Connections for Success

 

02.03.15

Return of Physician Practice Management Companies
Jason Flahive

Physician practice management companies (PPMCs) rose and fell during the 1990s. After acquiring dozens of medium-to-large multispecialty and single-specialty physician practices, most of these organizations failed and declared bankruptcy.

The consensus is that the PPMC concept did not work because it was both premature and poorly executed. But now, a new generation of PPMCs has emerged with a stronger value proposition.

How It Works

The typical PPMC acquires all the tangible assets, other than real estate, owned by a physician practice. It then employs all the personnel associated with the practice (other than the physicians and certain clinicians) who are needed to operate it, in exchange for a management fee that includes reimbursement of its costs. The amount of the fee depends on the structure of the relationship, as well as the particular services provided.

The PPMC manages the day-to-day business operations of the practice, and physicians are solely responsible for the clinical aspects. Each doctor typically has an employment agreement with the practice that includes noncompetition and nonsolicitation provisions.

Filling the Gap

PPMCs fill several gaps in the abilities of physician practices to thrive in a highly dynamic health care environment. They offer help with capital investments, managing risk, payer contracting, acquiring new patients, improving administrative efficiency and other economies of scale. Here are just a few of the support services a practice can expect from a PPMC:

Operations

  • Strategic organizational growth (new office/clinic expansion and acquisition)
  • Systems (evaluation and selection of required IT and EMR systems)
  • Staffing support (workforce planning, recruitment, hiring, education and training)
  • Clinical functions (protocols and best-practice sharing)

Financial

  • Accounting (financial reporting and benchmarking)
  • Reimbursement (negotiation of payer contracts, claims submission and collections)
  • Employee benefits (incentive plans and payroll processing)

Compliance

  • Coding analysis (education and training on coding and documentation)
  • Legal (compliance support, as well as certifications, accreditations and licensures)
  • Operational processes (performance measurement, documentation and improvement)

Teamwork Makes the Dream Work

The relationship between the acquired physicians and the PPMC should be one of partners with a common vision, rather than employer and employee. This can happen only through a business model that encourages physician engagement and aligns incentives between them and the company. The challenge here is to ensure that the physicians stay connected to the local practice while simultaneously supporting the overall interests of the larger entity.

Decision Point

If you are considering whether it makes sense to sell your practice to a PPMC, there are certain features you should consider. Look beyond the savings from the services mentioned above; they will likely be offset by charges assessed by the company. Focus on the prospects for increased income from the time freed up from the practice management functions, the value realized through the sale of the tangible assets, and fewer aggravations.

PPMCs boost profitability through superior revenue generation schemes, local marketing, payer contracts, per-patient revenue optimization and specialized front-office systems. Be sure to ask whether all these activities will be updated regularly to account for changes in the health care ecosystem.For additional questions, contact Jason Flahive at jflahive@orba.com or call him at 312.670.7444. Visit orba.com to learn more about our Health Care Group.

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