Physician practices that charge membership or retainer fees and provide enhanced services or amenities are referred to as concierge care or retainer-based medicine. The origins of this practice approach are often traced to a medical practice founded in Seattle, Washington, in 1996. Physicians in this practice provide comprehensive primary care to no more than 100 patients each and currently charge annual retainer fees of $13,000 for individuals. These physicians do not bill any form of patient health insurance. As more physicians have begun concierge practices, concierge care has become more diverse, comprising physicians who bill patient insurance, charge lower membership fees, and see more patients than the original Seattle practice. The American Medical Association (AMA) has described concierge care as one of many options that patients and physicians are free to pursue. AMA in 2003 adopted ethics guidelines for physicians who have concierge care contracts—which AMA calls retainer contracts—with their patients. These guidelines specify, for example, that physicians should facilitate the transition to new physicians for patients who choose not to join their concierge practices and that they must observe relevant laws, rules, and contracts. The Medicare program was established by title XVIII of the Social Security Act, which governs how physicians bill for services that the program covers. Limits on what physicians may charge their Medicare patients depend on (1) the relationship between the physician and the Medicare program and (2) the type of service provided. Physicians who provide services to Medicare beneficiaries may choose one of three ways to relate to the program: participating, nonparticipating, or opted out. Participating: Participating physicians agree to accept Medicare’s fee schedule amount as payment in full for all covered services they provide to beneficiaries. In accordance with the Medicare participation agreement, these physicians receive reimbursement directly from the Medicare program and agree to charge beneficiaries only for any applicable deductible or coinsurance. More than 90 percent of the physicians and others who billed Medicare agreed to participate in Medicare in 2004. Nonparticipating: Nonparticipating physicians do not agree to accept the Medicare fee schedule amount paid to participating physicians as payment in full for all covered services they provide to beneficiaries. They are still subject to limits on what they may charge, however, and those limits depend on whether they seek reimbursement directly from Medicare. When a nonparticipating physician files a claim to be reimbursed directly from Medicare, he or she must accept the Medicare fee schedule amount for nonparticipating physicians, which is 95 percent of the fee schedule amount for participating physicians, as payment in full and may charge the beneficiary only for any applicable Medicare coinsurance or deductible. When a nonparticipating physician does not request reimbursement directly from Medicare, he or she may charge the Medicare beneficiary up to 115 percent of the fee schedule amount for nonparticipating physicians. Opted-out: Physicians who opt out of Medicare are not subject to any limits on what they may charge their Medicare beneficiary patients, even for services that Medicare would otherwise cover. Physicians who opt out of Medicare must agree not to submit for 2 years any claims for reimbursement for any of the services they provide to Medicare beneficiaries. Contracts between opted-out physicians and their beneficiary patients allow them to make their own financial arrangements for services that would otherwise be covered by Medicare, effectively taking those services outside the program. These contracts must be in writing and they must clearly state that the beneficiary also agrees not to submit claims to Medicare and assumes financial responsibility for all services provided by that physician. In addition to a physician’s Medicare participation status, the type of service provided also determines whether limits apply to physician charges. Physicians and beneficiaries are free to make private financial arrangements for the provision of services that Medicare does not cover. General standard for Medicare coverage: Medicare law states that, to be covered, services must be reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member. The scope of coverage and the exact type of service that may be reimbursed depend on the circumstances of each case. This medical necessity standard can result in situations where the same service—for example, a comprehensive office visit—is considered medically necessary and reimbursable by Medicare in some circumstances but not others. Specific inclusion in Medicare coverage: Medicare law also establishes coverage for certain specific services. For example, Medicare covers an initial preventive physical examination for beneficiaries who become eligible for Medicare on or after January 1, 2005. Other examples of specific preventive benefits established by statute include immunizations against pneumonia, hepatitis B, and influenza and periodic screening tests for early detection of certain cancers. Specific exclusion from Medicare coverage: Medicare law specifically excludes certain items or services—for example, personal comfort items, purely cosmetic surgery, hearing aids, and routine physical checkups except for the initial preventive examination for newly eligible beneficiaries. Table 