Is Private Practice Dead?

Don’t want to be employed by a hospital but fear that private practice is no longer a viable model? Learn how some physicians are discovering new alternatives.

With more than half of today’s physicians employed by a hospital or health system, and new physicians increasingly seeking employment over private practice, is the autonomous physician practice on its deathbed? Will all physicians eventually become employees of the government or a health system?

A 2014 survey of practice executives by Medical Group Management Association (MGMA) found that 40% of over 500 respondents planned to engage in looser affiliations – such as joining an ACO, a PHO, an IPA or clinically integrating with a health system. Another 27% planned more formal integration, such as mergers with other practices or selling their practices to a health system.

However, Merritt Hawkins and Associates, a physician search and consulting firm, expects three quarters of new physicians to be hired by hospitals this year, and Accenture found that only 39% of physicians today own their practice, compared with 57% in 2000.

While solo practice is likely to vanish as providers grapple with a move from fee-for-service to value- and population-based reimbursement approaches, physicians may be pleasantly surprised to learn that new options for retaining autonomy are emerging. Among them is a newer type of single- or multi-specialty ‘mega’ group that allows physicians to remain in their existing offices and maintain more say over their practice than they would as hospital employees.

Single-Specialty Mega Groups

In Maryland, large groups have long included single-specialty groups like Advanced Radiology and Chesapeake Urology Associates, and multi-specialty groups like Clinical Associates. Newer entrants include Capital Digestive Care, a group of gastroenterologists established in 2009 with 57 physicians in 16 offices, and The Centers for Advanced Orthopaedics (The Centers), launched in early 2014 with the merger of over 130 orthopedists in 46 locations (including 35 in Maryland).

Nicholas Grosso, MD, president of The Centers, describes how the group formed. “It started with my group, Orthopaedic Associates of Central Maryland, and Robinwood Orthopaedics from Hagerstown. After considering other practice models, we eventually hired Joseph P. Melvin Company, a CPA group from Philadelphia. We were attracted to their proven model, and their experience allowed us to anticipate where the roadblocks would be. At one point we had about 35 interested groups. We did a vetting process of all the practices, and kept the ones we felt practiced great medicine. We also lost a few physicians to hospital employment.”

The Right Timing

The group took three years to finalize. “Each practice provided funding,” Dr. Grosso notes. “Similar models have been tried before, but they often failed when implementing the details and dealing with members’ egos. I attribute part of our success to timing – most smart doctors can see the writing on the wall. I also give credit to the model that we chose, which allows each practice to remain a division that retains a lot of their autonomy.

The Centers is keeping its additional overhead expenses low. In addition to Dr. Grosso, who continues to practice orthopaedics full time, the group has only a chief administrator and an assistant, and they soon will seek a quality and compliance officer.

Employing about 1,200 staff, the group offers a single benefits package, tax ID and billing system. They are undertaking a strategic planning process now and researching EHR systems so they can transition the practices’ separate systems to a single one. “If we had told the practices they had to use a single EHR to join,” laughs Dr. Grosso, “it never would have happened.”

As the group coalesces, it is undertaking a gradual branding process and creating a physician portal to better identify appropriate super specialists in the group and find the right provider for their patients.

Savings Coupled with Better Rates

The savings are already mounting. The group estimates that they have already saved as much as 30% on malpractice rates and injectibles, and they expect future savings from joint durable medical equipment purchases. They also believe they have gained the attention of insurers in a way that would not have been possible as a collection of smaller groups.

“Suddenly, they are taking our calls,” notes Dr. Grosso. “We’ve already negotiated somewhat on insurance rates, and in the future we’ll be able to consider bundled payment plans and the like.”

Preparing for the Future

Dr. Grosso advises physicians seeking to build a large group to “have the right consultants and the right partners. It’s a small community so it’s pretty easy to find the good consultants. Many groups have expressed interest in joining us since our launch, including practices in New Jersey and beyond. For now, we’ll stay in the D.C., Maryland and Virginia area, and then we may eventually expand further.”

“None of us knows what the future looks like,” he comments, “but we are in a much better position to face it as a large group. We know it’s a marathon, not a sprint.”

Privia: An Autonomous Approach to Population Health

Launched in February 2014 with 143 participating physicians in the greater Washington, D.C., area, Privia Medical Group is a different model from most multi-specialty groups. For one thing, it is focused on transitioning physicians to population health-based care. For another, while physicians are partners and co-owners of the medical group under a single tax ID, doctor members have autonomy over their staff and practices. Providers maintain and manage their own PC. Additionally, a board of governors comprised of physicians leads the group.

Andrew Aronson, MD, an emergency medicine physician, is the new chief medical officer of Privia. He explains, “About 65% of our group are primary care physicians and 35% are specialists. Physicians are compensated based on the revenue they generate when they join, and they keep additional revenues they generate. We partner with payers to help physicians increase their revenue by getting rewarded for quality care. Their expenses usually decrease as a result of our ability to negotiate better malpractice rates; centralize billing, electronic medical records and IT support; and achieve economies of scale through group purchasing.”

