California Knox-Keene compliance, refund demands, broken access promises, and regulatory leverage for patients and physicians
California's affluent coastal communities—Los Angeles, San Francisco, Orange County, Silicon Valley—have become hotbeds for concierge medicine and Direct Primary Care (DPC) models. High-net-worth patients pay annual fees ranging from $2,000 to $25,000+ for enhanced access, longer appointments, and personalized care. When these arrangements fail to deliver on promises—or when physicians abruptly terminate memberships—disputes involve significant money and complex California healthcare regulations.
Unlike traditional fee-for-service medicine, concierge and DPC models create ongoing contractual relationships where both parties have substantial expectations and obligations. When those expectations are not met, patients seek refunds and physicians face regulatory scrutiny. California's unique regulatory framework—particularly the Knox-Keene Health Care Service Plan Act—creates legal risks that generic concierge contracts often fail to address.
Concierge Medicine (Retainer + Insurance Billing):
Direct Primary Care (DPC) (Membership Instead of Insurance):
Marketing materials and membership agreements commonly promise:
| Promised Service | Common Reality / Breakdown Points |
|---|---|
| Same-day or next-day appointments | As practice grows, availability decreases; "same-day" becomes "within 3-5 days" |
| 24/7 physician access via text/email/phone | Physician rarely responds after hours; nurse or assistant fields messages; wait times extend to 24-48 hours |
| Longer appointment times (30-60 minutes) | Physician double-books or rushes appointments to maintain revenue; visits revert to 15-20 minutes |
| Annual executive physical with comprehensive labs | Basic physical only; advanced imaging (cardiac calcium score, full-body MRI) require additional fees despite marketing suggesting inclusion |
| Care coordination with specialists | Physician provides referral names but no actual coordination; patient manages appointments independently |
| Personalized wellness plans | Generic nutrition/exercise handouts; no individualized coaching or follow-up |
Several factors drive the rise in concierge/DPC membership disputes:
Physician Retirement or Departure Mid-Contract: Physicians retire, relocate, or sell practices to larger groups that don't honor concierge arrangements. Patients who paid annual fees upfront demand prorated refunds; practices refuse, citing non-refundable terms.
Practice Capacity Overload: Physicians over-enroll concierge members to maximize revenue, then cannot deliver promised access. Patients experience appointment delays, brief visits, and limited physician communication—essentially paying concierge fees for traditional care quality.
Bait-and-Switch Staffing: Marketing features "direct access to Dr. Smith," but in reality, nurse practitioners or physician assistants handle most visits. While NP/PA care is often excellent, patients paying premium fees expect physician-level attention.
Knox-Keene Compliance Failures: Some DPC or concierge models cross the line into unlicensed "health plan" territory under California's Knox-Keene Act, creating regulatory exposure that patients can leverage in refund demands.
California's Knox-Keene Health Care Service Plan Act (Health & Safety Code § 1340 et seq.) regulates entities that arrange for or provide healthcare services to enrollees in exchange for a prepaid or periodic charge. The Act requires "health care service plans" to obtain a license from the California Department of Managed Health Care (DMHC) and comply with extensive financial, access, quality, and consumer protection standards.
Who Needs a Knox-Keene License? The Act applies when an entity:
Traditional HMOs, PPOs, and managed care plans are clearly subject to Knox-Keene. But some concierge and DPC models blur the line, creating unlicensed health plan risks.
| Likely Knox-Keene Compliant ✓ | High Risk for Unlicensed Plan Violation ✗ |
|---|---|
| Membership fee buys access and amenities (longer appointments, coordination, wellness services) but physician bills insurance for all medical services | Monthly fee covers all primary care services without insurance billing; physician assumes financial risk for unlimited visits, procedures, labs |
| Contract explicitly states: "This is not insurance; patient responsible for all insurance premiums and medical costs" | Marketing uses "coverage," "plan," or "insurance alternative" language suggesting comprehensive healthcare provision |
| Defined, limited scope: "Membership includes office visits, basic screening labs, and care coordination" | Open-ended promises: "All your primary care needs," "comprehensive medical services," "we handle everything" |
| Patient pays specialists, hospitals, urgent care directly or via insurance; physician does not arrange or assume cost | Physician arranges specialist care, imaging, or procedures and includes cost in membership fee or capitated rate |
| Practice has 300-600 members with sustainable per-member revenue; not relying on high volume to spread risk | Practice has 2,000+ members paying low monthly fees ($50-75); physician assumes actuarial risk like an insurance plan |
| Membership fee is transparent add-on to insurance-billed services; patient understands they're paying for convenience | Fee structure replaces insurance entirely; patient believes they're buying healthcare "coverage" rather than enhanced access |
The Department of Managed Health Care has authority to investigate and prosecute unlicensed health plan activity. Penalties include:
DMHC has not aggressively pursued DPC models to date, but the legal risk remains. As DPC grows and venture capital enters the space, regulatory scrutiny will likely increase.