1 summarizes the limits on physician charges depending on their Medicare participation status and the type of service provided. Physicians who impose charges on beneficiaries beyond the Medicare limits may be subject to civil monetary penalties. The Secretary of HHS has delegated enforcement of Medicare limits to two different entities within HHS. CMS, which administers the Medicare program, has enforcement authority over the limits that apply to nonparticipating physicians. HHS OIG has enforcement authority over participating physicians’ compliance with the terms of the participation agreement. The Medicare law’s limits on physician charges protect beneficiaries from additional charges for services they are entitled to receive under Medicare. The law does not, however, provide that a beneficiary has the right to receive services from any particular physician. Physicians are free to choose how they will interact with the Medicare program. They may decide to close their practices to new Medicare patients or decline to treat any Medicare beneficiaries at all. Concierge care is practiced by a small number of physicians, located primarily in urban areas on the East and West Coasts. Although nearly all of the concierge physicians who responded to our survey reported practicing primary care, they differed in many of the characteristics of practice design, including the annual membership fee charged, number of patients treated, features offered, whether they billed health insurance, and their relationship to the Medicare program. Concierge physicians are few in number and located primarily in urban areas on the East and West Coasts. Since the first Seattle practice was founded in the mid-1990s, the number of concierge physicians has been rising but remains small. We were able to locate 146 concierge physicians in the United States as of 2004—a small number compared with the more than 470,000 physicians who regularly submitted claims to Medicare in 2003. The 146 concierge physicians we identified practiced in 25 states, with the greatest numbers in metropolitan areas on the East and West Coasts. California had the highest number, with 26 concierge physicians, followed by Florida with 22, Washington with 21, and Massachusetts with 17. We identified 1 to 8 concierge physicians in 21 other states, though most of these other states had 5 or fewer. All but 2 of the concierge physicians we located practiced in metropolitan areas. We found the highest numbers of concierge physicians in the metropolitan statistical areas (MSA) of Seattle (19); Boston (17); and West Palm Beach–Boca Raton, Florida (13). Figure 1 presents the locations of 144 concierge physicians we identified who practiced in MSAs throughout the nation. The number of physicians practicing concierge care has increased in recent years. Among the 112 concierge physicians who responded to our survey, the cumulative total number practicing concierge care has increased by more than 10 times in the past 5 years (see fig. 2). About two-thirds of the responding physicians reported that they began to practice concierge care in 2003 or later. The number of responding physicians starting to practice concierge care rose each year after 2000, except in 2004, although we did not include physicians who began practicing concierge care after October 2004. Nearly all of the physicians who responded to our survey reported practicing primary care and most were not new to medical practice. Physicians reported practicing the primary care disciplines of internal medicine (about three-fourths of respondents) and family practice (about one-fourth of respondents). Survey respondents reported being in various stages in their medical careers, from relatively new to practice to decades of experience. More than two-thirds reported having been in medical practice for 15 years or more. The average length of time in medical practice was 19 years, and about one-fourth of the respondents reported being in practice for 25 years or more. See appendix II for additional information provided by survey respondents. Concierge physicians responding to our survey reported a variety of practice characteristics. These included the amount charged to be a concierge patient, practice size, features offered, whether they billed patient health insurance, and their relationship to the Medicare program. The annual membership fee for an individual to join a concierge practice ranged from $60 to $15,000 among the physicians responding to our survey. As shown in figure 3, more than 80 percent of respondents reported annual fees from $500 to $3,999; the most frequently reported annual fee was $1,500. Three-fourths of our respondents reported that they waived the membership fee for some of their concierge patients. About one in eight of these physicians reported waiving the fees for 20 percent or more of their concierge patients. Concierge physicians responding to our survey reported, on average, 491 patients under their care as of October 2004—significantly fewer than the average of 2,716 patients they reported for the year before beginning to practice concierge care. Of the total patients they reported in October 2004, an average of 326 were concierge patients—that is, patients who either paid the membership fee or had the fee waived, and were offered the enhanced services or amenities associated with membership. Nearly two-thirds of responding physicians reported having fewer than 400 concierge patients (see fig. 4).