Highlights of the AAPP Southeastern Regional Summit in Kiawah Island, SC

June brought the AAPP to an incredible summertime destination – the beautiful Kiawah Island, just off the coast of Charleston, SC.

With each regional summit, the content of the meetings evolves to keep the information fresh, timely and relevant. This meeting delivered some of our best sessions to date, and we’ve decided to dedicate this issue of our newsletter to passing along some of the highlights to you who were unable to attend.

Part 1. Key Drivers of Growth in Private Medicine

Following an engaging welcome from our local event host, Dr. David Albenberg, and the physician panel discussion that has become the kick-off to AAPP Executive Director, Tom Blue delivered a talk on the future of private medicine and an apparent evolution in the marketplace for private medical services…

The market for private medical services is growing and being driven by several key market dynamics:

1. A growing number of physicians are concluding that their third-party payer dependent business models are becoming unsustainable. Coupled with lifestyle challenges and the erosion of professional satisfaction with providing patient care at an ever-accelerating pace, doctors are seeking alternative business models that hold the promise of restoring personal and financial fulfillment to the practice of medicine. Many are choosing to leave their practices for other pursuits. Others are exploring private medicine.
2. Not surprisingly, the ranks of medical students pursuing careers in primary care have withered by 30% since 2002 – further depleting the current and future supply of primary care physicians.
3. As the population of primary care physicians in the U.S. contracts, the demands for primary care services is rapidly growing and will continue to do so for at least another 15 years. Between the aging of the U.S. population and the effects of health care reform, the shortage of doctors in the U.S. may reach 200,000 by 2025.
4. Patients are beginning to feel the growing shortage of primary care doctors, and it is being reported in the media. Increasingly, patients are recognizing that insurance coverage does not always equate to access to a physician relationship. Health-conscious, proactive consumers are beginning to seek out relationships with private physicians.
5. Further stimulating consumer demand for private medicine is the proliferation of consumer directed health plans (CDHPs). More than 10 million Americans now have high deductible health plans. As consumers save thousands a year in insurance premiums and become the stewards of their own health care dollars, many are realizing the prudence of investing a potion of their savings in prevention… and a real physician relationship. Many of these consumers are beginning to find what they seek among private physicians.

Meanwhile, as the private medical field has matured, two important things have happened:

1. Over the last 14 years, the pioneering private physicians have paved the way for other physicians to enter the field of private medicine. Most of the business and legal uncertainties have been resolved, and the decision for physicians to make the transition is a much easier one than it ever has been.
2. The array of business models and price points for private medical services has broadened to accommodate every conceivable practice vision – from practices that target executives to those that target the uninsured. No longer does the term “concierge” medicine really apply to the diverse assortment of private physician practices. And the diversity and numbers of physicians entering the field of private medicine is growing quickly.

As new practices are established and established private physicians continually revisit their service offerings, doctors are advised to fashion their services to complement CDHPs and cater to this growing consumer segment of high-deductible policyholders.

In addition, private physicians are advised to consider the relevance of their offerings to the wellness and prevention interests of area employers. Increasingly, private physician practices that are priced for the mass-market are entering relationships with employers to provide services for their employees.

Part 2. Physician2.0 and the Future of Private Medicine

As the private medical industry matures, Tom Blue argues that we are witnessing, and should embrace, an evolution in the value proposition offered by private physicians.

When asked what patients are really buying with their investment in private medicine, most private physicians will respond with an answer that amounts to “better access to your doctor.”

A quick scan of most private medical web sites will produce lists of services like:

• House calls
• No waiting
• Cell phone and email access to your doctor 24×7
• Same day appointments
• 30 minute appointments
• Extended/weekend office hours
• Limited patient panel size

In one way or another, all of these propositions amount to access. They are valuable, and they certainly differentiate the private physician from the pack.

Access alone is a private physician version 1.0 value proposition. It should not be the heart and soul of what you offer to patients. Here’s why…

1. The only people who can really place a value on access to a particular doctor are the patients who already know that doctor. If you sense that the only real prospects for your practice are your former/existing patients, this is probably your problem. You have to add medical substance to your value proposition.
2. Access… no waiting… house calls… when household budgets tighten, these service amenities feel like luxuries that should be foregone in order to preserve the premium HBO cable package.
3. Wellness-focused employers and the multiplying crowd of high-deductible policyholders want a return on investment for their health care dollars. While access actually does yield an ROI, this is not commonly understood, and it is hard for these buyers to appreciate as a stand-alone value proposition.

So if access isn’t the core value… what is?

Access, time, and superior information management are the pillars on which the Private Physician2.0 value proposition of health risk management rests.

The value proposition that weathers economic storms, attracts patients (and employers) who have never met you before, gives people something to talk about to their friends is the prevention of expensive, painful, and dangerous health events.

