In January, 2009, the Maryland Insurance Administration (the MIA) issued a report on whether physicians who are operating boutique medical practices are violating the Maryland insurance laws by "practicing insurance". In that report, the MIA made several recommendations to boutique medical practices to avoid this problem.
Although few physicians would consider their medical practice as the "practice of insurance," this report represents the MIA's position on that subject.
A. The Practice of Insurance
A health insurance company "practices insurance" when it contracts with individuals to pay for the cost of needed medical care for a set fee per person per year. The insurance company uses the aggregate annual fees to pay the medical bills for an entire pool of insured individuals.
The insurance company takes a financial risk that the aggregate cost of the individual claims each year (from physician visits, diagnostic testing, hospital care and other health care services) will be less than the aggregate amount collected from the pool of insured individuals. Insurance companies licensed in Maryland must have sufficient assets, and meet other standards, to assume this risk.
It is the MIA's position that a physician with a boutique medical practice may become a de facto insurance company if the physician agrees to provide services beyond which the physician or his or her practice can reasonably provide. To determine the permissible amount of services, a boutique practice should consider both the number of patients, and the number of services per patient, that each individual physician can provide in a year.
Further, a boutique medical practice should not offer to patients, or purchase, a substantial amount of services provided by others. If these out of office services become a substantial portion of the aggregate annual fee charged to a patient, such out of office fees would make the boutique medical practice more like an insurance company, and less like a medical practice.
Lastly, the MIA suggested that the retainer agreement between the boutique practice and the patient should allow the patient to terminate the relationship, and receive a pro-rated refund of the retainer fee.
B. Types of Boutique Practices
The MIA report reviewed two types of boutique medical practices.
The first type is a Retainer Practice, where the patient pays an annual retainer fee for a fixed amount of annual services. The Retainer Practice generally sends no other bills to the patient. The number and variety of services offered vary depending on the physician. These services generally include evaluation and management office visits and consults, but exclude out of office medical services such as diagnostic testing.
The MIA recommended that Retainer Practices should set their fees to reflect the fair market value of the services rendered by the physician. Retainer Practices should also have a limit on the types of services provided by the physician, including a limited number of office visits, and a cap on the number of patients.
The second type of boutique medical practice is the Executive Physical Practice. In the Executive Physical Practice, patients pay an annual fee for an expanded physical examination. The examination usually includes certain diagnostic or laboratory tests. However, subsequent office visits by patients are generally not covered by the annual fee, and may be billed separately.
The MIA recommended that Executive Physical Practices should set their fees to reflect the fair market value of the expanded physical examination. It is also a good practice to have a patient agreement that explains the patient's rights, and what his or her annual fee purchases.
B. Other Considerations
The MIA report advised that other ethical and legal issues must be considered before a doctor converts to a boutique medical practice. The MIA report also recommended that physicians seek legal assistance before establishing a boutique medical practice.
Physicians who wish to convert to a boutique medical practice are subject to Maryland HMO balance billing prohibitions, and the contractual obligations found in their existing participating provider agreements.
Medicare billing prohibitions require doctors converting to a Retainer Practice to opt out of the Medicare Program totally, and require doctors converting to an Executive Physical Practice to be careful that the services they provide in return for their annual fee are not covered by Medicare.
Physicians must also remember that they have ethical obligations to their patients depending upon each patient's health. Therefore, physicians should arrange for the continuity of medical care for those former patients who choose not to participate in the boutique medical practice.