For Patients Seeking Refunds: If a concierge/DPC practice's model appears to violate Knox-Keene, patients can reference the Act in demand letters—not as a threat to report, but as a legal basis for rescission or reformation of the contract. Example language:
"Your membership agreement may constitute an unlicensed health care service plan under California's Knox-Keene Act (Health & Safety Code § 1340 et seq.), which requires DMHC licensing for entities that assume financial risk for arranging or providing healthcare services in exchange for prepaid charges. If this agreement is an unlicensed plan, it is voidable, and I am entitled to restitution of all fees paid. I request immediate refund and restructuring of the agreement to comply with California law."
For Physicians Defending Refund Demands: If your model is compliant, proactively address Knox-Keene concerns in your response:
"Our membership program is not a health care service plan subject to Knox-Keene. We do not assume financial risk for providing medical services; rather, the membership fee compensates us for enhanced access, administrative services, and care coordination. All medical services are billed to your insurance or paid directly by you. We do not arrange or provide specialist care, hospitalization, or other services characteristic of health plans. Our model is consistent with California's regulatory framework for concierge medicine."
Scenario 1: Physician Retirement or Departure Mid-Year
Facts: Patient paid $12,000 annual concierge fee to Dr. Jones in January. In June, Dr. Jones announces retirement effective August 1. Patient demands prorated refund of $6,000 (6 months remaining). Practice refuses, citing "non-refundable" clause in membership agreement.
Legal Issues:
Demand Letter Strategy: Request prorated refund based on breach; argue non-refundable clause is unconscionable when physician initiates termination; reference California's patient-protection standards requiring continuity of care.
Scenario 2: "24/7 Access" That Disappears
Facts: Membership agreement and marketing materials promised "24/7 access to Dr. Smith via phone, text, and email." Patient experiences repeated delays—texts unanswered for 24-48 hours, weekend calls routed to answering service, urgent issues handled by nurse who can't prescribe. Patient paid $8,000 annually and wants refund.
Legal Issues:
Demand Letter Strategy: Document instances of delayed or inadequate access; reference B&P §§ 17200, 17500; demand partial refund or contract reformation to accurately describe available access.
Scenario 3: Auto-Renewal After Patient Attempts to Cancel
Facts: Patient sent cancellation email 25 days before renewal date. Agreement required 30 days' notice. Practice charged $10,000 renewal fee, claiming insufficient notice. Patient argues notice requirement was not clearly disclosed and seeks full refund.
Legal Issues:
Demand Letter Strategy: Cite B&P § 17602 violations; argue patient made good-faith cancellation attempt; demand refund and cancellation confirmation.
Scenario 4: Patient Stops Paying But Demands Concierge Access
Facts: Patient's credit card declined for monthly $500 DPC fee. Practice sent reminder emails; patient ignored them but continues scheduling same-day appointments and texting physician after hours.
Legal Issues:
Demand Letter Strategy: Demand payment of outstanding fees; if not paid within 10 days, provide formal termination notice with 30-day transition period; offer to convert to traditional fee-for-service relationship.
Scenario 5: Patient Abuses Messaging and Threatens Burnout
Facts: Patient sends 15-20 texts daily with minor symptom updates, questions, and demands for medication adjustments. Physician spends 2+ hours daily responding. Physician wants to terminate membership due to excessive use.
Legal Issues:
Demand Letter Strategy: Send respectful letter explaining that patient's messaging volume exceeds sustainable practice patterns; offer amended membership with defined access limits; if patient refuses, provide formal termination with 30-day notice and transition support.
Date: [Current Date]
To: [Concierge Practice Name]
[Practice Address]
Attn: Practice Manager / Billing Department
From: [Patient Name]
[Patient Address]
[Phone / Email]
RE: DEMAND FOR PRORATED REFUND – PHYSICIAN DEPARTURE MID-CONTRACT
Dear [Practice Manager]:
I write to demand a prorated refund of my concierge membership fee following Dr. [Physician Name]'s unexpected departure from your practice.
