Successful private practitioners: Why partner with your organization?

Even as reimbursement continues to fall for physicians, there are independent entrepreneurial practitioners who successfully provide high quality care and operate a well-run business. In this era of healthcare reform with its mandate to enhance quality, safety, perception and reduce costs, why would a successful physician want to partner with a larger healthcare organization and reduce the opportunity of autonomy and individual control?

Several large systems such as Baylor Health in Dallas and SSM Healthcare in St. Louis have created compelling arguments for partnership. Their arguments are not based upon quality, safety or perception; nor are they about cost reduction strategies or organizational outreach. Instead, they create a compelling business argument for partnership that equally benefits the independent physician(s) as well as the organization.

These compelling arguments are:

• Branding. Decades of successful innovation and management have helped many large systems to achieve regional, national, or even international reputations. Being affiliated with such an organization brings the reputation to the physician’s practice and communicates to the public a deep commitment to excellence. Powerful brands should not be underestimated and may successfully launch a practice from a “wannabe” to a “player.”
• Reduction of purchasing and other overhead costs. Large systems often create sophisticated supply chain management processes that include a highly competitive purchasing organization or group to negotiate near wholesale costs for medical supplies and equipment. Contracting with a larger organization may give a practice access to this purchasing network and significantly reduce the cost of supplies, equipment, and other short- and long-term assets.
• Optimization of revenue cycle management. Documentation, coding, billing, and collections is the bane of many practices. It takes capital to invest in software and other IT supports that can do the job efficiently and effectively. Many large organizations enable practices to outsource this service in a way that may provide significant additional income to both the practice and the organization.
• Installing EHR and other IT functions. Whatever integration and alignment model an organization chooses under the Patient Protection and Affordable Care Act, it will be increasingly necessary to report quality, safety, and cost data to third-party payers in order to be optimally reimbursed. The overhead cost of much of this unfunded mandate may be impractical for a private practice. The organization may be able to install these systems in a practice in a far more cost effective manner. It will also enable physicians to monitor their hospitalized patients in real time and to access protected health information necessary to provide optimal care.
• Providing access to capital. Many large systems have excellent credit ratings (AA or AAA) and have access to capital at a far lower cost than small or less successful healthcare entities. Access to relatively inexpensive capital may be appealing to entrepreneurial physicians who would like to expand their facilities or provide new innovative services.
• Providing fair market value reimbursement for services rendered. EMTALA has created yet another unfunded mandate in which physicians must provide services to those unable or unwilling to pay and represents a growing problem for physicians who cannot afford the luxury of leaving their practices for significant periods of time to care for individuals at the expense of their practice. It is in the interest of the organization to provide a community benefit, and it may receive disproportionate payments through the state when it does so. Organizations can help support its mission and the ability of physicians to provide emergency coverage by paying them fair market value compensation in a benchmarked fashion (e.g. percentage of? Medicare) so that patients can get the care they need without placing physicians’ practices in jeopardy.
• Providing organizational indemnification. Large organizations have access to far lower indemnification policies than individual physicians do and this may lead to a significant overhead reduction for those in private practice.
• Providing lifestyle and business options. Many physicians are looking toward the future and would like options to consider as they mature. Such options may include:
  • Fewer night calls
  • A more diverse professional life
  • Lower acuity with an emphasis on elective admissions and surgeries
  • More free time for self and family
  • Greater personal and professional balance

• Working with a larger organization may create opportunities that would not be available to a private business owner and would paradoxically enable the physician to extend his or her practice successfully. Other physicians may wish to expand their entrepreneurial reach or grow into a leadership or management role with the organization. Options create possibilities that may be mutually beneficial for both parties.

As you can see, healthcare reform, with its mandate of decreasing reimbursement, lower cost, higher performance and quality expectations has created the necessity to consider opportunities for integration and alignment that go beyond employment. It may require a new kind of partnership that creates the opportunity for managers and entrepreneurial physicians to work together in new and mutually beneficial ways.

This aritcle is Jonathan H. Burroughs, MD, MBA, FACPE, senior consultant and director of education services at The Greeley Company, a division of HC Pro, Inc., Danvers, MA,