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Questions to ask before joining a multispecialty group


Some have gone under in today's changing market. Find out as much as you can before signing on.


Questions to ask before joining a multispecialty group

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Some have gone under in today's changing market. Find out as much as you can before signing on.

By Ken Terry
Managed Care Editor

Multispecialty groups have a lot to offer primary care physicians. You can get quick consults from specialists in a collegial atmosphere, avoid the difficult details of running a small business, benefit from the group's contracting clout, and share in ancillary revenue streams from labs and other facilities. If you're a young doctor just starting out, joining a multispecialty group can help you establish yourself, especially in a competitive metropolitan area.

Changes in managed care and specialists' growing preference for single-specialty practices, however, have made it more difficult for multispecialty groups to survive (see "What's the future of multispecialty groups?"). But many are doing well, and they're still pursuing primary care physicians.

What should you look for in a group you're considering? What should you avoid? How can you determine whether a group shares your values? Here are a few considerations to take into account when sizing up a multispecialty group.

How large should a group be, and what mix? Specialists need a steady stream of referrals, and won't get them from primary care physicians outside the group. So the rule of thumb is that PCPs must form at least half of a multispecialty group, says Geoffrey T. Anders, a consultant with The Health Care Group in Plymouth Meeting, PA. At the same time, groups need enough specialists to balance the lower revenue and higher overhead of the primary physicians.

A small multispecialty group may have only one or two specialists in a given field, which can make call coverage problematic. In an internal-medicine group, general internists can cover for internal-medicine subspecialists. (But if you're an internist, you better be sure you're comfortable doing the job of a cardiologist or a pulmonologist, notes David C. Scroggins, a practice management consultant with Clayton L. Scroggins Associates in Cincinnati.)

Once a group starts adding procedural specialists, at least 25 to 50 physicians are required to provide call coverage and economies of scale, says Mark Smith, executive vice president of Merritt, Hawkins & Associates, an Irving, TX-based physician recruiting firm.

Large groups have some other advantages over smaller ones: They usually provide better continuity of care. They have greater bargaining power with managed care plans. And they tend to reinvest more of the group's income in things with long-range payoffs, such as new medical equipment, information systems, and quality improvement. On the other hand, that reinvestment, along with extra layers of management, often means higher overhead and lower salaries.

Who owns the group? Considering all the groups that have failed under physician practice management company ownership, steer clear of any entity not owned by physicians, says Jeffrey J. Denning, a practice management consultant in Long Beach, CA. "If it's owned by an MSO, hospital, or university, find out why," he says. "The only reason doctors sell their practices to hospitals or others is to get a financial subsidy. That's not a good sign, because once the hospital figures out it's losing money on the group, it's likely to turn the group loose or sell the individual practices back to the doctors."

On the other hand, some networks of hospital-employed physicians have been successful. These groups offer doctors stability and good market position, and save them from management hassles, says Bob Bohlmann, an Arlington, TX-based consultant for the Medical Group Management Association.

It's important to distinguish between health care systems that assembled physician groups mainly as a source of referrals, and systems that are committed to an integrated delivery strategy. Some of the latter have done quite well.

Ironically, one sign of a well-run integrated system is that the medical group is operated at arm's length from the hospital system. This is important because a hospital's business approach is very different from that of a physician practice, notes internist Eugene S. Ogrod II, former chief medical officer for development of the Sutter Medical Foundation, which operates the Sutter Medical Group in northern California. For instance, Ogrod points out, hospitals will write off a $25 bill that a practice would try to collect.

What's the capitation picture? Experts disagree on this. On one side, Mark Smith advises job seekers to shun groups that depend on capitation contracts. "Considerable risk is put on the physicians' shoulders," he notes. "And they no longer have to do that. Opportunities are now available that don't require doctors to be ex-posed to so much risk."

In areas like southern California, however, most groups are highly capitated. If you want to work there, says Jeff Denning, ask how many capitation contracts the group has and how many lives are in each one. "If a group says 40 percent of its covered lives come from one contract, that's a red flag."

Geoff Anders suggests you ask how much of a group's revenues are at risk and how long it has held its capitation contracts. "If a group loses a major contract, that could present financial problems. The longer the group has had the contract, the better the chance it will keep it."

