September 29, 2010

As reimbursements from Medicare, Medicaid and traditional insurers decline and the costs of running a medical practice soar, more and more physicians are considering converting to a concierge-style practice, also known as a boutique or direct medical practice.

What exactly is a concierge practice? Under this business model, doctors charge patients an annual fee (or retainer) to be a preferred patient within the practice, entitling the patient to additional access that may include longer visits, same-day appointments, off-hours access and, in some cases, home visits. Oftentimes, doctors even give preferred patients their cell phone numbers and personal e-mail addresses. Physicians usually limit the number of patients they will accept so as to ensure greater access to care. Fees start at approximately $1,000 and go as high as $20,000 or more for the most elite practices.

The concierge model has grown in popularity in recent years among both patients and doctors. In fact, the American Academy of Private Physicians estimates that there were approximately 5,000 concierge physicians in the United States as of 2009. While doctors understandably are drawn to the financial incentives of this model and the opportunity to provide improved care with longer appointment times and fewer patients, the decision to convert to a concierge practice is not easy. Not only is there a risk of alienating long-standing, loyal patients who may be either unwilling or unable to participate in such a practice, but there are also a number of operational issues to bear in mind.

Things to Consider

First of all, it is important to look at your existing patient base. Do you have a busy practice that is overwhelmed by the current volume of patients? Are there long waiting times for appointments? Are you concerned that care is already suffering because of the number of patients you must see every day in order to meet expenses? If so, converting to a boutique practice may be the answer. On the other hand, if your practice is underutilized, then you and your patients are unlikely to benefit from a concierge transition.

You should also consider the financial status of your patients in an effort to determine if they can support the fees associated with a boutique model. This is not always easy to ascertain, as doctors are not privy to the incomes of their patients. However, a quick analysis of your accounts receivable may provide an indication of whether or not your patients are struggling to meet their current commitments. Additionally, you should research the median incomes associated with your patients' professions. Ultimately, if your patient profile isn't right for a concierge practice, a hasty decision to convert could be very risky, especially for a young doctor without an established patient base.

You must also ask yourself if you are honestly willing to commit to providing the greater access that patients expect from a concierge model, including possibly limiting the number of patients you will accept in order to deliver the individualized attention that is required. If your patients are merely paying a fee for the same level of service they received before the conversion, loyalty will suffer.

Another important—but often difficult—area of assessment involves the other members of your practice. Before embarking on a transition, you should engage in an open dialogue with the rest of the group to see if they share the desire to "go concierge." It is also wise to discuss how the funds and new responsibilities will be shared. If all partners are not on board, your practice may become divided and even split up over the different viewpoints. In light of these potential land mines, you should consider amending or revising your current corporate or operating agreements to plan for what happens in the event the practice transitions to a concierge model. In addition, these agreements should carefully outline the voting procedures required to make such a significant change to your practice structure.

You should also consult with legal counsel about drafting a patient agreement that details the amount of your annual patient fee and specifically what services are included. Other regulatory and legal issues, including Medicare compliance, should be analyzed by your attorneys. For instance, you must be careful about which services are included in your concierge agreement because you will not be allowed to charge patients a fee for any services that are also paid for by Medicare.

The Hybrid Alternative

One alternative that some groups have pursued is a "hybrid" model in which patients can choose the practice type that works best for their needs. This approach allows you to offer the concierge option without having to turn away patients who are unwilling or unable to pay the associated fee. A hybrid model, however, does not come without its challenges, including the awkwardness that can result when you have to explain to non-concierge patients that they will have a different level of access.

What about Public Opinion?

The current political environment also raises some potential concerns regarding a concierge transition. Ongoing criticism that this type of practice is elitist and unfair has gained new momentum with the recent passage of President Obama's health care reform bill. Critics are now saying that the concierge model may hasten the creation of a two-tiered medical system, where the rich have a different standard of health care than the rest of the population. Physicians and patients alike, however, should remember that the annual fee charged by many concierge practices is actually less than what some people pay each year for their cable television service. Many patients are willing to accept these fees because they, like their doctors, are so dissatisfied with shorter and shorter appointments, coupled with longer and longer waiting times for these appointments.

It's Up to You

The ever-changing face of health care in the United States is inspiring many physicians to consider the concierge model—even though the prospect of a practice transition can be daunting. Not only is a concierge conversion potentially difficult and stressful, but there are significant marketing and insurance challenges to be faced. You may also be forced to change your corporate structure, which requires lawyers, accountants and consultants to guide you through the process. In the end, you must carefully examine your own unique practice, patients and style to determine if this model is right for you.

This article contains material of general interest and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Under applicable rules of professional conduct, this content may be regarded as attorney advertising.