Losing your practice management hassles
Losing your practice management hassles
Alternatives to selling to a PPMC
Your practice is growing, but as it grows, more physician time is spent on administrative matters. No matter what organizational structure you choose, patient time is cut, and the doctors don’t like it. You may think that your only option is to sell your practice either to another practice, to a hospital, or to a physician practice management company (PPMC). Well think again.
When Angelo Acquista, MD, was in discussion with 40 other physicians to form Madison Medical in New York City, he knew he needed some expertise and ability that neither he nor the other physicians had. "But I didn’t want to sell the practice," he says. "We understand that medicine is a business, but we are not business people. We needed management, not ownership."
The result: a management agreement with Advanced Health Corporation of Tarrytown, NY. The two-year-old relationship was the first for Advanced Health, and it has proved very successful to Madison Medical. Acquista says the multispecialty clinic, with 63,000 square feet of office, consulting, and minor operating space cleared about $27 million last year. "We went with them because they didn’t want to own us but manage us. That’s different than a lot of the PPMCs."
PhyCor in Nashville, TN one of the largest PPMCs in the country does purchase practices, says Acquista, and for some, it is a viable option. But for him and the other partners who own Madison Medical, giving up that much autonomy was not a desirable option.
Determine your needs
Acquista says that practices looking at PPMCs should first determine what their needs really are. Do you need capital to expand as well as management expertise? If so, then you may want to seek ownership or joint venture with another company. "We just needed negotiating skills, administrators, and controllers," he says. "Now we have that, but the owners are still making all the decisions."
The agreement with Advanced Health puts a full-time administrator and controller on site at Madison Medical and also provides the clinic with expertise in other areas as needed. For example, when leasing medical equipment such as magnetic resonance imaging, a call to Advanced Health secures someone who has worked in that field to handle the negotiations, Acquista says.
When negotiating with managed care companies, the PPMC sends down two negotiators who spent their previous careers working for Blue Cross/Blue Shield in California. "These people know the industry and have an expertise we don’t have and couldn’t afford to hire full time," he adds. "Advanced Health provides us with a lot of subspecialty business management skills."
Acquista talked to a lot of other management companies before settling on this one, he says. While he opted to go with an untested company as its first contract, he recommends that others considering a management arrangement check references carefully. "Ask for names of practices that are like yours that they have worked with," he advises. He had to settle for checking out character references on the main players.
"It’s important to determine that the people you will work with are honest and honorable and keep the promises they make," he says. "You have to know they will be there if there is a problem."
A short-term relationship
But maybe a long-term contract is not for you. In that case, you may want to hire a management company for specific projects only. That is the route that Jim Guetzkow, MD, took for his practice, Aviva Medical in Los Gatos, CA. The three practices which formed the six-physician primary care practice were building a common facility but didn’t have the expertise to handle the transition appropriately.
Guetzkow hired the Santa Rosa-based Professional Management & Marketing to liaise with building companies, secure bids, and help finalize financing for the project.
"They came in and gave us information on issues from accounting firms we might want to use, to how to choose a lawyer," says Guetzkow. "We had to come to agreement on issues ranging from cost accounting to how to reimburse each other on capitated patients. They helped us through the talks and get all our concerns on paper. It really prevented surprises down the road."
There was one large benefit from the relationship, as well, says Guetzkow. Without the help of Professional Management & Marketing, the new practice would have had more expensive financing. "It was through their help that we got our start-up loans," he notes. "They got us competitive bids, and we were able to get 1% over prime."
The management firm also helped Guetzkow map out a growth plan for the future. While he serves as managing partner for now, there is a plan for adding a full-time administrator as the practice grows.
"We knew we didn’t want a long-term contract with a management service organization," Guetzkow says. "It works better for us to outsource what we need to now, and then as we grow, slowly add the staff who will help us."
The choice suited the physician partners, Guetzkow says, all of whom had successfully managed their own practices for years. "We wanted to retain that authority. When we merge with another practice or two, then we will be able to afford the full-time expertise of a good administrator. For now, this is the best thing for us."
Although it will be another couple of years before the start-up expenses at Madison Medical decline, there have been tangible financial results from its relationship with Advanced Health Corporation, says Acquista. "Our volume is up 20% over what we did when we practiced separately," he notes. He says it is largely due to the lack of administrative hassles which the physicians no longer have to deal with.
Advanced Health handled the lease agreements and contract negotiations for the new facility, he notes. "They acted as intermediaries with lawyers and accountants; they helped us to determine compensation and revenue sharing. But they only make recommendations to the board. The doctors still make the decisions. And because they are seen as a more neutral third party, we are able to get a three-quarters majority vote on issues of great importance. It gives us a feeling of having an unbiased opinion among us."
• Angelo Acquista, MD, Madison Medical, New York City. Telephone: (212) 583-2850.
• Jim Guetzkow, MD, Aviva Medical Group, Los Gatos, CA. Telephone: (408) 874-0800.
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