By Michael Tetreault, Editor-In-Chief
JUNE 4, 2014 – When launching a direct primary care (DPC) medical practice, many “Doc-Preneurs” grapple with how to structure their practice and which business model to choose. Here are the pros and cons of each practice model commonly used by direct primary care doctors and retainer-based medical physicians.
Distinct advantages for selecting the “FNCS” model are:
- Physicians who are looking to slow down without affecting their current income levels will find this model attractive. These types of models offer an enhanced physical (or some enhanced procedure or procedures not covered by Medicare), on an annual basis, which is the basis for the entire fee. Fees for these models usually range from $1,200 – $2,000. It is critical that physician converting to this business model are able to reduce expenses to accommodate this type of practice.
- There is typically a maximum number of patients allowed to join the practice, usually around 600. Industry sources tell CMT that they have not seen too many of these concierge medicine practices reach the 600 patient-member level, but that most are satisfied at the 400 patient-member level.
- Contrary to what people think, this model is not just for the rich as the vast majority of patients make less than $100K, according to industry surveys. The concierge medicine industry has been touted by the media and television for years as an expensive way to see the doctor you’ve known for years. At the inception of the movement in the early to mid-’90’s, this was factually true. What’s not truthful is that nearly two decades later, the majority of concierge medicine and direct primary care clinics cost their patients between $50 – $135 per month.
- Family Practice Physicians typically offer a family plan where dependent children up to a certain age are covered free. Internal Medicine Physicians may offer a similar program but typically for dependent children between the ages of 16 and 25. Therefore there are many single moms joining these practices.
- There are many development teams and implementation companies that are helping physicians to convert to these more price transparent business models. They have every base covered with regards to ensuring a successful launch. There is nobody in this industry that does it better. There is a very high failure rate for physicians trying to transition to this type of model on their own. The conversion process is intense and every transition has its own unique challenges.
Distinct disadvantages for selecting the “FNCS” model are:
- The FNCS business model works very well when implemented appropriately. Although a medical practice is considerably smaller and much easier to manage, there are still existing issues with regards to billing Medicare and insurance companies, collecting co-pays, checking patients in and out, etc. This not only increases operational costs, but most of the problems surround billing insurance. Alternatively, in other concierge and direct primary business models, operational costs are much lower because the physicians/practice do not participate in Medicare or insurance plans. We will write more about the pros and cons of this in Part 2 of our follow-up article:
- FNCS Business Models require that the services paid for by members are not Medicare covered services. Accordingly, it is critical to have legal input with regard to structuring this model. Because Medicare regulations are likely to change frequently, especially with the ACA, ongoing legal monitoring is necessary in this type of model.
According to a recent 2013 Physicians Practice Survey (2013 Staff Salary Survey) respondents in practices of six-to-10 physicians reported practicing in a concierge/membership practice. Here are some more specific findings from the survey:
- Solo practices: 2 percent are in concierge/membership practices.
- Two- to five-physician practices: 2 percent are in concierge/membership practices.
- Six- to 10-physician practices: 5 percent are in concierge/membership practices.
- 11- to 20-physician practices: No respondents are concierge/membership practices.
- 20-plus physician practices: 1 percent of respondents are concierge/membership practices.
It’s likely that more physicians, especially physicians in smaller practices, will begin transitioning to concierge, membership, and even direct care practices in the coming years. Physicians who favor independent practice will likely view these alternative reimbursement models as a way to retain their independence, spend more time with patients, and combat declining reimbursement.