Connecting the Data Dots

Privia selected open-source Athena as their common EMR, to which all physicians in the group have elected to switch before they ‘go live.’ “With a bidirectional patient portal, data aggregating warehouse, and a population health software package, we’re seeking to connect the ‘data dots,’” states Dr. Aronson. “Physicians can do outbound calling campaigns, such as urging patients to get flu shots during flu season, and patients can complete an online health risk assessment.”

The company also offers disease registries, analytics, predictive risk stratification, and private health information exchange (HIE)/connectivity. To better coordinate care, Privia provides remote health teams that include nurse care managers, dietitians, fitness trainers, and soon pharmacists, mental health professionals, social workers and nurse triage.

Aronson notes that it takes about five to six months from the time the practice signs up until they can ‘go live’ with Privia. “The day that they go live is the day the management fee kicks in,” he notes.

Privia also offers physicians a second practice option – the opportunity to participate solely in Privia Quality Network, its Accountable Care Organization (ACO). Currently, the ACO has over 240 participating providers, including the 200 plus providers in the medical group, and about 40 physicians that have signed up for the ACO only.

Future Plans

Having grown quickly in the first six months, Privia Medical Group initially is targeting small- to medium-sized practices in the Maryland, Virginia and D.C. area, but is considering future expansion into non-contiguous markets.

“Our goal is to become vertically integrated by partnering with hospitals, sub-acute facilities and home care agencies so that we can provide health care at all points where patients need care, which is in line with federal health reform goals,” notes Dr. Aronson. “Our model follows what the payers want, which is local, primary care and multi-specialty care. This model is right for any forward-thinking physician who wants to be rewarded for high quality care. We want high quality physicians who understand that healthcare is changing.”

Maryland’s Unique Challenges

Nancy Smit, MBA, is a partner at RS&F Healthcare Advisors, a recent joint venture between RS&F, a major regional accounting and consulting firm, and SHR Associates, a healthcare consulting firm. The new firm was launched in mid-2013 to help doctors and hospitals successfully navigate healthcare changes. “RS&F’s culture was a good fit with our firm,” she comments. “They have high-level professionals who can address the financial and strategic work, while we focus on internal operations and billing. As physician organizations grow in complexity and size, they need that robust level of advisory support.”

Smit notes that physicians practicing in Maryland face some unique challenges. “Physicians in New Hampshire and many other states are reimbursed about 40% above Medicare, whereas in Maryland, the private insurers’ reimbursements are below Medicare. Physicians also have high malpractice rates here, and the major health systems – University of Maryland, Hopkins and MedStar – are another key factor pressuring the physician market in Maryland.”

Advice: Shop Wisely, Be Efficient, Prepare for Audits

Smit warns that physicians need to be savvy in their dealings with health systems. “My advice is to talk to anyone and learn what you can, including your competitors and your referring physicians. Hospitals may try to play competitors against each other, so be careful not to believe that your competitor is joining them without independent verification.

“The best thing any physician can do today is to make his or her practice as efficient and patient-centered as possible,” she continues. “Most practices have a 30-40% level of inefficiency that can be addressed by embracing technology, retaining high quality staff and maximizing billing and collection procedures.”

Smit adds, “Predictions are that nearly every practice will be audited in the next 24 months by at least one entity. Our company is helping practices conduct those audits proactively to see if they need to make changes in their documentation, coding or other practices to avoid having to pay back money or incur penalties.”

Predicting the Future

The days of the cottage industry for medical practice are over,” believes Smit. “Small practices need to buy the same software and systems as the larger groups. The sheer pressures from administrative and overhead burdens are driving many small and solo practices to merge or seek employment. Five to 10 years ago, you didn’t need IT support, but today you can’t do without it. When that kind of cost can be spread over more physicians, it saves money.”

What will healthcare look like 10 years from now? “From the physician perspective, bigger will be better and there will likely be much more consolidation and downsizing of hospitals,” Smit predicts. “Urgent care is a growing trend, with more convenient labs and X-rays. And I think hospitals will continue seeking to employ primary care physicians in an effort to control where the patients ultimately go for their total healthcare needs.

“I also think the patient centered medical home (PCMH) model, which I love, will continue growing,” she concludes. “The medical home offers opportunities for greater satisfaction for the physicians, patients and staff, and it encourages physicians not to do what the staff can do more cost-effectively. Interestingly, even the Feds are embracing this model; we’re now working with community health centers and federal community health centers to credential them as medical homes through NCQA.”

Nicholas Grosso, MD, president of the Centers for Advanced Orthopaedics

Andrew Aronson, MD, chief medical officer of Privia Medical Group

Nancy Smit, MBA, partner at RS&F Healthcare Advisors

As published in Maryland Physician Magazine.

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