From Amazon Prime to the local gym, everyone is familiar with the membership business model. Customers pay a regular fee and receive membership benefits in exchange. As with a service like Netflix, the benefits may include access to all products that the company offers. At the other end of the spectrum are many big box stores, such as Sam’s Club, at which the membership fee buys little more than access to the products. The customers must then pay the (albeit discounted) retail price for desired goods. On the continuum between those two examples are services like Amazon Prime that offer a substantial suite of services for the standard membership fee, but also offer additional benefits for additional fees. This article addresses the application of the membership model to the practice of medicine—often called concierge or retainer medicine—and discusses some advantages and disadvantages of the trend.
Frustrated with billing complexities, weekday schedules filled with too-many too-short appointments, patient lists approaching 3,000, and the misaligned incentives that often ignore patient outcomes, doctors are increasingly turning to the alternative of membership models for their practices. Many doctors see little room in the traditional model for appointments of a length necessary to truly address the patients’ concerns, much less time adequate to provide the patient with comprehensive, preventative care. These doctors often turn to the membership model as a remedy.
To avoid the double-dipping concerns associated with third-party payers (e.g., Medicare and insurers), the access-only model linked above with big box stores is largely unavailable to medical practices. Instead, the model as applied to medical practices typically falls somewhere on a narrower continuum between the Netflix-like “all-inclusive” structure (a.k.a., fee for all services) and the more Prime-like tiered structure (a.k.a., fee for extra services).
In a fee for all services practice (as described above), the member-patient pays a set fee in exchange for all primary care services one would expect from a medical practice. The suite of services can include regular checkups, screenings, and diagnostic tests—all included in the membership fee. The practices only form of revenue is the membership fee, which makes this structure the cleanest and most legally simple. This is because it avoids concerns of “double-dipping,” i.e., overlapping those membership fees from patients with reimbursements from Medicare or insurers for the same service. Note, however, that a practice adopting this model must submit an affidavit to Medicare advising explicitly that the practice is foregoing Medicare payments. The practice must thereafter follow through on its pure structure and actually forego submitting any claims to either Medicare or an insurance carrier. This requires the practice to enter into separate remuneration agreements with Medicare patients for direct payment of the membership fee.
If that structure is too extreme a transition from the traditional model, the fee for extra services model offers something more akin to a hybrid approach. The patient pays the membership fee in exchange for a suite of services. In addition to those, the practice can submit a claim to Medicare or to the patient’s insurer for any services not included in the membership suite of services. A practice adopting this hybrid structure can apply the membership fee to a more complex suite of services (e.g., such as longer appointments, immediate call-backs, direct cellphone access, weekend and evening availability, and house calls) and submit more standard services to Medicare and private insurers. Alternatively, the structure may grant members a suite of standard services and only submit claims to Medicare and private insurers for more complex procedures or tests not included in the membership suite.
In either instance, the practice must carefully segregate the services for which it receives Medicare and private insurance reimbursements from the services it includes in the membership fee. Failing to do so may subject the practice to allegations, as discussed above, of accepting the same fee from two sources for the same service—i.e., “double dipping.” There is divided opinion regarding how a practice can successfully accomplish this segregation. Some say it is proper to apply the membership fee to wellness programs, certain excess administrative costs, newsletters, and longer appointment times, but others have concerns regarding the ethical implications of particular distinctions. A practice is therefore best served by seeking legal counsel before transitioning to any form of membership-based medical care. While searching for counsel, note that the rules vary from state to state.
There are many advantages to the membership model of medical practice, in either pure or hybrid form. The regular and consistent revenue from membership fees makes the practice’s finances more predictable. Also, cutting overall patient numbers down to approximately 500-800 allows physicians to listen more carefully, respond more fully, and focus more on preventative advice. In fact, the membership model turns incentives on their head. Specifically, where a traditional practice benefits from maximizing the number of paying patients coming through the door, the membership structure benefits when paying members have no need for an appointment. By way of analogy, think of the financial benefits realized by an empty gym with 500 paying members. In the membership model, doctors have a financial incentive to do what most doctors want to do anyway—that is, actively assist their patients with comprehensive preventative care until visits become rarer and rarer.
The lower patient count also limits paperwork. In the fee for all services (as defined above) model, many billing and reimbursement headaches also go away. Even if their structure makes them available for weekend and evening calls, many doctors find that the membership structure allows them to have a better work-life balance. Overall, doctors are given the opportunity to develop a deeper and more productive relationship with their patients.
The membership model is not without its disadvantages, however. Apart from the “double dipping” concerns addressed above, the transition itself requires a potentially disruptive restructuring and often substantial retraining of administrative and support staff. Further, as revenue (or at least some revenue) is coming directly from patients—and a smaller group of patients, at that—rather than from Medicare and insurance carriers, the practice must institute aggressive and effective collections procedures to maintain cash flow. It must also have a reputation adequate to attract patients with wherewithal willing and able to pay out-of-pocket for this.
Depending on the market, doctors wishing to adopt the membership model may face one of two problems. In some markets, there is a glut of prospective and current patients at which point the challenge is deciding which patients to turn away. In other markets, doctors may face a dearth of prospective and current patients unable to support the membership model in the first place.
A traditional practice considering the transition to a membership model must carefully consider the foregoing advantages and disadvantages because not every practice will benefit from such a structure. If the transition seems like the right move, then the next step is to contact experienced legal counsel to evaluate the economic, practical and legal ramifications.
Andrew Stein is an associate at Lamb McErlane PC. He concentrates his practice in the areas of health law and business law. He represents individuals and businesses with a primary focus on licensed medical and dental professionals, medical and dental practices, and other health care entities. firstname.lastname@example.org. 610-701-4433.