Published 2/1/2013
Kathleen L. DeBruhl, JD

Survival Skills For Independent Practices

The Affordable Care Act charged healthcare providers to seek ways to integrate the delivery of health care for a patient. Several innovative ways to accomplish this goal were introduced that require hospitals, physicians, and other healthcare providers to work together.

As in the 1990s, hospitals responded by buying physician practices, employing physicians, and creating clinically and financially integrated organizations with the medical staff or community physicians. This flurry of activity, along with the uncertain economic and political times, has resulted in the erosion of the independent physician practice.

In some markets, all primary care physicians and all physicians in certain specialties, especially orthopaedics and cardiology, are employed by a hospital. However, the independent physician practice can survive if it plans carefully and implements specific strategies.

Challenges to staying independent
Independent physician practices face both external and internal challenges to their autonomy. Primary care practices are most at risk due to low reimbursements, limited access to ancillary revenue sources, and increasing practice expenses. As a result, many primary care physicians are joining local hospitals that will provide this infrastructure and guarantee compensation.

The loss of the independent primary care physician has a direct impact on specialty practices, which depend on referral relationships. Employed physicians, however, may be required to refer patients to other employed physicians of the hospital and to hospital-based services such as imaging. When primary care physicians become hospital employees, specialty practices may experience a reduction both in referrals and in income from ancillary services.

Many independent practices also face challenges in recruiting physicians. In addition to demographic challenges faced by practices in rural or healthcare shortage areas, competition from local hospital systems can make it difficult for independent practices to attract younger physicians looking for stipends, sign-on bonuses, and student loan forgiveness.

Finally, many independent practices find themselves unable to negotiate effectively with managed care payers.

To remain independent and compete successfully, medical practices must address these challenges. Strategies that specialty practices may pursue include merging with other medical practices, collaborating with local hospitals as independent medical staff members, and seeking to align with and secure primary care referral sources.

Physician practices may merge for many reasons, including the desire to maintain independence and control of their own destiny. Identified goals of a merger can include the following:

  • Aligning providers to better coordinate and manage patient care
  • Providing higher quality care at better cost
  • Creating an organization that will enforce compliance with established quality goals and metrics
  • Developing enhanced recruitment opportunities
  • Coordinating development of approved clinical processes
  • Assisting with strategic and succession planning
  • Assisting with physician manpower planning, including recruiting and/or hiring nurse practitioners or other physician extenders
  • Developing new service lines, possibly in imaging, therapy, or outpatient surgery

In addition to achieving these strategic goals, the affiliation of medical practices can position the new group as high-quality care providers for a bundled payment program or accountable care organization.

The business goals of a practice merger may include the following:

  • Achieving practice efficiencies through combined management, consolidation of insurance coverages, and consolidation of medical equipment and practice software and systems for electronic health records, billing, and related practice management software and systems
  • Cost-sharing for major expenses
  • Cost savings in health insurance premiums, professional liability costs, administrative costs associated with pension or profit-sharing plans, as well as in legal, accounting, and marketing representation

Securing referral sources
Although many multispecialty practices are successful, integrating primary care and specialty practices is challenging. Issues that arise include different management styles, inequitable treatment by specialists of primary care physicians, income differentials, and inequitable governance and sharing of compensation.

Specialist practices that seek to integrate primary care physicians must overcome these difficulties. Equitable governance and management are critical. The practice may also consider creating compensation set-asides and bonuses for primary care providers to recognize their participation in the overall enterprise.

Offering meaningful, competitive benefits, such as the following, is key in recruiting new physicians:

  • Competitive base compensation
  • Health insurance, possibly including dependents
  • Disability insurance
  • Time off
  • Permission to moonlight
  • Shared medical directorships
  • Stipends while finishing residency or fellowships and/or sign-on bonuses
  • Relocation allowances
  • Fair and equitable “on-call” arrangements
  • Fair and timely ownership (including of ancillaries)
  • Clear path to leadership

Current recruits, especially residents, are interested in both financial and “quality of life” benefits, so a medical practice should be ready to comply.

Enhancing hospital relationships
Physicians, especially specialists, have always served in positions of leadership in hospitals. Utilizing these positions can be critical in maintaining independence while working with a hospital toward its goals. Developing management relationships, including comanagement agreements with hospitals to help control the costs of inpatient and outpatient orthopaedic care, is one way the independent practitioner can help reduce hospital costs, enhance the patient experience, and generate additional revenue.

Enhancing practice revenue
To maintain or increase practice revenues, the independent practitioner may consider adding additional revenue producers, such as nurse practitioners. The integration of nonphysician primary care practitioners to deliver patient care is becoming a critical part of medical practices. A practice can add significant revenue if it can find the initial capital to fund new services, such as laboratory or bone-density testing, or if it can participate in external joint ventures such as a surgery center.

Get involved
Although the United States has many more physicians than hospitals, hospital associations have far more political power and influence on both the federal and state levels than most professional physician organizations. Physicians are often reluctant to become politically involved, but politicians need to hear doctors’ voices. Remaining independent requires participation in the political process.

Even small contributions and minimal involvement can have big results. Some medical practices “tithe” or earmark some funds for political contributions.

Orthopaedic practices must develop both short-term and long-term strategic goals to maintain their independence. These include assessing the ages of physicians in the practice, identifying referral sources, and determining future markets. Internal documents should be reviewed with a particular focus on noncompete provisions, partnership terms, and compensation arrangements. Finally, reviewing internal costs and implementing efficiencies will help maintain revenues that enable the practice to remain independent.

Kathleen L. DeBruhl, JD, is the owner of Kathleen L. DeBruhl & Associates, LLC.She can be reached at kdebruhl@md-law.com

Editor’s Note: This article provides general information only and is not to be considered legal advice. For specific questions or advice, consult a qualified professional.