The Legal Risks
of Boutique Medicine
Whether the law adapts to permit or prohibit boutique medical practices remains to be seen
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
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
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.
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. ■