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Setting Up a Concierge Practice, Step-by-Step: Working with a Consultant

A walk through the doors in the "fun house" of concierge practice conversion

Budgeting for expert consulting assistance.

How much you will need to spend and over what period of time varies on what you want the consultant(s) to do and if you want the services of a project manager or you feel competent and capable to play general contractor for yourself.

While the well-meaning friend or acquaintance who has already coverted his or her practice might be a good mentor, they are often woefully unprepared to act as change agent and professional advisor in every aspect of concierge practice strategy, conversion and operations management.

And, let's be fair. If they are not practicing medicine, not retired, but selling services as a consultant, why aren't they seeing patients in their own thriving and sustainably profitable practice?

To give you and idea of what it's like to work with me, I have an hourly fee, just like you do. It includes money to pay my salary, my staff, our benefits, and my rent, utilities, insurance, taxes, and overheads. When you ask for assistance, I may not have a feel for what you specifically want me to handle, how much time you will need, what will be delegated to my staff and to yours, what your budget is for market research, graphics design, website design, and other necessities.

Hiring a consultant to build your concierge practice is a lot like building a house. I can be the architect, the site engineer, the interior designer, the inspector, the general contractor, the master carpenter, the master plumber, etc. I can be all of the above or only some of the above. You are the resident who will live in the house. Depending on your proclivity for D-I-Y projects, that still leaves many roles to be assigned to others.

For those services, I will bring you my best, most qualified and experienced associates and colleagues for your approval. You will engage them, not me. Just like it is not appropriate in healthcare to arrange kickbacks and fee splitting, I don't take overrides on their fees or kickbacks for referrals. I charge no extra fee for this either. It is part of my deliverable to you.

My time is contracted in blocks by the month, and prepaid. This charge is a multiple of my hourly rate to which you have agreed that is reasonable to meet your needs. If, on occasion, we decide that you need more than we mutually estimated, you purchase more. If you find you require less than originally estimated, we adjust the monthly fee downward. If occasionally you have underutilized time each month, it rolls over like cell phone minute plans.

The deliverables to you each month are:

my availability to share with you my experience, training, professional education in healthcare business administration and practice management in the concierge medicine setting,

professional insight, advice and guidance

participation in meetings in person or by phone or web-meeting,

review of documents and payer contracts

interpretation of data and development of action plans based on those data

interpretation of market research findings and developing proaction or reaction strategies, and

the value I bring in identifying the other specialty craftsmen/ women needed to do the jobs required.

All in all, you've probably figured out that my arrangement pretty much follows the fundamental concept of concierge medical practice - but this time, it is between the consultant and the doctor.

If you require a non-compete or exclusive arrangement within a market area for a certain time or distance, there is an extra charge, because you are restricting my ability to earn other income in that market.

If you require me to travel to your location - outside the Denver metro area, all travel costs are charged to you. The travel time is charged against your monthly block. I travel using non-stop flights, I book accommodations in moderate, business class hotels, and I rent cars with a platinum card that pays for most extra insurance coverage options.

To learn more

You may benefit from reading the Handbook of Concierge Medicine Practice Design, written by Maria Todd. To contact Maria, please call toll free: 800.727.4160 or self-schedule a 15-minute no-obligation block on her appointment calendar at http://meetme.so/mariatodd.

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Setting Up a Concierge Practice, Step-by-Step: Branding the New Concierge Medical Practice

A walk through the doors in the "fun house" of concierge practice conversion

Create your marketing materials, website, collateral and branding/image package.

One thing we've learned throughout the years is that it is often best to develop and promote a new brand and image. Pick a look and feel that is culturally aligned with your new practice. Uncluttered, clean modern lines for artwork, fonts, a new practice name, and a new website. One thing is for sure: Your website will have to be more functional in this setting than in the traditional setting because it will need to offset the staff that it takes to practice medicine in the traditional setting.

A website with excellent functionality will often take the place of up to 2 full time front office personnel in reduced telephone calls and repetitive tasks. It is also something we've learned that concierge patients expect and will leave if it's not available.

Often when we go into a concierge medical practice for a "branding" consultation, most physicians are surprised at what is involved.

Phase One:

We ask for a copy of every flyer, brochure, and printed collateral you currently use

We review your logo, advertising, website and social media channels

We interview staff privately to get an overall feel for the living brand and practice culture.

We interview the doctor to compare the doctor's perception of his or her brand culture, mission, vision, aspirations, and perceived and real challenges.

