The Economics of Retainer-Based Medicine

An important innovation in the organization and financing of primary care is retainer-based medicine, also known as concierge medicine. In contrast to traditional models of primary care that rely on patient volume, the central and novel contractual element of retainer-based medicine is a direct, fixed, monetary transfer from patients to physician that resembles a membership fee. In return, patients gain access to longer office visits and shorter waiting times. This research empirically examines how retainer-based medicine affects utilization, health spending, and health outcomes for patients compared to traditional primary care models using claims data from a 20 percent sample of Medicare beneficiaries. We study inpatient, outpatient, and prescription drug consumption of patients who join one of the largest companies that manage retainer-based medicine practices for over 500 physicians. Our methods address selection on both the demand and supply sides of this market. To explore the welfare consequences of these new contracts, we combine our regression estimates with a model of physician organization based on two-part pricing. We discuss the extent to which retainer-based medicine leads to changes in efficiency versus transfers from patients to providers.