United States: Reform Means Hospitals Must Reconsider Primary Care Strategies

Article by Gregory Brodek and C. Mitchell Goldman | Mondaq

JULY 20, 2011 – A key issue to remember: Under health care reform, it is projected that more than 32 million new people will be covered by health insurance, but virtually no new primary care physicians will be trained to serve them.

Thus, it is widely expected that primary care physicians will be in very short supply as health care reform is implemented over the next several years. Hospitals without an effective plan to attract and retain primary care physicians will struggle to compete and survive as the current system moves toward enterprise risk payment models like accountable care organizations (ACOs) and pay for performance reimbursement programs.

Massachusetts is serving as a an unofficial “test” laboratory as it implements a health care reform program that is similar to the federal program. Since the 2009 passage of the Massachusetts Health Care Reform Plan, the waiting time for a primary care physician appointment has increased from 4 to 6 weeks. Many physicians in Massachusetts have chosen not to expand their practices and have declined to participate in Medicaid. So, while some patients may have to wait 6 weeks, the possibility that some patients will have no access is very real. Another factor that will impact the situation nationwide is the growing interest in concierge medicine. Concierge medicine offers primary care physicians an alternative business model that pays them more while working less. Patients pay a fixed sum per year to the primary care physician for preferential appointments, access by text message and more personalized attention from their physician. Concierge medicine is growing dramatically and is attracting significant investment dollars as recently indicated by the purchase of the largest provider of concierge medicine services, MDVIP, by Proctor and Gamble. A number of other significant competitors in the concierge medicine space are also venture and private-equity backed.

So, while the opportunities and options for primary care physicians improves, the ability of hospitals to attract and retain these physicians may become increasingly difficult and certainly more expensive. Many leading hospitals employing primary care and other physicians already struggle with how to most effectively compensate these providers to retain them over the long haul. In addition, it is not clear that hospitals are attracting the best practitioners. With the rise of ACOs, having more physicians will not necessarily be better if their practice habits are not cost effective and patients are not retained.
What options are available to hospitals and health systems in this difficult and competitive marketplace?

First, hospitals should look closely at developing relationships with Federally Qualified Health Centers (FQHCs). With significant federal funding for expansion of existing FQHCs as well as for new FQHCs, hospitals should examine potential relationships with these FQHCs since they will attract primary care physicians looking to eliminate their student loans for medical school. Hospitals have traditionally avoided developing FQHCs because the regulations required consumer control. However, FQHCs could be a real opportunity for hospitals to retain and grow market share. ACOs also receive significant financial incentives to maintain relationships with FQHCs.

Second, since hospitals will need to continue to address the issue of keeping patients who cannot get access to primary care out of the emergency room, one strategy is to expand the use of nurse practitioners and physician assistants. Health care reform provides for additional reimbursement for these practitioners. However, retail clinics provided by national chain retail pharmacists use nurse practitioners and physician assistants and could make recruiting these practitioners increasingly difficult in local markets. Hospitals may need to consider developing new delivery models or creating new relationships with retail clinic providers.

Finally, hospitals should consider one of the challenges to be an opportunity. Since concierge medicine offers an attractive option for primary care physicians and their patients, hospitals could offer their employed physicians an opportunity to serve concierge patients. Since these patients pay to have an enhanced relationship with a physician, they are less likely to change physicians. The physicians also typically work less and earn above market rate compensation so hospitals with a large pool of concierge patients may gain a competitive recruitment advantage if appropriately managed. While these models have not to date been implemented for hospital employed physicians, there is no reason that hospitals cannot develop such approaches in conjunction with many of the current concierge medicine companies.

With competition for primary care physicians, physician assistants and nurse practitioners intensifying over the next few years, new payment models will make it imperative for hospitals and ACOs to devise new relationships and strategies with these primary care providers. FQHCs and concierge medicine strategies may offer hospitals new opportunities to protect and grow their market shares by retaining primary care practitioners and their patients.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today’s evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today’s evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.

Specific Questions relating to this article should be addressed directly to the author.

New Health Care Act Removes Legal Justification
For Most FNCS Concierge Practices

By John R. Marquis | Contributing Legal Writer | Warner Norcross & Judd LLP
85 East 8th Street, Holland, Michigan 49423 | |


1. Introduction

The largest segment of the concierge medicine industry is now almost ten years old. The legal foundation on which it is based was laid in 2002, when Tommy Thompson, the then-secretary of Health and Human Services, formally concluded that physicians who participate in Medicare could nonetheless charge patients a special fee in exchange for services that are not covered by Medicare, even when the fee amounts to a precondition to providing Medicare-covered services to those patients.1

Since 2002, these so-called “fee for non-covered services” (“FNCS”) concierge practices have proliferated across the country to the point where one estimate puts the number of physicians practicing this form of medicine in the thousands.2 While over the years there have been periodic threats to the legal validity of these practices, none has been as great as that created in March of last year with the enactment of the Patient Protection and Affordable Care Act (the “Act”)3. It is not unreasonable to conclude, as the author has, that the challenge presented by the Act is so great as to remove the remaining legal validity of most FNCS concierge practices.

2. The Problem

It has been customary for these FNCS practices to provide a patient with an annual “wellness” physical exam, which is normally accompanied by the development of some form of wellness or health plan for the ensuing year. In addition, the typical FNCS patient contract includes around-the-clock direct phone or pager contact with the physician, no wait appointments, same day or next day appointments, and e-mail access.

Congressman Henry Waxman (D-Cal) and five of his colleagues initiated the 2002 controversy by complaining to Secretary Thompson that concierge practices were charging patients a special fee for services already covered by Medicare and were making the payment of the fee a precondition to rendering Medicare services.4 Secretary Thompson disposed of this latter issue by his oblique statement that “physicians have some discretion regarding the patients they choose to accept.” Since then there has not been anything written about this “precondition” issue, and it seems to have pretty much fallen by the wayside.