We interview patients about their experience with your "brand"

We mystery shop your local market competitors

we compare this to the findings of the staff interviews, and finally,

We create a report that de-identifies who said what, but lay out a professional rendering and interpretation of the findings and our suggestions for next steps.

Phase Two:

We implement the next steps, after adjusting for your input.

This may include:

Staff training and development

Physician coaching and mentoring

Revision of the layout and look and feel of your website, social media channels, graphics, and sometimes even the office decor and layout (often a matter of de-cluttering, tweaking certain amenities and re-considering room layouts, etc.) In this step, the objective is to pull together the look and feel of the brand to something that is exceptional and unique - like a signature.

Possible revision of your logo, other associated graphics, colors, tag line, etc.

Phase Three:

Official re-branding launch

A comprehensive re-launch of the brand to debut the new identity:

Coordinated news media coverage

Promotion and press releases

Community re-branded awareness event(s) to engage consumers, referring physician(s), hospital(s), and other local value chain partners to become top of the mind

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Setting Up a Concierge Practice, Step-by-Step: Legal & Compliance Issues

A walk through the doors in the "fun house" of concierge practice conversion

Addressing legal and compliance issues

Many concierge physicians have heard that they may qualify for a "Country Doctor" exclusion as a small practice with fewer than 10 employees. It's not that simple. The rule states that HIPAA-covered entities, as defined at 45 C.F.R. § 160.103, are required to obtain an NPI. You may not need an NPI if you are a non-covered entity, and take absolutely no third-party payment. The rules require that any provider who files claims with Medicare, INCLUDING PAPER CLAIMS, must use an NPI. That applies whether you are participating or non-participating.

If you are currently participating with Medicare, you may only opt out quarterly, in the month preceding that quarter. In order to opt out for Oct 1, Medicare would need to receive your opt-out affidavit in September. A sample opt-out letter is available on online. Be sure to send the letter via certified mail with return receipt requested. Medicare will also send you a confirmation letter of your opt-out status. You have 90 days from the effective opt-out date to change your mind. Be aware that every two years you must again opt out of Medicare. You must also provide Medicare beneficiaries 30 days notice of your opting out.

Do Not Fail to Maintain Opt-Out. Remember to re-file your affidavit every two years. Otherwise, the opt-out will be nullified and all of the private contracts during that period deemed null and void. The physician may then have to file Medicare claims for services provided under voided contracts (63 FR 58814, 11/2/98; 42 C.F.R. §405.435).

Opted-Out Physicians May Order Medicare-Covered Services for Beneficiaries. The physician or practitioner who has not been excluded under sections 1128, 1156, or 1892 of the Social Security Act may order, certify the need for, or refer a beneficiary for Medicare-covered items and services, provided the physician...is not paid, directly or indirectly, for such services (except as provided in §405.440 [regarding emergency and urgent care services])" (63 FR 58903-04, 11/2/98).

Opted-Out Physicians May Bill Medicare for Emergency Services, or Privately Contract With Those Patients Beforehand. When a patient is in an emergency or urgent care situation, he is considered unable to consent to private contracting. Accordingly, an opted out physician may bill Medicare for services rendered to such patient.

Accordingly, a physician or practitioner will not be determined to have failed to maintain opt-out if he or she furnishes emergency care services or urgent care services to a Medicare beneficiary with whom the physician or practitioner has not previously entered into a private contract, provided the physician or practitioner complies with the billing requirements specified in paragraph (b) of this section." 42 CFR § 405.440(a). Paragraph (b) specifies that the Medicare billing must include the proper coding of emergency or urgent care services, and that the physician must not collect more than the Medicare limiting charge. If, however, the physician had previously entered into a private contract with such patient "before the onset of the emergency medical condition or urgent medical condition," then the emergency or urgent care services should be provided pursuant to the terms of the private contract and are not subject to the Medicare limiting charge. 42 CFR § 405.440(c). (63 FR 58904, 11/2/98).

As for other third-party payers, be cognizant of the rules on balance billing patients for contractual adjustments on covered services, non-covered services, and rules under the contract for medical necessity denials. If you feel apprehensive here, you're not alone. Most of my managed care clients have a poor grasp of how this stuff works in a traditional practice setting. As a result, they often write off things they shouldn't, leave contract language in that should be dealbreaker and negotiated out, and write off incorrect amounts and fail to properly appeal denials and fail to articulate the correct defenses to overturn those denials resulting in tens thousands of dollars in lost revenues each year.

One clean way to avoid the mire here is to establish a separate corporation for your concierge business services administration. The business corporation, which is not authorized to engage in the practice of medicine in a number of states, collects the noncovered fees. The professional corporation, which is authorized to practice medicine, accepts payment in full for covered services from third-party payers, subject to coinsurance, deductibles, and copays.

