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HEALTHCARE
LAW |
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July 2003
The
Legal Risks of Boutique Medicine
Whether
the law adapts to permit or prohibit boutique medical
practices remains to be seen
Steven M. Goldstein
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A small but growing trend in
medicine is the establishment of "concierge" or "boutique"
medical practices. For a fee, ranging anywhere from $900 to
$20,000 per patient per year, a physician agrees to provide a
range of primary care medical services to a limited number of
patients.
The range of services typically
focuses on wellness or preventative medicine, but can span the
entire scope of a primary care practice. Often included in the
services provided are amenities and preferences that are not
usually associated with physician practices, including
24-hour/seven-day-a-week access to the physician, same-day or
next-day-preferred appointments, private reception areas, and
even such luxuries as free hotel rooms for out-of-town patients,
heated towel racks, and monogrammed bathrobes. Membership is
usually limited to 300 to 600 patients. Some practices cater
exclusively to these patients, refusing to take any Medicare or
private insurance. Others continue to provide these services and
apply the membership fee only to those services that are not
covered by Medicare or private insurance.
There are several high-profile
examples of these types of practices throughout the country. In
Florida, a company called MDVIP has been in the forefront of
this movement and offers ambitious plans to recruit 1,000
physicians nationwide. In Seattle, the former team physician for
the Seattle Supersonics has converted his practice into this
type of arrangement. Two well-known internists in the Boston
area converted their practice into a boutique arrangement. Even
in Arizona, such practices have already been established and
more are on the way.
Physicians who have begun these
practices extol their virtues in glowing terms. They cite the
financial and psychological benefits of being free from dealing
with the legal requirements and billing nightmares associated
with Medicare and insurance companies. Because the number of
patients permitted to become members of a boutique practice is
limited, physicians are able to spend much more time with each
patient, which these doctors are certain increases the quality
of care provided.
On the other hand, many medical
ethicists, consumer advocates, and government officials express
concern over the creation of a two-class system of medicine,
with more services and higher quality available to those who can
afford the often substantial membership fees required by these
practices. They ask what will happen to the Medicare system if
more doctors elect to opt out and attempt to serve an all-cash
patient population only.
These practices have not slipped
under the radar screen of government officials, as numerous
investigations and other efforts to stop this movement have
begun. The most visible action was a letter sent in March of
this year to the Inspector General for the Department of Health
and Human Services by five members of Congress, including
Representative Henry Waxman from California and Representative
Pete Stark, the author of the Stark self-referral law. In their
letter, the Congressmen raise several concerns that the boutique
practices are violating federal laws, and they asked the
Inspector General to take "rapid action" against these
practices. Last year, Senator Bill Nelson of Florida introduced
a bill in Congress to prohibit physicians from charging
additional fees to Medicare patients. In addition, various state
agencies have begun their own investigations. Departments of
Insurance in the states of Massachusetts and Florida are
reviewing the practice.
The legal risks with these
practices can be briefly summarized. Most of these risks arise
when a practice continues to seek reimbursement from Medicare
and private health insurance companies for covered services in
addition to providing these additional "boutique" services for a
separate fee.
Violation of Medicare
regulations. Medicare regulations prohibit charging Medicare
beneficiaries for services covered by Medicare. Some argue that
the services offered for the additional membership fee overlap
with services that are covered by Medicare. To the extent that
there is such overlap, charging for such services would
constitute a clear violation. However, there is significant
dispute over whether any such services would be reimbursable
under Medicare.
Violation of the False Claims
Act. In their letter, the five Congressmen alleged that the
annual membership fee should be considered part of the charges
for basic office visits, which charges are often reimbursed by
Medicare or health insurance plans. As the letter itself
explains:
An MDVIP patient, for example,
might pay $1,500 per year in order to see his or her doctor five
times for covered services, with each visit costing an
additional $100 (billed to Medicare). Looking back, the true
charge for each visit, including the value of the annual fee,
was really $400. By failing to put the true charge on its claim
to Medicare, a physician could be violating the False Claims
Act. Of course, if the membership fee is for additional services
provided by the doctor, then it may not be accurate to allocate
that fee to office visits and other items normally covered by
Medicare.
Violations of provider agreements
with private insurance companies. Most private insurance company
provider agreements prohibit balance billing of patients in a
manner that could prevent charging any amounts to enrollees of
those health plans, even for non-covered services. If these
arrangements were found to violate Medicare regulations, they
are likely to also violate private health insurance provider
contracts in the same manner.
Violation of state insurance
laws. To the extent that these practices require annual
prepaid membership fees, they could be viewed as offering
insurance without a license. If the physician is taking the risk
of providing these services for a cost greater than the fee paid
to him, insurance statutes define the offering of insurance
broadly enough in many respects to encompass such an
arrangement.
Violation of the anti-kickback
statute or other laws prohibiting payments to induce patient
referrals. To the extent that the practices offer amenities such
as heated towel racks, free hotel rooms, special bathrobes, and
the like, these luxuries could be viewed as improper inducements
under the federal anti-kickback statute or provisions of the
Health Insurance Portability And Accountability Act that
prohibit such inducements. Of course, since these amenities are
offered only upon payment of a fee, they could be nothing more
than an exchange of fair value in return for what was paid.
Abandonment of existing
patients. Often, a physician who attempts to transition an
existing practice to a boutique practice which limits the number
of patients will have to terminate his relationship with many
existing patients. If that is not done correctly, the physician
could expose himself to liability for abandonment.
In many situations, trends in the
health care industry have run far ahead of the applicable law,
requiring the law to be changed to catch up with what quickly
becomes common industry practice. For example, the explosion of
physician networks or IPAs required clarifications of the
antitrust statutes in order to permit them. On the other hand,
sometimes common practices are shut down once the law catches up
to them, such as the widespread practice of physicians selling
prescription drugs over the Internet. Clearly, boutique medical
practices are ahead of the law at this point. Whether the law
adapts to permit or prohibit them remains to be seen.
These materials
are designed to provide general information prepared by
professionals in regard to the subject matter covered. It is
provided with the understanding that the author is not engaged
in rendering legal, accounting, or other professional service.
Although prepared by professionals, these materials should not
be utilized as a substitute for professional service in specific
situations. If legal advice or other expert assistance is
required, the service of a professional should be sought.
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