Legal review of concierge medicine contracts is needed to handle regulatory issues & liability risks

Legal review of concierge medicine contracts is needed to handle regulatory issues & liability risks, as otherwise medical doctors opening concierge practices risk triggering all sorts of enforcement tripwires. 

A tale of two corporations

We borrowed Dickens’ title with a little less glamour.

Douglas Matlock MD was approached by a national chain that branded itself as running concierge medical practices.

Concierge Medical Practice Management & Marketing, Inc. told Dr. Matlock that it would convert his existing family medicine practice into a well-oiled concierge medical machine, bringing in VIP patients at $25,000 a pop for a year of amenities and making his professional life more streamlined, lucrative, and fun.

All Dr. Matlock had to do, Concierge Medical Practice Management & Marketing, Inc, told him with daily reminder emails, was sign on the dotted e-lijne and make a b-line to profits.

Concierge Medical Practice Management & Marketing would, of course, take 45% of his gross revenues as compensation for setting up the concierge medicine practice, marketing it, and administering the money flow.

Dr. Matlock thought about the offer and then decided that he could keep the 45% in his pocket, and then create his own concierge medical practice. Initially, he tried a do-it-yourself approach; but when some medical doctor colleagues confronted him about potential compliance issues, he grew anxious about DIY.

He then booked a one-hour consult with our law firm to obtain of legal review of concierge medicine contracts he himself had drafted, based on what his buddy, a medical doctor signed up with Concierge Medical Practice Management & Marketing, had sent him.

Dr. Matlock’s motivation and business structure

Dr. Matlock sent us an explanatory email:

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us …  and so, it’s time to change up my family medicine practice.

Dr. Matlock had a professional medical corporation for his family medicine practice; and now, echoing the business structure of Concierge Medical Practice Management & Marketing, Dr. Matlock had set up an LLC.  So his tale of two corporations was that the LLC entered into “consulting, concierge” services with his patients.

Dr. Matlock sought legal review because he was emulating Concierge Medical Practice Management & Marketing, but he didn’t know what he was doing any more than we’d be handy with the Physicians’ Desk Reference.

He didn’t know what he didn’t know, but he knew he didn’t know.

Concierge medicine legal issues: an overview

Dr. Matlock had read some of our prior posts on concierge medicine legal issues, including:

He wanted to know if his two-corporation structure and basic concierge medicine contract were good to go.

A doctor by any other name is still a doctor

Was that a rose by any other name?

The point is, it’s hard to remove the professional hat.

We’d advise against Dr. Matlock offering “consulting” services to patients.

We do counsel physicians on how to set up telemedicine practices.  But the fundamental first decision is whether the physician is going to be expanding his or her medical practice into an online venue–potentially across states–or, transforming the clinical piece into a strictly educational and informational service.

If Dr. Matlock is offering medical services to patients in two formats–one, his regular family medicine practice and the other a concierge medical practice–then he is not “consulting,” and he is not doing something a general corporation or LLC should do.  More on that below.

The why of Concierge Medical Practice Management & Marketing, Inc.’s business structure

Part of the job of legal counsel is to issue-spotting.  Dr. Matlock copied a business model and went right to the contracts.  In so doing he overlooked a number of regulatory challenges presented by his budding concierge medical practice.

The business structure of Concierge Medical Practice Management & Marketing, Inc.is dictated by the fact that operates as a management services organization (MSO) in a strong corporate practice of medicine state (such as California, New York, and Texas).

Because of these corporate practice of medicine concerns, Concierge Medical Practice Management & Marketing, Inc. is organized as a general business corporation, and there is in essence a two-company structure:

  • the physician’s professional medical corporation, which operates all clinical activities, and
  • the MSO, which operates management, administration (including patient billing and collections), and marketing

However, this is not the model that Dr. Matlock, the physician, should necessarily adopt.

An MSO is useful if it is going to manage and market more than one physician practice; or, if the medical doctor wants to build value in the management entity and eventually sell it, so as to try to capture more value than in the medical practice alone.

However, many states prohibit delivering professional services (such as medical services) through an MSO or general business corporation or LLC.

Dr. Matlock might want to have two professional medical corporations, one for the regular practice, and one for the concierge medical practice.  This might have some accounting and tax benefits and could potentially separate the liabilities – depending on much else; or, maintain a hybrid practice (part regular, part concierge) under the same corporate rubric.

The point is that Dr. Matlock shouldn’t necessarily duplicate what the national, branded chain does.

Legal review of concierge medicine contracts first requires regulatory review

The key issues for Dr. Matlock are regulatory, not contractual.  These include:

  • Figuring out whether his state Department of Insurance has any restrictions on concierge medical practice — i.e. when does it become the regulated “business of insurance?”
  • Ascertaining whether his state Department of Health has any restrictions on concierge medical practice – i.e. when is it “discrimination” to offer different sets of services for a higher fee.
  • Confirming his Medicare status (par, non-par, or opted out) with his local Medicare carrier and then deciding whether to see Medicare patients in his concierge medical practice (i.e., if so, he must bill Medicare, unless opted out; and he can only offer non-covered services, pursuant to an Advanced Beneficiary Notice (ABN)) or exclude Medicare patients from his concierge medical practice.
  • Having legal review of his insurance participation contacts to see whether he is required to bill everything through the carriers, or an offer non-covered services on a concierge medical basis.
  • Securing legal review of anti-kickback issues and ensuring, for example, that all services are offered at fair market value.  (For example, promising unlimited medical services could run afoul of this rule.)

The Medicare issues are particularly thorny.  For example, in a 2004 Alert, OIG stated that some concierge medicine services are already covered and reimbursable by Medicare.  These include:

  • coordination of care with other providers
  • comprehensive assessment and plan for optimum health
  • extra time spent on patient care.

In New York, the Commissioner of the Department of Health warned in 2004 that DOH’s opinion was that 24-hour coverage, case management, and referrals to specialists were services already covered by New York’s HMOs and that to bill them as concierge medical services, constituted double blling.

New Jersey also weighed in with various strictures.

The concierge medicine contracts

In terms of legal review of concierge medicine contracts themselves, key terms include:

  • A description of the concierge medical program that is compliant with the concerns identified above
  • A description of billing arrangements
  • Discussion of renewals and termination
  • Discussion of excluded services
  • Appropriate discussion of how the concierge medical program fits in a hybrid practice where other services may be covered by insurance
  • Familiar terms such as a disclaimer of warranties and limitation of liabilities

Without legal review of concierge medicine contracts and related regulatory issues, Dr. Matlock would face liability risks from multiple government regulators, as well as patients.

I see a beautiful city and a brilliant people rising from this abyss, and, in their struggles to be truly free, in their triumphs and defeats, through long years to come, I see the evil of this time and of the previous time of which this is the natural birth, gradually making expiation for itself and wearing out.

And so concierge medicine marches on, in a hybrid practice or silently extinguishing the prior reimbursement-based practice.  Contact us for details.

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Michael H Cohen Healthcare & FDA Lawyers

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