Wednesday, September 20, 2006
Models for medical practice integration
The practice of medicine is becoming increasingly business-like and the business of medicine is becoming increasingly complex. Third-party and government organizations are imposing more regulations. Insurance companies and managed care firms are requiring more stringent utilization and quality controls, resulting in a blizzard of paperwork. The costs of practice inputs continue to rise, while physician revenues are stagnating. The availability of experienced support staff is limited, and turnover is frequent.
The need to investigate organizational alternatives to the traditional practice of medicine is becoming even more urgent with the expectation that the next few years will see a revolution in the way health care is organized and paid for. "Managed competition, "guaranteed access, "community capitated health plans, and "global price controls" are but a few of the new concepts that are being discussed at the national level and that may dramatically affect the delivery of physician services. Physicians, and the hospitals they relate to, must position themselves to respond quickly to these changes.
Objectives of Practice Integration
In order to compare the advantages and disadvantages of alternative models, it is important to identify key operational, financial, and legal objectives of medical practice integration. Does the model enable physicians to: * Enhance (or preserve) take home pay by:
* Raising practice revenue through improved collections and higher productivity.
* Benefiting from profits from group-owned ancillary services. * Reduce practice costs (lower prices for supplies and services, greater practice efficiencies). * Share profits from high-income specialties to low-income specialists. * Increase their influence in dealing with managed care and other payers. * Improve practice "life-style" by reducing hours spent in nonpatient care, permitting the physician to focus on the practice of medicine and leaving administrative, financial, and management issues to others. * Avoid, or deal more effectively with, burdensome government regulations. * Retain a large measure of autonomy and control over practice management and operations. * Participate in the strategic and operational decision making of the organization. * Avoid potential political problems with nonparticipating medical staff colleagues. * Expend a minimal amount in personal funds and time. * Avoid the risk of antitrust and/or fraud and abuse prosecution. * Involve the hospital in assisting financially in development and operations.
The table below provides a "score card" of how well the various models achieve these objectives.
Group Practice without Walls (GPWW)
A GPWW can be formed jointly by a hospital and physicians, referred to in this article as an affiliated medical practice corporation (AMPC), or it can be formed independently by community physicians, an independent group practice without walls (IGWW). The two models have much in common but are different in some very important ways.
Features in Common:
A GPWW is formed by physicians in established practices coming together to develop and control a professional corporation. (If this is an AMPC, the hospital is also involved and may take the lead, but the established physicians must have a major input). Physicians become employees of the group practice, merging their existing practices. Support staff members become employees of the group practice or of a separate management company that contracts with the professional corporation for management services. This management company may be owned 100 percent by the physicians, jointly by the physicians and the hospital, or by a third-party management firm.
Regardless of the arrangement, the physicians maintain their separate office locations and operational control over their support staffs, equipment, medical records, and clinical relationships with patients--the without walls aspect of the model. Practice income and expenses are tracked through the group practice's central financial books to each physicians' "profit center" so that the individual's productivity and cost-effective management are rewarded.
Other than common elements of a single fee schedule, flow of at least 75 percent of business through the group, a standard fringe benefits plan, central payables and payroll system, and risk sharing on managed care, physicians in a GPWW may operate their practices quite autonomously.
The employer/employee relationship of the GPWW provides very powerful advantages of this model over the other models in figure 1. As a single legal entity, the group practice can act on behalf of its physician/employees without fear of violating antitrust, safe harbors and other regulations that limit solo physicians from planning and working together. This enables the participants to enjoy the following benefits that can be achieved from the operation of a GPWW: * Collective operational and financial leverage in negotiations and program development with hospitals, HMOs, and third parties. (See sidebar, page 21, for a discussion of why group practices are attractive to HMOs. * Opportunity to share overhead costs and even revenue among physicians. In some GPWWs, specialty physicians "tax" their earnings in order to increase the income and ensure the survival of primary care physicians who are their referral base. * Opportunities to refer to and enjoy profits from group-owned ancillaries and other medically related businesses. Group practice ownership of ancillaries is one of the few remaining "safe harbors." * Efficiencies and professionalism of centralized billing, accounts receivable management, accounting, and financial reporting generate higher revenue. * Collegiality and support, financial and moral, of others who share common values, objectives, and strength in confronting common problems and external threats. * Enhanced ability to recruit new physicians to the area to assume the practice of a retiring physician or to expand services. * Economies of scale in buying supplies, services, equipment, and fringe benefits. * Centralized human resource functions providing wage and salary management, personnel policies, recruiting, orientation, training, and performance appraisals and advancement opportunities for support staff. * Ability, through cooperative marketing, to better withstand erosion of patient base to established groups that are expanding aggressively. * Delegation of administrative burdens to a central administrator, returning the physician's time to the delivery of medical services.
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