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Forming a Medical Practice 'Super Group'

September 3, 2014

Article

Coming together to benefit from economies of scale is good for physicians and their patients. One way to do that is to form a super group.

We have seen an enormous consolidation in medical practices across the industry in the last three years. Many practices are being bought out by hospital systems in preparation for laying the groundwork for accountable care organizations and for building market share in the new value-based purchasing environment.

But rest assured, the independent practice is alive and well - there are practice models available that allow physicians to operate independently, while coming together as one entity to reap the benefits of cost efficiency. One way physicians can reinvent their practices, is to become a "super group."

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So what is a super group? Simply put, it is a group of practices that have come together under one umbrella corporation and operate as a single entity to realize cost savings and efficiencies of scale. Unlike independent physician organizations (IPAs), where practices remain independent and bill under their own tax identification numbers (under unified IPA insurance contracts), super group organizations typically bill under one tax identification number.

Are super groups legal?

Absolutely! While there are always anti-trust concerns about large numbers of physicians coming together, provided that the new entity is not taking advantage of patients and dominating a market (for, say, the express purpose of extracting higher payments), there should be few problems with creating a new group in this way.

Insurance companies are also looking at new models for doing business. Many would prefer to work with clinically integrated groups, where all of the members are on the same EHR platform and adhering to the same set of standards, than they would doing business with IPAs that may not be able to steer their membership toward producing higher-quality outcomes.

How do you form a super group?

The structure is not a complicated one but it does require two major ingredients. First, the practices coming together must have similar practice philosophies and be willing to adhere to a common governance structure, and second, the practices must use an appropriate legal structure for creating the new entity. The key to ensuring that you are coming together to benefit your patients is using a unified technology platform - that is, all of the practices should be on the same EHR system in order to allow for clinical integration and the ability to consistently monitor clinical performance.

What are the benefits of a super group?

The benefits are many. Practices are able to retain their autonomy while achieving efficiencies of scale that help to decrease costs. For example, several of our clients' medical malpractice insurance rates went down because there are more physicians to dilute risk, employee payroll costs and healthcare benefits become cheaper, and practices are able to secure better prices from suppliers.

We see our clients in super groups able to take on large transformative projects such as seeking NCQA's Patient-Centered Medical Home (PCMH) and Patient-Centered Specialty Practice (PCSP) recognition, and often they are able to invest in patient education programs that the individual practices alone would not have been able to manage.

Where do you start?

• Talk to your colleagues. Single-specialty super groups are often the most effective due to the singular focus within that specialty. It is imperative that the physicians are clinically aligned as well as philosophically on board. The most successful super groups are those where everyone is pulling oars in the same direction and understands the same vision.

• Bring in experienced legal counsel. Do not work with a lawyer who has not previously built a super group. There are several excellent lawyers across the country that have put together organizations like this, and know how to do it well and efficiently. They will also know if your proposed group has the potential to run into trouble with state and federal regulators.

• Employ an accountant. Look for one who is used to dealing with multiple cost and profit centers, because that is what each practice becomes under the parent organization. Above all you will want financial transparency in your organization, so that all members understand what the cost structure looks like and exactly where the revenues are going.

• Consider a consultant. Depending upon the size of your group, you may also wish to engage a consultant to assist with merger activities and to manage all of the parts involved in the transition.

There are many, many details to work out when bringing practices together in a new entity, but starting with a solid partnership, legal, and accounting framework, will ensure a successful start to any new super group.

Susanne Madden, MBA, is founder and CEO of The Verden Group, a consulting and business intelligence firm that specializes in practice management, physician education, and healthcare policy. She is also COO, National Breastfeeding Center, and cofounder, Patient Centered Solutions. She can be reached at madden@theverdengroup.com or by visiting www.theverdengroup.com.