Secretary Thompson dealt with the main issue more directly by concluding that:

While the limiting charge provisions govern physicians’ charges for Medicare-covered services, these provisions do not directly affect charges for noncovered services. Insofar as the retainer under such an agreement is truly for noncovered services, such fees would not appear to be in violation of the Medicare law.

The Thompson letter then referred to a field memorandum issued just a few weeks before his letter by the Centers for Medicare & Medicaid Services (the “Field Memorandum”). The memorandum, which was also attached to the Thompson letter, instructed the agency’s field agents on how to handle concierge practices. While not commenting on the specifics of the Waxman complaint, it did define the sort of practice with which the memorandum was concerned: practices that required an annual fee in exchange for which the patients “receive various services (such as an annual physical) or amenities (for example, same-day or next-day appointments).”

Several years ago it was conventional wisdom that Medicare did not cover so-called periodic wellness physicals. An otherwise healthy Medicare patient could not just have her physician give her an annual physical and expect Medicare to pay for it. It was quite simple, therefore, for a physician to charge a special fee for an “annual wellness physical” because it was just not covered by Medicare. The syllogism sustaining the legal justification for FNCS practices thus ran as follows: Wellness physicals are not covered by Medicare; a physician can legally charge a special fee for medical services that are not covered by Medicare; therefore, a physician can legally charge a special fee for wellness physicals. The Act fundamentally changes the syllogism’s major premise.

3. Administrative Attitude

An important element in assessing the impact the new Act will have on FNCS practices is an appreciation of the federal government’s historical attitude toward them, starting with Secretary Thompson’s letter itself. For instance, it would be an error to conclude that the Thompson letter was a clear and ringing endorsement of this form of medical practice. While the letter has served for almost a decade as the only legal authority for them (at least insofar as Medicare is concerned5), it was somewhat reserved in affirming the essential FNCS concept. While generally giving physicians the go-ahead, Thompson cautioned that they “are responsible for complying with applicable Medicare requirements” and that his office “…will continue to monitor the situation carefully – especially for any evidence of coercive activity relating to such agreements – and consider whether any further steps are indicated.”

While the Field Memorandum was, of course, consistent with the Thompson letter, it was nonetheless obtuse, if not outright cagey, as to how far the basic FNCS concept could be taken. It warned that “the structure of these [patient] agreements present certain legal concerns” and then instructed the agents not to give any physician in the field guidance as to the question of legality (the agent should “neither approve or [sic] disapprove” of the practices). Finally, the agents should warn the physicians that if they were contemplating forming such a practice they should “seek legal counsel to ensure the agreements comply with the law.”

If we left 2002 with a semblance of guarded clarity as to the legality of FNCS concierge practices, it was not too long until CMS, speaking through its enforcement arm, the Office of Inspector General (the “OIG”), injected considerable uncertainly into the issue. In 2004, it issued a fraud alert6 that seemingly was designed not only to cast doubt on the validity of the Thompson conclusion but intentionally to obscure the legal status of concierge practices. The Alert dealt with a physician in Minneapolis who had agreed to pay a significant fine and step out of Medicare for a number of years for doing something wrong in operating a concierge practice. While what this physician was doing was clearly a problem7 even within the confines of the four corners of the Thompson letter, the OIG chose not to explain the case by reference to that one thing. Instead, it proceeded to list three things the physician was doing and, in an apparent effort to keep everyone guessing, warned us that “some of them are covered by Medicare.”

Probably because the facts of this case were somewhat on the egregious side, nothing much was done to apply the case to other situations. Then in 2007, along came the more troubling Rocomora case. This case involved a North Carolina physician running what appeared to be a fairly standard FNCS practice. Here is how CMS describes the case on its website:

Lee R. Rocamora, M.D., North Carolina, agreed to pay $106,600 to resolve his liability for allegedly violating the Civil Monetary Penalties Law. The OIG alleged that the practitioner requested payments from Medicare beneficiaries in violation of his assignment agreement. Specifically, the practitioner allegedly asked his patients to enter into a membership agreement for his patient care program, under which the patients paid an annual fee. In exchange for the fee, the membership agreement specified that the practitioner would provide members with: (1) an annual comprehensive physical examination; (2) same day or next day appointments; (3) support personnel dedicated exclusively to members; (4) 24 hours a day and 7 days a week physician availability; (5) prescription facilitation; (6) coordination of referrals and expedited referrals, if medically necessary; and (7) other service amenities as determined by the practitioner.

Note that this practice sounds a lot like the current standard FNCS practice, but again the OIG does not tell us what the doctor was actually doing wrong. The author filed a Freedom of Information Act Request with the OIG in hopes of finding out what the transgression actually was, but nothing much was furnished in response (other than Dr. Rocamora’s patient agreement). The OIG therefore passed up another opportunity to inform the legal and medical communities whether it was applying new rules regarding concierge practices or whether the old rules were simply falling apart.

It is a reasonable conclusion to draw that the OIG and CMS are not particularly fond of concierge medicine. If that conclusion is accurate, it reinforces the concern that the provisions of the new Act may bring an end to FNCS practices that charge a special fee for annual wellness physicals.

4. The Dynamic

Notwithstanding the above, there is no real evidence that CMS or the OIG have changed their views regarding the continued merit of the Thompson rule or the legality generally of the FNCS form of concierge medicine. But there is plenty of evidence that the other part of the Thompson equation (that is, the services covered by Medicare) has changed significantly since 2002. In the years after 2004, Medicare began covering certain screening and preventive services, which in turn automatically reduced the number of things concierge physicians could offer in exchange for their special fee. To the extent a service or procedure that was typically performed as part of an annual wellness exam (for which a patient had paid a special fee) became covered by Medicare, then the physician automatically (and perhaps unknowingly) began charging a special fee for something that was covered by Medicare, and that was a clear violation of the Thompson rule.

