As a business and health care law firm, it’s important to zoom in on the details. In this episode Michael and Brad share the story of a physician who found a way to deliver care to patients in a relatively new model – concierge medicine. Tune in as we discuss business and compliance considerations for subscription services in health care.
Listen to the full episode using the player below, or by visiting one of the links below. Below is the episode’s transcript which has been edited for readability. If you have any questions or would like to learn more, email us at info@byrdadatto.com.
Transcript
Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues, simplified through real client stories and real world experiences. Creating simplicity in three, two, one.
Brad: Welcome back to another episode of Legal 123s with ByrdAdatto. I’m your host, Brad Adatto with my cohost Michael Byrd.
Michael: Thanks, Brad. You know, I love to look at the big picture.
Brad: And context, lots and lots and lots of context.
Michael: As a business and healthcare law firm it’s important to also focus on the details. This season’s theme, Brad is zoom in. Once we know our big picture vision or strategy, we have to roll up our sleeves to get the work done. With each episode this season, we will have our typical stories and make sure we talk about the specific actions to focus on for 2022.
Brad: Yeah. And as we’ve talked about, I love the jump into the details first when presented with a [00:01:00] problem. So this season is in my wheelhouse.
Michael: Well, my daughter, Ellex recently saw Stephanie and I talking with another couple. She asked if we were talking about taxes. She figured for adults talking, that’s where they went with it. She must think adults are so boring.
Brad: She might be right. That you are boring. But tell me please that you were not in fact talking about taxes.
Michael: Of course not. Brad. We were talking about the subscription model and business, which is obviously super cool.
Brad: Yes, I agree. It is super cool. And I’m not sure Ellex would agree, as I’m pretty sure my daughter Madeline would take Ellex’s aside on that one. Why are we even talking about this, Michael?
Michael: Brad, our story today will center on the subscription model. While any business has considerations, with the subscription model, there are additional risks when using a subscription model for health care.
Brad: Yeah. So that’s kind of like the Dollar [00:02:00] Shave Club for medical practices.
Michael: That’s a decent analogy. You pay a set monthly fee in exchange for a defined amount of products or services. And despite my first experience with a subscription model, I absolutely love it. And as many people know ByrdAdatto’s client base is 75% based on Access+ which is our subscription model.
Brad: I feel like you’re wanting me to ask, you said something earlier, what happened with your first experience with the subscription model?
Michael: I thought you’d never ask, Brad.
Brad: I’m figuring that.
Michael: Well, if you insist, do you remember Columbia House back in the eighties and nineties?
Brad: Well, as everyone knows in the audience, I’m not as old as you, but I do remember people older than me talking about it.
Michael: My first foray into the subscription model was with Columbia House. I signed up and received [00:03:00] 12 free CDs.
Brad: I think, audience, we had our first vocabulary word of the season, it is CD for the youth that have never heard the word before. This is referring to a compact disc. The compact disc was replacing what a lot of people now are bringing back vinyl records and tapes. This was the original digital storage platform for music. So way back in the eighties and nineties, this is how people bought their music.
Michael: I’m starting to agree with you. It’s making me feel old. Anyway, 12 CDs was a huge score. I mean they were upwards of $14 to $18 per CD. And so it was a big deal and they would send you a CD each month going forward for a cost. And you could even reject the CD if you did not want it.
Brad: Which of course was the problem as I too remember well.
Michael: Yeah, Brad, [00:04:00] you had to let them know once they told you what it was going to be by a certain deadline, or if you miss the deadline, the CD shipped and you got charged and I missed the deadline basically every month after that, because I was a 18 to 20 year old kid and ended up paying hundreds of dollars for CDs that I did not want.
Brad: Yeah. And just a little background here. This is before the internet, this is before email where you could just easily email something. You actually had to go and actually put something together, mail it to them timely. And as you said, as a college kid, that was not something that we were really good at mailing or being timely. So basically it was nearly impossible to cancel the membership.
Michael: Yes. Well, fortunately subscription models have come a long way. You do not tend to see the massive cancellation fees or the requirement that you have to come in person or [00:05:00] jump through a bunch of hoops in order to cancel.
Brad: So earlier you mentioned a subscription model, Access+, which is ours. It has been for us, at least a revolutionary experience in the legal industry. From a business perspective, we have a recurring revenue that we can count on from a planning perspective. From our client’s perspective, they love it because they’re not getting any surprise bills in the mail and they get unlimited access to us and our team.
