Many physician practices are joining forces to better compete in today’s healthcare market. But often these loose coalitions don’t go far enough to gain the efficiency physicians seek. That requires the more challenging step of becoming an official medical group.
A physician practice often will identify itself as a medical group, yet may only vaguely resemble a true group practice. In the past few years, solo and small physician practices have come together to form common legal entities that often are no more than a contracting confederation.
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These “group-ups” involve physicians joining together to gain payer leverage in fee negotiations, along with cost savings for information technology, supply purchases, equipment maintenance agreements, professional liability insurance, and employee fringe benefits. The group-up also may benefit by centralizing business office functions, such as management of the accounts receivables.
Today, these loose collections of individual practices are increasingly finding themselves in difficult positions in the new world of healthcare reform. In this article we discuss the benefits and limitations of group-ups and the steps that can be taken to transition from a group-up to a true medical group practice.
The most notable failings of the medical group-up is in governance, and sometimes, management, and many fail to generate substantial savings for a variety of reasons. Many group-ups allow the physicians to remain in their small practice sites, duplicating administrative and clinical support staff that would have been consolidated in a true group practice. Contributing factors allowing physicians to remain in their historic small-practice environments are the terms of current lease agreements and/or ownership of the practice facilities by the physicians.
If you recognize some of these characteristics in your own practice and group, there are steps to take to transition from a loose group-up into a true group practice, with all the benefits that go along with it.
NEXT PAGE: Setting up a true medical group
Revise the governing body structure and composition
Many group-ups form a governing body with equal representation from each practice site. As the group grows in size, however, usually it is not possible to sustain this governance model.
Instead, transition to a structure appropriate for your legal form, with a board of directors for a corporation or a board of managers for a limited liability company. The shareholders/members that are elected to the board should have staggered terms to assure ongoing continuation of the medical group practice’s governance.
We suggest two- or three-year terms for each director/manager. The board should be comprised of no more than seven physician-owners.
To facilitate decisions and daily oversight, form an executive committee comprised of the organization’s officers.
Revise the chair/president term and conditions
Require the chair/president term to be a two- or three-year paid position. Base the election of the chair/president on leadership and administrative capability, with successive terms permitted, rather than rotating or assigning this role. Encourage physicians interested in being chair/president to take courses or attend meetings to gain business and leadership skills.
Institute formal physician compensation plan and assessment
Implement a formal physician compensation methodology and couple this with a physician assessment process to include an evaluation of each physician’s:
By focusing physician attention on these specific areas, discussions can take place on methods to enhance and develop a more unified group culture.
Clarify decision-making powers
Reach consensus of the shareholders/members on a decision matrix that identifies who has authority for any particular decision within the medical group.
It is important to create an appropriate decision-making process without the need for a meeting of the owners for particular (authorized) decisions. The group needs to demonstrate the ability to meet the needs of patients, payers, community, and other key constituents, requiring it to move quickly and act with one voice.
Formalize the use of data and analysis
Data should drive decision-making, thereby reducing the reliance on emotion and persuasion to guide decisions.
For example, new projects, new equipment, new staffing models, and/or new provider recruitment should be supported by data and return-on-investment analyses. After new projects or programs are implemented or new providers are recruited, data should again be analyzed to determine if the expectations for financials, market share growth, etc., have been met or if a decision needs to be modified.
NEXT PAGE: Should practice sites be consolidated?
Develop a strategic plan
Obtain agreement on a two- to three-year strategic plan. The plan should define the image the group wants to project to the community, as well as the key initiatives and timeline the group is committed to achieving. This is invaluable in today’s environment, given the increasing concentration of providers into narrow networks. The group needs to be viewed as a strong, viable practice to ensure that it remains in the “tier 1” networks of its key payers.
Evaluate practice site consolidation
Determine if site consolidation will give the practice an appropriate geographic reach, while achieving economies of scale.
If the brick and mortar of the practice sites are owned by individual physicians or practices, evaluate market conditions and determine if the existing facilities can be sold or sub-let so that the group can consolidate in more efficient and cost-effective practice space.
Standardize patient access
Payers, employers, and patients are equating “quality” with “access,” so a group-up will need to adopt open, rather than restricted access. In many such practice arrangements, each physician retains his/her own scheduling templates and scheduling rules and methods.
Consider the following methods to standardize patient access for the group:
The administrative infrastructure of a group-up often has a physician serving as both the president and chief executive officer (CEO). This is a difficult model to sustain if the physician continues to maintain an active clinical practice.
In more mature medical groups, there will be a separate administrative arm of the organization consisting of a CEO and, depending on size, a chief operating officer and chief financial officer, each with well-defined roles and performance expectations.
READ MORE: Administrative burdens lead to rise in practice spending
In a group-up, each the practice site typically will retain its own office manager or practice manager. This is a high-cost staffing model, given the size of many of the practice sites.
Instead, as a group matures, regional practice managers overseeing working leads in the practice sites is a model that is cost effective and facilitates the standardization of policies, procedures, forms, and processes, as well as knowledge transfer from each site regarding performance best practices.
Clinical support staff
The clinical staff of a group-up typically involves a one-to-one assignment between the physician and a nurse or medical assistant. The physician’s clinical staff member usually performs all of the work associated with that physician’s clinical practice, including visit preparation, patient flow, visit support, visit discharge, follow-up, inbound telephone management, and secure messaging.
In true medical groups, this model typically changes to recognize nurses or medical assistants who support patient flow for the face-to-face visit and separate staffing unit to manage inbound clinical calls and secure messaging, in a shared staffing model. This clinical support team model has been very successful not only as a “patient satisfier,” but because it allows the physician to stay on time throughout the day, with a member of the team available to support the physician rather than the physician having to wait for the nurse.
The transition from a group-up to a true group practice will not occur overnight. In our experience, it may take three to five years after the consolidation or formation of a group-up before it attains corporate culture.
Significant work needs to be done, including developing a single compensation plan, transitioning to an elected governing body, consolidating practice sites, creating common forms, policies and procedures.
Although the transition from a group-up to a true medical group is difficult, it will likely be necessary to achieve competitive advantage in the new world of value-based care.
Deborah Walker Keegan, PhD, FACMPE, is President of Medical Practice Dimensions, Inc., a national healthcare consulting firm. Marshall M. Baker, MS, FACMPE, is President of Physician Advisory Services, Inc., providing strategic, governance and consulting services to physician practices.