Can Surgeons Operate a Concierge Medical Practice?
Concierge Medicine is a membership fee model of private practice that physicians adopt and build a product and a program for patients who need ongoing continual care over the course of a year.
Many surgeons operate an “episodic” practice that has a defined beginning and ending of an episode of surgical care or consultation. For a surgeon who wishes to jump out of the managed care hamster wheel and transition to a self-pay/private pay and attract patients who have “out of network” coverage, the concierge medicine fee-oriented model may not be a match.
I recently accepted a call from an exasperated neurosurgeon who visited this website and read articles I’d written on concierge medical practice design. He called to ask my assistance to “transform his neurosurgery practice to “concierge medicine”. When I asked “How can I help you?” He responded with “I just told you I want to transition my neurosurgery practice to concierge medicine. What part of that wasn’t clear?” Whoa! Well to tell the truth, none of it was clear. It indicated the nature of the topic we were going to discuss, not what part he needed help with. That’s like saying “we’re going to perform surgery”. That’s not the same as saying “rongeur” or “Allis clamp”.
It was immediately apparent that he didn’t understand that concierge medicine was a “thing” with a definition and a specific business model. His exasperation came from not understanding this critical differentiator from a “private surgery practice that offers “concierge-level” service – whatever that means – to him. So today, let’s clear up some of the mystery behind concierge medical practice as it relates to surgeons.
To offer “concierge-level service”, as Nike says, you “just do it”. You don’t need to pay a consultant for this. Treat people as you would like to be treated and be consistent about it so that you establish a brand reputation for patient delight. Simple. Right?
What business model and why?
It was immediately apparent to me that he wanted some way to connect with patients who had insurance that would pay his fees for surgery even if he was not a participating provider. He participated with the Medicare program and with BCBS in his state and was under the impression that most patients with insurance had “out of network” coverage to pay for his services. That mistaken impression was an assumption of a fact not in evidence.
Concierge medicine features a membership fee. What he described was not a concierge medicine business model practice. That’s merely private practice operating out of network. How one decides the “level of service” and amenities featured in their business is a branding and reputation management issue.
Over the past decade, many plans have eliminated out of network coverage. They pay zero to out of network providers unless they don’t have an adequate network in the county in which they sell premium. If that’s the case and an insured member requires the services of a specialist in a specialty where they lack a participating provider, then they must pay the non-participating provider at out of network rates (billed charges unless otherwise negotiated) and the member suffers no consequence. After all, it isn’t the member’s fault that the network is incomplete.
Plans that offer out of network coverage often reduce benefits and a require a separate, matching or higher out of network deductible to discourage accessing out of network services.
In 2018, many of the major managed care payers added new language to their provider manual that if a participating network provider opts to launch a membership fee business model, they view the membership fee as balance billing to their customers and prohibit participation by concierge medical practice owner/operators. They will terminate the contract.
Ask for the specific assistance you require.
When I then asked if he had hospital and/or ASC privileges, he became belligerent. As a former OR nurse, I knew I was not deserving of his belligerence. He seemed frustrated with his own lack of knowledge. He was not accustomed to asking for help. Smart and otherwise surgically accomplished, it was clear he suddenly felt helpless and frustrated that his practice growth wasn’t what he needed to thrive and be profitable. That’s fixable but you must specify what assistance you want or need. Otherwise, you risk being “sold” a package of consulting services which may or may not be the right guidance – for you.
That’s how doctors end up paying $50,000 to $900,000 for someone to set up a concierge medical practice when they could have had all the guidance they needed for under $5000.
His belligerence was merely the unfiltered frustration coming out at a stranger he called for help. OR nurses and scrub techs face this all the time when surgeons begin yelling and throwing instruments and adult tantrums. We let it roll like water off a duck’s back.
He really didn’t need my services to build what he thought was a “concierge medicine practice”. He just needed to design his brand and his product to meet the needs of an ideal client.
Can a surgeon operate a concierge medical practice?
Well, in a word, “yes”.
I believe a better question is “should” a surgeon operate a concierge medical practice? Is there a business case argument to support doing so? In most cases, I don’t believe it is the right model.
If I had a blank canvas upon which to develop a concierge medical practice for a neurosurgeon who focuses primarily on spine surgery or an orthopaedic surgeon that is out of network for most health insurance programs (HMOs, PPOs, ACOs, IPAs, PHOs), I would start with the required basic elements to make a product that someone would pay monthly or annual or other program membership fees to access. That’ would be the first speed bump. I don’t think consumers would pay the fee for a surgeon involved in rendering episodic care. A cardiologist or rheumatologist? Yes. A cardiac surgeon? Not so much.
Most U.S. surgeons are commodity sellers of consultations and surgical procedures.
They are essentially “technicians”. Only in rare instances would a consumer need have a private practice membership product for a year. So the annual membership fee business model isn’t usually viable.