Michael: Yeah. I mean, it’s been a blast and we’ve learned a ton. There are legal risks from a business perspective and when you kind of fold in professional services into the subscription model, there’s also a compliance considerations as well.
Brad: Yeah. I can’t wait to talk about today’s story. Most of us have at least have heard of this term called concierge medicine, but then you have to understand really how it works. Let’s get into what are those risks involved with that?
Michael: Our client in this story, Brad is a board [00:06:00] certified internal medicine doctor. Like many of our clients, she was trained at the best schools, known as one of the best in our community, and just an all-around amazing doctor. And we’re going to call her Dr. Creative.
Brad: You didn’t go with Dr. Rockstar or you said she’s really smart, like Dr. Brainiac. So why Dr. Creative?
Michael: Our client took her traditional rockstar training and found a way to deliver care to patients in a relatively new model, concierge medicine. Now this is a common term now, but back when she did this, most people had no idea what in the world that meant.
Brad: Okay. Okay. Well let’s that’s fair enough. Let’s go back a little bit, Michael, even though this is a zoom in season, how did her practice start?
Michael: It started the traditional route, Dr. Creative finished her medical school and residency and joined a large private practice of internal medicine [00:07:00] specialists as an employed physician.
Brad: Yeah. Pretty standard. Practices typically are closely connected, some type of hospital system. They’re either working with them in a geographic proximity, or they actually may be part of the actual hospital system itself. So yeah. Got it.
Michael: Yeah. I mean the internal medicine doctors are doing the annual checks that we all know and have experienced and the tests that go with that. And then of course, if there’s anything wrong, we go in to see them. And so they’re the first point of contact, both from a wellness and a sickness perspective. And so they end up referring a ton of patients out to specialists and it can be advantageous to be connected in some way to a hospital system.
Brad: And the way these practices typically were, especially in this big systems, it’s a lot of clinic time, seeing patients, but to be successful you also have to have a super high volume of patients.
Michael: Yeah. And there’s a ton of administrative time [00:08:00] here to deal with the charting and coding just to maintain this clinic.
Brad: And back when she first started, EMR r didn’t really exist and obviously EMR has helped a lot making it more efficient in that perspective, but that’s still is a timely aspect, no matter whether or not you’re in the current day or even in the past.
Michael: Yeah. And because historically reimbursements for primary care were not great, the top end of compensation for internal medicine doctors was a fraction of what can be realized in the other specialties.
Brad: Got it. So far, this doesn’t really sound like a story that is typically worthy of one of our podcast episodes. So Dr. Creative was doing virtually what everyone else in her specialty was doing when she got out of school.
Michael: The part that was inspiring, Brad was her decision to do two things. Number one is she went out on her own and number two, she wanted to build a different model. [00:09:00]
Brad: I think that we don’t have to hide the ball here. We’ve been alluding to concierge medicine so I’m assuming that’s kind of where she went. So for the first pause, let’s talk about her going out on her own. We both know what it’s taken to get out of our comfort level and your comfort zone. And Michael, do you remember about this time period what you were going through when we decided to leave a well-known mid-size firm to start our own firm ByrdAdatto?
Michael: I remember it being a chock full of emotions. Excitement at the possibilities, excitement at building something you and I’ve had helped clients build forever. I know we talked a lot about this, even in our introductory podcast episode. And I also remember the gripping fear that could overtake you, when you would realize, wow I mean if we hit a slowdown in our [00:10:00] group, we don’t have any backup or reinforcements with other practice areas. When you have a 40 partner firm it is a little more smoothed out from a risk perspective. And so it really, especially in making the decision to make the leap, it was really scary. What about you?
Brad: I agree with what you were saying there. I mean, for those who’ve ever done the rollercoaster ride. I can still kind of remember the very first time I was on it. It’s both thrilling and terrifying all at the same time. I mean, you have, as you said, the potential ups and downs and side-by-sides as you’re doing it. And that’s how it was when we first started. Both of us had had plenty experience but you know as you said, if there’s a slowdown, we have our team to take care of and their family and then our family. And so there there’s some terrifying moments, but the thrill of being entrepreneurs trapped in lawyers bodies, as we’ve talked about in the past, it’s been a great ride. [00:11:00]
Michael: So we can easily tap into that part of Dr. Creative deciding to break free and to do something different. And that in of itself is cool, at least because we know how impactful that has been to us personally, but then she also did the second thing, which was decide to do it in a different way and build a different model. And let’s talk about this different model that was built by Dr. Creative.
