VIP Medicine: Paying Your Way Out of Managed Care

By Suria Santana, ssantana@aamc.org

Boutique medicine,” “concierge health care,” “personalized health care” — the terms vary, but the underlying implication is the same: patients receiving this type of medical service pay thousands more than standard insurance premiums for more immediate attention from doctors.

Fitzhugh Mullan, M.D., worries that boutique medicine “represents a fracturing of the social compact.”

Many boutique practices charge patients an annual membership fee and their high profitability allows them to limit their patient load and offer conveniences such as same-day appointments and unlimited access to doctors. Some of these practices are small, set up by a few physicians, while others are for-profit, single-specialty hospitals.

In the world of luxury health care, those with more means are able to buy specialized medical services. Some might view it as a natural outgrowth of a free-market economy, but many in the health care community believe that the area of health care should be spared from the workings of society’s materialistic enterprise.

Fitzhugh Mullan, M.D., clinical professor of pediatrics and public health at George Washington University School of Medicine and Health Sciences, a staff pediatrician at the Upper Cardozo Community Health Center in Washington, D.C., and a contributing editor of the Journal of Health Affairs, sees boutique medicine as a threat to the fabric of the American health care system.

“What worries me about boutique medicine is that it represents a fracturing of the social compact where everybody is cared for under a common covenant,” says Dr. Mullan. “The whole notion of health insurance is that we have a risk pool and that when we are well, we pay into it, and we get no benefit from that. But when we are sick, we are taken care of and other people’s money pays to cover our expenses.

“The notion that people can buy out of health insurance, or not be at risk with everybody else, begins to pull apart the notion that we are at risk together,” he continues. “Boutique medicine is the most ‘in your face’ version of ‘I don’t want to be at risk with everybody else, let me buy my way out of this one.’”

William Petasnick, president and CEO of Froedtert Memorial Lutheran Hospitals, says that the hospital provider community is viewing the trend with growing concern. He cites the development of for-profit “boutique institutions” offering specialized services such as orthopedic hospitals, spine hospitals, and other single-specialty hospitals, as a threat to teaching programs’ sources of profitable revenue.

“Boutique medical practices are spreading quickly throughout the country and have the potential of eroding access to our acute-care institutions,” says Petasnick. “These programs are set up to get at the major revenue generators of our hospitals, and they are taking away our profitable services. As a result, hospitals that are competing with the boutique services find themselves unable to underwrite community-based programs and services. Teaching hospitals are significantly vulnerable [because of their community service missions and] because their ability to underwrite societal programs, as well as provide care for the underserved, is compromised.

“These boutique services raise the bar with regard to convenient, accessible services,” Petasnick continues. And in addition to raising the bar, these for-profit institutions are under no obligation to take Medicare and Medicaid patients, unlike not-for-profit hospitals and teaching hospitals, he points out.

Medicare controversy

Some concierge providers have chosen to treat Medicare patients, and the legality of their decision has been questioned. Robert Hayes, president of the Medicare Rights Center, argues that boutique practices that charge annual membership fees and still bill for Medicare are violating the law because paying an annual fee effectively raises Medicare services’ prices. “Medicare is heavily set up to constrain costs for people’s medical care,” says Hayes.

“For physicians to attempt and run around the cost constraints either expressly violates the law, or, at minimum, violates the spirit of the law. So our organization has asked Congress to make it clear that doctors may not ask for additional fees for people covered by Medicare,” he says.

“Let’s say Medicare pays $100 for a particular procedure,” he expands. “A doctor cannot charge $150 for that procedure, collecting an extra $50 from the patient. That’s because in exchange for the privilege of being paid by Medicare — in some cases hundreds of thousands of dollars annually — they are required to have regulation of their fees.”

Five Democratic members of Congress wrote a letter to the Bush administration in April asking for a review of boutique practices that charge membership fees as well as bill Medicare, to determine whether they are in violation of the law. Under current law, physicians who do not bill for Medicare can charge a beneficiary for a covered service no more than 115 percent of the Medicare rate.

These Congress members — Reps. Henry Waxman (D-Calif.), Fortney “Pete” Stark (D-Calif.), Ben Cardin (D-Md.), and Sherrod Brown (D-Ohio) and Sen. Richard Durbin (D-Ill.) — argued in the letter that the annual membership fee charged by some concierge health care providers is illegal. In May, Health and Human Services Secretary Tommy Thompson ruled that concierge billing practices for Medicare are legal as long as fees don’t go toward standard medical care.