Background: On [Date], I enrolled in your concierge medicine program and paid an annual membership fee of $[Amount] for the period [Start Date] through [End Date]. The membership agreement and your marketing materials emphasized that I would receive personalized care from Dr. [Name], including same-day appointments, 24/7 access, and continuity of the physician-patient relationship we had built over [X] years.
On [Notification Date], your practice informed me that Dr. [Name] would be leaving the practice effective [Departure Date], approximately [X] months into my annual membership. You offered to transfer my care to Dr. [New Physician], whom I do not know and who has no familiarity with my medical history, conditions, or treatment preferences.
Legal Basis for Refund:
1. Breach of Contract: The membership agreement created a reasonable expectation of year-long care from Dr. [Name]. While the written contract may not explicitly guarantee Dr. [Name]'s availability for the full term, the nature of concierge medicine—and your marketing emphasizing the personal physician-patient relationship—created an implied promise that Dr. [Name] would provide my care throughout the membership period.
California contract law recognizes implied terms that are necessary to give effect to the parties' reasonable expectations. My decision to pay a premium concierge fee was based on the relationship with Dr. [Name], not merely access to "a physician" at your practice.
2. Failure of Consideration: I paid for a specific benefit—personalized care from a physician I trust—that you can no longer provide. When the fundamental basis of a contract fails, the non-breaching party is entitled to restitution.
3. Unconscionability of "Non-Refundable" Clause: Your membership agreement includes a "non-refundable fee" provision. However, California courts decline to enforce non-refundable clauses when the service provider voluntarily terminates or substantially alters the service mid-term. Applying this clause when your practice chose to allow Dr. [Name]'s departure would be unconscionable.
DEMAND FOR PRORATED REFUND:
I request a prorated refund calculated as follows:
Alternatively, if you can demonstrate that Dr. [New Physician] has comparable qualifications, experience, and availability, and if I elect to continue with the new physician after a trial period, I am willing to accept a reduced refund of $[Reduced Amount] as compensation for the disruption and loss of continuity.
Deadline and Next Steps: Please confirm your agreement to this refund within 15 days of this letter. If I do not receive a satisfactory response, I will pursue the following remedies:
I prefer to resolve this matter amicably. Dr. [Name] provided excellent care, and I appreciate the services I received during the portion of the membership he fulfilled. However, I cannot accept paying a full annual fee for services that were not delivered as promised.
Please contact me at [phone/email] to discuss resolution.
Sincerely,
[Patient Name]
Enclosures: Membership agreement; marketing materials emphasizing Dr. [Name]; notification of physician departure
Date: [Current Date]
To: [Patient Name]
[Patient Address]
From: [Physician Name], M.D.
[Practice Name]
[Practice Address]
RE: NOTICE OF OUTSTANDING FEES & MEMBERSHIP TERMINATION
Dear [Patient]:
I write to notify you of outstanding concierge membership fees and, if not resolved, to provide formal notice of termination of our concierge membership agreement.
Outstanding Balance: Your account shows the following unpaid charges:
Despite multiple email and phone reminders, these fees remain unpaid. Your credit card on file was declined on [Date], and you have not provided updated payment information despite our requests.
Impact on Membership Services: Under the terms of our membership agreement (Section [X]), failure to pay monthly fees for [X] consecutive months constitutes a material breach, and I reserve the right to terminate the membership and convert your care to a traditional fee-for-service arrangement.
During the period of non-payment, you have continued to use concierge services, including:
These services are provided exclusively to paid concierge members and represent a value significantly exceeding standard primary care.
PAYMENT DEMAND: Within 10 business days of this letter, please remit payment of $[Total] via check, credit card, or electronic payment. If payment is received by [Deadline Date], your membership will remain active and in good standing.
TERMINATION NOTICE (If Payment Not Received): If I do not receive payment by [Deadline Date], I will terminate your concierge membership effective [Termination Date], which is 30 days from this letter. During the 30-day transition period:
After [Termination Date], you will no longer have access to concierge services (same-day appointments, after-hours communication, extended visit times). If you wish to continue seeing me on a traditional fee-for-service basis, I can accommodate that, subject to standard appointment availability and insurance billing.
My Commitment to Your Care: I value the physician-patient relationship we have built, and I regret that financial issues have led to this situation. My priority is ensuring continuity of your medical care and a safe transition if you choose to see another physician.
If you are experiencing financial hardship that prevents payment of the concierge fees, please contact me to discuss alternative arrangements, such as a reduced-fee membership, payment plan, or conversion to traditional fee-for-service care.