Finally, under the topic of compliance, make sure that you follow your state's patient protection laws with regard to advance notices and potential abandonment of patients in active or continuing treatment. Your consultant and health specialty lawyer will suggest steps you should take and the order in which they should be taken to maintain compliance.

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Setting Up a Concierge Practice, Step-by-Step: Dealing with Managed Care Contracted Plans

A walk through the doors in the "fun house" of concierge practice conversion

Explaining the plan to insurers. As a rule, health plans don't exclude participating physicians with a concierge practice, but they will want to understand how the relationship will work. Insurers will cover contractually obligated office- and hospital-based services and procedures, but are not likely to cover the "extras" that are characteristic of concierge practices.

Consider that in most cases, there is a summary plan of benefits that describes what is covered and the circumstances under which coverage is offered. For example, monitoring specialist care if a patient is admitted to the hospital under the specialst's service may be good medicine, but not "medically necessary" from the payers' point of view unless the specialist requests your participation on the case for a specific reason. Otherwise, that service may be a social call included under the concierge fee and not separately billable.

Two things that have changed under U.S. healthcare reform since the late 1990s when these practices first started to gain momentum: 1) preventive care is now covered without copays, coinsurances or having to meet a deductible under the Accountable Care Act, and 2) with the advent of consumer driven health plans, depending on your service inclusions under your annual fee, some of the service may be includeable under HSAs and HRAs whcih were not available until the law took effect in 2003. Check IRC213(d) for specifics on qualified expense classifications.

One very strong admonition: If you plan to turn your billing and collections and contracting over to the local billing agency in town, DO NOT leave this important explanation up to them under any circumstances. If you don't understand why, call me for the fifteen-minute free consultation and let's see if I can't give you as many reasons to reconsider your decision to do this.

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Setting Up a Concierge Practice, Step-by-Step: Membership Fees and Conversion Timetable

A walk through the doors in the "fun house" of concierge practice conversion

Steps Two and Three

2. Develop your product and fees before the survey. Base your fees on activity-based costs and overhead expense to offer the services you include. For example, you'll need a better web hosting service and communications throughput if you plan to offer integrated video consults and telehealth than if you have a static 5 page website. Your technology may have a short service life, especially smart phones and tablets and iPads, etc. Based on your patient demographics, you'll need to offer meaningful package inclusions, not necessarily what the doc up the street offers. Read my favorite book for this first, Blue Ocean Strategy® (Kim & Mauborgne). Then carefully analyze your market and plan your strategy. Before you start surveying, determine the menu and price so that your sales representative/surveyor can ask specific questions using a tool such as a Likert scale to guage receptiveness by your prospects. If after a statistically significant survey sampling, you find that the data indicates low interest, readjust. There's a market for hand-crafted artisan, organic whole grain bread and one for white sandwich bread. You may not be able to sell all things to all potential customers.

3. Set a timetable. Establish benchmarks with the guidance from an experienced consultant who has been through the process before. Otherwise, your benchmarks and your financial projections may be fraught with fantasy and leave you frustrated and financially unprepared for the road ahead.

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Setting Up a Concierge Practice, Step-by-Step: Start-Up Costs

Start up costs

I looked at startup costs by analyzing old engagement agreements and client accounts from the early 2000s when I was competing with a few big ticket consultants. Those consultants often came in with a lowball front end quote but required a "piece of the action" for as much as seven years. They came in with a prepared document set of the membership subscription agreement, marketing pieces, and also required the client to purchase a license for the bespoke concierge medical records and patient accounting systems that were "designed to meet the unique needs of the concierge physician". (Hogwash!)

In the end, the physician paid so much more and was often tethered by contract for as long as seven years before the consultant released their grip financially on practice revenues. The powerful threat was that if they broke the contract, the physician lost the special magic software, and could no longer access their patient accounts or medical records. I can only assume there was some first mover advantage to that consulting business strategy, but many have come and gone since.

Now that I look back, perhaps there was some merit to the model, just not the method. The startup costs ranged from $70,000 to $100,000 (and often several hundred thousands) back then in 2001. Using WestEgg's (westegg.com) inflation calculator, what cost a new concierge physician $70,000 in 2001 would cost $86,349.62 in 2010, and the number will continue to rise in 2012. But.... not so fast! What the money was used for back about 11 years ago is a very different landscape in 2012. For example:

There was no content management system to leverage website design costs. One paid upwards of $30,000 for design only, and then much more than today's costs for hosting and maintenance. Now there's access to free website design tied to offers for free first month's hosting costs and low monthly fees to outsource all the maintenance and updates needed to maintain the site, while enabling the physician or their assistant or office manager to easily update content in a matter of less than 60 seconds.

