The debate rages over the "good" or the "bad" of a concierge or boutique medical practice, but the trend shows no sign on abating.

In a newspaper article I read online today, it's estimated that there are about 400 such practices around the country.

Fact-o-stat of the day: According to Consumer Reports, Americans on average wait 68 minutes to see a doctor for six minutes.

Rather than enter into the debate, I'd like to focus on the business model of the "concierge" (also called "boutique" or "retainer") practice, and how it differs from a traditional medical practice.

A doctor in a typical primary care practice may serve between 2,000 and 4,000 patients, deriving most his or her revenues from insurance billings at contracted rates, capitated per member per month fees, co-pays, and a certain amount paid in cash. This leads to variable and somewhat unpredictable cash flows, unless the physician's practice is consistently full.

Under this model, patients are allocated a certain amount of time for each appointment, and they "pay as they go", either directly or via insurance - except in the case of capitation.

Expenses tend to be a combination of fixed, variable and semi-variable costs. Rarely is there an influx of capital to be able to invest in practice upgrades. Instead, moneys have to be set aside in a disciplined fashion, or borrowed and repaid, to fund new projects such as installing an electronic medical record or a practice management software system.

The concierge practice business model differs substantially in a number of ways:

1. The per-physician patient roster drops, usually to between 400 and 700 patients.

..........few third-party payors have been receptive to the concept. ....Most managed care companies contractually prohibit providers from charging "access fees" to enrollees. Accordingly, many concierge practices voluntarily terminate their contracts with third-party payors and function as out-of-network providers. Because this scenario leaves patients responsible for a greater portion of office charges, some concierge practices have reduced their office fee schedules. For the physician, this accommodation rarely results in a significant loss of revenue. As a service to its patients, the practice can offer to bill insurance, or patients can submit claims directly. Nevertheless, before converting to a concierge model, physicians should consider whether their patients will be willing to see an out-of-network provider.

Another potential area of concern for concierge physicians is the Medicare program. The Department of Health and Human Services has reviewed the concierge model and determined that, if structured properly, this type of practice does not generally violate current Medicare regulations.

To avoid potential violations, a concierge practice must carefully structure its benefits so that the annual fee does not cover services that are already reimbursed by Medicare. For example, Medicare now pays for a comprehensive physical examination for first-time enrollees. As a result, most concierge practices exclude the exam from the annual fee for first-time Medicare enrollees but offer a corresponding discount to the annual fee. Additional items eligible for Medicare reimbursement that should not be covered by the annual fee include coordinating consultations with other physicians and writing prescriptions. Although current Medicare laws are generally favorable to the concierge model, the risk remains that Congress will pass future legislation that adversely affects the viability of these types of medical practices. 

Depending on which actual model of "concierge" medicine is being used, patients can rely on having enhanced  access to their physicians without any change in medical services, or they may have both enhanced access and enhanced services. In order to provide the latter legally, it appears that a physician may not be a part of the Medicare program or a contracted provider for an insurance company. Healthcare attorney, John Marquis, discusses this in greater depth and describes three different business models in a March 2005 article, entitled Legal Issues Involved in Concierge Medical Practices.

It seems sensible to consult a healthcare lawyer familiar with these practice models, to understand all the ins and outs and implications of a decision to move to this medical practice model. 

For entrepreneurial physicians committed to staying in clinical practice, the first challenge is to recognize when your current business model is not serving you any longer. It won't take much to drive you out of practice altogether, if you hate going to work.

The second is to become truly entrepreneurial and creative --- to spend the time configuring the practice model that best meets your income and lifestyle needs, while permitting you to continue serving the many patients who need your care. Including folks like me!

I'd love to hear your thoughts about these practices.