Choosing The Best Business Model For Your Practice
- Volume 25 - Issue 4 - April 2012
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On the downside, this model does require a much higher level of management with more costs initially until you get to about $50 million or so to minimize your corporate overhead. In addition, at this size, you truly are a big business and have to run like one. Many physicians have a hard time adjusting to this size of a practice structure. You lose your autonomy and rely on a board of directors, which the shareholders vote in to make decisions on your behalf. This is a more sophisticated and complicated model, and it takes both a financial investment and emotional commitment to be successful. At this size, you start attracting all kinds of outside investors and have to be very skilled or have very skilled advisors to deal with these individuals or institutions.
You also need to have a non-physician based board of directors with a great reputation in the investment community and who have done what you are trying to do. In this model, you have no choice but to grow and get big, and have passed the point of no return.
This model is not easy. It is filled with lots of volatility and since I am living this model everyday, I can honestly say that you must have the right people in place both on your physician team and leadership team, or failure is highly likely. However, the upside of this model is far superior to any of the previous models I discussed. In addition, your leader or CEO must have a proven track record with a lot of experience to make this a success.
This is by far the safest model from a regulatory standpoint and is the most equitable way to create value in a physician enterprise. The super group practice model is by far the most difficult to start but it is achievable with the right leadership and expertise. It has taken me 20 years to get our group to the current level with an annual growth rate of 147 percent since inception. I have mentioned most of the pros and cons already but I just wanted to reinforce that the super group is a model that takes a lot of patience and requires the most investment of time, energy and capital. However, if it is executed properly, it is this type of model that will provide you with the greatest returns in the long run.
Pertinent Insights On Multispecialty Groups And Hospital Employment Models
Many podiatrists find security in working for established organizations or within big multispecialty groups connected to hospitals or insurance companies. This type of model has the advantages of not having to deal with management headaches or building a practice. You are also usually guaranteed a salary and could have some type of bonus. The usual downsides are a limited upside and not having any equity in most of these models. However, some multispecialty groups do offer equity options.
I have found that these types of arrangements work well for physicians who want a secure paycheck and a fairly hassle-free lifestyle. They are willing to deal with the politics to offset the stress of running and managing their own practices. These types of models are often very attractive to newly graduated residents because they often pay well up front. I have always preached to residents that it is not all about the money and if you focus on the big pay up front, chances are you are missing better opportunities. Again, there is not one flavor for every doctor and that is why all models are different.
The Pros And Cons Of The Independent Physicians Association
Independent physicians associations have been around for a very long time. I have seen many groups structured under this model yet in reality they are crossing over and trying to act like a true super group model. Be very careful here because there are state and federal laws that govern these entities. Violation of these laws can cause severe penalties.
These associations are generally set up to organize independent practices into contracting entities. Independent physician associations generally contract with risk-bearing HMO contracts, vendor contracts and are loosely affiliated without significant loyalty among group members.