Latest / The High Net Worth Podcast with Fexingo: Wealth Management, Tax Strategy, and Affluent Finance / How Family Offices Use a Direct Primary Care Concierge
Transcript
- Lucas: Luna, I was reading about how a single family office in Greenwich hired a full-time physician for the family and their senior staff. Not a doctor on call, not a telehealth subscription. A salaried doctor, with an office in the family's complex. Luna: That's a step beyond the usual concierge medicine. What's the going rate for that kind of arrangement? Lucas: So the typical direct primary care membership runs maybe two to three hundred dollars a month per adult. For that you get same-day or next-day access, longer appointments, direct communication with your doctor. But a full-time in-house physician for a family office is a different beast. We're talking a base salary of two hundred fifty to four hundred thousand dollars, plus benefits, plus the cost of outfitting a clinic space. For a family with a couple of principals, some adult children, and a handful of key executives, you're looking at a half million dollars a year, easy. Luna: Wow. And why do they do that instead of just buying premium insurance or using a virtual service? Lucas: A big part is privacy. When you're a public company CEO or a principal of a major private enterprise, your health status is a material piece of information. A family office that runs its own clinic can keep health data completely off the traditional medical records system. That means no insurance claims, no third-party electronic health records, no risk of a data breach at a hospital network. The doctor is employed by the family office, so the records are protected by attorney-client privilege in many cases. Luna: That's a clever legal workaround. But isn't it also about convenience and time? I imagine these people don't want to sit in a waiting room. Lucas: Exactly. And that's where the productivity argument comes in. If a principal's time is worth a thousand dollars an hour, spending two hours at a specialist's office is a real cost. With an in-house physician, they can have blood work done in the morning and review results over lunch. The doctor can also coordinate with specialists directly, so there's no back and forth with a gatekeeper. Luna: And before we go deeper, I know our listeners appreciate that we keep this podcast ad-free. If you find value in these conversations, supporting us at buy me a coffee dot com slash fexingo helps keep it that way. Every contribution, no matter how small, keeps us independent and focused on what matters to you. Lucas: Absolutely. And to bring it back to the topic, the structure of these arrangements is fascinating. Some family offices use a PEO, a professional employer organization, to hire the physician and other clinic staff. That way, the doctor is technically an employee of the PEO, which can simplify benefits and malpractice insurance. Others set up a separate medical practice as a wholly-owned subsidiary of the family office, which gives them more control but also more compliance burden. Luna: And what about the tax side? Is there any way to deduct these costs? Lucas: Generally, personal healthcare expenses are not deductible for individuals, but if the family office is a business entity and the clinic serves key employees as part of a wellness program, some costs may be deductible as a business expense. There's also the option to use a health savings account, an HSA, to pay for qualifying medical expenses with pre-tax dollars. But you have to be careful. The IRS rules for HSAs are strict, and you can't use HSA funds for insurance premiums, but you can use them for direct primary care membership fees if the membership qualifies as a medical expense. That's a nuance that a good tax advisor can help navigate. Luna: So it's not just about the medical care itself. It's about integrating healthcare into the family's financial and legal structure. Lucas: Exactly. And that's why we're seeing more family offices hire a chief medical officer. This person doesn't necessarily see patients on a daily basis. They oversee the family's overall health strategy, coordinate with specialists, manage the clinic, and sometimes even advise on long-term care planning for aging principals. It's a role that blends medical expertise with administrative acumen. Luna: Now, let's talk about the numbers. You said a full-time physician could cost half a million a year. How does that compare to what a typical wealthy family might spend on healthcare without this arrangement? Lucas: For a family of four, an average gold plan on the ACA exchange might cost twenty-four thousand dollars a year in premiums, plus out-of-pocket costs. A concierge practice might charge five thousand dollars a year per person, so twenty grand for a family, on top of insurance. Direct primary care, a more bare-bones version, might run five thousand dollars total for a family of four. So a half million dollar in-house operation is clearly a different tier. But for a family with a net worth of five hundred million dollars, that's one-tenth of one percent of their wealth. It's a rounding error compared to the value of peace of mind and privacy. Luna: And what about the quality of care? Is there any evidence that having an in-house physician leads to better health outcomes? Lucas: There isn't a huge body of research on in-house family office physicians specifically, but the broader literature on direct primary care is positive. Longer appointments, more time for preventive care, and better management of chronic conditions all lead to fewer hospitalizations and lower overall costs. For principals who are under a lot of stress, having a doctor who knows their history and can spot early warning signs is invaluable. Some families even use their in-house physician to administer regular executive physicals that include advanced imaging and genetic testing, which can catch issues early. Luna: That sounds like a healthcare experience that most people can't even imagine. But I'm curious about the ethics. Is it fair that the ultra-wealthy can essentially buy a private physician on retainer while others struggle to afford basic care? Lucas: It's a fair question, and it's one that comes up a lot in wealth management circles. The counterargument is that healthcare has always been tiered. People who can afford it choose private rooms, top surgeons, and faster access. Family office physicians are an extension of that. The system is not equitable, and that's a broader societal issue. But for the families themselves, they're making a rational choice to protect their most valuable asset: their health. Luna: And it's not just about health, is it? It's also about continuity. If you have a