Please contact me within 10 days to resolve this matter.
Sincerely,
[Physician Name], M.D.
California Medical License No. [XXXXX]
Enclosures: Account statement showing outstanding charges; list of referral physicians; medical records authorization form
California's robust healthcare regulatory framework provides patients and physicians with leverage in concierge/DPC disputes—but using that leverage requires careful phrasing to avoid extortion or bad-faith claims.
For Patients:
Knox-Keene & DMHC: If the concierge/DPC model appears to be an unlicensed health plan, patients can reference DMHC jurisdiction and Knox-Keene compliance as a basis for contract rescission—without threatening to file a complaint unless the practice refuses to refund.
"I am concerned that your membership model may constitute an unlicensed health care service plan under California's Knox-Keene Act. I am consulting with legal counsel regarding whether to seek guidance from the Department of Managed Health Care. To avoid regulatory uncertainty, I propose we restructure or rescind the agreement and issue a refund of fees paid."
Unfair Competition Law (B&P § 17200): Patients can cite UCL violations for false advertising, unfair business practices, or unlawful conduct (Knox-Keene violations) as a basis for rescission and restitution.
Medical Board Continuity Standards: When physicians terminate memberships abruptly or fail to provide adequate transition support, patients can reference Medical Board standards on patient abandonment—not as a threat, but as an explanation of why the physician's conduct is problematic.
For Physicians:
Contract Enforcement: Physicians have clear contract rights to collect unpaid fees and terminate non-paying members. Demand letters should emphasize breach of contract and the financial impact on the practice.
Professional Standards Compliance: When terminating memberships, physicians should proactively demonstrate compliance with Medical Board standards (30-day notice, transition support, emergency coverage) to avoid abandonment allegations.
Knox-Keene Safe Harbors: Physicians defending against Knox-Keene allegations should clearly articulate why their model is not a health plan (no risk-bearing, limited scope, insurance billing for medical services, no specialist/hospital arrangements).
| Escalation Option | When Appropriate | Pros & Cons |
|---|---|---|
| Medical Board Complaint | Physician failed to provide safe transition; patient abandoned with active medical conditions; substandard care | Pro: Board investigates and may discipline physician, order remediation. Con: Slow process (6-24 months); no direct financial recovery for patient |
| DMHC Complaint | Practice appears to be unlicensed health plan; Knox-Keene violations; systemic consumer harm | Pro: DMHC can shut down unlicensed plans and order restitution. Con: DMHC may not pursue individual membership disputes; focus is on systemic violations |
| Small Claims Court | Refund amount under $10,000; straightforward breach of contract or false advertising | Pro: Fast (3-6 months), no attorney needed, low filing fee. Con: Claim limit; no discovery; no attorney's fees recovery |
| Superior Court Civil Action | Refund/damages exceed $10,000; complex legal issues; potential for attorney's fees recovery | Pro: Full discovery, attorney representation, jury trial option, fee recovery. Con: Expensive ($10k-50k+ in legal fees), lengthy (12-24+ months) |
| Arbitration (if required by contract) | Membership agreement includes mandatory arbitration clause | Pro: Faster than court (6-12 months), expert arbitrators. Con: Expensive (arbitrator fees $5k-15k), limited appeal rights, may favor repeat-player practices |
Concierge and Direct Primary Care membership disputes involve unique legal issues at the intersection of healthcare regulation, contract law, and consumer protection. These cases require counsel who understands California's Knox-Keene framework, Medical Board standards, and the business models driving concierge medicine.
I represent California patients, physicians, and concierge/DPC practices in membership disputes, regulatory compliance, and contract litigation. My practice focuses on achieving practical resolutions that preserve physician-patient relationships when possible and protect clients' financial and regulatory interests when litigation is necessary.
Generic business or healthcare attorneys often lack the specific knowledge required for concierge/DPC disputes:
Concierge and DPC membership disputes involve substantial fees, complex regulations, and high-value physician-patient relationships. Whether you're a patient seeking a refund or a physician managing a difficult membership termination, I can help you achieve a fair resolution while protecting your legal and professional interests.
Send me your membership agreement, communications with the practice or patient, and documentation of the dispute. I'll evaluate your legal position and outline a strategy for demand letters, negotiation, or litigation.
Contingency representation available for patients with strong refund claims. Hourly or flat-fee for physicians and practices. Knox-Keene compliance audits $2,500-$5,000. Attorney's fees often recoverable under membership agreements or consumer protection statutes.