Is Concierge Medicine Finally Ready for Takeoff?

John Commins, for HealthLeaders Media , January 18, 2013

"The old model is 2,500 to 3,000 patients in a panel. The practice generates $400,000 to $500,000 a year and overhead is 50%-60%. In that model these physicians are going to see between 25 and 30 patients a day. One would argue you are on the hamster wheel," Smith explains.

"In the concierge model the patient pays $1,500 to $1,800 a year for unlimited access to the doctor. But if you look at what you pay for premiums for your insurance, that is $120- $150 a month—that's a high end gym membership. The concierge target is to have 600 patients in the practice. On the low end with $1,500 with 500 patients that is $750,000. The docs are going to see five to eight patients a day but there is no real overhead."

Then there's the billing, says Smith. "There is no billing or collecting. There is a one-time fee that you put on a credit card. So you are dropping your overhead to 10%-15% and managing with one full-time employee while your patients spend all the time in the world with you."

Even if overhead is 20%, he points out, that's still means net revenue of $600,000 to provide managed care for a fraction of the people. "You are still working hard, but you are going to spend an hour with each patient rather than eight minutes. I find physicians attracted to that," he says.

"In a panel of 2,500 to 3,000 patients finding 500 to 600 who want to convert with you to this is not much of a challenge."

Tom Blue, executive director of the American Academy of Private Physicians, a professional association for direct pay physicians, estimates that there are about 4,400 physicians in direct pay private practices.

"Recognize that private medicine is almost entirely a primary care phenomenon. And my hunch is that this will settle out with 15% of primary care physicians operating in this kind of model in the next five or six years," Blue says. "I think we are poised to see a pretty good surge."

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