How physicians can join forces to remain independent

October 3, 2018

Six models physicians can explore to create economies of scale while preserving some career autonomy.

Internal medicine and other primary care practices that want to stay independent are joining together in a variety of practice models and corporate structures they hope will give them a better chance of survival.

The shift to value-based care, consolidation among healthcare providers and an emphasis on finding efficiencies are making it difficult for smaller practices to succeed alone. So they’re turning to organizations that help practices transition to value-based care by providing the administrative support, tools and negotiating leverage that comes with size.

“I think (independent) practices are looking for a way to survive. There are a lot of practices that would like to try to make it on their own and they want to find the model that lets them do that,” says Kenneth Hertz, FACMPE, principal consultant with Medical Group Management Association (MGMA).

Though the organizations have common goals, there are differences among them and practices should do their homework to find the best fit, says Hertz. For example, many practices join Accountable Care Organizations (ACOs), which are groups of healthcare providers, potentially including doctors, hospitals, public and private health plans, and others, who come together to provide coordinated care to Medicare patients. But there are multiple types of ACOs, each with its own features, to choose from.

And there are other options as well, such as independent practice associations (IPAs), clinically integrated networks (CINs) and divisional mergers. “The key to it is knowing what you want and what you want for your patients,” Hertz says. You’ve got to think it through very well and you’ve got to ask a lot of questions. You can’t ask too many questions.”

Six options are highlighted below:

ACOs led by private firms

Jonathan Lilly, MD, an internist in Dunbar, W. Va., knew his practice would need help negotiating value-based care if it wanted to remain independent.

That’s why Dunbar Medical Associates, which has seven physicians and five non-physician practitioners in two offices, has contracted since 2016 with Aledade, a Maryland-based company that forms ACOs with independent practices. Dunbar is in an Aledade-led ACO with 16 other practices. 

Aledade uses the practices’ data to track patient care and identify where practices can provide better service. Among other things, it identifies high-risk patients, flags emergency department visits, tracks immunizations and wellness visits, manages specialist referrals, and alerts the practice to cases in which chronic care management is needed, says Lilly.

“They help us to identify (patients) who are more fragile and who need additional attention,” he says.

Aledade, which works with 275 practices in 18 states, uses its proprietary population health and workflow tools to analyze practice and ACO data and recommend the correct action for them to take, says Vice President of Provider Networks Dan Bowles, MBA, MPP. “Having the data is good, but you need to know what to do with the data. You’ve got to mine the data in an efficient way, ” he says.

Aledade takes a share of practice reimbursements earned through the Medicare Shared Savings Program (MSSP).

Dunbar earned shared savings reimbursement for 2016, the first year it worked with Aledade, and expects to earn it for 2017 as well, says Lilly. (The reimbursements for 2017 have not been announced yet).

Lilly says his practice plans to stay in the ACO because it’s not sure it could remain independent without that assistance. “Anyone who is going to do [value-based care] on their own is taking on a lot,” Lilly says.        

Hospital-led ACOs

Some independent practices that want to avoid being bought by large healthcare systems are instead joining ACOs led by those same systems.

Many healthcare networks, such as Deaconess Health System in Evansville, Ind., are forming ACOs that offer primary care practices tools and resources to help them realize the benefits of value-based care. The Deaconess system includes five regional healthcare facilities and more than 160 primary care providers in Indiana, Illinois, and Kentucky.

“The practices understand the pressures they’re up against and they know they have to seek some outside help,” says Fredrick Wallisch, MD, who owned his own practice before joining Deaconess where he recruited members for the healthcare system ACOs.

Now working for Evolent Health, a consulting firm that works with Deaconess and other organizations on the transition to value-based care, Wallisch says hospital-led ACOs offer easy integration with and access to a healthcare system, in addition to the usual service sharing, back office, population management, and data services support. In addition, many practices were already affiliated with Deaconess before joining the ACO, which gives them a level of familiarity, he says.

The Deaconess ACO is attractive to many practices, Wallisch says, because, as a CMS Next Generation ACO, its members are exempt from reporting requirements under the Merit-based Incentive Payment System and are eligible for greater financial incentives.

Clinically integrated networks

CINs can give internal primary care practices the advantages of practicing integrated medicine within a large network of providers, but without becoming employees of a healthcare system.

A CIN is a collection of healthcare providers, such as physicians and hospitals, that work together to improve care and reduce costs. They generally share record systems, track data and rely on evidence-based care. CINs were created by the Federal Trade Commission (FTC) to serve the commercial or self-insured market while ACOs treat Medicare patients.

The FTC requires a CIN to include: clinical practice guidelines to improve performance, financial incentives for achieving goals, physician leadership and commitment, and development of infrastructure and technology. CINs can jointly negotiate contractual fees if the primary purpose of the negotiation is to improve care. CINs can support ACOs or patient-centered medical homes as part of the network by acting as a mechanism for sharing infrastructure and development costs.