But as a consultant, my role is not to tell you “no”. If a change to your business model is something you really want to do, then as the expert, my role is to find a way to do it and make a profit if possible. I don’t give orders to clients. Instead, I bring clients the option to agree, disagree or do nothing with my guidance and expertise. They don’t have to hire me or anyone else. And often, they don’t need to hire anyone. They just need to craft a plan and execute on it. If they want someone to execute it for them, that’s not a “consultant” that’s a freelance contractor. The freelance contractor “does stuff”. The consultant analyzes and develops solutions and strategies to help the client or his/her contractor do what’s necessary. Contractors and freelancers are paid about $50 an hour. A consultant may bill at $400 to $600 per hour. To convert a practice to concierge level amenities, there should be no external cost to “just do it”.
Build the program you want to offer your ideal customer and then analyze the cost and margins to set your price.
So let’s say, for argument’s sake he wants to transition to the concierge medicine business model anyway. What kind of product might he build?
First, I would abandon the idea of a monthly or annual concierge membership fee. People don’t like to pay “extra” without an itemized list of ways it will benefit them. That means he must make up income for base costs for a smaller practice patient panel some other way. Think of the monthly or annual concierge membership fee as the price of exclusivity. A physician opens their practice to fewer patients but still has basic overheads and overheads associated with amenities. The fee covers that. The patients still pay fee for service for the services they require. Whether their insurer reimburses them to make them whole is a completely different matter.
Instead of a membership fee model, I would embed the costs of the business overheads and amenities of the “concierge level of service” into a bundled surgery package price for an “episode of care.” How long the episode of care spans is a product design decision. It need not be limited to the familiar 90 days post-op included model. In fact, a longer span of follow up care over time can be a differentiator – assuming that’s what makes sense for the product design desired. To expand the follow up period if it isn’t valuable is a ruse people will see through over time.
The rest of the component parts of the episode of care package that he requires from other suppliers are “make or buy” decisions. Does he have his own private operating suite? If not, then he must arrange with the owner of an operating suite to partner with him as a wholesaler – hospital or ASC.
Beyond that, he may require some brief guidance to put the product together and help with pricing, but he’s going to need far more help to create the branding message and marketing and advertising to connect with the market.
Who decides product, features, benefits, brand marketing and reputation?
Nobody but you. Period.
How will you build a reputation for your brand? Through customer experience and strategic online and offline marketing and advertising. Simple as that.
Two big challenges
The surgeon just completing residency or fellowship will have a tough time building a cash-pay, out-of-network brand and reputation. If you want to argue that the networks don’t pay “enough” I would advise you to reassess your perspective. The rate they offer is a composite of what they believe is your value proposition to their network. It is also a reflection of what they believe is the value of their marketing and referral steerage. Don’t forget the last part – marketing and steerage. That’s what often makes reputation development possible. Without customers and customer experiences, there can be no reputation; no word of mouth testimonials, no patients or referring physicians to sing your praises and refer surgical patients to you for consultation and procedures.
Once you have developed a reputation by whatever means you decide to establish it (employment, advertising, discounted health plan participation, etc.) your best bet is to simply decide what is your unique “product” will be. Your product isn’t appointments for surgery and consultation. And with an episodic service, the product doesn’t quite lend it self easily to an annual, semi-annual or quarterly fee for amenities associated with a membership program. If you don’t have a “product” then that’s the first gap to fill. Build a product you enjoy delivering. After all, it is your business.
What can you leverage with payers during the period you’ll agree to be “in network”? What will cause them to agree to pay you more than they pay your competing “licensed and fellowship trained” technicians? They view all licensed and board certified surgeons as a commodity. In fact, if you are “too good” or “too attractive”, they may perceive risk of higher utilization and worry that your reputation will attract adverse selected (sicker, riskier) patients to their plan to avail of your services. They won’t agree to pay you more because you are a higher profile or more renown surgeon.
The other surgeon I frequently encounter is one without a reputation that moves from a big city (or suburb of a big city) to a much smaller town and is suddenly an unknown and likely unwelcome competitor. The local incumbents (and even the local hospital(s) and ASC(s) may exercise a number of strategies and tactics – not all of which are legal, mind you – to make it as difficult as possible for you to establish your new practice in their playground. They bet on the fact that as a startup you don’t have money to both make a go of establishing and sustaining the practice and cash requirements to carry the debt or overheads and hire attorneys to fight any collusion, restraint of trade, monopsony, monopoly, or other anti competitive behaviors. So they run roughshod over you until you quit or capitulate to their way of doing things (become employed, be willing to sell to them to eliminate you as a competitor, or move someplace else.)
Think of your surgical service component as part of the steel, glass, or rubber that makes a vehicle.
Once you have decided the product, you build a brand and the product to satisfy the needs of your ideal customer. For example, if you are a neurosurgeon who specializes and decides that minimally invasive spine surgery and not peripheral nerve (carpal tunnel, etc.) surgery is your passion, then your ideal patient is one who needs minimally-invasive surgery. The marketing becomes a matter of cueing up the campaigns and having the budget to launch the and sustain advertising campaigns to build comparative advantage, awareness and competitive advantage or demand – for minimally invasive surgery.
