How to survive in independent practice
Finding strength in numbers and developing business savvy can help physicians retain their autonomy
Despite a healthcare environment that’s pushing physicians toward employment, many doctors still value their autonomy, and are exploring strategies—from banding together in physician independent associations or consortiums to enhancing their business strategies—to preserve their independence in the face of increasing burdens and financial difficulty.
Orthopedic surgeon Barbara Bergin, MD, is running out of options for keeping her private practice in Austin, Texas ahead of the economy. With her partners, she has expanded Texas Orthopedics Sports & Rehabilitation Associates from three to 25 physicians, making it more cost-effective to handle escalating medical records requirements. Meanwhile, the practice invested heavily in technology and staff to make paperwork more efficient.
Nonetheless, after 27 years in private practice, Bergin often faces a workday that stretches beyond 12 hours, starting with surgery at 7 a.m. and extending into the evening, as she fills out forms for insurance company reimbursement. Meanwhile, she says her income has gone down, and she has less time to see patients.
“I do hours of paperwork and things that don’t really contribute to the care of my patients,” says Bergin, 60. “That’s very frustrating.”
Bergin is not alone in finding that running a private practice has become an obstacle course, where regulatory burdens make it ever-harder to focus on treating patients and stay afloat financially.
“It is a diminishing margin business,” says R. Brian White, who advises medical practices at Competitive Solutions, a Nashville-Tennessee-based consultancy he founded in 1992. “I think it’s important for physician practices to realize that.”
Against this backdrop, more physicians are leaving independent practices and joining hospital systems as employees. If you don’t want to go that route, yet still maintain your autonomy, it is critical to look at your practice like a business owner. Many physicians are finding strength in numbers and joining organizations such as independent practice organizations (IPAs).
The IPA Association of America, a trade group, says it represents more than 300,000 physicians associated with IPAs. Physicians who join IPAs maintain their independence, but become part of a separate organization that contracts as a group to provide services and can negotiate better reimbursement rates with insurers.
“Outside of the IPA, the physicians are free to compete with the other members of the IPA for other business that the IPA is not contracting for them,” explains John Kancilia, shareholder with the law firm, GrayRobinson, P.A., which has offices throughout Florida.
IPAs are just one possible way to become more productive, free yourself from time-draining minutiae and trim unnecessary costs to preserve your independence—without sacrificing your relationships with patients. “I wish more doctors understood that they can be successful without the big entity behind them,” White says. “They do have to be smarter about how they go about their business—and run it like a business.”
Here are some approaches that experts recommend. None can be executed overnight, but it is important to consider the alternative, says Jennifer Searfoss chief executive officer of Searfoss Consulting Group, LLC, in Annapolis, Maryland. “You can’t help people if you can’t keep your doors open,” she says.
Strengthen your negotiating power
Many consultants and doctors say there is no substitute for aligning yourself with other physicians to hammer out reimbursement schedules with insurance companies, as well as service providers.
“You get leverage,” says Austin Kirkland, principal and founder of Outperform, LLC, a consultancy in Falls Church, Virginia.
At the Medical Group of Ohio, an IPA founded in 1995 that has grown to 2,300 physicians, the group’s power at the negotiating table is an important draw, according to CEO John Schmeling, MD.
“We have been very successful with commercial payers,” says Schmeling. “We have contracts with two Medicare Advantage plans as well.” The IPA also offers benefits such as its own billing company and professional liability company, which he says provides savings.
Physicians have the option of buying stock in the IPA and paying no annual membership fee, or paying $125 annually as a primary care physician or $250 as a specialist. For every contract the IPA negotiates, physicians in both categories pay a fee ranging from 1.5% to 2.5% per transaction.
Some physicians in IPAs have found that membership helps them negotiate tricky situations where they might not otherwise get reimbursed. For example, if a medical office checks on the status of a patient’s insurance coverage, but the insurer’s system doesn’t yet indicate a lapse, the physician might not get reimbursed.
If insurers have a relationship with an IPA to which that physician belongs “they pay attention more,” says Richard Segool, MD, who practices at Pioneer Valley Pediatrics in Enfield, Connecticut, a seven-physician practice that also has an office in Longmeadow, Massachusetts. He is also president of the roughly 1,200-member Greater Springfield IPA, founded about 20 years ago.
But being part of an IPA brings obligations, too. To meet federal guidelines and avoid anti-trust violations, IPAs must take financial risk. To demonstrate that, says Kancilia, an IPA might agree to provide all services to patients at a capitated rate. IPAs are also expected to take steps to improve patient care and reduce costs.
Sharing data among physicians through an IPA can help physicians improve the care they offer to patients, says Tatiana Melnik, JD, an attorney in Tampa, Florida with expertise in healthcare.
“If you look at how physicians can stay independent long-term, it is to take advantage of the data they have, to really put themselves in a position to provide significantly better services,” Melnik says.
To that end, IPAs and other alliances can provide technology that an individual physician may not be able to afford. “By being part of our organization, you have access to resources like IT [information technology] support to help with population health management and practice coaches. These are things that are very hard to do by ourselves,” says Schmeling, who left his family practice two years ago to run The Medical Group of Ohio.