The trend toward expanding Medicare coverage of preventive and screening services presented itself in several forms over the years,8 the clearest example of which was the so-called Welcome to Medicare Physical created in 20059 (the “IPPE”). This presented a serious problem for concierge physicians, since the wellness exam preformed for the patient who paid the special fee arguably and suddenly became covered by Medicare. Initiated in January of 2005, the IPPE was originally available only during the first six months of the patient’s Medicare coverage.10 On January 1, 2007, the six-month period was extended to the entire first year of Medicare coverage.

Whatever solutions concierge physicians put in place to accommodate the new IPPE, they were at best imperfect. Most concierge physicians argued generally that their annual physical exams were much broader and more comprehensive than the simple IPPE, therefore taking them out of the Thomson rule. But in doing so they neglected to realize that taking a patient’s blood pressure, for example, as part of a broad and comprehensive physical exam is pretty much the same as taking a patient’s blood pressure as part of the briefest of wellness visits.

The new Act presents a much more fundamental problem for FNCS practices by creating a new Medicare-covered service called Personalized Preventive Plan Services, now being called by CMS simply the Annual Wellness Visit (the “AWV”). Unlike the IPPE, the AWV is by its very nature an annual service the patient can request of his physician, including his concierge physician.11 The reason this presents a more significant problem is that it is one thing to contend with (accommodate) a one-time physical exam when a patient starts Medicare coverage; it is another to contend with (accommodate) essentially the same problem year after year for each Medicare patient in a practice. For example, one obvious solution to the IPPE problem was for the FNCS physician simply not to charge the new Medicare-covered patient the special fee for the year in which the patient was eligible for the IPPE. That simple solution is not available when the Medicare patient can have what amounts to a wellness physical every year.

If there is any doubt as to CMS’s view of the current status of Medicare coverage for annual wellness exams, one need look no further than the content of Medicare’s web site (see CMS states here that:

New For 2011.

As part of the Affordable Care Act of 2010, Medicare now pays for most preventive services at no cost to you (no Part B deductible or coinsurance) if you get the services from a doctor or other health care provider who accepts Medicare assignment.

Moreover, in a recent publication for new physicians12 (“A Roadmap for New Physicians – Avoiding Medicare and Medicaid Fraud and Abuse”) the OIG and CMS had this to say on page 14:

You may see advertisements offering to help you convert your practice into a “boutique,” “concierge,” or “retainer” practice. Many such solicitations promise to help you work less, yet earn more money. If you are a participating or non-participating physician, you may not ask Medicare patients to pay a second time for services for which Medicare has already paid. It is legal to charge patients for services that are not covered by Medicare. However, charging an “access fee” or “administrative fee” that simply allows them to obtain Medicare-covered services from your practice constitutes double billing.

There are certainly ways to try to square the AWV with the existing law relating to concierge medicine.13 But after having worked with many concierge physicians in the last six months regarding these issues and studying the AWV provisions, the author has come to believe that there is simply no clear way to accommodate the AWV within the Thompson rule. Here is why.

I looked at a random number of so-called executive physicals found on the Internet with an eye to isolating what might be a typical fulsome, expanded, and comprehensive physical exam (one like an FNCS physician might say she is giving to her concierge patients). A typical one is the Mass General Executive Physical, which includes the following:

(i) Medical History
(ii) Comprehensive Physical Exam*
(iii) Colorectal cancer screening
(iv) EKG
(v) Body Composition Analysis
(vi) Series of lab tests
(vii) Spirometry
(viii) Audiometry
(ix) Visual acuity
(x) Immunizations
(xi) Pap smear
(xii) PSA

*Although not stated, one would assume that blood pressure, pulse, and the basics are covered.

Now look at the particulars of the AWV, as provided by the Act and by the new Rules issued pursuant to it14:

(i) Medical and Family History
(ii) List of current providers and suppliers to patient
(iii) Measurement of height, weight, body-mass, blood pressure, and other routine measurements
(iv) Detection of any cognitive impairment
(v) Review of risk factors for depression
(vi) Screening schedule for the next 5 to 10 years
(vii) List of risk factors for which primary, secondary, and tertiary interventions are recommended
(viii) Furnishing of personalized health advice

While these two exams are by no means identical, one cannot reasonably reach the conclusion that there is no significant overlap between them. The medical history, for instance, is identical. And the blood pressure and other standard measurements would certainly be included in the Mass General physical. It is not too much of a stretch to say that almost everything included in the AWV would be included in the Mass General Executive Physical in some form. And it is the case that virtually every component of the Mass General physical would be covered by Medicare if it were given to a Medicare-covered patient under certain circumstances.15

So, the issue is framed like this. A concierge physician accepts $2,000 from a patient in exchange for a comprehensive annual wellness physical exam and the normal amenities (24×7 personal physician contact, no wait appointments, same day appointments, etc.). If we are now in a position to assess whether this practice is violating the Thompson rule, what is our test? The test pretty clearly is whether the physician has accepted the $2,000 in exchange for something that is covered by Medicare. Is it possible to conclude that nothing the physician will do as part of the comprehensive annual physical is within the AWV list? Put another way, how is it possible for the physician to perform the comprehensive annual physical exam without performing many of the things that are within the AWV and now covered by Medicare?

