Concierge medicine wars heat up as model gains ground

Photo of MDVIP headquarters from Google

As vice president of medical management at Zenith Insurance in the early 2000s, Matt Jacobson liked the company's unique approach to workers compensation benefits. "We paid doctors better rates than the fee schedule required to have the right docs to do the right surgery, rather than paying the lowest cost providers and having people get complications, go into rehab or get addicted to drugs," Jacobson said.

He tried to apply the same model when he co-founded the concierge medicine management company SignatureMD in California in 2006. Concierge practices charge patients a flat retainer fee that is applied towards the cost of care. SignatureMD is what Jacobson calls a "turnkey concierge service provider," helping docs convert to concierge with a panel of 300-600 patients and handling their overhead. The Santa Monica, California-based company serves concierge doctors working in Southern California, the Bay Area, Colorado, Florida, greater Washington D.C. and St Louis.

But as SignatureMD has tried to expand, they've come up against MDVIP, the nation's largest concierge company and one of the oldest--which SignatureMD is suing over alleged anticompetitive practices.

SignatureMD has struggled to expand in regions like greater Boston, Atlanta and Fort Lauderdale in large part because of MDVIP's lock on concierge doctors in the areas with non-compete clauses and alleged termination fees of as much as $1 million, Jacobson said.

In 2013, Jacobson said SignatureMD was approached by a number of MDVIP docs to support their practices. "We acquired a pretty significant book of business from docs who were either dissatisfied or frankly just wanted a lower rate," he said. The risk of converting a practice to concierge, which can either increase or decrease a physician's salary, "was gone" with these doctors with established patient paying anywhere between $1,500 to $2,500 annually. "The management rate didn't need to be a full percent that we take up front when you are taking the conversion." It was then that MDVIP's non-compete contracts starting weighing down on physicians, Jacobson alleges.

SignatureMD's contracts with doctors run 8 years and don't restrict practice afterwards, but do require non-compete agreements in the event a doctor leaves before the 8 years are up. MDVIP signs up docs for five year terms, seeks a five year renewal and has a two-year noncompete clause that restricts concierge practice to within 10 miles of another MDVIP practice location.

Jacobson and SignatureMD lawyers argue that those noncompete clauses are "non-enforceable," anticompetitive and illegal under various state laws and federal antitrust laws. SignatureMD is seeking an injunction for MDVIP to cease anti-competitive activities as well as damages under the California Business and Professions Code. In April, U.S. District Judge Dolly Gee allowed the case to move forward, denying MDVIP's bid to have lawsuit thrown out. The next hearing is scheduled for October.

'A good job of commercializing'

SignatureMD was not the first concierge medicine company and nor was MDVIP. According to Jacobson, the field really started in Seattle in 1996 when Howard Maron, MD, founded MD2, a concierge model where a physician's panel includes only about 50 families at annual rate of $25,000. The high-end MD2 served very rich families, Jacobson said.

In 2000, at the other corner of the country, MDVIP was founded by a group of doctors in Boca Raton, Florida, among them Robert Colton, MD, Edward Goldman, MD, and Bernard Kaminetsky, MD, the current medical director. For $1,500 a year, the practice offered patients same-day appointments, home delivery of prescriptions, house calls and 24/7 help. "This is the way medicine should be practiced," Kaminetsky said in 2004. They raised money from Procter & Gamble and the private equity firm Summit Partners, which is now the owner.

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Other concierge practices on the high-end and low-end have come since then, but MDVIP was the first to take it big by commercializing concierge medicine for a more middle class demographic, Jacobson said.

Today, MDVIP has a large market share, which Jacobson calls a monopoly. According to court documents, MDVIP holds more than 70 percent of contracts with physicians in concierge practice nationwide and market share of 70 percent and up in many major metropolitan areas.

MDVIP, however, claims that the company is doing a better job serving physicians and their patients, and their numbers reflect that.

"It's not surprising that they've had a difficult time breaking into the market," MDVIP's lawyer Jerome Hoffman said of Signature MD. The lawsuit is "a distraction" from the benefits of concierge medicine, he added.

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For one thing, Hoffman argued, MDVIP's contracts reflect healthcare industry standards. Many concierge and traditional medical practices have noncompete clauses "because it makes sense," he said. "Intellectual property is something you want to protect." The two-year restriction on practicing within 10 miles of another MDVIP practice is "pretty common," and the there's "nothing illegal or anticompetitive about it." MDVIP's docs can also go back to traditional medical practice without the noncompete clause applying.

For another thing, Hoffman argues that SignatureMD and its lawsuit vastly underestimates the concierge market and thus overstates the market share and power that MDVIP has.

"You can't look at it as a static model. The market share is eligible physicians who are interested and haven't yet signed a contract," he said.

"They allege that we have a 70 percent share of physicians in the U.S. who are suitable candidates for concierge providers and 700-800 signed up, which would suggest that only 1,000 docs are doing this" he said. If MDVIP, SignatureMD and the other concierge management companies are growing, as more docs leave "treadmill medicine," then "the number of available positions has to be larger than 1,000."

MDVIP and SignatureMD, Hoffman said, agree that concierge medicine is a good service and that more doctors want to try it out, whether it's on their own (which can be big financial risk) or with a practice  manager. 

Twitter: @AnthonyBrino