The availability of electronic medical records systems was rare and very costly and extremely inefficient. Now we have fully-certified EMR systems one can access for free that offer e-prescribing, remote smartphone and iPad access, and are not tethered to contracts of consultants who threaten to take it all away if the physician parts company.

Professional equipment procurement is very different these days. There's Ebay, Dot.med, and many group purchasing organizations (GPOs) that can help you to lower costs on professional equipment, if you are up for all the logistics required to get the equipment to you intact. If you haven't the foggiest idea how to go about arranging for shipping from a location across the country from a retiring physician who knows as little as you (or less) on how to get the item moved, there are logistics specialists that can solve that problem for you so that their assistance plus the shipping cost is well below the differential to purchase new. The concern then becomes warranty and serviceability, which can tie back to cost.

Leases have gone up in some markets and remained stable for several years in others. The commercial real estate market is very different from the housing market and apartment market. In rural America, some physicians practice in an attached, purpose built outbuilding next to their home, like ol' Doc Welby. In other regions, a more traditional practice setting in a Class "A" building commands "triple net" rents per square foot, that make the base rent only part of the story.1

Consulting fees have actually gone down or remained stable by comparison because there is more competition. While the dollar figure we charged per hour was $250 in 2003, that figure is now slightly less per hour, adjusted for inflation. Still, the consulting assistance will be a large part of your startup, especially if you use a national consulting firm like ours that carries professional liability insurance and maintains staff and overhead as opposed to someone between practice management gigs that has never managed a transition to concierge practice before.

The point here is, don't get caught up in the numbers at first. Instead, determine what you want and need (do the Maslow's thing) and how you'll fund the startup budget and then be as frugal and efficient as you must be to meet your objectives.

How to save $25,000 in management consulting fees

In our consulting practice, we use a lengthy (12-page) questionnaire that we send prospective clients to complete in private where the soul searching occurs. We send this out without obligation because we know from experience that often, the soul searching exercise leads to a better, more realistic picture of the work that lies ahead. And sometimes, it leads to a delay or abandonment of the conversion for good reason. We don't ask the physician to return the questionnaire, it's private. Instead, we ask them to use the questionnaire as a tool to prepare for our initial interview.

Whether they choose to work with us or with another consultant, this exercise saves the physician an easy $25,000 in initial consulting fees (the cost of doing the exercise with the consultant across the table or on the phone while the physician comes up with answers and data needed to respond to the consultant's probing questions.)

It is interesting how in some cases, we hear from them in a few weeks or months, and in others, we never hear from them again. Some see what is involved and choose to go the franchise route rather than heave-ho the independent route and fund the transition. That's why we don't ask them to return the form - the decision is personal and sometimes its "face saving".

It is analogous to a complete history and physical on a much larger scale and brings to light many considerations that they physician didn't know they didn't know about themselves, their competition, the market, funding and budget limitations, family reactions to the change, collegue reactions, competitor reactions, payer reactions, patient reactions, employer reactions, hospital administrator reactions and new market opportunities that arise with consumer driven healthcare and direct contracting with local employers.

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1There is no definitive formula for classifying a building, but in the general characteristics of each are as follows:

Class A. These buildings represent the highest quality buildings in their market. They are generally the best looking buildings with the best construction, and possess high quality building infrastructure. Class A buildings also are well-located, have good access, and are professionally managed. As a result of this, they attract the highest quality tenants and also command the highest rents.

Class B. This is the next notch down. Class B buildings are generally a little older, but still have good quality management and tenants. Often times, value-added investors target these buildings as investments since well-located Class B buildings can be returned to their Class A glory through renovation such as facade and common area improvements. Class B buildings should generally not be functionally obsolete and should be well maintained.

Class C. The lowest classification of office building and space is Class C. These are older buildings (usually more than 20), and are located in less desirable areas and are in need of extensive renovation. Architecturally, these buildings are the least desirable and building infrastructure and technology is out-dated. As a result, Class C buildings have the lowest rental rates, take the longest time to lease, and are often targeted as re-development opportunities.

