Last year, US hospital profits declined because, the Wall Street Journal reported in April, of growing labor costs, a shift in the payer mix due to Medicare enrollment surges, and more patients seeking medical care in nonhospital settings. Patients are increasingly choosing providers who offer flexible hours of operation, same-day appointment availability, and convenient locations that minimize travel. These changes are forcing health systems to rethink their portfolio of ambulatory care services and develop solutions that not only cater to patients’ changing demands but also provide financial opportunities to the system.
In response to these industry trends, most provider organizations are investing operational and capital resources in cost improvement and expanded patient access initiatives. These initiatives are often developed with the following strategic goals in mind:
- Increasing top-line revenue
- Expanding the system’s service offerings
- Attracting patients who are willing to pay out of pocket for tailored, nontraditional healthcare services
- Retaining experienced providers
One strategy that continues to gain industry traction is concierge medicine, which is growing at an annual rate of 3% to 6%. While the model does have some critics, organizations are increasingly pursuing this business model due to its ability to generate predictable revenue streams and expand their scope of healthcare service offerings. Additionally, many providers see concierge medicine as an opportunity to practice medicine the way they intended to when they entered medical school.
What Is Concierge Medicine?
The healthcare industry’s deviation from the traditional primary care physician practice model (i.e., an average primary care panel of approximately 1,750 patients1) has led to a variety of provider business models that are categorized under the concierge medicine umbrella. Figure 1 provides an overview of the three most common approaches to concierge medicine.
Since a growing number of health systems are pursuing the subscription model, the remainder of this article will focus on that approach. The subscription model presents fewer regulatory issues when compared to the direct primary care approach and serves as a complement to many systems’ existing executive health programs.
The number of patients served, the cost of membership, and the type of patient care services offered within subscription-model concierge medicine programs vary significantly throughout the industry and depend on the providers’ desired scope of practice. That means there is no one-size-fits-all business model. Figure 2 presents a range of subscription-based practice approaches.
It is important to note that this list of services is illustrative, and there may be variations depending on the program.
The Business Case: A Patient Perspective
A growing sector of the population is willing to pay out of pocket for expanded access to and an enhanced relationship with their providers. Individuals with chronic care conditions, elderly patients with multiple health issues, and busy professionals with tight schedules are all types of patient groups who value nontraditional appointment availability and the expanded services concierge practices can offer. As the industry continues to recognize individuals as consumers of healthcare, providers should adopt service offerings that meet the demands of all patient groups, especially those with a high willingness to pay for healthcare services.
Relative to more traditional, independent concierge medicine practices, health systems have a competitive advantage in being able to provide patients with primary care providers, specialists, and ancillary services such as radiology and labs all within one health system or network. This differentiator can be a key marketable component for a health system–owned concierge practice in attracting patients.
The Business Case: A Provider Perspective
Cost pressures and declining reimbursement rates are forcing medical groups and health systems to look for alternative revenue-generating models of care. Concierge medicine offers a more predictable revenue stream, delivers higher profit margins than a traditional practice, and is less dependent on reimbursements from patients’ insurance plans for financial success. These higher-margin services can subsidize lower reimbursed Medicaid care, charity care, community care, or other mission-support activities (e.g., research, teaching) that traditionally run at a financial loss.
Provider productivity targets and the time needed for the required administrative duties, including clinical documentation, are leading to high provider burnout rates and stress levels. Providers are dissatisfied with the pressures of maintaining large patient panels and with the hurried visits that are commonplace in traditional clinic settings. Managing the care of fewer patients reduces the pressure on providers. The smaller panel sizes and longer appointments inherent in a concierge medicine model may lend itself to a less strenuous and more satisfying work environment for providers.
However, concierge medicine is not the right practice model fit for all providers. There may be a tradeoff in work-life balance if practices offer 24/7/365 coverage and providers are required to be on-call and available every night, weekend, and holiday. Additionally, providers who are early on in their career may not have sufficient patient volumes or enough community brand recognition and demand for a full-scale concierge medicine practice. Organizations need to take a strategic approach to recruiting concierge medicine providers.
Questions to Ask When Considering Adding Concierge Medicine to Your Organization’s Care Offerings
- Does a concierge medicine program align with your organization’s values and broader strategic initiatives?
- Do concierge programs currently exist in your market? If so, does market research suggest there is room for additional market entry?
- Which concierge medicine services are both appropriate for your organization to offer and align with your strategic goals?
- Do you have providers within your organization who would be ideal for transitioning to a concierge medicine model? Will their transition mean less access for their nonconcierge patients or can they be absorbed by other provider panels?
- What key performance indicators should be used to measure the success of your concierge medicine practice?
- What are the risks and mitigation strategies of pursuing a concierge medicine program within your organization?
Integrating Concierge Medicine in Your Portfolio of Service Offerings
Health systems that are serious about providing truly patient-centric care should consider including some level of concierge medicine in their portfolio of service offerings. While some attributes of concierge medicine are bleeding into traditional practice models (i.e., care team models, electronic patient portals with 24-hour response time, expedited test results), full-panel practices are still generally limited in regards to the amount of time a provider can spend with each patient, as well as timely appointment availability.
Concierge medicine programs that align with organization strategic objectives and are properly implemented will expand patient care choices, retain experienced providers, and increase revenue. Additionally, operating margins will improve and the organization will be better positioned for sustainable, long-term success.
Based on weighted average of average physician patient panel size across internal medicine, pediatrics–general, family practice with OB, and family practice without OB provider specialties, ECG 2017 Physician Compensation Survey. Panel size is defined as the number of patients under the care of a specific provider, who serves as their designated PCP. Panel size is commonly determined using enrollment data to link patients to individual providers; however, it may also be calculated as the number of unique patients who have been seen by a provider in the last 18 months.