Most multispecialty groups have some capitation. In fact, for those that belong to the Medical Group Management Association, an average 23 percent of revenues came from this source in 2000. And in "better-performing" multispecialty groups, as defined by MGMA, net capitation revenue per physician was $128,731, 18 percent higher than the average for all multispecialty groups. So capitation isn't a must to avoid; you just have to find out how the group is doing with it.

How much will you be paid? Back in the '90s, when risk contracting and gatekeeper model plans were widespread, primary care physicians were the core of many multispecialty groups, and their compensation reflected that. Today, however, the shoe is on the other foot, and it's the specialists who are seeing the big salary increases.

According to Cejka & Co., a St. Louis-based health care recruiting firm, 2000 median charges and income for general internists were about the same in multispecialty and single-specialty groups. But family physicians made significantly more in single-specialty practices—a reversal of the situation in the late 1990s. "Their role isn't as critical as everyone thought it would be when the gatekeeper model was more common," says Geoffrey Staub, Cejka & Co.'s director of marketing.

MGMA figures for 2000 show the same pattern. The median compensation of FPs who didn't do obstetrics was $143,000 in multispecialty groups, $20,000 less than in single-specialty groups. General internists and pediatricians made about the same in both work situations.

Typically, a group will pay a new doctor a guaranteed salary, and perhaps a bonus if he meets production targets. Later, the compensation formula will usually shift in the direction of productivity, says Staub. That might be measured on the basis of charges, collections, number of visits, or relative value units. Some experts believe that RVUs are the best yardstick of physician work, but revenues are the key measure in most groups, says Mark Smith. Large groups are more likely than small or medium-sized ones to provide incentives based on patient satisfaction and quality.

Another consideration is how overhead will be divided in calculating physician compensation. If a group's overhead formula applies the same cost percentage to each physician's collections, primary care physicians will benefit because their overhead is higher than that of specialists. But if the group employs a cost-accounting approach, deducting the cost of each doctor's space and staff time from his revenues, generalists will pay a larger share of the overhead.

Primary care physicians often participate in the ancillary revenues of groups that have their own labs and imaging centers. This doesn't violate the Stark self-referral rules as long as the sharing of ancillary fees isn't related to referrals. By giving primaries a portion of lab and radiology revenues, notes Eugene Ogrod, groups buttress the PCPs' incomes without taking too much from specialists.

How will you build a practice? Anders warns new doctors to avoid groups that pay physicians solely on the basis of production. "If the older docs are productivity-driv-en, they won't give patients to the new guy, and potentially they'll cherry-pick," he says. "Another question is, how do you get your share of new patients? Because people won't be asking for you right off."

Staub agrees. "A physician may walk into a situation where they're going to get dumped on—they're going to get all the Medicare/Medicaid patients, indigent patients, and so on, while the other physicians get all the fee-for-service and PPO patients. Consider how patients are allocated. Because if they're going to move you to productivity after the first year, and you get nothing but the uninsured, you've got a problem."

Ask how many exam rooms you'll be given, and how many hours a week you'll have full access to them, says David Scroggins. "If it's below 30 hours, you're going to starve. You'll be missing out on at least 500 visits a year. And at $50 a crack, that's $25,000. But if you have at least 35 hours with a full complement of exam rooms, that's huge, because that's how you make your bread and butter."

Would physicians in a small multispecialty group be more inclined to give new doctors a helping hand? "A larger group probably has support mechanisms in place, because they've brought in new guys so often," says Anders. "So a 100-doctor clinic could probably integrate a new doctor better than a group with 15 physicians."

At the Sutter Medical Group, notes Ogrod, doctors are required to put 30 hours a year into marketing, which counts toward the minimum number of hours they need to get their guaranteed salary. They may go to health fairs, give health presentations in schools, or visit senior citizen centers, all of which help publicize the doctor himself as well as the group. Sutter also advertises new doctors and works with health plans to make sure they're added to networks.

How much will it cost to buy in? Ask how long it will take you to make partner, how much it will cost to buy in, and what the process is. Will you be paying a set amount per year or will you remain a salaried associate for an extended period in lieu of payments?

The market value of a multispecialty group is skewed toward the specialty component, which could mean a higher-than-average buy-in for PCPs. But sophisticated groups design the formula so that the primaries don't get mistreated, says Staub.

