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Is Concierge Medicine Finally Ready for Takeoff?

 |  By John Commins  
   January 18, 2013

For years observers have been predicting the impending migration of physicians into direct pay or concierge medicine, where no longer will they have to accept low Medicare and Medicaid reimbursements or haggle with private payers. 

Has that time finally arrived?

A recent survey of more than 13,500 physicians found that 6.8% of them would "embrace" direct pay or concierge medicine within the next three years. That includes 9.6% of practice owners, 7.7% of primary care physicians, and 6.4% of specialists, according to the survey conducted by physician recruiters Merritt Hawkins for The Physicians Foundation.

"This is a building crescendo because of a number of things that have happened to physicians or could happen to them," says Mark E. Smith, president of Merritt Hawkins.

"We keep kicking (the Medicare Sustainable Growth Rate funding formula) down the road and the docs' confidence becomes less and less that those chickens will come home to roost," he says.

A fear of major reimbursement cuts is among the top three threats cited by healthcare leaders surveyed in the HealthLeaders Media 2013 Industry Survey.

"There are a lot of unknowns with what will happen with reimbursements and the [Patient Protection and] Affordable Care Act, what it will ultimately cost and what will change. There are big questions about who will be in control of bundled payments. There are a lot of legitimate concerns and unlike a lot of professions physicians have a lot of options."

Reid B. Blackwelder, MD, a family physician in Kingsport, TN, and president-elect of the American Academy of Family Physicians, says his organization has no specific policies in place around direct pay practices. However, he says a proliferation of the direct pay practice model could create access issues.

"It depends again on how the physicians chose to provide that care," Blackwelder says. "It doesn't mean that it is a good or bad thing. As individuals choose to practice medicine in a certain way and patients choose to find that care we just want to make sure that all patients have access to the right care from the right person at the right time."

The AAFP in its 2010 practice profile found that 3% of respondents practiced in a cash only, direct care, concierge, boutique, or retainer medical practice. Blackwelder remains skeptical that significant numbers of primary care physicians will migrate to direct pay practices.

"We've been hearing for a long time that this is about to take off, but I have also read a lot about physicians who chose that model but it didn't meet their needs," he says.

"I am a little unsure that this is the time we are going to see a breakout just because there is so much economic uncertainty right now that will remain for the foreseeable future. SGR has gotten tapped down for a year but we have a lot of issues about what we are going to do with the [PPACA] and the debt ceiling and other deficits. Given these economic uncertainties it would be a challenging time to boldly go off in a new direction."

Merritt Hawkins' Smith says changes in the healthcare payer market will lure physicians into direct pay practices.  "You can take a private practice it and convert it to a concierge practice and make life greatly better for the physician," he says.

"They will become much more prosperous and reduce their business responsibilities by 90% and their employer responsibility but 75%."

"The old model is 2,500 to 3,000 patients in a panel. The practice generates $400,000 to $500,000 a year and overhead is 50%-60%. In that model these physicians are going to see between 25 and 30 patients a day. One would argue you are on the hamster wheel," Smith explains.

"In the concierge model the patient pays $1,500 to $1,800 a year for unlimited access to the doctor. But if you look at what you pay for premiums for your insurance, that is $120- $150 a month—that's a high end gym membership. The concierge target is to have 600 patients in the practice. On the low end with $1,500 with 500 patients that is $750,000. The docs are going to see five to eight patients a day but there is no real overhead."

Then there's the billing, says Smith. "There is no billing or collecting. There is a one-time fee that you put on a credit card. So you are dropping your overhead to 10%-15% and managing with one full-time employee while your patients spend all the time in the world with you."

Even if overhead is 20%, he points out, that's still means net revenue of $600,000 to provide managed care for a fraction of the people. "You are still working hard, but you are going to spend an hour with each patient rather than eight minutes. I find physicians attracted to that," he says.

"In a panel of 2,500 to 3,000 patients finding 500 to 600 who want to convert with you to this is not much of a challenge."

Tom Blue, executive director of the American Academy of Private Physicians, a professional association for direct pay physicians, estimates that there are about 4,400 physicians in direct pay private practices.

"Recognize that private medicine is almost entirely a primary care phenomenon. And my hunch is that this will settle out with 15% of primary care physicians operating in this kind of model in the next five or six years," Blue says. "I think we are poised to see a pretty good surge."

Blue says the time is right because of a convergence of supply and demand factors.

"On the physicians' side, you've got a growing realization among primary care doctors that the business model of the independent or small practice is likely not sustainable and they just having a harder time keep the lights on," he says.

"They are working faster and faster and it is not satisfying and potentially not viable. It's likely we will see the extinction of the small independent practice in the traditional sense. You have that forcing doctors to explore alternative business models."

Blue says private practice also allows physicians to better serve a smaller number of patients. 

"Private medicine in the early days used to represent a moral dilemma around displacing a large number of patients to attend to the needs of a smaller number," he says. "Today that moral dilemma is largely offset by the dilemma of ‘is it right to deliver care that is not the best I can do thousands of people or do I deliver really good care to smaller numbers?' More physicians are able to reconcile the decision with their own personal principles and that is driving more doctors into private medicine."

The anticipated surge of about 32 million new insured patients under the PPACA in 2014 is expected to exacerbate the physician shortage, and the increasing cost of health insurance coverage, with its higher premiums, co-pays and deductibles, also makes direct pay practice more appealing to a growing number of consumers, Blue says.

"The pace of healthcare has gotten to the point where it has begun to strip the consumer perception of quality down to the bone," he says. "In an environment where the physician relationship is scarce free market principles would suggest that people who value that relationship are now looking for alternative ways to secure it for themselves."

"For people responsible financially for their own health with high-deductable plans there is a growing appreciation for the value of preventive care and staying healthy as opposed to reacting when you are sick," he says.

"The economic value of preventive care is beginning to increase in the minds of the consumers because of the financial responsibility."

Blue says self-insured companies are already seeing the value of hiring private practice physicians to provide on-site primary care for their workers. "Making care more accessible and convenient reduces hospitalizations and specialized care. It's a formula that is playing out conclusively and we are seeing more companies that want to take control of that relationship," he says.

For physicians who are sick of the hassles around practicing medicine, Smith says direct pay may be the perfect remedy.

"It's the easiest way for a doc to go off the grid," he says. "I've heard people describe it as a bit of a time warp. You get to go back 30, 40, 50 years and remove the insurance hassles from your practice and have this practice of 600 patients or so that you handle."

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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