Medical Practice Super Groups, Are They for You?

Practices today are facing challenges such as lower earnings, more complex regulations, higher costs, obligations to create higher-quality care and produce better outcomes, all while they see other colleagues merge or become acquired by local hospitals or healthcare systems. So at least once a week I get an inquiry from a physician asking, "Should I sell my practice?"

There is no single answer to that question. It depends on many factors, including whether or not the practice is in good financial shape and if it is well managed. I do consider those to be two of the strongest indicators for successfully remaining independent. However, the options shouldn't be limited to either selling or remaining independent.

Practice-without-walls models

As an alternative, some practices are now coming together to form "practice-without-wall" groups or "super groups." Some of these are single specialty and band together in order to achieve efficiencies of scale, to reduce costs, and to create collective competitive advantages. Others operate more like independent physician associations (IPAs) due to the fact that they are multi-specialty and may bill under multiple tax identification numbers.

I'm a big proponent of single-specialty super groups because this model allows for practices to come together under one unified business structure that can focus very effectively on building a quality single-specialty organization. That is, single-specialty super groups understand the challenges inherent in their particular specialty, and therefore are best equipped to tackle them and provide the most appropriate solutions.

So what does a super group actually do?

If built well, a super group offers individual practices the opportunity to retain some autonomy while reaping the benefits inherent in being part of a larger organization. The primary purpose of a super group is to centralize services and gain efficiencies of scale. Centralized services include billing, human resources, and accounts payable. Most contract and bill under a single tax identification number, and depending upon the size and quality of the group, will probably be able to negotiate better rates with insurance companies.

By centralizing things like payroll, billing, accounts payable, and claims management, you reduce the overhead that each practice has to lay out independently. But more than that, a larger-scale operation reaps the benefit of lower collective costs for things like malpractice insurance, medical supplies and vaccines, and health information technology, and provides the business resources best qualified to manage them.

What about practice autonomy?

You may be thinking that this sounds a lot like selling to a hospital. So what is the difference? To start, you won't be just another employee. Super groups consist of shareholders. Certainly there will be collective rules that need to be adhered to, the same as there would be if you sold to a hospital, but most practices that join super groups get to keep their own staff, their patients continue to see the same providers, at the same locations, and arrangements between partners can remain the same depending upon the governance structure chosen.

What will change is usually the technology you use - super groups work best when all practices are on the same EHR, for example - and more and more frequently, the standard of "quality" to which you must perform.

Specifically, in order to achieve better insurance contracts, super groups need to demonstrate quality clinical outcomes and show that their members can achieve certain metrics and clinical targets. Payers are no longer interested in just size - even a small super group has negotiating power, provided it can demonstrate a compelling "value proposition" to the payer. That is, if the super group can provide superior services by managing care more effectively and successfully than its peers, then it can benefit from shared cost savings with a payer.

How to start a practice without walls

Are you friendly with associates in another practice? Do you share similar philosophies and clinical practices? Then it may be time to talk to one another. Seek out others who have formed super groups in other regions or in other specialties and ask them how they did it.

Forming a super group requires setting up a legal structure and working through development of an operating structure that all members can be happy about. With the proper support from lawyers, accountants, and consultants who have put together other super groups, you will be in good hands.

So before you sell, consider joining or starting a super group. It really is a great option!

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.