Published 11/1/2013
David J. Collon, MD

Super Groups: Are They the Future of Private Practice?

Issues to consider before moving forward

Orthopaedic group practices—whether single specialty or multispecialty—have been around for a long time. But in recent years, a new type of group practice—the “super group”—has emerged, not only in orthopaedics, but in many other medical specialties. Super groups may range from 15 to several hundred physicians and may have multiple locations in a market area.

In some cases, they are practices that have grown by the addition of partners over a period of time; this is probably the easiest path to establishing a super group. In other cases, several individual practices may join together to form a super group.

In this situation, the individual practices may become one large homogenous group, all sharing the same operating structures, electronic health record system, a centralized billing operation, and other administrative features. Other super groups share only the basic required elements, such as a single tax identification number, common employee manuals, and benefit programs. The individual practices within the group then retain their own identities, facilities, and other operating structures.

Why a super group?
The reasons for developing a super group are many, but generally fall into the following three categories:

  • the financial advantages of size
  • increased leverage in dealing with other institutions such as hospitals, insurance companies, and accountable care organizations (ACOs)
  • academic advantages such as combined research and outcome studies

Historically, the most compelling reason to form a super group has been for the financial advantages that accrue to larger practices, such as increased purchasing power, ownership of ancillaries, and general economies of scale. In many cases, developing and operating ancillary services necessitate a critical mass of physicians to make the business manageable and profitable.

Recently, more attention has been given to the increased leverage that a super group may have when negotiating with institutions such as hospitals, insurance companies, and ACOs. A group that is responsible for a significant share of the market can more easily negotiate a favorable contract than a single physician can. However, size may not be the most important factor in these negotiations.

Finally, some super groups have been formed with a primary goal of advancing patient care and research through the academic advantages of size. Although this reason has frequently been underemphasized, it is important. Super groups can make significant strides in patient care through outcome and research studies that are nearly impossible to conduct in very small practices. As insurance companies, ACOs, and the government place more emphasis on “value” rather than “volume,” outcomes data will play a critical role in negotiations with these institutions to secure patient referrals, establish alliances, develop contracts, and obtain maximum reimbursements.

As the academic influence on the financial and leveraging strengths of the super group becomes clearer, it may well become the strongest reason for forming a super group. In the future healthcare environment, size alone will be insufficient to deliver negotiating power. If the super group cannot prove it offers a superior product in terms of outcomes and patient satisfaction, its competitive leverage will be seriously compromised.

Bringing together multiple practices into a super group can provide financial and negotiating leverage, but the new organization must be structured carefully to avoid failure.
Courtesy of Thinkstock

Issues to consider
The two most important factors necessary for the successful formation of a super group are trust and transparency. Without them, the group ultimately will fail.

The operating agreement that governs a super group can be complicated to develop and, in some cases, it can be a contentious process. Several management firms specialize in assisting with the process and all stress the need for the participants to recognize and address these issues.

For example, the operating agreement must address what happens if a physician or group of physicians decides to leave the super group. Noncompete clauses can significantly affect a physician’s options if he or she decides to leave a group, and they must be addressed in the super group’s operating agreement. Unless the operating agreement includes a noncompete clause, members could be drawn away by competing physicians and physician groups that are employed or owned by hospitals, thus undermining the integrity of the super group.

Assistance from qualified, experienced attorneys and accountants who can provide advice and create the appropriate legal structure for a super group is key. A consultant with appropriate business expertise is helpful in properly evaluating and analyzing the business model to ensure that it makes sense from an economic standpoint in the given business environment.

One important factor in the organization and development of a super group involves the issues that develop due to the multiple different personalities of the physicians involved. These problems arise most frequently when several separate groups join together as a super group. It is generally difficult for groups that have been competitors for many years to suddenly become allies, so trust is a significant issue.

Physicians from different groups may also have very different priorities, and the groups may have dramatically different financial structures, overhead, retirement programs, ancillaries, and other practice structures. Combining these multiple entities into a single entity that meets all federal, state, and local laws and regulations can be problematic.

To avoid excessive consultant fees, physicians should attempt to reach agreement on most issues, including the proposed structure of the super group, before engaging the consultants. This process can be facilitated if all the groups agree on the same lawyer, accountant, and manager representation.

David J. Collon, MD, is a member of the AAOS Practice Management Committee who is currently involved in the formation of a super group. He can be reached at drcollon@comcast.net

Bottom Line

  • Super groups not only offer financial and negotiating advantages, they also enable practices to collect and analyze outcomes and performance data—a key requirement under many new physician payment structures.
  • Transparency and trust are key elements when multiple practices agree to form a super group.
  • Outside consultants—including attorneys, accountants, and business managers—will be helpful in developing the operating agreement and addressing issues, but may be expensive if the physicians involved have not previously discussed and agreed upon many issues.