Brad: I think we’ve said this word a couple of times, if our audience is not familiar with the term concierge medicine. I have my research assistant Siri. She has a lot of scientific resources with her. She looked up the concept of concierge medicine and it’s also known as retainer medicine it is a relationship between the patient and the primary care physician and which the patient annually pays or monthly pays a fee to that physician for those services.
Michael: Siri did a Pretty good [00:12:00] job there, Brad. The fee typically covers a defined amount of services, like an annual exam and sick visits. The key benefit is typically access to the doctor. They’ll say, I’m going to give you my cell phone and just call me anytime or text me. And you have that access, but things like testing, referrals to specialists are still going to be outside of what you’re paying and they will be subject to extra charges.
Brad: That’s definitely an important part for any doctors considering this model. And even if you’re a potential patient consumer who’s considering joining this platform, you want to understand what your fee actually covers and what it doesn’t. Michael, talk about why this is so inspiring to jump into this model.
Michael: Concierge medicine goes against the grain of everything that Dr. Creative would have known about primary care at that point. I mean, her employment position relied [00:13:00] entirely on insurance for revenues to the practice.
Brad: And there’s an entire process on coding and billing and it takes a tremendous amount of time, and administrative time, and sometime doctor time of it. And then you have a revenue cycle that is dependent on your actual insurance payer and how much they actually pay you on top of that. So it could be 90 plus days after you’ve seen the patient and you may have charged $200, but because of the contract, they’re only going to pay you $75.
Michael: Concierge medicine kind of flips this inefficient model on its head. And it’s a subscription model. You have a fee that’s often paid once a year by the patient, and this is the revenue for the practice for the year. So in other words, Dr. Creative will be paid before she provides the services, rather than sometimes months after she’s provided and billed for [00:14:00] a service. And the key of course, to making this work is that the doctor has to offer something unique and beneficial and the experience because you’re asking the patient to do something different as well. And you’re often asking them to just frankly go out of pocket just so they can have this access to this doctor or they’re the ones having to do the work to get reimbursed by the insurance company.
Brad: Michael. I’d like to have a secret between you and I. I’d like you to not to let your daughters know because I think they like me and I don’t want them to know that I’m siding with you on this one. I absolutely find this subscription model fascinating, so that’s just a secret between you me don’t tell anyone. And, you know, of course the models not for everyone, both as a platform for the individual user and also for the person who wants to do it, but it’s creative, there’s a lot of chances for everyone to win-win, and I think that’s what is so intriguing to me and you [00:15:00] about it.
Michael: I totally agree with you agreeing with me. Very well said, Brad, but let’s take a break and go do a quick commercial. And on the other side, let’s visit about the business of concierge medicine and some considerations with the healthcare element introduced into it.
Access+: Many business owners use legal counsel as a last resort rather than as a proactive tool that can further their success. Why? For most it’s the fear of unknown legal costs. ByrdAdatto’s Access+ program makes it possible for you to get the ongoing legal assistance you need for one predictable monthly fee that gives you unlimited phone and email access to the legal team so you can receive feedback on legal concerns as they arise. Access+, a smarter, simpler way to access legal services. Find out more. Visit byrdadatto.com today.
Brad: Welcome back to Legal 123s with ByrdAdatto. I’m your host [00:16:00] Brad Adatto with my cohost Michael Byrd. There’s a lot to unpack with Dr. Creative’s story on the concierge medicine, Michael. But this season is zoom in. Let’s roll up our sleeves and talk about this model.