The essence of the OIG’s 2004 Fraud Alert was the following, appearing on the second page:

While the [Minneapolis] physician characterized the services to be provided under the contract as “not covered” by Medicare, the OIG alleged that at least some of these contracted services were already covered by Medicare. Among other services offered under this contract were the “coordination of care with other provider,” “a comprehensive assessment and plan for optimum health,” and “extra time” spent on patient care. OIG alleged that based on the specific facts and circumstances of this case, at least some of these contracted services were already covered and reimbursable by Medicare. (Emphasis added)

In face of this language, it is small comfort to assert that not all the physical exam services for which the patient pays the special fee are covered by Medicare all the time. The rule seems to be, as articulated in the Fraud Alert, that it is sufficient if just SOME of them are. Assuming this is the rule, for an FNCS physician to bring himself or herself within the protection of the Thompson rule, no part of the annual physical exam he or she is charging the special fee for could be covered by the AWV, a truly untenable position. Putting it in the words of the Fraud Alert: at least some of the elements of the annual wellness physical are already covered and reimbursable by Medicare as part of the AWV.

5. What Services Are Likely Still Safe?

While half the Thompson equation appears to have been obliterated by the new AWV for those FNCS practices offering an annual wellness physical, the reach of the Thompson letter was broader than a mere physical exam. Recall that the Waxman letter complained of a number of other services being offered by the physicians he described in his letter. The list included the following:

1. Same day and next day appointments
2. 24/7 direct physician contact16
3. E-mail and fax access to the physician’s office
4. Prescription facilitation
5. Coordination of necessary referrals
6. Claims facilitation
7. Travel medical services
8. Private reception area “replete with amenities”

Since neither the Field Memorandum nor the Thompson letter condemned any on this list, and since most of them are not medical services at all, there does not appear to be a good reason why a physician cannot charge a special fee for some of them.17

One approach for FNCS physicians who have historically offered an annual physical as part of their special fee could be to eliminate the physical altogether and instead include (or retain) some of the above “amenities” in the special fee.18 The most typical would be 24/7direct physician phone access, same day/next day appointments, and e-mail access.19 This may create a marketing problem for many practices, since eliminating (or not offering) the annual physical will reduce the value of what the FNCS physician is offering. On the other hand, the issue is one of legality, not economics. Moreover, a case can be made for adopting the practice of performing the physical, at the request of the patient, and billing as much of it as can be billed under Medicare and private insurance rules and charging the required co-pays and deductibles to the patient. This would put the billing for any periodic physical in accord with Medicare and private insurance billing requirements. Of course, if the physician includes in his or her annual physical items that are not covered by Medicare or private insurance, the patient is either going to have to pay for them out of pocket or the physician is not going to bill for them.

Some caution should be exercised in adopting one or more of the amenities, however, as Medicare may take the position that, even though there is no particular billing code for an item, some are still covered. For instance, the private reception area “replete with amenities” sounds very close to the general office overhead that Medicare already impliedly covers.

6. Conclusion

While the new Annual Wellness Visit has likely spelled the end to most traditional FNCS concierge practices that include an annual wellness physical as part of their special fee, there is no reason why these practices cannot be reconfigured and continue to operate within the law. The Thompson principle that a physician may charge a patient a special fee for things that are not covered by Medicare is still viable and remains the law. Many services, mainly non-medical amenities or valuable attributes of a concierge practice, should continue to be the subject of special fees for FNCS practices.20


1. For more on the Thompson letter and its historical context, see the author’s article: “Legal Issues Involved in Concierge Medical Practices,”

2. One blogger suggested that there are about 5,000 concierge physicians operating in the United States. He does not cite his source for this, but the suggestion is most certainly inflated, by a lot. The authors of a March of 2010, MedPAC report (“Retainer-Based Physicians: Characteristics, Impact, and Policy Considerations”) (see could find fewer than 800 such practices, although they acknowledged that their number would likely be the lower limit of the actual one.

3. Public Law No. 111-148, March 10, 2010.

4. Patients around that time had complained that physicians converting their practices to the FNCS concierge model were requiring them to pay an annual lump-sum fee or find another physician.

5. There is also an issue whether FNCS practices square with the provisions of private contracts between physicians and insurance companies. These issues are not uniform from insurance company to insurance company and are not, in terms of their effect on physicians, as daunting as those presented by Medicare.

6. See the author’s article The Politics of Concierge Medicine; the Vulnerability of the FNCS Model, for a more in-depth treatment of the Fraud Alert.

7. The physician agreed to waive the patient’s co-pays in exchange for the annual fee.

8. See Charles B. Root, “New Medicare Preventive Services and Screening Tests You Can Perform in the Office,” Medicare Patient Management, March/April 2006, page18, http://www.medicare

9. The technical name for this physical exam is the Initial Preventive Physical Exam. See 42 USC 1395x(ww).

10. This led some physicians to postpone any physical exam for a new Medicare patient until AFTER the six months of her Medicare coverage expired to ensure that the physical exam could not possibly be mistaken for the IPPE. Aside from the obvious ethical problems with this approach, as a practical matter this shenanigan was put to rest in 2007 when the eligibility for the IPPE was extended to the full year of a patient’s Medicare coverage.

11. There are no co-pays or deductibles associated with the AWV. Medicare pays 100%.


13. See the author’s article “Suggested Modifications to Fee for Non-Covered Services Concierge Practices as a Result of New Healthcare Act,” _modifications_to_fee_ for_non-covered_services_concierge_practices_as_a_result_of_non_health_ care_ act-concierge_law/.

1475 Fed Register 73170-01, November 29, 2010.

15. Some services listed would not be covered in an annual wellness context, at least every year, but some would be covered even in a wellness context in certain years and as part of a physical if medically indicated as part of an underlying diagnosis. A screening EKG, for instance, is covered by Medicare on a one-time basis, but an EKG is also covered in a non-screening context if indicated as part of a diagnosis and is medically indicated.