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Setting Up a Concierge Practice, Step-by-Step: Transition & Conversion

A walk through the doors in the "fun house" of concierge practice conversion

Step One: Survey the patients you already have. My own physician did this with an outside marketing company. They asked a typical set of questions and peppered it with a patient satisfaction survey, which I though was clever. We structure the questions for the doctor and get sign-off before we use them. Most doctors don't have the time to conduct these interviews themselves and their staff, no matter how well meaning is rarely capable of doing this well. The person who does this should be equipped with contracts in case they have a "taker" who is ready to sign up on interview, rather than have to say, "Oh, we're only doing the survey at the moment. We'll call you back when we are ready to sign people up."

Your consultant should be prepared to help identify and train a new hire with a sales and marketing background for this, as typically this skill set is not frequently held by medical assistants and practice managers. A part of this that many consultants (and clients) don't consider when this hire is contemplated is 1) the job will be ongoing for 2-3 years in all likelihood 2) their compensation may need to be tied to results with a modest base salary 3) the initial candidate you hire may turn out to be incapable of producing results and you may have to replace them 4) someone, the office manager or you, has to evaluate their performance, train them how to sell, and troubleshoot performance instead of terminating their employment. The HR challenge will be to maintain team engagement with total rewards and incentives that drive them to sell, not occupy a desk when they are not like the rest of the clinical support team or the billing and reimbursement team 5) they may perform better from a seat in the office than a seat in their basement at home, and 6) depending on your patient base, they may need to be bilingual.

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Setting Up a Concierge Practice, Step-by-Step: Mission & Motivation

As more and more physicians investigate this alternative to the participating managed care conventional practice, Maria Todd shares a high level path to concierge practice set up.

Concierge medical practices have been popping up all across America since about the 1990s. The number of these practices and the business models we see across the nation vary because unless they opt for the "franchise models" out there, (MDVIP, OneMD, Signature, and others) each doctor is able to express their unique approach to medicine in the culture of the practice they establish. Even in the franchise models, while there is more conformity to a brand standard, the physician is still somewhat able to establish their unique cultural overtones in the practice.

The reasons physicians establish these practices vary, but the most echoed is the desire to spend more time practicing medicine and treating patients. They don't claim to be practicing "better medicine"; instead they argue that "they practice medicine better".

Some years back, the American Medical Association reported that their best guesstimate of the number of hours the average physician spends performing administrative tasks that take them away from patients, family and friends is about 26 hours per week. Those who establish concierge practices long for a different pace and work-life balance. Instead of spending 6-10 minutes per patient, working off a problem list in their EMR and squeezing 40 patients per day into their schedules, physicians who transition to concierge medicine (also called "retainer practices," "boutique practices", subscription or membership practices, custom medicine, and other similar definitions) limit their practice to typically between 300 and 600 patients and have fewer administrative burdens. They are not "as dependent" on government and third-party payment sources of revenue. As a result, they are able to attend to patients at a slower pace and become more familiar with each families' lifestyle, medical history, wellness and preventive health orientation, and more.

The right motivation is critical to success

Physicians should be clear about why they want to commit to this radical change in practice operation and business model. If it is for the lure of big bucks, retaliation at a broken system, or wanting to take it easy, go visit a few concierge docs who have been in the new business model for fewer than three years. Those are pipe dreams. The reality is more likely that during those first few years, you will be in for the revenue and emotional rollercoaster of your life. Not everyone is cut out for this, no matter how good your consultant, and no matter how many patients "like" you. The truth is it may take 3 to 5 years to convert your practice to the subscriber level you've established as your target goal.

But, there's also an added bonus to this model. For one, a deeper patient familiarity that I've witnessed when I've been out socially or at conferences with concierge physicians. They access their EMR remotely on their smartphone or iPad, they feel more comfortable offering additional amenities such as telemedicine consultations over Skype and Google chat to peek at a rash acquired or an edematous and ruborous leg after a 26-hour flight when their patient is traveling on business in Bangkok. They are also comfortable texting via SMS back to the GenY patient who doesn't find value in the offer to come into the office and "spend an hour with the doctor". E-prescribing can easily be done remotely because they have the technology in their hands, familiarity with the patient, and all the patients' allergies and medication compliance data in front of them. As a result, they can be at their child's soccer practice or piano recital, at a CME conference, or on a long-ish leisurely lunch with a colleague at a local restaurant instead of grabbing a frozen microwave lunch pak and zapping it in the office microwave while standing in the kitchen or break room. These trade offs are impossible to report in revenue cycle analyses.

Typically, income drops to scary levels as patients who were all gung-ho to the idea on initial inquiry decide whether or not to sign on the dotted line of your service agreement or membership contract. For some, it has never come up to targeted numbers, but this happens for a variety of reasons and can also be largely dependent on the market economy of the community, competition, the amenities you include that your patients perceive as valuable, and how creative you want to be going after market share.

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