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Healthcare Practice Models

Styles? Types? Models? I could ask ChatG, but let’s go with it. Knowing all the different healthcare practice models out there is helpful because it might help entrepreneurial doctors figure out what style fits them best. Different medical practice types will likely show up in the future, and most will have a lot of overlap.

1. Traditional Medical Practice

The good old standby; the patient has health insurance, pays their copay, and is seen by the PCP or specialist. The doctor will write the SOAP note to justify the billing code they will use – such as, 99201, 99202, 99203, 99204, 99205 … and then replace the 0 for a 1 if it’s an established patient.

The patient gets 7-10 minutes per visit and the doctor will have to do quite a lot of admin work to run the clinic. Profit margins seem to be in the 20% range.

Patient panel sizes per doctor are in the 2,500 to 5,000 range.

2. Cash-Only Practice

This is the total opposite, where the patient pays cash for everything. They pay cash for blood tests, injections, and office visits. I don’t see too many of these, but when they exist, they are on the ends of the spectrum—rich and poor.

There is no billing or administration, and it’s common to see a single clinician run the practice.

3. Direct Primary Care

DPC, baby! The member pays a monthly fee to join the clinic, and theoretically, this solo doctor should meet 95% of their care needs.

Many DPCs are now run as group practices but you still get your own doctor, which is important to people who are drawn to these practices. The PCP DPC doc usually has a panel of 250-500.

There is no billing or coding. Whether the patient does or doesn’t have insurance is often irrelevant because most practices are considered out of network.

4. Concierge Practice

The Concierge practice type is often a hybrid where the patient’s insurance is billed for everything as in the traditional practice in #1, but the doctor charges an annual fee to limit the number of people who are part of the practice.

The patient panel size is in the 800-1,000 range. And the practice can charge anywhere from $200 a year to $150K a year and I’m sure much more for specialized clinics. An example of a private practice I found was Dr. Fuchs @ $10K a year.

It’s common to see group practices, such as MDVIP, where a few like-minded doctors get together to open a posh clinic to serve those who have more money than time.

5. Virtual Practices

Of course, any of the practices above could be virtual, as well. But a virtual-first practice essentially exists only online and is rather rare.

That’s how I run my practice at Digital Nomad Health. Most of these virtual practices are cash-only or are membership-based, similar to DPC. A few are also concierge but may not take insurance.

6. Hybrid Practice

Combine any of the above, and you get a mix of virtual, DPC, cash-only, and concierge. I mention this one because you don’t have to rely on just a single income source. But, running different practice types can get exhausting and overwhelming quickly.

7. Retail Clinic

We’ve all heard about this kind of practice model, often run by PAs or NPs. The patients usually pay a small fee and are seen for a very narrow spectrum of conditions.

They call these pill mills because you essentially go there to get your antifungals, antibiotics, and antivirals.

These are usually run by large corporate groups, and their profit margins are abysmal, but they make up for it in volume. Well, that was the idea; every time these start up, they fail in less than five years.

8. Mobile Health Clinics

You don’t have to just live out of your van, you can now convert it into a medical office and see patients out of it.

I’ve worked in a few of these – actually, quite a few for some odd reason. They are rather fancy and gadget-y. Most are meant to serve those who just have limited access.

9. Specialty Boutiques

Think of aesthetic clinics, advanced urology, or back pain center, or addiction clinics. These can be ridiculously lucrative but they are also customer-service intensive and can be an HR nightmare.

Many patients pay in cash so you need to buy a safe; no kidding.

10. Community Health Center

CHCs are common in low-income or rural neighborhoods. A Community Health Center might have many NPs and PAs and even the occasional specialists, such as OB/Gyn. Sometimes, they’ll staff pediatricians, too. I’ve worked at one in LA called UMMA Clinic.

CHCs are often non-profit and receive funding from various sources, including wealthy donors, endowments, and local or state governments. However, they aren’t usually funded federally; that’s where the FQHC, below, comes in.

These will often have a board of directors, often be a chain, and be bureaucratically and administratively heavy. Profit margins are low, but leadership gets good money.

11. FQHC

Federally Qualified Health Centers (FQHCs) receive grants under Section 330 and must meet strict requirements to get funding. I’ve worked for a few of these, and in practice, they are quite simple. But a lot has to happen behind the scenes.

Both CHCs and FQHCs are great resources for uninsured patients who can qualify for discounted services. Both will have social workers or community liaisons on staff to do the billing and referrals.

A rather large chain in the state of CA is AltaMed. They have urgent care, specialty groups, primary care, and elderly care which they call PACE.

12. Group Practices

A group practice might be a group of primary care doctors or a group of doctors focusing on specific diseases. For example, you might see urologists, gyn, and pelvic floor PTs all practicing in one practice.

Other examples are orthopedic surgery, sports medicine, and physical therapy coming together to run a group practice or IM, FP, and Peds.

13. ACOs

ACOs are rewarded for saving the healthcare system money and providing “good care.” If they meet quality goals and improve patient care, they get to keep some of the money they save for Medicare. They focus on providing quality care efficiently instead of just performing more procedures.

There are examples of Medicare ACOs, commercial ACOS, and Medicaid. Usually, these are groups of doctors and entities such as hospitals, specialists, and PCPs.

14. Hospital Owned Practice

This is self-explanatory. The profits here come from the gatekeepers and feeders – the PCPs.

Patients with good insurance will be fed into the system for imaging, tests, biopsies, and surgeries. Admission are “encouraged” when the reimbursement is good and avoided when it’s bad.

A PCP who earns $150 an hour often earns the hospital group $1,800—about a 12-fold increase. In terms of salary, an internist who makes $300K will earn the group $2M.

15. Integrated Delivery System (IDS)

Kaiser Permanente and Geisinger are great examples of such a system. It basically combines the ER, hospital, urgent care, specialists, and PCP under one roof. In KP’s example, it operates as an HMO.

16. Medicare Advantage Plans

Beneficiaries must enroll in Medicare Part A (hospital insurance) and Part B (medical insurance) to join a Medicare Advantage plan. They then choose a plan from a private insurer approved by Medicare. MAs are also referred to as Medicare Part C.

17. A Mix of Everything

ChenMed is a popular example of a large, private group of physicians doing concierge medicine, IDS, and Medicare Advantage. Of course, this gets complicated, but for those of you interested in working in these groups or starting your own, it’s good to know the different varieties out there.

Healthcare practice models are often hybrids of different practice models. They might start out as one type but evolve into others. Right now, we are seeing many traditional practices also do concierge or DPC.

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