Tips to successfully navigate a ‘practice unwind’
By Edward Doyle
Atlanta—You sold your practice to a hospital or physician practice management company (PPMC) expecting an infusion of capital, management help and maybe some computerization. Five years later, however, your practice hasn’t changed much and you want out.
At a presentation on how physicians can take back their practices, Gary E. Matthews, a practice consultant with Physicians HealthCare Advisors LLC in Atlanta, said this is a relatively common scenario.
In the mid-1990s, he explained, hospitals and practice management companies were so eager to purchase physician practices that many engaged in what he called “buying intoxication.” These organizations began losing money because of their aggressive acquisitions, however, and many physicians discovered that their new employers frequently did not keep their promises.
|Mr. Matthews says it is essential for physicians to present a united front during negotiations.|
Mr. Matthews explained that physicians quickly realized that instead of helping to reinvigorate the practices they had already purchased, most PPMCs were more interested in future acquisition plans. And while administrators at hospitals thought that running small physician practices would be easy compared to running a large inpatient facility, Mr. Matthews said, most never learned to manage physician practices and quickly lost money.
So what can physicians do to extricate themselves from these situations? Mr. Matthews gave several tips to help physicians navigate what he called “practice unwinds.”
His main advice: Be prepared to take charge of the process of negotiating your release from these situations, as well as rebuilding your practice. “You’re the ones with MDs after your names, you’re the ones who relate to your colleagues, and you’re the ones who need to step forward,” he said.
Mr. Matthews reeled off a list of tasks that need to be completed to successfully withdraw from a relationship with a hospital or PPMC. Practices must assess their strength in the marketplace, benchmark their financial performance, examine no-compete clauses and review contracts with health plans and vendors.
Perhaps just as importantly, however, practices must also identify physician leaders who can represent their groups with a single voice. When negotiations get tough, he said, hospitals and practice management companies often try to win concessions through a divide-and-conquer strategy.
“You need to present a united front in negotiations,” Mr. Matthews said. “Part of the opposition’s strategy is to break down your collective organization.”
Strong physician leadership is also necessary, he explained, to guide the practice as it evolves into a new organization. “You need to know where you’re going before you can start negotiating to get out of your current practice,” he said.
Many practices make the mistake, however, of relying on a very small group of physicians to handle all aspects of negotiations and planning. Mr. Matthews said that a mid-size group, for example, may appoint a steering committee of four or five physicians.
Instead of relying on such a small group to handle all the details, Mr. Matthews suggested that practices create committees to address issues like the type of information technology a new practice will use, the benefits it will provide to employees and the payment plans it will offer physicians. These committees then report to the steering committee.
“Board members for each of those committees serve as liaisons to the steering committee, doubling the size of your leadership,” Mr. Matthews said. “This creates a group of second lieutenants stepping forward to help look at some of the issues.”
One of the most contentious issues in planning a practice unwind is physician pay. A key consideration is whether to continue using payment incentives the hospital or PPMC currently uses.
Mr. Matthews said he urges practices to pay physicians based on productivity. “You all grew up on productivity, you all grew up on an ‘eat-what-you-kill’ basis,” he said. “I suggest that you go back to that, then gradually move to a more hybrid system” that incorporates bonuses and incentives.
If you try to pull out of a practice where pay is tied to a bonus based on an esoteric hospital goal, he said, it will be difficult to apply the same standards and goals to your private practice.
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