With so many physicians thinking about starting concierge medical practices, I asked financial planner Jason Hull for his thoughts. His firm, Hull Financial Planning, focuses on entrepreneurs and small businesses.
Martin Merritt: Dropping out of the health insurance rat race is the number one topic at medical practice seminars I attend. What are you seeing from a financial planning viewpoint?
Jason Hull: I’m seeing that this is a growing trend. Physicians want to take back the practice of medicine, avoid the pitfalls of Stark Law, and the uncertainty of post-payment audits.
MM: What tips can you provide our readers who are considering transitioning to concierge practices?
JH: As much as we entrepreneurs wish it was the “Field of Dreams” scenario where we could build it and they will come, simply opening up an office will not guarantee success.
There are a lot of variables to keep in mind when deciding whether to form a concierge practice, and when deciding what type of concierge practice to form. Here are five of the big ones:
• Convenience. Patients who can see a doctor right away in a location convenient that is to them are more likely to use that doctor. Concierge practices should ensure they provide patients with access to benefits that they can’t get at a normal general practitioner’s office.
• Price. More and more patients are paying attention to the costs of medical care, not just the costs of their health insurance. If they can get the same treatment for less, without a significant increase in inconvenience, they’ll choose the cheaper option. That differentiates the strategies of running a high-end high-touch concierge practice compared to a low-cost a la carte concierge practice.
• Value. If you can give patients a special experience, then they are more likely to stay loyal, and tell their friends. Think about medical tourism. People are paying less for certain elective procedures overseas, and they are getting a spa week in the deal. They are getting both price and value. Consider what you can do to make the patient experience memorable, particularly if you’re offering a high-touch concierge practice.
• Specialization. If you’re the only pain management specialist within a hundred mile radius, then you’ll own the market, at least until another pain management specialist moves nearby. The same applies for either high-end concierge or low-cost concierge services.
• Referrals. If you’re a specialist, then most of your business comes from referrals from general practitioners. Do you have enough referral sources who would refer to your concierge practice? Furthermore, do you have enough pull so that they would refer patients to you rather than the doctor to whom they currently refer patients?
MM: What is the difference between a high-end high-touch concierge practice and a low-cost a la carte concierge practice?
JH: Low-cost membership concierge practices tend to provide a la carte basic healthcare services aimed at patients who have high-deductible insurance or no insurance.
High-end membership concierge practices provide on-call specialized services for a smaller number of patients who pay a value-added retainer fee for the availability and convenience.
The revenue and expense models for both are vastly different.
MM: What are some other considerations physicians need to take before opening a concierge practice?
JH: There are four more big considerations. They are:
1. Are you going to go it alone or with others? If you’re bringing in other doctors, how much of a book of business will they be expected to bring in? How will you share costs and revenues? Will it be a PLLP or PLLC?
2. What are your projected cash flows? You’re going to have to hire staff to handle the other aspects of running the practice. How much will they cost? How many patients do you need to bring in to cover your expenses (including paying yourself and/or your partners)? How long will it take for you to get insurance reimbursements?
3. Where will your patients come from? Can you bring in your current patients without violating non-compete agreements? How will you get the word out about your practice? Will you rely on advertising, location, referrals, or a combination of all of those sources? How long will it take to get a steady stream of patients?
4. Do you have enough cash in the bank to cover a worst-case scenario? My motto as an entrepreneur is to plan for the best and prepare for the worst. What happens if you hire staff, sign a lease, pay for insurance, and only a trickle of patients come in? Will you be able to pay the bills? How long until you will have to cut the cord?