principal with a complex medical history, having a doctor who knows everything can be crucial in an emergency. Lucas: Absolutely. One family office we looked at had a principal with a rare autoimmune condition. The in-house physician was able to coordinate with a specialist at Johns Hopkins, but they also had the principal's full history on file, so in the event of an emergency, the ER team could get the right information quickly. That kind of continuity is hard to replicate with a traditional primary care setup. Luna: So, what's the future? Do you see more family offices adopting this model, or is it just a niche for the ultra-wealthy? Lucas: I think we're going to see it grow, but not necessarily in the form of a full-time in-house physician. More likely, we'll see shared arrangements where several families in a region hire a physician together, or family offices contract with a concierge practice for dedicated slots. The rise of telemedicine and ai driven diagnostics also makes it easier to provide high-touch care without a full-time doctor on site. But for the very top tier, the privacy and control that comes with an in-house physician will remain a compelling draw. Luna: And what about the legal and regulatory risks? Are there any pitfalls that family offices need to worry about? Lucas: Definitely. If you're going to set up a medical practice, you need to comply with state regulations, which can vary widely. You need proper licensing, malpractice insurance, and you have to be careful about the corporate practice of medicine doctrine, which in many states prevents a non-physician entity from employing a physician to provide medical services. That's why many family offices use a PEO or a separate medical entity. There's also the risk of HIPAA violations, even if you're trying to keep records private. If you're not careful, you could inadvertently trigger a breach notification requirement. Luna: But isn't the point to keep records out of the system entirely? How do you avoid HIPAA if you're not dealing with insurance? Lucas: HIPAA applies to covered entities, like doctors and health plans, regardless of whether they bill insurance. So even a private physician is subject to HIPAA. But the family office can structure things so that the physician is an independent contractor and the family is not a covered entity. In that case, the records might be considered personal property rather than medical records under HIPAA. It's a gray area, and it's exactly why you need a lawyer who specializes in health law. That's a cost that adds to the overall expense. Luna: Now, let's zoom out a bit. How does this fit into the broader trend of family offices professionalizing everything? We've covered private jets, art, insurance, even weather derivatives. Healthcare is just another dimension. Lucas: Exactly. And it's one that's often overlooked in financial planning. People spend a lot of time on asset allocation, but they neglect their human capital. A principal's health directly affects their ability to generate returns and manage the family's businesses. So investing in healthcare is not just a personal choice, it's a strategic one. Luna: That makes sense. And it also ties into estate planning. If you have a long-term care plan, having a physician who understands the family's history can be helpful. Lucas: Absolutely. Many families use their in-house physician to conduct annual wellness assessments that include cognitive screenings and functional evaluations. That information can inform when to transition control of the family business or when to bring in a geriatric care manager. It also helps with long-term care insurance underwriting, because you have detailed medical records that show proactive management. Luna: So, what would you say to a family office that's considering this? What's the first step? Lucas: I'd say start with a needs assessment. Talk to the principals and key executives about their health concerns and preferences. Then talk to a healthcare consultant who can help design a model that fits. It doesn't have to be a full-time physician from day one. You can start with a part-time doctor who comes in a couple of days a week, or a contract with a concierge practice that gives you dedicated appointments. The key is to be deliberate about the goals: is it privacy, convenience, or specific medical management? That will drive the structure. Luna: And what about the cost-benefit analysis? How do you quantify the return on investment for something like this? Lucas: It's tricky, but you can look at it in terms of opportunity cost. If an executive illness causes them to miss, say, forty days of work, and their annual compensation is two million dollars, that's roughly a two hundred twenty thousand dollar cost. If an in-house physician can catch a condition early and reduce that downtime by half, that's a hundred thousand dollars saved. Plus, there's the intangible value of peace of mind. For a family office managing billions, a half million dollar annual expense is justified if it prevents even one major health crisis. Luna: That's a compelling argument. But is there any risk that the physician becomes too close to the family and loses objectivity? How do you handle that? Lucas: That's a real concern. The best arrangements build in a second opinion mechanism. Some families require that any major procedure be reviewed by an independent specialist. Others bring in a part-time physician from a major hospital to act as a check. You also need to have clear boundaries about the physician's role. They're not a family friend, they're a medical professional. The family office should establish a governance structure that allows the physician to make recommendations without fear of losing their job. Luna: So, it's not just about writing a check. It's about building a system. Lucas: Right. And that's what we're seeing with the most sophisticated family offices. They treat healthcare like any other business function: they set goals, define processes, and measure outcomes. It's not a luxury, it's a strategic investment in the family's most important asset. Luna: Lucas, this has been a great deep dive. I think our listeners have a much clearer picture of what goes into this kind of arrangement. Where do you see this heading in the next few years? Lucas: I think we'll see more regional shared arrangements, maybe a group of family offices in a city like Houston or San Francisco co-funding a clinic. And as AI diagnostics improve, the in-house physician might become more of a care coordinator than a hands-on provider. But the core value proposition, privacy, convenience, and proactive management, will only become more important. If you're a family office executive, it's worth paying attention to.