16. Some anti-concierge medicine public officials, like the New Jersey and New York health departments (for copies of the letters from these departments see retainermed/legal_developments/), have suggested that physicians already, as a matter of course, give or are obligated to give their patients 24/7 access. Such a suggestion reveals a bias that is not supported by any real analysis or even much awareness. Very few non-concierge physicians expose themselves, personally, to 24/7 direct contact by patients. Certainly patients of most primary care physicians can “reach” their physician 24/7 by called an answering service, which then routes the patients to a covering physician, and maybe directly to the patients’ actual physician if he or she happens to be on call. But that is much different than the patient paying the concierge physician a special fee in order to have direct 24/7 access to her physician at all times.

17. Nothing in this comment should be taken as legal advice. Any physician contemplating including one or more of these services in a patient agreement should consult his or her attorney.

18. Another reason this result will be disappointing to many concierge physicians is its effect on efforts to inform patients that the special fee is an expense that can be paid from a Health Savings Account, another so-called “acronym plan” (like an FSA and MSA), or a cafeteria plan. Concierge physicians are notorious for jumping to conclusions as to the applicability of these plans to special concierge medicine fees. But this entire area is cloudy and uncertain and no one can be sure, under existing law, whether any part of a concierge fee can qualify for any of them. However, the chances they can qualify increase if the special fee is paid for medical care, like an annual physical. If only “amenities” are included in the special fee, then there is likely no chance the payments will qualify. A similar point can be made about whether the special fee can count toward a patient’s deductible amount under a high-deductible health insurance policy.

19. And there are others that would not likely trigger a Medicare problem because they are not medical services. For instance, some physicians include “friends and family” provision that allows friends and family visiting or vacationing with the concierge patient to have the same direct access to the physician for a limited number of days during the year.

20. Recall in footnote 12 the reference to the new CMS publication warning new physicians that charging an “‘access fee’ or ‘administrative fee’ that simply allows them to obtain Medicare-covered services from your practice” amounts to double billing. This reference to an “access” or “administrative” fee should not be taken as referring to providing the patient with something special that has value in the market place, like personal, direct, 24/7 coverage or friends and family access, things that a physician is not otherwise obligated (legally or ethically) to do for patients. The reference should be taken to mean those sorts of across-the-board charges that are little more than surcharges to patients just so they can continue to belong to a practice. There have been reports of physicians billing all their patients a small amount annually to help the physician with his or her overhead. Such charges are without much question illegal.

Thursday, February 24, 2011
Questions Raised About Oversight of Concierge-Style Health Providers

As some California health care providers move to a concierge-style direct primary care model, questions have emerged about how the state should regulate such services, the Los Angeles Daily Journal reports.

Direct primary care services typically charge patients a flat monthly fee that allows them to have a physician available on retainer. The fee also ensures that patients can receive coverage for all routine medical care.

Expected Expansion

Beginning in 2014, the federal health reform law will allow direct primary care practices to market their coverage alongside traditional health plans in health insurance exchanges.

Norman Wu — co-founder of the Seattle-based direct primary care firm Qliance — said the reform law will help his company extend its reach. Qliance already is looking to open clinics in California.

Questions on Regulation

In California, the agencies that regulate health insurers do not have guidelines on overseeing direct primary care practices.

The Department of Managed Health Care currently is reviewing whether to require Qliance to obtain the type of license that managed care plans need to operate in California. Managed care plans are tightly regulated in California to ensure that they have sufficient financial reserves to cover services promised to patients, who pay up front.

Marian Mulkey — director of the Health Reform and Public Programs Initiative at the California Health Care Foundation — said regulators likely will have concerns about the financial stability of direct primary care practices, specifically if the services were marketed as part of high-deductible health plans. CHCF publishes California Healthline (Gallegos, Los Angeles Daily Journal, 2/23).

Medical Reform and Private Physician Contracts

By James J. Eischen, Jr., Esq. | Source: | September 2010

Whether you consider “Obamacare” a swear word, the arrival of end days, or the beginning of long overdue reform, national health care reform affects private fee physicians. As the scope of Medicare coverage expands to include more preventative care (including more frequent or more extensive physical exams), how can private fee physicians be certain that when they privately charge patients covered by Medicare, they are compliant with federal laws requiring Medicare fee schedule compliance?

The easy (really, the uneasy) answer is that they cannot necessarily know with absolute certainty that their private charges to Medicare-covered patients for preventive care or physical examinations are absolutely neither charging for services covered by Medicare nor charging for services that may be considered “bundled” with covered services. Of course, there is little anyone knows with absolute certainty (death and taxes come to mind), but how can private fee physicians most effectively address this risk?

– Ensure that your physician-patient private fee contract confirms your intent not to charge privately for what a Medicare-covered patient is entitled to receive under the Medicare covered services fee schedules. Your contract should reflect your intent not to violate Medicare billing laws.

– When creating or evaluating your physician-patient contract private fee schedule, or your allocation of medical services to an annual (or quarterly or monthly) “retainer” or fee that you may charge for superior access, evaluate whether you are allocating any medical services potentially covered by Medicare to a private fee or retainer. By attempting to carve out medical services currently or potentially covered by Medicare from your private fee schedule or retainer services menu, you better protect yourself from a possible claim that your private fee or retainer improperly exceeds the Medicare fee schedules. This is not as simple as it sounds (it certainly is not simple), but it is a worthwhile exercise.

– Ponder whether your private fees or retainers should be allocated to services or benefits that are unlikely to represent Medicare covered medical benefits. For example, if your private fee medical practice offers telecommunications/electronic records access or other unique administrative benefits that are not truly a “medical” service, consider whether you can or should allocate certain fees or your retainers toward non-medical services benefits.