MGMA consultant Bob Bohlmann agrees. Most multispecialty groups base buy-in amounts on tangible assets less debt, with some allocation of receivables, he says. Since goodwill isn't involved, the greater earning power of specialists doesn't affect the buy-in amount for PCPs.

He recommends that groups keep buy-ins low, while emphasizing things like benefits and good pay for productivity. "I've seen too many groups fall over themselves by trying to extract a high buy-in and pay out a significant investment to physicians who are retiring."

How will your lifestyle fit with the group? Some multispecialty groups put a high premium on productivity. That's great for doctors who want to earn a lot of money, but those groups might not be the best fit for younger, family-oriented doctors.

How do you spot the gung-ho groups? "Ask how many patients a day you'll be expected to see, both at the start and later on," Anders says. "Also, what's the work ethic of the group? Will you have time for vacations and family, or will you be working 65 hours a week?"

In Bohlmann's view, "Somebody who wants to coast or have a balanced lifestyle will probably be better off with a salary. Still, even if a group pays you a salary after you've established yourself, it will expect you to justify your compensation."

Eugene Ogrod of Sutter doesn't like coasters, and he advises older doctors who want to join a multispecialty group to think about why they're doing it. "If you want to slow down, don't knock on my door," he says. "We're not in a position to be any less productive than small groups."

Large groups do, however, offer some congenial features to doctors who aren't workaholics. For one thing, you'll be on call less frequently than you would be in a small practice. And there may be part time or job-sharing opportunities for physicians who have families or are winding down before retirement. But when you're on the job, you'll be expected to work as hard as anyone else.

What's the group's reputation? A group's patient satisfaction scores provide a good indication of how dedicated the group is to providing quality care. You might be able to get those from the group or from health plan surveys. In California, PacifiCare includes patient satisfaction scores and quality data in publicly available group ratings, and five other West Coast plans are about to follow suit. Business coalitions in California and Minnesota rate groups on quality, too.

You might also be able to glean this kind of information during your interview. "If you talk about the business plan of the group, and where the group is going, there should be hints that patient satisfaction is given some attention," says Anders. "You can ask, 'What's the group's philosophy?' Is it to see as many patients and make as much money as possible, or is there some nod given to patient satisfaction and quality of care? A candidate who's serious about a group should spend a day with its doctors in the trenches, observing." Anders also recommends asking other doctors in the community, hospital administrators, and OR nurses about the group's reputation.

"Joining a group is like a marriage; you want to make sure it'll work long term," says Bohlmann. Finding a group that you're comfortable with might be worth more than a high starting salary, he adds. "It's good to have a financial goal, but that needs to be balanced with the cultural issues."


What's the future of multispecialty groups?

Even large group practices have had difficulty coping with the fast-changing business environment of recent years. Veteran groups such as the Burns Clinic of Petosky, MI, the Nalle Clinic of Charlotte, NC, and the Thomas-Davis Medical Centers of Tucson, all dissolved after having been sold to physician practice management companies. Financial pressures have consigned scores of Cal-ifornia groups to oblivion since the mid-'90s. And many hospital systems across the country have jettisoned their money-losing physician practices.

The decline of integrated delivery systems and changes in managed care account in large part for the stagnation in the number of multispecialty groups while the number of single specialty groups grows. The ability of multispecialty groups to meet all the health care needs of a population has become less important to health plans as capitation has declined. At the same time, the rapid growth of PPOs and the loosening of HMO utilization controls have raised demand for specialists. As a result, specialists often earn more in single-specialty than in multispecialty groups where they're subsidizing primary care doctors.

"At one time, specialists were more willing to join a group that guaranteed them a flow of patients," says Mark Smith, executive vice president of Merritt, Hawkins & Associates, an Irving, TX-based physician recruiting firm. "Today, they're so busy and in such demand that they don't have to incur the expense of supporting primary care."

Nevertheless, some observers—like Arnold S. Relman, former editor of The New England Journal of Medicine—believe that multispecialty groups still offer the best environment in which to practice high-quality medicine. "When you hold doctors accountable to their peers, you'll begin to see medicine at its best," he said in a recent speech.

In any case, multispecialty groups aren't about to fade away. According to Stephen Shortell, a professor at the University of California, Berkeley, "It's one of the models that will continue to be viable. I don't foresee the disappearance of multispecialty groups."


Ken Terry. Questions to ask before joining a multispecialty group. Medical Economics 2002;9:124.

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