All the logistics, partner selection, experiential design for the “concierge level of service” is part of the product development. It doesn’t stand separate or alone. For a surgeon, I would build in concierge level service that includes:
- same day appointments
- home or office visits
- a longer or more intensive course of post-operative service
- pre-op consultation
- facility fee
- device or prosthetics and implants
- one post op overnight stay (23h) or inpatient stay as medically indicated
- discharge management, and
- follow up continuity of care for a certain period of time
for one bundled price.
Make it easy (easier) for people to do business with you
If you aren’t going to participate with insurers or TPAs or employers, then might consider aligning with one or more medical financing programs that will buy your accounts receivable for patients who cannot pay in full at the time of service.
Align with one that has no recourse (meaning they don’t dump the delinquent accounts in your lap and take their money back) on accounts that convert to bad debt. Choose one that has a high acceptance rate for people with a job and a bank account, and charges zero interest. Expect they will pay you 80% of your package price, and keep the other 20% for their risk and profit. The financing folks generally require 25% down by the patient, and they front you 25% of the loan and then the remaining 30% is paid to you over 9-12 months. The argument is that for 20% of your price, you don’t have to bill, collect, be an unregistered lender, set up payment plans, or accept risk of nonpayment for other than the 30%. By IRS regs, you also pay your vendors (anesthesia, facility, etc.) out of the payments received, so they must also be willing to wait on their portions of the 30% and be at risk with you if the amount goes unpaid.
Price the surgery package to the financed price, and discount 20% for those who are ready to pay in full, in cash, via ACH transfer or bank draft. If the patient wishes to pay with a credit card, the amount of the transaction cost varies from 1.8% to 3% or more, so the significance of the transaction fee is decided based on how much you want to absorb out of your planned margin. You cannot surcharge separately because they are paying by credit or debit card because the contracts with AMEX, VISA and MASTERCARD forbid it in most cases. So you’ll either absorb those fees or bucket them in with the “financed” price.
You are also going to cover all the costs of marketing, advertising, brand development, product development, and overheads associated with attracting patients to the model, all the logistics management, and supply chain settlement. Those are costs. Build them into the pricing model. Your suppliers and wholesalers don’t take any risk until there’s a case to be called into.
How important is reputation?
For every concierge medical practice and maverick surgeon or practitioner who has decided against joining the mainstream managed care business model, every touchpoint in the customer experience relates to reputation. Each touchpoint is a building block for your brand’s reputation. Reputation may be measured by likes, follows, membership purchases, but there must first be something by which to measure. That measurement is the brand essence and its reputation. Without those things there’s nothing to like or dislike, right?
How will you design and architect your customer’s experience? By building and design and positioning your brand.
With which touchpoints will they come in contact? You can’t know that unless you know the customers who will buy or are likely to buy. We do this through the science of psychographics, a qualitative methodology used to describe consumers on psychological attributes. Psychographics have been applied to the study of personality, values, opinions, attitudes, interests, and lifestyles. All are components of brand building, design and positioning.
Does your value proposition change over time? Yes.
Competitors and disruptors that come on the scene after you, the first mover, have settled in and become complacent are your greatest risk for success. It is cheaper to be in second place. To maintain your positioning, you must continually adapt and face the new challenges posed by subsequent disruptors. Otherwise, your risk allowing your brand to become irrelevant to patients or payers. (Think adaptive/specific immunity).
What will be their awareness and understanding touchpoints with your brand? Their pre-visit touchpoints with your brand? Their digital experience with your brand? Their appointment scheduling experience with your brand? Their diagnostic experience with your brand? Their treatment experience with your brand? Their payment and account settlement experience with your brand? These seven brand design questions should eliminate any misconception that branding is all about logos and colors and tag lines.
Two dimensions of brand value proposition
- Emotional value: “I feel peace of mind after receiving health services, diagnosis or treatment from my doctor.” What would make your patients say that?
- Symbolic (financial) value: “I feel like it was worth the cost to receive the best care and I am happy with how I chose to spend my money with my doctor.” What would make your patients say that?
All the “value-based purchasing” blather being bandied about, measured with tedious reporting to health plans, defended to Medicare, is just that: Blather for bloggers.
If people felt so compelled to proclaim to the world these two sentences about your service, value-based purchasing would be proven and indisputable. These two sentences, when proclaimed by your patients about their brand experience with your brand, connect care to cost. That’s where value-based purchasing rubber meets the road. As a concierge surgeon, you must be able to “cause” people to say these two sentences with every transaction and encounter and be happy to pay a membership fee for the privilege. If you don’t, can’t or won’t cause your customers to proclaim these two sentences to the world on your social feedback platforms and reputation platforms, your business and your brand and product as a concierge surgeon is at risk and in danger of demise. It is my professional opinion that a concierge membership fee for most surgeons is the wrong model. My mind is open to new perspectives, but experience has led me to believe the way I do at this time.
As a concierge physician you must build a product a consumer will pay for. You must have the courage and drive to constantly surveil the competition and the disruptors, and then decide how to adapt and face the challenges of disruptors head on. If all you do is build your brand and then tread water, eventually, you’ll run out of glycogen, and you know what ultimately happens then… right? You bob for a while and then you sink and don’t come back up.
So should a surgeon attempt to launch a concierge medical practice business model? You decide. And then you tell me what help you need to accomplish it.