Your equation is not in the correct form for FEM. Homogeneous Neumann conditions are applied automatically.
Needs["NDSolve`FEM`"]
Bi = 0.5; xf = 5; reg = Rectangle[{0, 0}, {xf, 1}];
mesh = ToElementMesh[reg, MaxCellMeasure -> 0.0001];
PDE = D[M[t, x, y], t] - 1/(x^2 + y^2)*D[(x^2 + 1)*D[M[t, x, y], x], x] -
1/(x^2 + y^2)*D[(-y^2 + 1)*D[M[t, x, y], y], y]
nv4 = NeumannValue[-Sqrt[(x^2 + y^2)/(x^2 + 1)]*Bi*M[t, x, y],
x == xf];
sol = NDSolve[{PDE == nv4, M[0, x, y] == 1},
M, {x, y} \[Element] mesh, {t, 0, 10}]
Table[ContourPlot[M[t, x, y] /. sol, {x, y} \[Element] mesh,
Contours -> 20, ColorFunction -> "TemperatureMap",
PlotLegends -> Automatic, PlotLabel -> Row[{"t = ", t}]], {t, 1, 10,
3}]

Consider a solution in a region with a hole (homogeneous Neumann conditions are applied automatically at the edge of the hole)
Needs["NDSolve`FEM`"]
Bi = 0.5; xf = 5; reg = Rectangle[{0, 0}, {xf, 1}]; reg1 =
Rectangle[{1, 1/3}, {4, 2/3}];
mesh = ToElementMesh[RegionDifference[reg, reg1],
MaxCellMeasure -> 0.0001];
PDE = D[M[t, x, y], t] -
1/(x^2 + y^2)*D[(x^2 + 1)*D[M[t, x, y], x], x] -
1/(x^2 + y^2)*D[(-y^2 + 1)*D[M[t, x, y], y], y];
nv4 = NeumannValue[-Sqrt[(x^2 + y^2)/(x^2 + 1)]*Bi*M[t, x, y],
x == xf];
sol = NDSolve[{PDE == nv4, M[0, x, y] == 1},
M, {x, y} \[Element] mesh, {t, 0, 10}]
Table[ContourPlot[M[t, x, y] /. sol, {x, y} \[Element] mesh,
Contours -> 20, ColorFunction -> "TemperatureMap",
PlotLegends -> Automatic, PlotLabel -> Row[{"t = ", t}]], {t, 1, 10,
3}]
