Cooling on concierge: Selling the service not so easy

When the idea first took shape, it sounded so promising: Charge patients a monthly or annual fee and offer extra services, such as same-day, extended appointments and 24-hour telephone access. Limit your patient panel to a fraction of what it would be under typical managed care parameters, giving you a chance to get back to the personal care that appealed to you when you first decided to be a physician.

Concierge medicine was touted by many as a viable alternative to the current health care maze when it started gaining popularity a few years ago, especially as monthly fees came down to a level that could entice the middle class. A few reports even projected a health care industry that relied on the membership concept, with patients having little choice but to pay above and beyond their normal insurance premiums for physician access.

While physicians knew it wouldn't get as big as those predictions, concierge medicine also never took off the way it was expected. While a few businesses have sprouted out of the movement, doctors still are generally slow to make the transition, mainly because it's a difficult model in which physicians can find success.

The concept still has considerable merit, judging by the anecdotes of doctors who are happy they made the switch and the statistics they produce about their patients renewing at a high rate. Entrepreneur magazine even lists concierge physician services as one of 13 "Hot businesses for 2005."

Running the practice is quite different from starting it, however. From having to find the right fee structure and the right group of patients willing to pay for it, it's not as easy as declaring yourself a concierge, boutique or retainer physician; flipping a switch; and collecting revenue.

In many ways, retainer physicians are discovering what doctors who run cash-only and non-insurance practices have learned over the years: Convincing patients with insurance to pay out of their own pockets for care can be a monumental task.

"Our society has an entitlement concept to their health care," said Rosemarie Nelson, a Medical Group Management Assn. consultant based in Syracuse, N.Y. "It's not like car insurance, where your policy doesn't cover preventive maintenance. But they're asking why should health care be out of pocket?"

Because the movement is still relatively new and consists mainly of individual physicians, comprehensive data on concierge medicine are not available. There are estimates, however, that place the number of boutique practices around the country in the hundreds, out of a physician pool that numbers in the hundreds of thousands.

The Society for Innovative Medical Practice Design, which is composed of physicians and ancillary support staff involved in patient-financed medicine, has about 200 members, said David Albenberg, MD, a family physician who runs Access Healthcare LLC, a retail medicine practice in Charleston, S.C. The society held its annual meeting in Dallas last month, where it welcomed about 180 people connected in any way to the industry.

The society has seen 100% growth since it was formed by merging the American Society of Concierge Physicians and National Organization of Retail Medicine last year.

But for an organization with so few members, that growth rate is quite low, said Dr. Albenberg, who is vice president of the society.

While the society has faced its own growing pains over the last year, the industry also has been saddled with increasing apathy among the public and among physicians who are not used to taking such financial risks.

"I am shocked at the inability of physicians to take that leap of faith and get off of Medicare," Dr. Albenberg said. "There's a lot of hesitation."

Different frame of mind

Part of that hesitation is borne out of a fear that patients just won't follow you into a boutique setting, no matter how long you've treated them or how well you know them.

The business planning involved is antithetical to a traditional practice as well, which can be enough to steer even the boldest entrepreneurs to another endeavor.

When you start a traditional practice, your thoughts are on enrolling with insurance plans and getting your name in their directories, MGMA's Nelson said. The location you choose usually is dependent on hospitals, other physicians and the growth potential of the community.

Starting a retainer practice, however, is all about demographics. Can the location you choose field enough people willing to pay extra for their health care?

Richard Goldman, MD, an internist in Wellesley, Mass., near Boston, started Access MD, a retainer practice, two years ago. After more than 10 years in a traditional practice in Framingham, another Boston-area community, he moved eight miles to Wellesley because "when I was looking to launch, I didn't think [Framingham] had the right demographics to support it," he said.

Dr. Goldman admits he didn't follow what many consider the blueprint for the easiest transition, which is simply paring down the existing practice, without moving. He has a membership goal of between 300 and 400 patients, but after two years, he is sitting at about 235.

"It's growing, but in small amounts," said Dr. Goldman, who charges $2,500 per individual and $4,500 per family annually. "I get a couple of new patients every week or every other week, rather than 10 at a time. It's not as far along as I had hoped it to be in terms of numbers, but I am certainly committed to it."

Often, there's a last straw or a feeling of desperation that precedes the transition to concierge medicine, where a physician has absolutely had it with the managed care culture and wants to try something different and liberating. For Dr. Goldman, the constant rigmarole finally got to him.

"When I mentioned it to my colleagues, they said, 'Great, you go first,' " he said.

The transition certainly can test your commitment, especially with the financial delays you're likely to experience, physicians said. If you've already started buying into a partnership agreement in your practice, for example, most likely you have to pay off that debt before you leave, doctors said. With buyouts not as common as they once were, leaving a practice can be costly. Add to that the time it takes to get the new practice up and running, and you could be talking a year of limited income, Dr. Albenberg said.

On the other hand, a young physician might take even longer to get a practice running, because there is no established group of patients from which a loyal few may become members at the new practice.

Meanwhile, you have a certain membership total you need to reach at a given fee to cover your fixed overhead costs, which start to accumulate before you see your first patient.

"There's a lot of financial downtime to getting it up and running," he said. "Trying to spin that to someone just out of residency is not easy."

Success stories

But with careful planning, even residents can build a successful practice.

Family physicians Brent Agin, MD, and Michael O'Neal, DO, were recent graduates of their residency programs in 2002 when they opened a successful retainer practice in Palm Harbor, Fla. They started a business, Cooperative Med Inc., which earlier this year received a "substantial" financial commitment from a private investor, Dr. O'Neal said.

The private financing will put CooperativeMed on track to reach its goal of 40 practices around the country, Dr. O'Neal said. The second office, located in Tampa, opened earlier this year.

"I think the concept has some room for growth," Dr. O'Neal said. "But this concept will not take over the health care system. We see a handful of high-quality practices in select niches."

MDVIP, based in Boca Raton, Fla., has expanded its business as well, from contracts with 25 physicians in seven states two years ago to 73 doctors in 14 states today. The company offers transitional, technical and marketing support to its doctors, but it views itself as the "anti-practice management firm," said Darin Engelhardt, MDVIP's chief financial officer and general counsel.

"It's a pretty daunting task for a physician to do it independently," Engelhardt said. "What we do is well beyond the scope of what physicians are able to do on their own."

While there are a few success stories, entrepreneurs have not flocked to the concierge model the way they did to the physician practice management model a decade ago. Dr. O'Neal said it's because those businesses are typically interested in generating high revenue totals immediately, which isn't really practical with retainer practices. Engelhardt said that because there was no blueprint for success, some businesses just couldn't comprehend the complexity of the business model.

"We've known of a number of companies that have tried to develop [a concierge model] that failed," Engelhardt said. "The level of difficulty was something no one could contemplate because no one had ever done it before."

Whether the concierge model grows into thousands of practices is really secondary to the physicians who are passionate about practicing without the hassles of managed care. To them, the model is not about numbers but about having the conviction to practice under a different framework.

"You take your stand and say, 'It's important for me to feel good about what I do, and it's OK that not everybody gets what I'm doing,' " Dr. Albenberg said.