MDVIP: A Business Solution to a Healthcare Market Inefficiency
The primary care delivery system in the US is broken. Can an innovative business idea create an operating model to solve it?
The primary care delivery system in the US is broken. The rising cost of healthcare combined with the shortage of primary care physicians has created an ineffective healthcare ecosystem for consumers.
The most prevalent pain points for healthcare consumers are access to and time with physicians. Both doctors and patients want to change this.
Can an innovative business idea create an operating model to solve this market inefficiency?
MDVIP Business Model
MDVIP created a business model known as “concierge medicine” that improves physician access and delivers more personalized care for patients. For a $2,000 annual subscription, customers have access to MDVIP’s exclusive network of affiliated primary care physicians. With the up-front fee, MDVIP physicians are able to serve 600 patients rather than the 2,000 typical in a traditional practice. This reduction enables doctors to spend more quality time with each patient, increasing the average consultation from 20 minutes to 60 minutes. In return for creating and supporting this system, MDVIP receives 30% of the subscription fee with the remainder of the proceeds going to the physician.
MDVIP elegantly addresses an unmet demand with an effective two-sided marketplace. In the crosscurrents of a turbulent healthcare market, MDVIP has created a highly attractive subscription-based revenue model with strong growth prospects, good revenue visibility and impressive cash flow characteristics.
MDVIP Operating Model
MDVIP has proven effective at aligning its business and operating models, creating a clear competitive advantage for its business while leveraging its unique characteristics to drive economic returns. In addition to the support and scheduling functions of the patient-physician ecosystem, MDVIP needs to execute against two primary operating objectives to create and capture value.
Attract, Hire and Retain Top-Tier Physicians
MDVIP currently has 700 of the top primary care physicians located across 42 states. The job of the MDVIP salesforce is to attract, hire and retain these individuals.
The pool of candidates includes 80,000 independent physicians. The recruitment model is very selective, with 1 in 10 physicians successfully completing the vetting process. Physicians typically have 15+ years of experience before joining MDVIP. Quality control is paramount to MDVIP’s business success.
The physician sales process begins with identifying markets that have a high probability of success with the MDVIP model. From there, the salesforce cultivates interest in targeted physicians through direct mail and advertisements, displaying the benefits of a concierge model vs. a traditional model, as portrayed in the below estimates from a Bloomberg publication.
Once a mutual understanding is established, the physician commits to a 10 year agreement and agrees to limit their practice to 600 patients. The contract includes a non-compete clause spanning the length of the contract.
This operational strategy has created large business benefits, notably a high barrier to entry and and higher barrier to scale. Competitively, it would be difficult for a new entrant to hire an MDVIP-affiliated doctor given the long-dated nature of their contracts and the associated non-compete.
Physicians have been extremely pleased with the MDVIP model as evidenced in the 95%+ physician retention rate. As a first mover, MDVIP is synonymous with concierge medicine, enabling it to consistently achieve double-digit growth and establish a leading market share.
Attract, Enroll and Retain High-Paying Patients
With a growing number of patients upset over the traditional healthcare model, patients are becoming more knowledgeable consumers and desiring a higher level of attention from their primary care providers. In order to generate interest and capture this market, MDVIP mixes traditional advertising with medical research to highlight the near-term and long-term benefits to patients.
In a study published by The Open Public Health Journal titled “The Impact of a Personalized Preventive Care Model vs. the Conventional Healthcare Model on Patient Satisfaction,” findings reveal that patients in concierge medicine are more satisfied with the ability to reach their physician any time, appreciate the ability to get an appointment in 48 hours or less, and have visits lasting 30 to 90 minutes. MDVIP has advertising processes in place to market these near-term benefits, as in the below press release.
Additionally, MDVIP’s personalized care model has had superior health outcomes. Research from The American Journal of Managed Care (below) has shown that increased physician interaction results in better health outcomes and ultimately lower healthcare costs. MDVIP markets these medical studies to consumers to drive interest and adoption.
Through these centralized campaigns, MDVIP educates potential members and drives referrals to MDVIP practices. Managing consumer marketing at the corporate level helps MDVIP manage capacity utilization at the practice level and moderate overall capacity in the system.
The quality of the MDVIP user experience is high, as evidenced by its patient satisfaction scores. MDVIP patient satisfaction scores are above 95% while the national average is 58% for traditional primary care practices.
The MDVIP business model captures value through charging patients $2,000 annually and generating approximately $400 million in system-wide revenue. With a 90% customer retention rate, patients are voting with their dollars in favor of this operating model.
Successful Alignment of Business & Operating Model
MDVIP has created a business model that sits in the crosscurrents of rising healthcare costs and dissatisfaction with the quality of care. The core function of its operating model is to attract and retain a two-sided marketplace between patients and physicians. MDVIP has succeeded in creating a new healthcare model, one in which consumers and physicians are happy, and MDVIP is profitable.
 MDVIP. http://www.mdvip.com/
 Bloomberg. http://www.bloomberg.com/bw/articles/2012-11-29/is-concierge-medicine-the-future-of-health-care
 MDVIP. http://www.mdvip.com/mdvip-patients-boast-97-percent-satisfaction-rate-with-their-doctor
 The Open Public Health Journal. http://benthamopen.com/contents/pdf/TOPHJ/TOPHJ-8-1.pdf
 The American Journal of Managed Care. http://www.ajmc.com/journals/issue/2012/2012-12-vol18-n12/personalized-preventive-care-leads-to-significant-reductions-in-hospital-utilization/
Student comments on MDVIP: A Business Solution to a Healthcare Market Inefficiency
This is great! Physicians frequently feel trapped between the demands of patients and the economic demands of maintaining their practice. It’s a real win to have doctors adequately compensated for focusing on the care of their patients. In fact, the entire health care payment system is trying to find an equally elegant way to do this across the care continuum.
As an aside, it’s also yet another illustration of how much of the cost of health care is eaten up by negotiating with payers, submitting claims, waiting for payment, etc. Next time you’re at the doctor ask how much they’ll charge your insurance company and how much it costs if you pay cash before the visit, you may be surprised at the difference.