Building a Compliant and Profitable Practice

Q: What's the difference between this approach and concierge or DPC models?

The primary differences are:Medicare Compliance: Our model maintains full compliance without opt-outTax Advantage Qualification: Structured for HSA/HRA/FSA/MSA and employer fundingMarketing Approach: Focuses on routine exams rather than “access” or “extra time”Insurance Flexibility: Maintains the option to bill insurance as desiredSpecialty Application: Works for any healthcare specialty, not just primary careThese distinctions create significant advantages in regulatory compliance, patient accessibility, and practice flexibility.

Your practice needs two things: Medicare compliance and patients who want to subscribe. Our model delivers both. It rests on federal statutes and Medicare and OIG guidance, draws on 100 years of proven demand, and, carefully implemented, has never been prosecuted for cash healthcare in US history.

The Statutory Foundation for Direct Care Services

The routine exam model is built on explicit statutory exclusions from Medicare coverage, creating a solid foundation for direct care services without requiring Medicare opt-out.

When Medicare was enacted in 1965, the Social Security Act expressly excluded “routine physical checkups” from coverage:

No payment may be made under part A or part B for any expenses incurred for items or services… where such expenses are for routine physical checkups

This exclusion established the foundation for lawful direct care services focused on routine exams, check-ups, and physicals.

In 1996, the Social Security Act was amended to further clarify that routine exams, check-ups, and physicals, and any service not predicated on medical necessity, are excluded from Medicare coverage:

which… are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member

This clarification strengthened the legal basis for routine exam services provided outside medical necessity.

Additional regulatory guidance in 2006 further confirmed the exclusion of routine exams, check-ups, and physicals from Medicare coverage:

“The following services are excluded from coverage: (a) Routine physical checkups such as: Examinations performed for a purpose other than treatment or diagnosis of a specific illness, symptoms, complaint, or injury…”

This comprehensive statutory framework creates a clear path for Medicare-compliant cash healthcare services focused on routine exams, check-ups, and physicals.

42 C.F.R. § 411.15(a)(1)

Real-World Verification of the Routine Exam Model

The routine exam model’s compliance approach isn’t merely theoretical; it has been confirmed through historical regulatory actions and guidance.

2002: HHS Secretary Confirmation

In 2002, then-Secretary of Health and Human Services Tommy Thompson issued a public letter confirming that providers may charge directly for services Medicare does not cover:

“Insofar as the retainer fee under such an agreement is truly for noncovered services, such fees would not appear to be in violation of Medicare law.” (Letter of May 1, 2002)

This explicit confirmation from HHS leadership validated the compliance approach of the routine exam model.

OIG Guidance: What to Avoid

The Office of Inspector General has provided clear guidance on what direct care models should avoid to maintain Medicare compliance:

Never charge directly for services already covered by Medicare
Don’t market or charge for “access” or “extra time” as standalone services
Don’t implement mandatory non-allocated “administrative fees”

Our routine exam model carefully avoids these pitfalls while leveraging the statutory exclusions for routine exams, check-ups, and physicals.

Regulatory Risk Assessment

The healthcare regulatory landscape includes many compliance areas, but not all carry equal risk. A rational assessment shows:

HIPAA Violations: 370,578 complaints resolved since 2003, with 730 corrective actions
Medicare Cash Compliance: Only four OIG alerts on cash healthcare since 1965. None involved the routine exam model.

Our approach focuses on both areas but recognizes that HIPAA compliance often represents a more formidable statistical risk than Medicare cash compliance when properly structured.

Why Medicare Opt-Out Is Unnecessary With Proper Structure

Many direct care models unnecessarily require healthcare professionals to opt out of Medicare. Our approach maintains full Medicare compliance without this limitation.

Limitations of Medicare Opt-Out:

Urgent/Emergent Care Limitations: Opted-out professionals cannot charge for urgent/emergent care
Contract Requirements: Patients must sign mandatory contract addendums confirming no present care needs
State Law Gaps: Does not address Medicaid or state HMO requirements
Administrative Burden: Creates additional documentation and maintenance requirements
Future Risk: Potential for increased audit scrutiny as provider shortages grow

Advantages of Compliance Without Opt-Out:

Expanded Patient Options: Maintain the ability to see Medicare patients
Flexibility: Bill plans never, some, or more
Locum Work: Keep working locum shifts, which require staying in Medicare
Reduced Administrative Burden: No opt-out contract requirements
Lower Risk Profile: Alignment with long-established statutory exclusions
Broader Application: Works for any specialty, not just primary care

Making Your Services More Accessible

Program patient fees are designed to be qualified medical expenses to enable employer/self-employed/HSA/HRA/FSA/MSA funding.

Qualified Medical Expense Status

When routine exam services are properly structured and marketed, they qualify as eligible medical expenses under IRC Section 213(d) and IRS Publication 502.

From IRS Publication 502:

“Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body…”

Routine exams, check-ups, and physicals clearly fall within this definition

Tax-Advantaged Funding Options

Our qualification creates several important funding advantages:

Health Savings Accounts (HSAs)

$137 billion in total US assets (2024)
Unused funds automatically carry over yearly
Triple tax advantage: pre-tax contributions, tax-free growth, tax-free withdrawals
Available to patients with high-deductible health plans

Flexible Spending Accounts (FSAs)

$3.6 billion in annual US contributions
Pre-tax dollars set aside for eligible medical expenses
Increasingly flexible usage rules
Available through many employer benefits programs

Health Reimbursement Arrangements (HRAs)

$2.5 billion US market size (2024)
Employer-funded accounts for qualified healthcare expenses
Growing popularity as employers seek healthcare solutions
Potential for direct employer funding of routine exam services

Medical Savings Accounts (MSAs)

Growing opportunity for Medicare beneficiaries
Offered as Medicare MSA plans, a type of Medicare Advantage plan
Funds carry over without forfeiture
Underutilized opportunity for cash healthcare integration

Critical Marketing Distinction

To qualify for tax-advantaged funding, direct care services must be properly positioned:

Compliant Marketing	Non-Compliant Marketing
Annual routine exams	“Access” as a standalone service
Follow-up routine exams	“Extra time” with your healthcare professional
Communications related to routine exams	Unspecified “convenience” fees
Specific preventive services	Non-allocated “administrative” fees

Proper structuring and marketing are essential for HSA/HRA/FSA/MSA and employer funding.

