Concierge medicine becomes an option in reform era

August 10, 2016

Once considered medicine for the rich, concierge practice may be worth exploring for doctors facing today’s challenges

Internist Jeffrey Puglisi, MD, first considered changing to a concierge practice six years ago, when he took a second job as a home hospice director. At the hospice, he loved having the time to talk with patients and families who were going through difficult times-something that was becoming increasingly difficult in his private practice.

“That job changed everything for me overnight,” says Puglisi, one of three partners in Glenville Medical Concierge Care in Greenwich, Connecticut. “It made me take stock of what I really wanted to do in the future and where I saw myself in 10 to 15 years. My strength is in building relationships, and you can’t really do that when you’re seeing patients every six to eight minutes.”

According to a recent national survey of physicians, an increasing percentage of doctors feel overextended and are spending a significant portion of their working day on non-clinical paperwork (see sidebar, “Forces driving growth of concierge medicine.”) With the potential for steady revenue from membership fees, concierge practice has the potential to relieve some of the financial pressures and administrative burdens inherent in the fee-for-service environment, says Puglisi. 

Concierge medicine-where practices charge an annual or monthly fee for enhanced services and greater access to providers-isn’t new, but its image among physicians and the public may be changing.  Once synonymous with VIP medicine serving an elite clientele, some physicians are finding they can succeed without charging exorbitant fees by signing on more than a handful of wealthy patients.

While annual fees can be as high as $5,000 or more, the national average is around $1,800, according to the industry trade publication Concierge Medicine Today. The typical concierge patient tends to be financially upper middle-class, with an annual household income of between $125,000 and $250,000, says editor-in-chief Michael Tetreault. 

While still a small slice of the physician workforce, concierge medicine is growing at a rate of about 5% to 6% annually across the United States, says Tetreault, with about 12,000 physicians now practicing some form of subscription- or retainer-based medicine. 

“This is really a return to a more personal relationship and traditional approach to medicine,” says family physician Patrick Tokarz, MD, chief medical advisor to SpecialDocs Consultants, based in Highland Park,
Illinois, which advises physicians on setting up concierge practices. “Concierge physicians are not driven by the need to maximize reimbursements, which allows us to be patient-centered rather than insurance-centered.”

Getting started

The first step toward making the transition is conducting market research, says Puglisi, who officially switched to a concierge model in May 2015. When he first became intrigued by concierge medicine, he attended conferences held by national trade groups such as the American Academy of Private Physicians, talked to practice management consultants and visited established concierge practices.

 

Deciding whether or not to work with insurers was one of the first major decision points. Puglisi and his partners opted out of all insurance contracts, requiring instead that insured patients pay out-of-pocket at the time of service and seek reimbursement on their own for routine care. 

While the majority of concierge practices continue to bill insurers, it often represents a service to patients rather than a significant income stream for the practice. For example, family physician Thomas LaGrelius, MD, owner of SkyPark Preferred Family Care in Torrance, California, says the bulk of his revenue comes from membership fees while 25% continues to come from Medicare, his only third-party contract.

“Although Medicare payments have decreased, I am still able to charge adequate membership fees for services not covered by Medicare to make up the difference,” he says. “That allows me to maintain a small, high-quality practice.”

Labeling your practice “concierge” is a decision in itself, since retainer- or subscription-based medicine also encompasses direct primary care (DPC), notes Tetreault. Generally, concierge practices bill insurers for routine care while also charging a retainer, while DPC practices operate on a direct-pay basis with no middleman. 

However, like Glenville Medical, not all concierge practices bill insurance so the distinction can be a bit murky for consumers. In general, DPC practices are a less-expensive option, with monthly fees averaging less than $100 compared with $175 and up at concierge practices. They also tend to have  larger patient panels-600 to 800 per physician compared with 300 to 600, on average, at concierge practices. 

Despite those distinctions, there is substantial overlap, notes Tetreault. Both models have much smaller patient panels than the 2,000 to 3,000 per physician that is typical among traditional practices, and offer increased access to and time with providers.

Ultimately, however, the label a physician chooses matters less than deciding on the type and size of practice they want to build, he notes, such as how many patients they want to see each day and their income goals. 

While DPC is usually the more economical option, some patients are willing to pay more for concierge because they see it as offering a higher level of service due to the smaller average practice size, experts say. Some may also be uncomfortable forgoing traditional insurance, which concierge practices are more likely to accept.

 

One of the most challenging aspects of transitioning to concierge care is marketing your new practice model to patients, says Tokarz, who recently retired from Northern Virginia Family Practice in Alexandria, Virginia. Established practices with experienced physicians have a distinct advantage. 

“My finances improved as soon as we transitioned, but I had 25 years of experience practicing in the same location with long-term patient relationships,” says Tokarz. “It would be extremely difficult to start a concierge practice from scratch.”

Almost 40% of Glenville Medical’s patients joined the new concierge practice, higher than the average retention rate of  15% to 35%, according to data compiled by SpecialDocs Consultants. Puglisi attributes his success to being in an established practice serving a relatively wealthy demographic. Still, losing the other 60% was tough. “You realize that once you put a price tag on your services not every patient will be able to afford it,” he says. 