Financial pressures

It’s not news that doctors are facing low Medicare and Medicaid reimbursement rates, rising overheads, and in particular, rising malpractice premiums that have caused many to close down their practices. Dr. Mullan recognizes that these issues might have influenced some doctors to opt out of the traditional health care system and set up concierge practices. “The fact that many physicians today, particularly generalist physicians, are in a pressured work situation is something that demands attention and much concern,” he says.

“In the policy, educational, and reimbursement debates about primary care and the health care system as a whole, these issues are being joined to the discussion of boutique medicine.” But, he adds, to opt out of the traditional health care system into boutique care is not “a responsible way to use one’s training as physician.”

Despite the substantial financial pressures many doctors face, Hayes doesn’t think practicing boutique medicine is an appropriate response. “One of the characteristics of market econ-omies is that everyone tries to get the most out of these economies for themselves,” says Hayes. “It shouldn’t be a surprise that physicians also feel this way. There’s a legitimate question as to the rate of Medicare payments to physicians that Congress should be studying more closely, as in some parts of the country, physicians are being paid too little by Medicare.

“But is boutique medicine a response to that?” he continues. “Probably not, because the places where such practices pop up tend not to be places with unusually inappropriate reimbursement schedules for physicians.”

Using the imagery concocted by Uwe Reinhardt, a Princeton economist who has spoken extensively on the issue of boutique medicine, Dr. Mullan acknowledges that the health care system is much like a three-class 747 with people receiving different treatment depending on whether they are flying coach, business, or first class. But, he says, they are all on the same plane.

“Under boutique medicine, the imagery of the three-class 747 is gone since folks are essentially buying their own Lear jet, are taking the pilots out of the cockpit, and are putting them in their own private planes,” says Dr. Mullan, referring to the out-migration of doctors from regular practices into concierge practices and hospitals.

Teaching hospitals expand scope

In addition to providing community services and taking care of a large portion of this nation’s uninsured, some teaching hospitals are also offering services outside of the mainstream health care system. The Johns Hopkins Executive Health Program and the Cleveland Clinic’s Personal Health Management Program are two examples. Both programs provide top-notch care to corporate executives in the form of a comprehensive health exam that usually takes one full day to complete.

The Cleveland Clinic’s program has been in operation for approximately 30 years, according to Richard Lang, M.D., M.P.H., chair of the department of general/Internal Medicine, and head of the section on preventive medicine at the clinic. “We have provided exams to executives from large, medium, and small companies in the greater Cleveland area, as well as nationally,” says Dr. Lang. The purpose of the program, he explains, is to serve corporate businesses’ needs by helping them protect their resources, i.e., their executive population. “Companies invest a lot of resources in their executives, and it’s not in their interest to have these individuals neglect their health or suffer from major health problems that can be detected, prevented, and handled in a proactive way,” he says.

These exams can cost companies up to $2,500 per individual. “We offer one-stop shopping,” continues Dr. Lang. “We pre-schedule a battery of screening tests and a menu of things that are devised for each patient. They come in and get a lot done in a very short amount of time. A person may get the same battery of tests elsewhere in multiple visits, while we get these tests done here in a very quick fashion.”

Executives benefit greatly from this, he says, considering their hectic lifestyles. “Oftentimes, the people we treat don’t have time to go to the doctor because they are working and travelling all the time,” says Dr. Lang. “They are heads of businesses and heads of corporations. This is the one time in the year when they can sit down with a doctor and talk about all the different things going on in their lives in terms of stress, symptoms, and worries.”

Over time, Cleveland Clinic’s Personal Health Management Program has acquired patients who come in independent of a corporate health program, have the means to pay for the hefty fee, and want the top-notch yearly check-up.

Dr. Lang argues that the clinic’s program doesn’t fall under the boutique medicine category. “What I am not describing here is another kind of trend that’s called luxury care, concierge service, with physicians serving a limited number of patients and requiring them to pay a fee that will make them available to them to manage their care constantly,” says Dr. Lang.

But Dr. Mullan argues that any type of care provided outside of the normal health insurance system only to individuals who have the means to pay can be branded luxury care. “Maybe there’s a split between what could be described as ‘upper case’ and ‘lower case’ boutique medicine,” says Dr. Mullan. “But services that are bought by some kind of individual bank account, whether personal or corporate, and that take individuals and providers out of the normal health insurance system, fall into the boutique medicine category. The various brands of boutique medicine are essentially taking patients, providers, and other key professionals with them.”

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