– Traditional concierge medical practices often allocate annual retainers to a superior and in-depth annual physical coupled with other preventive care benefits. With Medicare evolving toward more preventive care and more frequent physicals, reconsider if the annual physical is truly what your patient pays for with their retainer payments.

Determining how best to structure a private fee physician-patient contract is by no means a cookie-cutter project. Private fee physicians are implementing diverse and creative methods of creating superior patient experiences in exchange for private fee payments. Some private fee medical practices focus on house calls and personal face-to-face interaction and access. Other private fee medical practices emphasize immediate technological communications access with health records platform access/interactions. Private fee physician practices have access to a growing array of EMR and communications platform, and cutting-edge diagnostic tools. So there is no one method of allocating private fees or retainers to medical or non-medical services. Review what your private fee medical practice offers, and question why you would allocate any medical services potentially covered by Medicare to private fees or retainer payments. Your practice may offer benefits unlikely to deemed covered by Medicare.

Medicare is evolving, and necessarily so. Private fee physicians should consider reforming their fee/retainer schedules. “Obamacare” represents an opportunity for private fee physicians to evolve, and to consider reframing what they sell to patients to better ensure ongoing Medicare compliance. And one more recommendation: while it might go against your grain, consult an attorney to enhance your Medicare compliance and your peace of mind.

James J. Eischen, Jr. is an attorney with over 23 years experience handling a wide range of business matters, including medical business planning. His practice, Eischen Law Group, APLC, is located in Cardiff By The Sea, California.

Summarization of New Healthcare Reform Law

Proud Sponsor of Concierge Medicine Today

Warner Norcross & Judd LLP

Warner Norcross & Judd, LLP has analyzed the package of bills and regulations and can provide practical, proactive solutions to help companies move forward with confidence.

Major changes to the law include:

  • Mandated insurance coverage for all Americans by 2014
  • Penalties for large employers who offer no or unaffordable health coverage by 2014
  • Refundable tax credits and reduced cost-sharing requirements, as well as an expansion of Medicaid, to offset expenses for those with lower incomes
  • Establishment of health insurance exchanges for families and small employers
  • Elimination of certain restrictions, such as pre-existing conditions, for employer-sponsored health plans
  • Elimination of life-time coverage limits
  • Extension of coverage for children up to age 26
  • Uniform benefit descriptions to allow employees to more easily compare coverage options
  • New reporting requirements
  • New programs that offer tax credits on health insurance premiums for small employers
  • Early retiree reinsurance

“While these changes are being phased in gradually, individuals and businesses cannot afford to postpone planning for the necessary changes to their employee health plans,” Conway said. “Many of the provisions are complicated and will require modifications to existing plans. Companies that do not comply with health reform face stiff financial penalties.”

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Suggested Modifications To FFNCS Concierge Practice(s) As A Result of Healthcare Act

By John R. Marquis (

Proud Sponsor of Concierge Medicine Today

Warner Norcross & Judd LLP

After the publication of my recent article about the new Patient Protection and Affordable Care Act (the “Act”), some concierge physician clients have discussed with me how best to handle the new annual Personalized Prevention Planning Services (“3P Services”) created by the Act. I suggested in that article one method (which I will explain in more detail here) to accommodate these new wellness/preventive services within the normal structure of a “fee-for-non-covered-services” (“FNCS”)ii practice, but it would require a fundamental change in the financial structure of these practices.iii

From a legal standpoint, FNCS practices are based on the principle that a physician may bill Medicare only the approved rate for a given service and cannot charge the patient anything for the service other than an applicable co-pay and deductible. Of course, this rule applies only to
services that are actually covered by Medicare; it does not apply to services that are not covered.

The concluding element of this legal syllogism is that if the service for which a fee is paid is not covered by Medicare, the physician is not restrained by the Medicare laws as to what she can charge the patient.

Most FNCS practices today are built around an annual wellness physical (that is, one prompted not by any injury or malady but one simply scheduled on a periodic basis) and a personalized wellness plan. The following is language used in typical agreements:


June 25, 2010, CMS issued proposed rules relating
to the new Health Care Act and the new
3P Services for Medicare patients.

Click HERE for the rules.

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Warner Norcross Launches Health Care Reform
Practice Group

Warner Norcross & Judd LLP has established a Health Care Reform Practice Group to assist employers, insurers and health-care providers in preparing for – and complying with – the sweeping changes to health insurance and health care-related programs enacted by the U.S. Congress.

Members of the firm’s Employee Benefits and Health Law practice groups have joined forces to provide counsel on issues arising from the Patient Protection and Affordable Care Act, which was signed into law this spring. The legislation is designed to change health insurance coverage practices and create health insurance exchange markets. The act requires individuals to carry health insurance and requires employers to offer group health benefits – or face penalties.

The new group has two areas of focus. The Employers’ Task Force has expertise in employer-sponsored group health plans. The Health Care Providers’ Task Force is available to help physicians, medical practice groups, biotechnology companies and others move forward under the new laws.

“The PPACA will be phased in over the next few years, with some immediate reforms taking effect as soon as September,” said Sue Conway, a Warner Norcross partner who concentrates her practice in employee benefits law. “While many significant changes will not take place until 2014, others are more imminent. Employers and health plans should begin preparing for them now.

“Our new practice group brings together attorneys with experience in group health plans, tax, employee benefits, health law and related areas to help businesses navigate the increasingly complex issues created by recent health reforms. Warner Norcross has analyzed the package of bills and regulations and can provide practical, proactive solutions to help companies move forward with confidence.”