Michael: Let’s jump in kind of from a business perspective, if you wanted to use a subscription model in your business, what are the things that you have to think about? And we alluded to this at the beginning. The most important thing is that you have to set the proper boundaries with the customer. And in this case it’s a patient and you have to define and set expectations as to what’s included and what’s not included. The second part of that is you have to kind of look at the financial side. Is this going to be an annual fee or a monthly fee and understand how that’s going to impact your cash cycle. So in concierge medicine, and [00:17:00] in fact with Dr. Creative, she does do it annually. And so if you have whatever, 350 patients that makes up all of your revenue. She’s going to have a revenue hit just randomly based on the anniversary date of her 350 different patients. And so you have a lot of irregularity with when the money’s coming in yet there’s not irregularity with when the bills are due typically. And so you want to kind of think through that. And then, one of the biggest principles we’ve learned about and having our own subscription model is figuring out how to deal with renewal. And do you do auto renewal, which is pretty much a sacred thing that you want to have in this model? Because it just administrative really is going to weigh the system [00:18:00] down if you’re having to chase people to figure out if they want to stay in or out each year. And so, you know, again, I alluded to the cash management. And then finally, documenting this with some form of a membership agreement with the customer or the patient is important because you’re trying to balance two things. One is you’re trying to sell something that’s cool and creative and be a win-win and so you don’t want to weigh the customer down with some huge long legal contract. And then at the same time, you want to set the proper boundaries that we just talked about. And so finding that sweet spot of something that is effective to let everyone know the ground rules and not scare them off is, is so important.
Brad: Yeah. I mean, I agree with most everything you said, except that I don’t agree with anything you said. [00:19:00] Hopefully the audience caught on because you really hit all these expectations that have to be set up, it’s extremely important. So you were talking about the membership agreements. We have clients where they actually have them sign it, or we have some clients that’s all on their website so they can always see it and update it. So how you develop that membership agreement, those terms and conditions are really key to making sure they have it. And unfortunately, as you said, there are times when the customer does want to leave your subscription model and you don’t want it to be like your Columbia House experience, where it’s impossible for you to ever cancel your CD collection. you want to have a smooth transition so they can dismount when necessary and so you’re hoping that they had a good relationship with you when they were there and then when they leave, whatever reason why they had financial reasons, more kids or whatever, the reason is that they left, for some particular reason you had a great way for them [00:20:00] at a kind way from the dismount so that doesn’t lead down the road, especially with medical provider complaints, the medical boards, or they complain to other members what a horrible experience they had, because if they had a great experience, that’s good. And if you making it painful and hard for them to leave, you’ll never ever have a satisfied former member of a model. And with subscription models, you definitely have to take into account that’s going to happen.
Michael: Yeah. And to add a little bit a layer of complexity to all of that, Brad is just understanding that if what you’re allowing them access from a benefit perspective is worth far more than what they may pay in a month or two or even four months And if they cancel, how do you protect yourself as a business financially for what they’ve received versus what they’ve paid. And so it is again, a balancing act of trying to make [00:21:00] this a win-win for your business.
Brad: Totally agree.
Michael: So let’s pivot because we’re not just talking about any old subscription business. This is not the Dollar Shave Club brand. We have an actual medical practice call it concierge medicine model. Let’s talk about the healthcare considerations
Brad: So model A was all about the business side of it and membership side of it. But now we definitely have healthcare considerations that they have. You have several different bodies that may be governing it, state laws or medical board rules. So for us, we really break it down to five. There’s more than five, but for the podcast to narrow down the five major things that you need to think about. One is patient care. Two is how your medical board views it, three is how your insurance payers are, how you’re dealing with that. Staffing as Michael was kind of talking to earlier in the following course. Last, but not certainly not least is professional liability insurance. So patient [00:22:00] care, if you are planning to switch to concierge medicine, you need to give your patients plenty of time to know that you’re going to be dropping their insurance. I know of clients that when they’ve done it, they’ve gave them at least 12 months’ notice so that the patient has plenty of time to go find themselves another provider if you’re going towards concierge. This will help prevent patient abandonment, which is the big buzz word here is patient abandonment. Now, for those not familiar with patient abandonment, that’s basically where you, the physician you’re terminating that doctor patient relationship. You didn’t give them reasonable notice and that’s defined by your medical boards or reasonable excuse and you failed to provide that patient with the opportunity to find some type of qualified replacement person to help take care of them. And if you happen to be in a process, again, this is internal medicine, but you’re taking care of critical care patients, we absolutely would not recommend you terminate that relationship yet until they at least have been stabilized or another [00:23:00] provider has taken over that care. Because again, there’s your exposure there on that. And like any other business model, I went and the health care thing, you wouldn’t want healthcare industry you want to understand how does the medical board view it? So on the medical board, that second issue is what are the board requirements on disclosures of fees? How does your board feel about unearned fees that you may be required or patient cancellations as Michael was alluding to earlier? That if you cancel, what does that look like for them?