Software providers naturally see this as an opportunity and are racing to market with new options to help. Lori Fox Ward, RN, is senior vice president of strategic initiatives at Valence Health, a Chicago-based consulting firm that works with hospital systems and about 30 IPAs. Its Vision platform assists IPA clients with clinical quality and integration, helping physicians evaluate their performance and identify opportunities to improve care to their patient population. The software can be used to recommend methods to care for individual patients and identify gaps in services.
“Organizations can identify high-cost, high-risk patients and really manage those patients more effectively,” Ward says.
Examine other alliances
Not all physicians find IPAs to be a good fit. In Kirkland’s view, physician-hospital integration is taking the lead over IPAs. In another approach to physician-hospital integration, hospitals contract with doctors for services under a professional services agreement (PSA). In the physician enterprise model, a hybrid approach, the hospital employs doctors but they retain ownership of their practice.
“I feel that independent practice in groups, complemented by the support of a hospital organization, is the preferred model,” Kirkland says. Regardless, he adds, you’ll have more strength in any group than as a party of one.
An independent practice group is another option. Providence Medical Group in Dayton, Ohio is owned and managed by about 40 physicians, mostly family practitioners.
“They mostly had been employed through a local hospital system. The hospital divested them of ownership about 12 year ago,” says Susan Becker, chief operating officer. Providence operates a management company that provides centralized services to the physicians. It runs its own clinical lab and gives the physicians access to a patient portal from athenahealth. It is working with athenaHealth to develop a population management software. The doctors pay fees for vendor management and billing services; at the end of the year, they get a profit-sharing distribution
“Physicians who are independent need to find a way to engage with someone who has access to technology and platforms they may not be able to have access to and to do something that is sustainable,” says Becker. “We have an organized approach that does that because we are a group.”
Look for high-impact savings
“The two biggest expense items practices desperately need to get right are occupancy costs—rent or ownership of their building—and their personnel costs,” says White. “If they get those two things right, everything else has a lower impact.”
Many physicians tend to be do-it yourselfers on fronts like negotiating commercial leases, but winging it can cost you money, says John Shufeldt, MD, JD, an emergency room physician and founder of medical businesses including Urgent Care Integrated Network in Scottsdale, Arizona, a national single-specialty network of independent urgent care centers that negotiate as a group with vendors and providers of ancillary services. Working with a consultant or getting informal advice from professional contacts can pay off, he says.
“The more advice you get from professionals who know about it, the better,” he says.
If you run a large practice, White also suggests looking for ways to thin your management ranks and reduce layers in the organization to make sure every staffer is fully productive.
“It’s similar to what the IBMs, GMs and Dells have done over the years,” he says.
Revamp billing practices
“Most practices fail to bill for about 12% of the work they do,” says White. Making sure that someone in the practice has clear accountability for checking that all services get billed can help plug that leak, he says.
Improving internal billing practices is generally better than outsourcing billing altogether, he adds.
“There are some fundamental flaws in how a billing service can work,” he says. “If a billing service is going to get 5% of what is collected, how much effort is it going to put into chasing my $100?”
Ensure collections from patients
Many practices already check on referrals and insurance authorizations before providing services and ask patients for co-pays at the time of check-in. If your practice does not, it’s time to use this easy way of maximizing revenue.
“It changes the culture of `You don’t have to pay here,’ that a lot of practices suffer from,” says White.
Sometimes, doing this requires a change of mindset. Searfoss advised one physician who was reluctant to have his staff collect co-pays from patients upon check-in. He told her, “I don’t want my patients to be back talking with me about money.”
Searfoss helped him set up a system where his staff collects payments on checkout. His wife, the practice administrator, keeps an eye on foot traffic in the office, so patients don’t leave through a side door before paying—which was happening often. “She is the sentinel who stands by the door and makes sure they go back to checkout,” says Searfoss.
Because of his wife’s personal warmth, her presence added a “high-touch,” feel to the practice. “Everybody loves his wife,” says Searfoss. “Now great conversations happen in the hallway about kids and family.”
Re-examine fee schedules
If you are not part of a group that negotiates for you, you may discover that you’re losing money in some ways you may not have reexamined in a while. When Searfoss persuaded the same doctor to review his fee schedules with her, they realized he was actually losing money when he was reimbursed by a particular group that has only 8% market share.
“Their fee schedule is so low he is paying to see the patient,” she says. “That contract is likely going to go away. If you can’t be reimbursed for seeing the patient, there is no point to have the contract.”
Consider a buying consortium
Some doctors gravitate toward giant organizations like the nonprofit Physicians Alliance of America.
Others, like Kevin J. Kelleher, MD, find that the informal route works just fine. Kelleher, who has been in private practice for 21 years, runs Executive Healthcare Services, a concierge practice in Reston, Virginia, as well as Generations Family Practice in the same building. Periodically, to reduce overhead, he has pooled money with other practices to make purchases.
“Over the years we’ve sometimes done that loosely for vaccines and costly hospital supplies,” says Kelleher.
Still, it’s not easy to constantly keep an eye on the bottom line—and treat patients. After being courted by several IPAs over the last six years, Kelleher is considering joining Privia Health, a physician practice management and population health technology company.
But Kelleher is still examining the tradeoffs. While he would remain in charge of his own HR, he would have to operate under Privia’s federal tax ID and dissolve his own business entity. Still, with more hospitals buying up primary care practices in the drive to create the Accountable Care Organizations encouraged under the Affordable Care Act, Kelleher believes independent physicians can benefit from the strengths of joining groups like this. “We’re strongly considering it,” he says.