Puglisi also cautions against transitioning too abruptly. He and his partners started informing patients about the change six months in advance of their official transition, giving them time to educate patients, sign up members, and find new medical homes for those patients who opted to leave.

The practice worked with a team of consultants to set up a dedicated phone line for patients to ask questions about concierge care and its cost implications. The physicians also advertised the change in local publications and revised the practice’s website.

In the months leading up to his official transition, LaGrelius made a point of speaking personally to each patient at the end of every visit. He also invited them to talk to one of his staff in a private room to ask questions and get additional details.

“Any physician planning to make this change needs a clearly delineated timeline as to how they will implement it,” says Puglisi. “If patients are clearly educated about why you’re transitioning, you’re more likely to have a full practice at the end of the day.”

Financial implications

For many physicians, the biggest fear about changing to a concierge practice is losing revenue during the startup period. They worry that their existing patients will balk at the membership fee and that the practice will struggle financially as it tries to attract new patients.

 

It may seem less risky to start with a hybrid practice, allowing patients the option of becoming members or staying on a fee-for-service basis. It can be a tempting scenario, says Lagrelius, but one that rarely works well in practice.

The reason is that physicians want to feel that they are providing the same level of care to all their patients, he says. However, it’s difficult to provide quality care to everyone while still providing an extra level of service to paying members. At the same time, fee-for-service patients have little incentive to join when they are getting essentially the same level of care for free.

“In some ways, transitioning to concierge is like jumping off a cliff,” says Tokarz. “But with enough experience and preparation, practices often find they are financially better off than they were in the past.” 

Part of that preparation is implementing cost-saving strategies, he says. Because there are far fewer patient accounts to handle compared with a traditional fee-for-service practice, they often need less space and fewer employees. For example, Glenville Medical reduced it’s staff by 30% prior to the transition, says Puglisi. Besides eliminating insurance billing services, it also stopped providing lab services, determining that it would not be a viable service with a smaller patient panel.

“Making layoffs was difficult but we now have a staff that is appropriate for the size of our current practice,” he says. 

Setting fees is another pivotal financial decision, he says. They have to be high enough to produce an adequate revenue stream but low enough to attract new patients.

Puglisi and his partners surveyed the market and settled on a mid-range price point for their geographic area. Determining the fees depends on the services you plan to offer and how many patients you can reasonably take on at that service level, he says. 

“I’m doing home visits, coordinating care in the hospital, and providing 24/7 access,” says Puglisi. “If you offer that level of service for too many patients, you will dilute what you provide to them.”

Puglisi declines to disclose his patient panel size and fees. However, the average for concierge physicians in the Greenwich area is 300 to 500 patients per physician, with annual fees ranging from $2,500 to $5,000,
according to SpecialDocs Consultants.

 

Workflow

Although you may be able to cut back on staffing in a concierge office, the people who stay become even more important to the success of the practice, says Puglisi. It’s vital that everyone in the office has a service mentality.

 

“Your staff has to buy into the idea of concierge care and be very aware of their role in helping patients have a positive experience,” he says. “Your whole staff will be interfacing with patients over email and in person and should be very knowledgeable about how things work.”

For Tokarz, switching to concierge led to greater job satisfaction and improved teamwork among his staff. “In a high-volume traditional practice, there is often a feeling of antagonism and isolation between patients and staff because the staff feel like they have to be a barrier between providers and patients,” he says. “But with a lighter patient load, they can focus on actually helping patients and doing their jobs properly.”

The typical workday changes significantly after the transition to concierge, says Puglisi. With insurance reimbursement no longer dictating the pace, physicians can book longer appointments and set aside time for activities that may have gotten lost in the shuffle in the past, like emails and phone calls.

At Glenville Medical, each physician typically books two 90-minute appointments in the morning for complete physicals. Puglisi also spends time summarizing findings from those visits and drafting a letter to the patient, which he mails along with any test results. “I often speak to them on the phone as well after their appointment,” he says. “At the end of all that, I feel like we’re on the same page in terms of continuing to keep them healthy.” 

The remainder of the day is filled with 30-minute slots for acute care visits and follow-up care as needed, he says. There is always room in the schedule to accommodate emergency visits and handle administrative tasks.

Along with home visits and coordinating care for hospitalized patients, physicians are kept busy, says Puglisi. But the atmosphere is much different from the frantic environment of his previous fee-for-service practice.

“I want patients to feel comfortable talking about their fears and anxieties and that was becoming more difficult in my old practice,” he says. “I also feel less stressed personally because I’m working fewer hours and providing the type of care I want to give.”

Puglisi also likes having time for professional education, including travel to conferences and interacting with colleagues. Instead of feeling stressed at the end of the workday, he now feels productive and fulfilled, he says.

“A major cause of physician burnout is not enjoying your work and always feeling like you’re cutting corners,” he says. “When you’re in a practice where you’re working more and more hours and not giving type of care you want to give, something will give and often it’s burnout and depression.”