Can expense sharing work?

October 20, 2006

Our roundtable panel of management consultants outline how neighboring physicians can join forces to cut costs and boost profits.

The scene: Three solo internists are concerned about the financial health of their practices. Reimbursements are, at best, stagnant while overhead continues to climb. While discussing their common plight at their local medical society meeting, they begin to wonder about the feasibility of getting together to share expenses. They don't want to give up their individual practices, but are eager to explore their options.

All three doctors pull patients from within a 10-mile radius, with some overlap. They range in age from late 30s to mid-40s; the oldest is 45.

Dr. A leases space in a medical office building. He sees about 20 patients a day with the help of two medical assistants and a receptionist. His wife manages the practice. Aside from blood draws, he offers no ancillary services.

Dr. C also owns his building. He has two employees: a receptionist and a medical assistant. He has no office manager, preferring to handle those duties himself. He sees only 12 patients a day. An avid runner, he has tailored his practice to include treatment of the hip, knee, and leg problems that runners typically develop, seldom referring those patients to an orthopedist. He does refer them for physical therapy, though, and has an arrangement with a therapist to whom he rents space in his building.

None of the physicians has an EHR, although Dr. C uses an SRS scanning system to create, in effect, an electronic paper chart. Drs. A and B use the same practice management system.

That's the scenario Medical Economics posed for three practice management experts at a roundtable held at the 2006 annual meeting of the National Association of Healthcare Consultants (NAHC)in Denver. (At the Denver conference in June, the NAHC completed a merger with the Institute of Certified Healthcare Business Consultants and the Society of Medical-Dental Managment Consultants to become the National Society of Healthcare Business Consultants. Michael Brady was named as the combined organization's first president). We asked them to offer outside-the-box solutions for soloists who want to remedy cash-flow problems without ceding their independence. The panelists-certified healthcare business consultants Michael P. Brady of Healthcare Business Consultants in Asheville, NC; Virginia Martin of Healthcare Consulting Associates of Northwest Ohio, in Waterville; and H. Christopher Zaenger of Z Management Group in Barrington, IL, rose to the challenge, developing a plan whereby the physicians would remain soloists but practice in a jointly owned building; share some employees, equipment, an electronic health record, and a practice management system; and develop ancillary services together. Such an arrangement, the consultants said, worked best for physicians who shared call and were comfortable clinically with each other-stipulations that the doctors in the scenario met. Still, the physicians in question had different practice styles, patient loads, and staffing needs. The consultants' proposal focuses on structuring the communal venture and reconciling differences.

Practicing separately, but together

Because housing accounts for a large chunk of overhead costs, the consultants' chief recommendation is that Drs. A, B, and C set up shop in a jointly owned building. As Chris Zaenger points out, "Getting into the real estate business together is less traumatic than getting into the medical business together."

Why not use Dr. B's or Dr. C's building? "Because the physicians are relatively young, it's unlikely that any of the three will be retiring soon," says Mike Brady, then president of the NAHC. "Rather than trying to restructure an existing space, it makes sense to purchase a suitable piece of property and construct a building that can accommodate all three physicians over the long term." The new building would also house the physical therapist who's been renting space from Dr. C, allow Dr. B to expand her ancillary offerings, and give Drs. A and C the square footage to develop ancillary services.