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The Physicians Foundation, a non-profit organization, published a survey finding that the lack of a permanent solution to Medicare’s Sustainable Growth Rate has caused more physician practices to consider moving to a “concierge” or direct pay model.

The Physicians Foundation, in a report titled “A Survey of America’s Physicians: Practice Patterns and Perspectives,” queried nearly 14,000 doctors who were asked about the future of their medical practice in light of possible changes in payor policies, including Medicare and Medicaid. Among the physicians who own their practices, nearly 10% indicated they were moving toward eliminating insurance company “middlemen” by providing concierge or direct pay services to patients.

Concierge medicine generally takes on one of two types of business models. The first model seeks to provide patients with services, in addition to those reimbursed by the payor, that are considered an added benefit, or a luxury, in exchange for a monthly fee. In this model, the patient might be provided routine free services, e.g., one x-ray per month, and priority scheduling. The second model eliminates the payor altogether for a higher monthly fee in exchange for certain types of medical services. This second model resembles a mobile phone plan.

Each model of concierge medicine brings operational and regulatory challenges. For instance, payors scrutinize the first model under the argument that the monthly fee is an inappropriate charge for services already paid by the payor. Governmental payors may move for severe penalties for violating the related provisions. The second model may require the provider to terminate all contracts with payors, which could potentially distance certain referring physicians and patients. Regardless of the chosen model, the operational and regulatory challenges should be considered seriously, and with the aid of professionals.

In March 2010 the Centers for Medicare and Medicaid Services (“CMS”) established the Self-Referral Disclosure Protocol (“SRDP”) for disclosures of violations of the Stark Law, which prohibits physicians from referring Medicare beneficiaries for designated health services to entities with which they have a financial relationship, unless an exception applies.

The SRDP provides an avenue for physicians to provide all necessary information to CMS in order to settle actual or potential violations of the Stark Law. CMS has the authority to reduce penalties assessed against the reporting provider for participating in the SRDP. CMS has disclosed its resolution of 16 settlements under the SRDP thus far. These settlements vary regarding the nature of the violation and settlement amount, and involve varying types of providers such as hospitals, specialty hospitals, and physician practices. For details of the actual settlements, click here