Michael: And I want to add to Brad, it’s kind of the flip is what if you’ve been paid for three fourths of the year and they’ve not used any services, right? And then they cancel and you have a cancellation policy that they don’t get their money back and they go to the board and say, I paid for medical care, three fourths of an annual fee or whatever. And didn’t get anything for it. And we know that the medical boards sometimes care about that depending on how it’s structured
Brad: Great [00:24:00] point. And that’s where the squishy area or the area in which the medical board loves the most, which is, it might not be a direct violation of anything, but the medical board may consider that unethical and unprofessional. So again, to charge that membership fee to the patients if they weren’t using it. Insurance, there’s two fold here, but the main piece is number one is you have an insurance provider, you have a contract, you have to terminate that contract with them. That could be anywhere from 30 to 120 days to notify them that you’re terminating that. That then pushes you to sometimes if you allow your patient to come see you and you give them their bill, if they want to turn around and bill their provider, that’s known as out of network. You would all of a sudden quote out of network, you may not be providing that to them. I know that Michael, this season we’re going to spend some time talking about zooming in on this particular in-network versus out-of-network, but let’s not move forward on that. So the patient might be able to [00:25:00] seek reimbursement. So is that something you want to have in your model? Also as you talked about, what other additional expenses would they have? So if you are sending on to another provider, running tests, how you’re billing for that? You’ve also talked about staffing and spacing. So staffing is a big piece, is that you have to have that staff to oversee all those patients that are coming in. Some of these places are 24/7 so what if you have the physician out of town, do you have another physician that oversees it? And what does that cost or do you have nurse practitioners or PA’s helping you out and then finally, when you do make this switch, how does your professional liability insurance view this? Do they understand that concierge is still the same thing as the practice of medicine? You just want to make sure you have that conversation with the agent. Those are the five big ones I wanted to take away on that piece.
Michael: Wow. I mean, you remind me of Will Ferrell in Old School right now. He’s just exhausted about to collapse after dropping all that knowledge.
Brad: What was I [00:26:00] talking? I don’t even remember if I was talking!
Michael: I knew I’d cue you up for the old movie reference. Anyway, I totally agree. All great points on the healthcare risk.
Brad: Cool. Well, let’s kind of start taking this back in. So how did it work out for Dr. Creative?
Michael: She’s crushing it. Her revenues are four times the typical take home of a primary care provider and the patients all love her and they love the model. Brad, as we zoom in, what final thoughts do you have for someone that’s considering the concierge medicine model in 2022?
Brad: Much like any new arrangement or bright idea, understanding the details of each step, although it can be very tedious and sometimes boring, it’s going to protect you when you actually do make that transition over to the concierge model. You’ve probably heard the term as [00:27:00] slow as fast, meaning that if you rush into something and you do it wrong it’s going to slow down the entire process. So don’t rush it. You don’t want to put yourself in a situation where you have angry patients or angry medical boards investigating you for cancellations or insurance companies claiming you breach their contracts. And then all that does is slow you down from that potential four times take home because you don’t want to be in a position where you lose out on those financial opportunities. Michael, zooming in with you. What are your final takeaways?
Michael: Similar. Subscription models need to be intentional and really focused on creating the win-win so sure you can get someone to get you a INXS, U2 Duran Duran, Taco, Men at Work, Journey, The Go-Go’s and a mix of other classic rock and bad eighties music on a whim, but keeping them in [00:28:00] by locking them in contractually is a bad idea. It’s not going to work out in the long run because eventually even me, Brad and the laziness, I was finally canceled the plan when they would finally let me out. And so it was just a matter of time before they got me. And especially in healthcare, you want there to be more of a win-win transparent approach to the subscription model.
Brad: Well, that’s awesome, Michael. I think that’s all the time we have with our audience today. Look, we’re going to be doing this every Wednesday for the rest of the season so look for us next Wednesday on your favorite podcast channel, or I guess in this case, the same podcast channel that we are currently on. Enjoyed spending time with you guys and look forward to next time.
Outro: Thanks again for joining us today. And remember, if you liked this episode, please subscribe. Make sure to give us a five- star rating and share with your friends. You can also sign up for the ByrdAdatto newsletter by going to our website at byrdadatto.com. ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast does not constitute legal advice, nor does it establish an attorney- client [00:29:00] relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. The views expressed by guests are their own and their appearance on the program does not imply an endorsement of them or any entity they represent. Please consult with an attorney on your legal issues.
