s about believability. Would it work for me? Could it work for me?” says Richard Doughty, CEO of Cypress Concierge Medicine. “In places where physicians have taken an early leap of faith [and started a concierge medical practice], they have been satisfied. As a result, physicians now have many examples of colleagues experiencing the benefits of concierge medicine for themselves and their patients. We see momentum continuing to build.”
CMT encourages physicians, business leaders and others to remember several key points before you decide on which franchise, concierge medicine company or DPC consultant you select:
- Don’t go into debt to purchase a franchise. Downsize your lifestyle and save up and pay cash. According to a 2013 poll of startup concierge and DPC physicians by Concierge Medicine Today, the majority of doctors used personal assets (savings, house, 401K) to fund their medical venture. Financial experts encourage that if needed, take an extra job while you are saving.
- Get an informal PhD in concierge medicine or direct primary care. Talk to a bunch of franchisee physicians. Find out why some are struggling and why some are successful. Build a relationship with your franchisor and stay in contact with them regularly. Gain as much perspective as possible before you begin and make an educated decision.
- According to surveys conducted by The Concierge Medicine Research Collective from 2007-2012, the majority of private-pay practices employ less than one staff person in a concierge medicine clinic. These offices are often less than 2,500 square feet. Do you have leased office space that you could no longer use?
- Most franchise transition companies and consultants will provide you with a patient sales or educational support team to help you explain your new billing and services to patients. If you have administrative or support staff that you could see coming with you, be sure they believe in where you are going and understand the new model of serving patients. The last thing you need is your front office staff telling patients behind your back that this isn’t a good deal – when in actuality, it very much is.
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- Many franchise, practice transition companies provide EMR, patient/membership billing services and legal document review. Ask them what support services they provide as you plan and prepare for opening day as well as up to 9-months after your opening day.
- Most importantly, look for an opportunity and evaluate the services you will enjoy providing to your patients — not just something that offers lower risk or more money. For instance, if you’re starting a concierge medicine or a direct medical care practice, ask these types of questions: Do I like dealing with people? Do I care about helping them with their healthcare needs, or am I more motivated by the potential money and working less hours?
“Don’t start out too high,” said Scott Borden of Direct Pay Consulting. “Many physicians choose patient pricing plans that are unaffordable for most of their patients. Remember that a higher monthly / annual membership fee will likely result in fewer patients each with higher medical needs. Do you want to spend every day treating a few chronically ill patients? A lower membership fee will allow healthy individuals and families that value your time to remain with your DPC practice. And you can always increase your fees next year if you completely fill your practice.”
By now, you get the picture: the more you pay, the more brand recognition, service, technology, etc., you will get and the more operational benefits you will receive.
Permenter also adds “There are a few things you should consider before joining any company. Start by asking ‘Is there a wide market for my concept?’; What makes me different from my neighbor who is already doing this?; and Does my form of delivery [of medical care] offer a reasonable return on investment (ROI) to prospective patients?’: If the answers to questions like these is ‘yes,’ then you should start the information gathering process and contact consultants and companies who can help you.”
“The key to success in any concierge medicine or DPC practice is, and always will be, the relationship that the doctor has with his or her patients,” notes Permenter. “With that in mind, one of the most important things for a new or established doctor to do is to constantly strive to improve the value proposition — at the patient level. The more you can do to improve the patient experience, the better each doctor’s financial returns are likely to be. Successful doctors need less in the way of support after the operational and internal planning has been done and should be hesitant to sign long-term contracts for longer than three or five years. Of course, a long-term contract can bring more patients and make your practice more profitable, thus improving the eventual sale of your practice or retirement plan. Nothing sells a concierge medical practice faster than patients that are exuberant about their experiences with a particular doctor’s office.”
Ultimately, it all comes down to the Physician’s ability to structure a program that delivers value in his/her practice. If doctors succeed in delivering value to the patient, they’re much more likely to create the win-win-win relationship that’s the hallmark of successful business.
Franchising can be a tremendously advantageous — and fast — way of expanding your medical practice into the area of concierge medicine. This is particularly true for the doctor who lacks the time, the manpower, and the finances to open a practice alone. It is a strategy that prospers even during times of economic uncertainty.
Before You Take The Next Step To Pursue A Concierge Medicine or Direct Pay Primary Care Practice Model For Your Local Area, We’ve (CMT) Has Put Together the Following Four Criteria to Self-Evaluate Yourself and Your Practice Before You Take The Next Steps.
Five (5) Self-Assessment Criteria:
- YEARS IN PRACTICE. Experts within the concierge medicine industry suggest that physicians (of any specialty) should have a minimum of 6 years in private medical practice. However, 10 or more years is preferable.
- YOUR PATIENT PANEL & HOW MANY PATIENTS YOU TYPICALLY SEE PER DAY. According to The Concierge Medicine Research Collective, July 2013, physicians considering a successful move into a concierge medicine practice should have a patient panel of at least 1,800 patients that they’ve seen within the last 24 months. They also recommend that a minimum of 15 patients per day are seen across a 4-day period as the current number that your practice is routinely seeing prior to making a transition into concierge medicine.
- MARRIED or UNMARRIED? Many physicians and their spouses work together in the same office. The Concierge Medicine Research Collective (October 2013), found in the practices surveyed and interviewed that changing your business model requires the joint agreement of both spouses, whether they work together or not. If your spouse is not in agreement with the change, a transition to a concierge medical practice is not recommended.
- SOCIO-ECONOMIC PROFILE of YOUR CURRENT PATIENTS. According to Concierge Medicine Today, September 2013, while over 67% of current concierge medical programs cost less than $135 per month, the socio-economic profile of patients in successful concierge medicine practices typically consists of middle class / affluent individuals and families.
- AGE RANGE of CURRENT PATIENTS. According to industry consultants, more than 50% of your current patient-base (last 24 months) should be 40+ in order to start, sustain and grow a successful concierge medicine practice in the future. (Source: Concierge Medicine Today, August 2013)
“Starting a concierge medicine or DPC practice we understand can be complicated if you do not know what you are doing,” adds Tetreault. “While choosing a concierge medicine or direct primary care company is often the fastest way to enter into the marketplace, it is not something you should venture into lightly. Physicians who’ve travelled down this road before you tell CMT … ‘You need to have a careful plan for controlling costs and quality before you begin. Start by asking yourself why you want to ‘do’ this?’ and then surround yourself with a trustworthy team that will support you and believe in what you’re doing in the months ahead.’”
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