Successfully Switching to Concierge Care in California

Thomas LaGrelius, a family physician in Torrance, Calif., first realized the potential of concierge medicine 25 years ago after becoming fed up with the restrictions imposed by third-party insurers and cutting his ties with Blue Cross/Blue Shield - at the time his largest insurance contract. He had feared a revenue shortfall after a third of his BC/BS patients left to avoid out-of-network fees but by year's end, he actually had an improvement in his bottom line.

"Two-thirds of those patients stayed with my practice and the revenue from that group for the year was 50 percent higher than my total revenue from BC/BS the previous year," says LaGrelius, owner of SkyPark Preferred Family Care, his family medicine clinic. "I saw then that it was possible to spend more time with fewer patients, without lowering my income."

LaGrelius began his career at a large medical group and over the next 20 years worked as a solo practitioner and manager of several independent medical groups. However, he became discouraged by the restrictions on practice and large discounts mandated by health maintenance and preferred provider organizations. He switched to an all-cash practice for a few years, which cuts out insurers and requires patients to pay upon receipt of services, then eventually settled on a retainer-based practice, in which patients often retain traditional insurance but pay an additional fee for expanded care and individualized attention.

For the past 10 years, he has run a concierge family practice specializing in geriatric care that employs one other full-time physician and five support staff. The best part of it, he says, is having more time to focus on patient care without spending all of his time in the office.

"The decision to go retainer 10 years ago was mostly based on the fact that I wanted a practice limited to a few hundred patients per doctor, all of whom get optimal care," he says. "The advantage of seeing a concierge doctor is that we are actually happy because we are not spreading ourselves too thin."

MAKING THE SWITCH

Physicians who consider transitioning to concierge medicine often worry that an abrupt switch will trigger an exodus of patients who balk at paying the retainer fee. However, LaGrelius recommends jumping in with both feet.

"My transition was abrupt on Jan. 1, 2006," he says. "Switching gradually sounds tempting because it allows you to get your feet wet without making a full commitment, but the reality is that neither you nor the patients end up happy."

Under a hybrid model, patients have the option of paying an annual fee for enhanced services or continuing on a fee-for-service basis. The goal is to grow the retainer side of the practice over time but that doesn't often happen, says LaGrelius.

"As a physician you want everyone in the practice to get the same level of care," he says. "But the patients already in your practice have little motivation to shell out a membership fee because they are already getting many of the services for free."

At the same time, patients who pay the fee may feel shortchanged as the physician continues to juggle the needs of thousands of patients. In contrast, all patients in a full concierge practice pay a fee, ensuring a steady revenue stream and allowing the physician to accept fewer patients.

In a full concierge practice, patients typically continue their coverage through Medicare or private insurers. Currently, patients with federal health savings accounts (HSAs) paired with high-deductible plans who live in California and many other states are prohibited from using their HSAs to pay their membership fees because direct primary-care practices (those that charge monthly or annual fees) are currently defined as health plans rather than medical services.

However, rules governing HSAs may change soon if the Senate approves the Primary Care Enhancement Act, which proposes redefining direct primary-care practices as medical home services that qualify as health expenses under the tax code. Several states have already passed their own legislation making direct primary care distinct from insurance products.

Lagrelius bills Medicare directly for covered services and assists patients with getting reimbursed by private insurers for out-of-network services. Currently, fee-for-service reimbursements account for about 25 percent of his income while the bulk of his revenue comes from retainer fees. Membership is restricted to about 600 patients per physician.

The membership fee covers all office-based services that are not covered by insurance plans. In addition, patients have cell phone access to their physicians at all times and can make same-day or next-day appointments.

LaGrelius initially charged an across-the-board annual fee of $1,800 per patient but has since adopted a sliding scale ranging from $700 per year for patients under age 35 to $2,100 for those over age 45, which make up the majority of his practice. Patients under age 35 receive detailed wellness exams every three years; those between ages 36 and 45 every two years; and those over 45 every year.

Although he does not participate in private insurance plans, LaGrelius chose to continue as a participating provider in Medicare because it places fewer restrictions on his practice, such as which medications are covered and where patients receive outside services.

MARKETING TO PATIENTS

One of the biggest challenges of transitioning to concierge medicine is convincing patients to make the switch. Anticipating that, LaGrelius invested in a conversion consultant, a significant investment but one that he considers key to his later success.

"The year I converted was extremely busy," he says. "Not only did I have to run my practice but I had to sell the idea of concierge medicine to 600 of my existing patients and make sure the ones who left had care."

LaGrelius sent letters to all 7,000 patients in his files telling them about the redesigned practice and that it would be limited to 600 patients. By the launch date, about 500 had enrolled. For the others, he offered help finding new providers, facilitated record transfers, and provided emergency care until they were established at other practices.

In addition, LaGrelius met personally with every patient who visited the office during the months leading up to the transition. He made sure that patients fully understood the cost of membership and what would be covered if they joined.

Although it was a huge investment of time and money, getting expert advice and prioritizing communication with patients laid the groundwork for his eventual success, he says. It allowed him to start with a loyal base of patients and grow the practice through word of mouth.

"My practice is always busy and we usually have a waiting list," he says. "I'm thinking of bringing on a third partner over the next couple of years."

LESSONS LEARNED

Thomas LaGrelius, a family physician in Torrance, Calif., made a successful transition to a concierge practice 10 years ago. He also helped found the American Academy of Private Physicians, a professional society that provides resources and advocacy for concierge and direct-care practices. He offered the following tips to others considering a switch to a concierge model:

• Use a consultant. It requires an upfront investment, but going at it alone could become overwhelming.

• Don't try running a hybrid practice. People won't buy the cow when they think they can get the milk for free.

• Make sure all your patients who don't join are transitioned to another doctor and receive emergency care in the interim.

• Staff is critical. Hire the best and pay them well.

• Offer 24/7 phone access. Remember that your relationships with patients are what make your practice successful.

Janet Colwellis a West Hartford, Conn.-based freelance writer specializing in healthcare. With more than 20 years experience as a journalist, she writes frequently about clinical and practice management issues for several national health industry publications. She can be reached at editor@physicianspractice.com.

This article was originally published in the February 2016 issue of Physicians Practice.