Diversifying your practice

June 22, 2015

Some physicians are finding that running two separate practices-or a hybrid concierge practice that includes traditional fee-for-service-can be a smart economic model. Attracting patients willing to pay extra for conveniences or more extensive care can ease the financial strain of treating patients for whom third-party reimbursements are declining.

When Kevin Kelleher, MD, and Mark Vasiliadis, MD, launched Executive Healthcare Services in Reston, Virginia, they viewed their fee-based membership practice as a way to continue practicing primary care in the way they loved. Executive Healthcare Services, which has a model somewhat similar to concierge practices, charges its patients a fee for enhanced access and greater coordination of care, letting the doctors spend extra time with patients. “It allows us to be the family doctors we’ve always wanted to be,” Kelleher says.

But when the physicians opened their doors in 2004 they didn’t abandon Generations Family Practice, a traditional one they have operated since 1998. Instead, they recruited two other physicians to treat Generations’ patients. Meanwhile, the success of Executive Healthcare Services has helped them bolster and sometimes subsidize Generations, which, like many fee-for-service practices, has felt the pinch of a tight reimbursement climate. (They don’t refer clients to each other, however, because the practice is illegal under the Stark Laws.)

“Because they’re two separate businesses, we try not to have it function that way,” Kelleher says. “But because they’re owned by Mark and me, it often turns out we have to subsidize the traditional practice. The traditional practice loses money some years and makes money other years. There have been years where our concierge practice, as a business entity, has helped us cover costs or loss at the other practice.”

Related:New payment models bringing changes to medical practices

Kelleher and Vasiliadis aren’t alone in finding that running two separate practices--or a hybrid concierge practice that includes fee-for-service patients--can be a smart economic model. Attracting patients willing to pay extra for conveniences or more extensive care can ease the financial burden on physicians who want to continue treating fee-for-service patients for whom insurance reimbursements often are declining.

Statistics on how many physicians are straddling the worlds of both traditional and concierge medicine are hard to come by, but in general concierge practices and hybrid versions of them still represent a small part of the medical landscape.

But many physicians do seem to be toggling between fee-for-service and some form of concierge practice, according to data from the Concierge Medicine Research Collective, which works with universities, physicians and others in the field to gather data. It has found that more than 80% of concierge medicine practices do accept patients who are covered by commercial insurance or Medicare.

Some physicians juggle the two temporarily, until they have enough concierge patients to sustain such a practice alone. Others don’t want to abandon patients who can’t afford concierge care. “We believe most physicians would prefer to retain their patients,” says Matt Jacobson, MBA, founder and chief executive officer of SignatureMD, a concierge medicine network based in Santa Monica, California, that helps physicians convert their practices. He says 80% of the physicians in the network have “segmented” practices.

Whether such a hybrid approach is temporary or long term, it can come with challenges. For one thing, given the rigors of running a single medical practice, it can be hard for an independent physician to juggle the administrative responsibilities that come with operating two separate practices, or a single practice with two distinct groups of patients who pay according to different models.

Here are some tips for making it work, so that the concierge or executive practice enhances your traditional practice.

 

NEXT: Identify your ultimate goal

 

Identify your ultimate goal

Before you decide to add concierge patients to a fee-for-service practice-or add a practice for concierge patients--consider how doing so will help achieve your goals as a physician. Is your goal to focus on concierge patients alone, or to care for both concierge and traditional patients? Is a tiered model a way to sustain the practice financially for the short term, while you gradually convert to a concierge or executive model, or is it a long-term plan?

“If they have a high turnover rate of patients, to expect them to pay a fee is probably a hard thing to expect,” says Kelleher. It’s also important to consider how juggling two groups of patients will affect your lifestyle. If you charge patients extra for 24/7 access, you’ll need to be available.

Marcela Dominguez, MD, an internist in Mission Viejo, California, instituted concierge service in her practice in 2013 because she found the business model of her traditional practice was not working, on a practical or personal level.

Related:From quantity to quality: Meeting the new demands of value-based care

“Patients who wanted to see me were waiting two to three months,” she says. “Running a practice was becoming more and more expensive. You cannot survive with just insurance alone unless you are seeing 30 to 40 patients a day. I was borrowing time from my family life.”

As Dominguez has made the transition, with the assistance of SignatureMD, she has found it works best for her to see traditional patients on a limited basis. In between their annual visits with her, they see another independent physician or her physician’s assistant. That allows her the time to stay focused on building the concierge practice. “My ultimate goal will be concierge,” she says.

Build the right administrative support

In a concierge practice, the level of administrative support you need may be less than in a traditional practice, especially if you do not accept insurance and opt to treat a much smaller patient panel, as many physicians do.

Executive Healthcare Services, for example has established a limit of 350 patients per doctor. But remember: if you combine a concierge practice with a traditional one, you will still need sufficient staff to process the paperwork from third-party payers. Maintaining a larger payroll will add to your expenses, so it’s important to calculate the overall impact on your bottom line across the practice or across two separate practices. “They have to look at their business like a business,” Kelleher says.

 

NEXT: Consider creative financing

 

Don’t try to do it all yourself

By all accounts, running dual practices works best when you see the concierge patients personally and use physician extenders, such as a nurse practitioner or physician’s assistant to see other patients, or hire or partner with other doctors to do so. It will be hard to deliver the level of access concierge patients expect if you are also caring for many fee-for-service patients.

Hiring another physician to treat traditional patients while you see the concierge patients can be an ideal solution but it is more difficult financially than some physicians expect.

“From my experience, for a single doctor doing a conversion, it’s usually not economically viable to bring in another MD,” says Jacobson. “We have some success stories where we have two doctors who brought in one younger doctor, but typically we’ve seen if you were to hire a doctor at $225,000 a year, plus expenses, to make it economically beneficial, you’d have to have 400 patients.” Kelleher and Vasiliadis were able to focus exclusively on their executive practice in 2007, three years after they started it, by recruiting another physician to run Generations.

Peter Bruno, MD, an internist in New York City, has found the cost of hiring another physician to be prohibitive. He began converting to a concierge practice in July 2014 to contend with the high cost of practicing in Manhattan and declining insurance reimbursements.

Like Dominguez, Bruno is part of SignatureMD’s network. Currently, he is treating concierge and traditional fee-for-service patients, but he’d like to bring in another physician to see the traditional patients.

Bruno first looked into hiring a junior physician but had to abandon that plan. “It became obvious it was going to be hard for me to take in someone as an employee and pay their malpractice and healthcare insurance and still not lose money doing all this,” he says.

So now Bruno has tried another solution: In search of a junior partner, he has been recruiting candidates through Lenox Hill Hospital in New York City, with which he has had a long relationship. He has spoken with several promising candidates. “Hopefully, I’ll have someone by July 1,” he says.

Consider creative financing

As Bruno has found, identifying a junior partner who can afford to buy into an existing practice can be challenging, because younger physicians may not yet have enough money to do so.

Related:Physician practices grapple with new financial pressures

After some experimentation, Bruno came up with an option he thinks will work. The younger physician will lead the traditional practice but share common office costs with him, such as the office staff and rent, becoming its owner eventually. “The deal would be that after whatever number of years we decide, he would take over the managed care side of my practice,” says Bruno.

That possibility has attracted two or three serious candidates to date, Bruno says. “The guy I’m looking at now has been in practice six or seven years,” says Bruno. “He’s an employee working for another doctor. He has a small practice he’ll be able to bring over with him.” Hopefully, he says, the revenue from those patients, plus those of his own, will make the deal work for his prospective partner. “More or less whatever he makes, he will keep,” says Bruno.