Major changes to the law include:

  • Mandated insurance coverage for all Americans by 2014
  • Penalties for large employers who offer no or unaffordable health coverage by 2014
  • Refundable tax credits and reduced cost-sharing requirements, as well as an expansion of Medicaid, to offset expenses for those with lower incomes
  • Establishment of health insurance exchanges for families and small employers
  • Elimination of certain restrictions, such as pre-existing conditions, for employer-sponsored health plans
  • Elimination of life-time coverage limits
  • Extension of coverage for children up to age 26
  • Uniform benefit descriptions to allow employees to more easily compare coverage options
  • New reporting requirements
  • New programs that offer tax credits on health insurance premiums for small employers
  • Early retiree reinsurance

“While these changes are being phased in gradually, individuals and businesses cannot afford to postpone planning for the necessary changes to their employee health plans,” Conway said. “Many of the provisions are complicated and will require modifications to existing plans. Companies that do not comply with health reform face stiff financial penalties.”

* * *

About Warner Norcross & Judd

Warner Norcross & Judd LLP is one of the leading law firms in Michigan. With nearly than 220 attorneys in Grand Rapids, Southfield, Sterling Heights, Lansing, Holland and Muskegon, Warner Norcross is a full-service provider of legal services. Nearly half of our partners are listed in the 2010 edition of The Best Lawyers in America. Warner Norcross has been recognized for business excellence and workplace flexibility with an Alfred P. Sloan Award, as a national leader in client service among law firms by BTI Consulting, as one of the nation’s leading employment law firms by Workforce Management, as one of the 101 Best & Brightest Companies to Work For in both West Michigan and Metro Detroit and as one of the Best Michigan Businesses by Corp! Magazine. The Firm represents local, statewide, regional, national and international clients in all areas of business and civil law.

Mary Ann Sabo
Sabo Public Relations
T 616.485.1432

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New Health Care Act Deals Serious Blows
To Concierge Medicine

By John R. Marquis (
Warner Norcross & Judd LLP |

In large part, HHS and its enforcement arms have left legitimate FNCS practices alone. But the Patient Protection and Affordable Care Act (the “Act”)3 is going to cause serious problems for these practices and will require them to restructure in order to accommodate the Act. The Act creates other problems for the fee-for-care model, problems that are not as fixable.

The provisions of the new Health Care Act discussed above are going to have serious consequences for both kinds of concierge medical practices. Those for FNCS practices can be adequately handled by restructuring patient agreements to modify how annual physicals and wellness plans are dealt with for Medicare patients. Fee-for-Care practices have more of a challenge due to the apparent blanket disallowance of Medicare payments for DME and home health orders by opted-out physicians.

READ FULL TEXT | April 22, 2010

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New Healthcare Act creates some real problems for physicians who have opted out of Medicare.

READ MORE | April 4, 2010

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Provision in New Healthcare Act could cause concern to concierge practices highlighting annual wellness plans.

READ MORE | April 3, 2010

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CBO: Medical Malpractice Reform Could Save $54 Billion

By: Janice Simmons, for HealthLeaders Media | December 10, 2009 | ShareThis

The Congressional Budget Office has concluded, after evaluating tort reform research and meeting with healthcare experts, that “the weight of empirical evidence” currently demonstrates a link between tort reform and the use of healthcare services. The CBO response is to questions posed by Sen. Jay Rockefeller (D-WV) regarding medical malpractice.

he CBO response is to questions posed by Sen. Jay Rockefeller (D-WV) regarding its recent analysis of the budgetary effects of proposals to limit costs related to medical malpractice, as described in a letter to Sen. Orrin Hatch (R-UT).

In the Hatch letter, CBO said tort reform would lower healthcare costs both directly by reducing medical malpractice costs, and indirectly by reducing the use of healthcare services through changes in the practice patterns of providers.

CBO estimates that enacting a package of proposals outlined in that letter would reduce federal budget deficits by about $54 billion during the 2010-2019 period. Those proposals were estimated to decrease spending by roughly $41 billion and increasing revenues by roughly $13 billion over that same period.

SOURCE: HealthLeaders Media | READ MORE

Comment About Senate Bill’s Effect on Concierge Medicine

November 10, 2009 | Source: Jack Marquis and Warner Norcross & Judd LLP | LINK | ShareThis

Many, if not most, primary care doctors go into some form concierge medicine to escape what can best be described as the low reimbursement rates for Medicare patients. The more Medicare patients the doctor has, the more difficulty he or she has in generating sufficient receipts to run his or her practice. The Senate’s proposal to allow millions of additional people to enroll in Medicare (down to as low as 55 years old) could mean bad news for primary care doctors but good news for those in the concierge medicine business. I predict that, if the Senate’s “early enrollment” idea is enacted into law, there will be a lot more primary care doctors moving toward concierge medicine as a way of augmenting their incomes to offset the increased number of Medicare patients.

Is the pending healthcare legislation “pro” or “anti” concierge medicine?

Source: Jack Marquis and Warner Norcross & Judd LLP | LINK | ShareThis

A LinkedIn acquaintance told me the other day that the new healthcare plans being considered in Washington were pro-concierge medicine. I asked him what he based that conclusion on and, essentially, here’s a paraphrase of what he said: wellness, overall care, etc. are being endorsed and encouraged in all aspects of the healthcare delivery. Endorsements for any preventative care are being talked about. Personalized healthcare models are one of the few opportunities and options to afford patients the overall care they need.

I don’t question his points, but I have not seen anything yet in either the House Bill or the Senate Bill that leads me to believe that the end result will be a boon to concierge medicine. In fact, I think there is plenty in these Bills that would point in the other direction. Here are some examples.

1. The contribution amounts to HSAs and other pre-tax acronym plans are being reduced. The less money going into these plans the less will be there to pay concierge medicine periodic fees.

2. Taxes on so-called “Cadillac” health insurance policies are being considered. The definition of these plans may eventually include high-deductible plans that would otherwise benefit concierge medicine.