To do this well requires a true physician relationship premised on a patient’s ability to access her physician when necessary. It demands that doctors have time to focus on a patient population that is limited to that number of people for whom the doctor can provide truly excellent care. And it requires that physicians and patients be equipped with the information they need to provide timely and accurate treatment.

These are the pillars of the 2.0 value proposition. What the mass-market for private medicine demands is the promise of prevention and state-of-the-art health risk management.

As you build the promotional message for your practice, focus on the steak and not the plate and table on which it sits.

A New Model Emerges for Valuing Private Medical Practices

This spring in Scottsdale, AZ, an exciting thing happened in the world of private medicine. A young doctor purchased a medical practice from a retiring doctor.

What made this transaction so significant is that it appears to be the first time that a PRIVATE physician has sold his practice to a successor private physician. What makes it even more interesting is the value the retiring physician received for his practice in comparison to the appraised value of his practice applying the traditional valuation formula for primary care practices.

Early this spring, an established private physician’s health forced him into a premature retirement. Virginia-based Private Medical Marketing Group identified a younger, private physician as a candidate to acquire the practice and facilitated what turned out to be a nearly perfect transition with the assistance of the Atlanta office of law firm Balch & Bingham.

All of the parties to the acquisition came together as panel in Kiawah to describe the experience.

The most interesting aspects of this case pertained to valuation. In this instance, the practice had been appraised independently one year earlier and was valued at $52,000 using a traditional valuation model for primary care practices. The key valuation drivers are traditionally accounts receivable plus the value of the used assets of the practice. (The practice in this case did not own its office building.)

Because the business was a retainer-based private physician practice, it was acquired using a performance-based valuation formula that will likely pay the retiring physician approximately $750,000 over ten years.

As is evident from the final valuation, this transaction represented a complete departure from the traditional approach to valuing a primary care practice. Because of the retainer-based nature of the patient relationships, the practice was valued in a similar way to a retainer-based financial advisory firm or an insurance agency.

The retiring physician’s compensation was calculated primarily on the basis of the percentage of patients retained through the acquisition, and he will remain engaged with the practice for a period of time to assist in maximizing the patient retention rate.

Now, several months after the transaction closing, the practice has retained approximately 90% of its patients, and both physicians are very pleased.

This milestone event highlights the fact that private physicians actually build equity in their businesses as do other entrepreneurs and serves as a strong encouragement to any primary care physician who is approaching retirement age to at the very least explore the potential of converting to a private model as a wealth building strategy for retirement.

AAPP Unveils a Developing Partnership with Athletes’ Performance

As the AAPP membership continues to grow, the Academy is beginning to explore ways in which to promote its entire network of doctors to large employers and other organizations in need of an elite network of physicians capable of delivering a defined primary care and prevention oriented service experience.

Our first relationship of this kind was announced in Kiawah by Marty Weems, Vice President of the world renown athletic training organization, Athletes’ Performance.

Catering primarily professional athletes (including five of the last five #1 NFL draft picks), Athletes’ Performance has been seeking a national network of physicians who could serve its athletes as they travel from city to city. The AAPP membership is exactly what they needed.

In the coming weeks, we will be announcing an AAPP meeting that will be hosted at one of the state-of-the-art Athletes’ Performance facilities to introduce our physicians to their program and enroll our interested members as part of their elite physician network.

IF YOU WOULD LIKE TO OFFER YOUR SERVICE AS PART OF THE ATHLETES PERFORMANCE ELITE PHYSICIAN NETWORK, PLEASE CONTACT US. We are compiling a list of interested members.

Upcoming Event: August 15-16, Cleveland, OH

AAPP Co-Hosts CVD Prevention Summit With the Cleveland Heart Lab at the Cleveland Clinic

In recent months, we have focused much of our attention on the importance of private physicians leading the field in the prevention of heart attacks and strokes. As the number one killer of Americans, it is logical that CVD prevention would be the principal preventive focus of your practice. And when properly communicated and executed, it is a powerful attractor of new patients and employers.

This two-day meeting will provide a great depth of content on the latest strategies, protocols, and technologies to enable you to deliver truly unsurpassed CVD prevention to your patients.

Event speakers include:

Dr. Brad Bale and Amy Doneen, creators of the Bale/Doneen Method of CVD prevention

Thomas Morledge, M.D, Medical Director, Wellness Enterprise, Cleveland Clinic

Carl Orringer, Director, Preventive Cardiovascular Medicine Program, University Hospitals, Case Medical Center

Tom Blue, Executive Director of the American Academy of Private Physicians

Honorable Tommy G. Thompson, Former Secretary of the Department of Health and Human Services

Register today online at AAPP.org or by calling Shelly Banyay at 877-746-7301.

Space is limited.