Expanding Access Through Corporate Benefits

The routine exam model’s qualification as an eligible medical expense creates opportunities for employer funding, significantly expanding accessibility.

Legal Framework for Employer Funding

Employer funding of routine exams can be structured through various mechanisms:

Cafeteria Plans (26 USC 125): Allows employees to choose between taxable cash compensation or qualified benefits, including eligible medical expenses
Health Savings Accounts (26 USC 223): Employer-funded HSAs for employees with high-deductible health plans
Health Reimbursement Arrangements (26 CFR 54.9815-2711): Employer-funded accounts that reimburse employees for qualified healthcare expenses
Fully-Insured Medical Reimbursement Plans (26 USC 106): Insurance plans that can incorporate routine exam services

These mechanisms create a legal pathway for employer funding of routine exam services, potentially making your cash healthcare model accessible to a much broader patient population.

ROI for Employers

Employers have strong financial incentives to invest in routine exam services for employees:

Reduced Absenteeism: Comprehensive care reduces unplanned absences
Lower Healthcare Costs: Timely care reduces costly emergency interventions
Talent Retention: Premium healthcare benefits improve employee satisfaction
Productivity Gains: Healthier employees demonstrate higher productivity

Corporate America has funded executive health services for decades based on these ROI considerations. Our approach makes this model available to a broader range of employees.

Protecting Patient Privacy in Direct Care Practices

While Medicare compliance is often the primary concern for cash healthcare practices, HIPAA compliance represents a statistically greater risk and requires careful attention.

HIPAA Risk Assessment

The Office for Civil Rights has settled or imposed HIPAA civil money penalties in 147 cases, totaling $143,728,972 since 2003. This represents a significantly higher enforcement rate than Medicare direct payment compliance issues.

Essential HIPAA Elements for Direct Care Practices

Our approach integrates HIPAA compliance into the routine exam model implementation:

Privacy Policy Development: Creation of HIPAA-compliant privacy policies specific to direct care models
Security Risk Assessment: Comprehensive evaluation of practice systems and protocols
Business Associate Agreements: Properly structured agreements with all vendors handling PHI
Documentation Framework: Development of required policies and procedures
Training Protocols: Staff education on HIPAA requirements and best practices
Breach Response Planning: Creation of protocols for managing potential data breaches

This integrated approach ensures your direct care practice maintains compliance in all regulatory areas, not just Medicare.

Common Questions from Specialty Practitioners

How can routine exams be provided directly when the patient has Medicare?

Federal statutes exclude routine exams, check-ups, and physicals, and any service not predicated on medical necessity, from Medicare coverage. Services are routine when patients buy annual and follow-up exams in advance, not in response to a specific condition.

Do I need to have patients sign a contract acknowledging Medicare won't cover these services?

While not specifically required by statute, we recommend using a patient agreement that clearly communicates which services are covered by the routine exam fee and which might be separately billable to insurance. This transparency benefits both patients and providers.

Can patients really use HSA funds to pay for a direct care membership?

Yes, when properly structured as payment for routine exams, check-ups, and physicals.

What if a patient develops a medical issue during a routine exam?

If during a routine exam you identify a medical issue requiring intervention, you have three options:

Include that intervention within the scope of your routine exam services
Bill insurance for the separate intervention if appropriate
Charge a separate fee for the intervention with the patient’s informed consent

The choice is entirely yours as the healthcare professional.

How do I handle Medicare patients who want to join my routine exam program?

Medicare patients can participate in your routine exam program for services not covered by Medicare. They remain free to use their Medicare benefits for covered services, either with you if you accept Medicare or with other providers. The key is clear communication about which services are part of the routine exam program and which might be separately billable to Medicare.

What's the difference between this approach and concierge or DPC models?

The primary differences are:

Medicare Compliance: Our model maintains full compliance without opt-out
Tax Advantage Qualification: Structured for HSA/HRA/FSA/MSA and employer funding
Marketing Approach: Focuses on routine exams rather than “access” or “extra time”
Insurance Flexibility: Maintains the option to bill insurance as desired
Specialty Application: Works for any healthcare specialty, not just primary care

These distinctions create significant advantages in regulatory compliance, patient accessibility, and practice flexibility.

Begin Your Compliant Practice Transformation

Ready to explore how our compliance-first approach can help transform your healthcare practice? Schedule a complimentary consultation to discuss your specific goals and challenges.

During your consultation, we’ll discuss:

Your current compliance concerns
How the routine exam model ensures Medicare compliance
Strategies for qualifying your services for HSA/HRA/FSA/MSA and employer funding
A preliminary timeline for implementation
Answers to your specific compliance questions

All consultations are completely confidential with no obligation.

Contact Information:

Jim Eischen
Eischen DPSC LLC
2323 Locust Street
San Diego, CA 92106
619-919-5395
jim@eischendpsc.com