3. The definition of what is acceptable private health coverage is going to fix a “not-greater-than” deductible amount. That would hurt fee-for-care concierge doctors in fitting their fees into the deductible portion of high-deductible plans.

4. Tax rates are going to go up on high income people, making it somewhat less likely they will want to spend their after-tax money on concierge fees. (See, for example, the Senate Bill’s increase in the Medicare portion of FICA and self-employment income tax.)

Source: Jack Marquis and Warner Norcross & Judd LLP | LINK

$2,500 Annual Limit on FSA Contributions 11-10-09

SOURCE: | Jack Marquis’ Concierge Medicine Postings Index

A Flexible Spending Arrangements (FSA) is a fund, normally part of an employer’s cafeteria plan, that allows an employee to pay healthcare expenses with pre-tax money. The employee directs some of his or her pay into the FSA and the amount contributed is not taxed to him or her. The employee can also use the FSA money to purchase over-the-counter drugs. The employer places a limit on how much an employee can divert to his or her FSA – the government does not impose such a limit, at least for now. Here is part of Section 532(a) of HR 3962 (the House-passed Healthcare Bill):

(i) LIMITATION ON HEALTH FLEXIBLE SPENDING ARRANGEMENTS. IN GENERAL.—For purposes of this section, if a benefit is provided under a cafeteria plan
through employer contributions to a health flexible spending arrangement, such benefit shall not be
treated as a qualified benefit unless the cafeteria plan provides that an employee may not elect for
any taxable year to have salary reduction contributions in excess of $2,500 made to such arrangement.

In short, this turns a no-limit-on-contributions, or at least one set by the employer only, not by the government, into an FSA contribution limit of $2,500 per year.

Section 531 of HR 3962 also allows payments from FSAs, MSAs, and HSAs for “expenses incurred for a medicine or a drug…only if such medicine or drug is a prescribed drug or is insulin.” Over-the-counter drugs could no longer be reimbursed under HR 3962.

Read More at:

AMA Issues Opinion On Retainer/Concierge Medicine Practices

Dec 2003 – AMA Opinion 8.055

Dec 2003 – AMA REPORT – Opinion 8.055

The AMA’s boutique care guidelines

The AMA issued ethical standards to guide doctors interested in starting a retainer-style practice. Among those standards are:

• Both parties must agree to—and be clear about—the terms of the relationship. Patients who wish to opt out should be able to do so without undue hassles or financial penalties.

• Retainer-style practices shouldn’t be marketed as providing better diagnostic and therapeutic services.

• Doctors must help transfer—at no charge—nonparticipating patients to others. If no others are available, a doctor “may be ethically obligated to continue caring for such patients.”

• Doctors must be honest in billing third-party payers.

• Starting a retainer-style practice doesn’t exempt physicians from caring for those in need, especially those in need of urgent care.

For a copy of the AMA’s guidelines for concierge practices, contact the

Council on Ethical and Judicial Affairs,
American Medical Assn.
515 N. State Street
Chicago, IL 60610;

Tel: 312-464-4823
Fax: 312-464-4799

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Feb 12, 2009 :: Cash Practice Alternatives


Published Reports

From The Maryland Insurance Commissioner’s Office.

Aug 2005 – GAO Report


2008 – Section 1862(a)(1)(K) of the
Social Security Act (42 U.S.C. 1395y(a)(1)(K))

2004 Medicare Act, Section 605

WEST VIRGINIA – March 2006 – H.B. 4021

Massachussets (2005) Senate Bill 1295

Apr 2004 – NY State DOH

Aug 2003 – New Jersey DHSS

Apr 18, 2008 – AARP Article


Washington State Is Seen As One of The Most Progressive
Areas In Concierge Medicine



Congressional Responses/Letters

Apr 2004 Sr. Democratic Rep. PETE STARK (CALIF.)

Mar 4, 2002 – Waxman Letter

May 1, 2002 – Waxman Letter RESPONSE

Concierge Medicine and the States
Can concierge doctors save primary care medicine? That’s up to the states.
…So far, states aren’t mediating this overarching debate over concierge medicine. Instead, they’ve focused on a narrower question…A few years from now, states are likely to have clearer guidance for doctors as to what they can and cannot do. It’s possible by then we’ll even have come to a consensus as to what to call these doctors.

September 4, 2009 :: FULL STORY

Leadership Day Launches New Legislation For Primary Care

July/August 2009 :: ACP Internist :: FULL STORY

Florida Medical Spa and Retail Medicine Lawyers

2009 :: READ MORE

Feeling the heat from doctor-rating sites, physicians ask for no-complaint agreements

July 21, 2009 :: FULL STORY

U of Michigan sees dramatic malpractice savings by saying ‘sorry’

July 21, 2009 :: FULL STORY

Indiana physicians group asks for mediation in dispute with insurer.

July 17, 2009 :: FULL STORY

Insurance industry goes after docs who help the uninsured

June 13, 2009 :: FULL STORY

Leadership Day Launches Push For Primary Care

June 2009 :: June ACP Internist :: READ FULL STORY

INTERNET MEDICINE – PART I: The New Concierge Practice.

April 19, 2009 :: READ BLOG

Physicians Declaim Unfair Targeting of Concierge Medicine by Maryland Insurance Commission

February 2, 2009 :: FULL STORY

The controversy of concierge medicine: Some states have been considering whether to regulate fee-for-service physicians who practice what is sometimes referred to as “concierge” medicine.

January 22, 2009 :: FULL STORY

Early Casualties in the War on Concierge Medicine

December 30, 2008 :: FULL STORY

Does Concierge Medicine Transcend Radiology Education Issues in Developing Countries?

June 23, 2008 :: READ MORE

Concierge Medical Practices Expanding Across the Nation

Feb. 2004 By John R. Marquis READ MORE

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