Independent practices can reap substantial benefits from CIN membership, says Gene Good, JD, CPA, chief executive officer of DoctorsManagement, a Knoxville, Tenn.-based practice consulting firm. He cites the potential for higher negotiated rates with private payers, help with care quality reporting, and a harmonious relationship with local hospitals that belong to the CIN. “Because you are willing to follow their clinical protocols, the hospital will be less likely to compete by buying another private practice,” Good says.

Practices that join CINs should retain an escape clause if physicians are unhappy with the results, including the right to opt out of the negotiated rates and to do quality care reporting on their own, if necessary, he says, adding that practices must guard against any infringement on their judgement.      

“Make sure there are no onerous restrictions on your clinical protocols, including restrictions on patient treatment or physician referral options for your patients,” Good says.

Independent practice associations

An IPA is a business entity owned by a network of independent physicians formed to share services, improve care, reduce overhead and negotiate with other healthcare organizations, such as insurers, HMOs, ACOs and hospitals regarding payments. Though originally formed to focus on fee-for-service rates, they are transitioning to negotiating value-based contracts.

IPAs typically charge a membership fee, which varies according to size and services provided.

There is no limit to the number of practices that can belong to an IPA, though they usually are located in the same area. The larger the association, the greater its negotiating clout.

A collection of independent practices in Vermont formed IPA HealthFirst. after two previous tries as ACOs failed to produce the hoped-for savings, says Chief Medical Officer Paul Reiss, MD.

Banding together is necessary in Vermont because the state is particularly challenging for independent practices, says Reiss. It’s small (pop. 623,000), consistently ranks among the healthiest states and is dominated by a single healthcare system, the University of Vermont Health Network, which gives it the upper hand when negotiating with small practices.

The IPA, which includes about 150 physicians and non-physician practitioners in 74 practices, offers members group purchasing, negotiated premiums on malpractice insurance, network-wide contracting with payers, a medical school loan repayment program, and more, says Reiss.

Practice managers and physicians regularly share ways to economize and become more efficient, he says.

“It’s a difficult situation, no doubt, but the IPA definitely helps us hang onto our independence,” he says.

Divisional mergers

In a divisional merger, two or more practices form a single corporate entity that, due to its larger size, can have greater clout in negotiating with private payers, healthcare systems, vendors, and others, Glaser says. It differs from an IPA in that it requires the practices to become a single legal entity with centralized decision-making, consolidated billing with accounting and financials and other services.

Divisional mergers are an increasingly popular option for internal medicine and other primary care practices that want to become larger without surrendering their individual autonomy, says David Glaser, JD, a healthcare attorney with Fredrikson & Byron in Minneapolis.

A divisional merger can make ancillary services more efficient-and profitable-because of the larger combined patient base. Also, practices in a divisional merger can add complementary ancillary services, as well as share such things as EHRs, IT, and other back office support, Glaser says.

Though the combined entity is governed by a supervisory board with directors from each member, each practice retains a great deal of financial and operational independence, Glaser says. For example, member practices do not need to be in the same building or even the same city and revenue flows are kept largely separate. Of course, being farther apart can make it more difficult to coordinate and share services.

The divisional merger must be structured carefully to avoid Stark law violations, Glaser says. Also, a divisional merger between two small practices might not deliver the desired leverage in negotiations. And, like in many marriages, frictions can arise between partners.

Nonetheless, it can work, Glaser says: “Doctors are an independent lot and, structured correctly, the divisional merger lets them stay that way.”

Insurer-led ACOs

Given the many points of friction between independent physicians and private payers, it might be surprising that practices are joining ACOs led by insurance companies. But several health plans, including some of the largest in the country, such as Aetna and UnitedHealthcare, have formed ACOs. They emphasize that they have the patient data and resources to evaluate patient outcomes.

Brown & Toland Physicians, a San Francisco-based IPA, says it’s achieved shared savings working with a variety of insurer-led ACOs. The network of 2,100 Bay Area physicians, most of them in small practices, cares for more than 335,000 HMO and PPO patients, says John Long, MD, vice president of external relations.

The ACOs have been successful in helping member practices stay independent largely by cutting costs and earning shared savings by demonstrating improvement in the various value-based care programs, Long says. The private insurers’ expertise in identifying lower-cost treatment options has been helpful in that regard, he says. 

Brown & Toland President Joel Klompus, MD, says physicians should not be wary of insurer-led ACOs because the IPA has largely been able to resolve conflicts in favor of the doctors while providing them with additional revenue needed to stay independent.

Taking action

Hertz recommends hiring legal counsel expert in healthcare law to help evaluate the options, as well the contracts, incorporation papers, and other legal documents. Above all, he says, a practice should know the details of any new affiliation and how it will affect the practice: “Know what you have to gain and what you have to lose.”

There is no simple formula that will determine for a practice which structure is best, Hertz says. Each practice must decide its own best course, based on its circumstances, available options, possible partner organizations, and the desires of its physicians.

And while the array of choices and the pressure to choose the right one can be intimidating, experts agree that the worst thing a struggling independent practice can do is nothing at all.

“Be willing to try something,” says Good. “If you think you can hide your head in the sand, you won’t survive.”

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