Subscription medicine is coming to a clinic near you

Written by on February 5, 2016 in Billing & Payments, Guest Blog with 0 Comments

subscription medicineThe latest disruption in the way we pay for goods and services may be coming to a doctor’s office near you. Subscription medicine replaces healthcare’s traditional fee-for-service payment structure with a recurring revenue business model. And while the concept has been around for two decades, it’s only started to catch on in the past few years. Here’s a look at the market forces driving adoption and what it may mean for doctor-patient relationships moving forward.

 How subscription medicine works

Known variously as concierge medicine, membership medicine, or direct primary care (DPC), subscription medicine enables patients to see their doctors as often as they wish for a flat fee paid monthly, quarterly, or annually.

In addition to unlimited office visits, most plans also offer: same day or next day appointments, no waiting on arrival, individualized attention, and 24/7 access to personal physicians.

The first concierge service opened in the Pacific Northwest in the mid 1990s. Today the concept, originally intended for the ultra rich, is now available to people in nearly every income bracket.

The average annual fee is $1,200. Yearly rates range from luxury concierge programs costing more than $25,000 to basic DPC plans at just $400 to $600. DPC is more affordable because its doctors don’t accept insurance, which lowers overhead.

Subscription fees cover many of the services of typical office visits. However, depending on the plan, additional services like specialist consultations and diagnostic imaging cost extra. Patients also carry health insurance for medical needs such as prescription drugs, surgeries, and hospitalizations.

Three key factors driving subscription medicine

Although it still represents a fraction of the healthcare market, subscription medicine is gaining steam. Since 2012, the number of doctors offering their services on retainer is up more than 50%.

Here’s a look at three market forces behind the growth in membership medicine.

Overbooked doctors seek relief. In traditional healthcare, doctors charge by the service. It’s a system that encourages high patient volumes. Doctors in standard practice may manage 2500 to 3000 patients at any one time and see 25 to 30 a day. As insurers continue to cut back on what they pay doctors for services, the pressure for doctors to see more patients is increasing.

So it should come as no surprise that more than 80% of physicians say they’re either over-extended or fully booked, according to a 2014 survey by the Physicians Foundation.

In contrast, doctors in membership medicine practices manage only 200 to 600 patients and may see just 10 a day, less than half as many as their traditional counterparts. They still work as many hours as other doctors, but because they treat fewer patients they get to spend more time with each one. Appointments can last anywhere from thirty minutes to two hours, compared to an average of just twenty minutes in a traditional practice.

The less hectic pace of membership medicine appeals to an ever-widening circle of physicians. According to the same 2014 study, 20% of primary care physicians are either already offering subscription services or planning to do so.

Patients are better informed, value personalization, and are more cost-conscious. Today’s patients want more personalized healthcare that’s more effective and convenient, which explains why retail medical clinics are sprouting up everywhere. At the same time, patients are paying more out of pocket than ever due to escalating insurance premiums and deductibles.

For some, membership medicine is ideal because it combines the on-demand scheduling of a retail clinic with the greater personalization of working with the same doctor. It also includes 24-hour access, if needed—and all for a low monthly price, luxury plans excluded.

With unlimited visits, membership medicine also enables patients to see their doctors not only when they’re ill, but regularly and proactively to stay healthy and out of hospitals. For example, MDVIP, one of the best-known concierge services in the U.S., boasts a 90% reduction in hospital readmissions.

And yet ironically, for a service initially created for the wealthy, cost savings are one of subscription medicine’s key selling points today—in the case of low-cost DPC plans, that is. In this age of soaring deductibles, it’s not unusual for patients to spend $1500 to $4000 or more out of pocket before insurance really kicks in. With some DPC plans, they can limit out of pocket expenses to $600 or less—and still see their doctor year-round.

Indeed, many DPC patients are able to reduce their overall healthcare spending by relying on subscription medicine for ordinary medical issues and health insurance for catastrophic events. By carrying higher deductibles and paying lower premiums, they can save more than the cost of their subscription.

Patients aren’t the only ones saving money this way. For example, Seattle-based DPC provider Qliance says that by making similar adjustments in coverage, employers who purchase subscription plans for their employees are cutting insurance costs by 10% to 40%.

Recurring revenue models are the new normal. The third factor in the growth of subscription medical plans is the rising popularity of incremental payment models across industries. As more doctors become aware that subscription medicine is a viable option, many like what they see. It gives them a predictable source of income and a more manageable patient load. For their part, patients are already used to paying recurring fees for many goods and services, so doing so for primary care is well within their comfort zone.

What it means for doctor-patient relationships

For patients, doctor accountability is one of subscription medicine’s chief benefits. If doctors in standard practices fail to satisfy patients, they still get paid. If doctors with membership practices do the same, their patients will simply churn out.

Consequently, just as in any recurring revenue operation, customer satisfaction is a primary goal of retainer-based doctors. That bodes well for patients. It’s no coincidence that MDVIP, the country’s largest network of concierge practitioners, has a patient satisfaction rate of 97% (compared to just 58% for traditional physicians) and a retention rate of more than 90%.

The road ahead

According to industry estimates, subscription medicine is growing 5% to 9% a year. How large a trend it eventually becomes is anyone’s guess. Its critics say it benefits doctors more than patients. If that’s so, doctors will have to take the same steps other recurring monetization businesses do in order to flourish—listen to their customers and adjust their pricing, packaging, and services levels to build retention, loyalty, and lifetime value.

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About the Author

About the Author: Brendan O'Brien is Chief Innovation Officer and Co-founder at Aria Systems. In 2002 he introduced the world to cloud billing, and innovated database-driven, enterprise-grade web applications before the concept of “cloud” was on the horizon. O’Brien is the industry’s foremost thinker on IoT and recurring revenue: enabling new business models, providing multi-dimensional customer choice, and ultimately increasing revenue. The number-one ranked cloud-billing provider, Aria, empowers enterprises to monetize a wider variety of product offerings, retain their customers for longer periods of time, and grow recurring revenue at scale. Trained as a professional stage actor and classical tenor, in the mid ‘90s Brendan realized coding paid better than acting. .


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