Is A Group Practice Without Walls Right For You?

Kevin McDonald, DPM

• The group practice without walls, as set up by our attorney, is legal and complies with the requirements of “clinical and financial integration” in group practice design.
• The model allows for most of the advantages of the fully integrated model including ancillary income development, group purchasing power, economies of scale and enhanced third-party payer contracting.
• The group practice without walls model allows for a degree of autonomy that is attractive to our members while we become more used to the idea of practicing as a single entity.
• The practice model avoids the need to appraise every individual practice prior to forming the group. There is no hierarchy of ownership.
• The group practice without walls model is easier to unwind in the event that the group’s (or one of its member’s) circumstances change.

What You Need To Form A Group Practice

The following items are ideas to consider in developing a large financially and clinically integrated podiatric business using the group practice without walls model.

   Legal. The services of a seasoned and smart healthcare attorney are required for anyone considering the formation of a large podiatric practice.

   Accounting. The group practice without walls will file a single tax return. It is recommended that all divisions of the group utilize the same “chart of accounts” to streamline bookkeeping and that each division e-mail its financial records to the accountant on a quarterly basis.

   Payroll. An Internet-based payroll service with electronic deposits is essentially required. Look for a rate of about $6.50 per employee per month for an entire package including the payment of all taxes and filing of W-2 reports.

   Employee benefits. This is a more complex issue for businesses with more than 100 employees as additional rules apply. Consider the use of an employee benefit company or the use of an insurance alliance offered by the payroll vendor.

   Benefits package. Typically, the practice must offer the same benefits to all employees in a large (greater than 100 employees) business. An agreement by all the podiatrists on a uniform set of benefits is challenging but will also typically reveal the level of cooperation of each of the members.

   It is advisable for each of the former practices to maintain its prior corporation as a “holding corporation” for the equipment of the former practices. Thus, one solution to the conundrum of providing the desired flexibility of employee benefits is for the new corporation to pay rent to the old corporations for the use of each division’s equipment. Then the old corporations can take this rental income to legally pay for various and sundry items.

   Health insurance. The ability to save on health insurance premiums is often one of the most eagerly anticipated benefits for small business owners joining a larger business.

   In general, group health insurance premiums decrease when: a) there are more than 100 “lives” covered; b) the company is paying 75 or more percent of the cost of the coverage; and c) the insurance company has data on the past healthcare use of the people to be insured. A business can save an additional 5 to 15 percent of the premium if it is willing to partially “self insure” against catastrophic healthcare events.

   Insurance companies will offer other types of insurance (dental, disability, life, commercial, etc.) and benefits (e.g. flexible spending accounts) to the group at attractive rates. Keep in mind that the agent is receiving a commission on each of the policies sold.

   Retirement plans. A large business is typically limited to a 401(k) retirement plan. A “safe harbor” plan offers advantages for our type of business with the choice of a 3 percent match for all employees or up to a 4 percent match for all participating employees.

   Insurance negotiations. It is frequently frustrating for small group podiatrists to compare the private insurance fees received by large group medical providers with the fees paid to small podiatry practices for the same CPT codes. However, private insurers will not be inclined to pay higher fees based on group size alone. The group practice without walls must provide additional information and come up with its own unique value proposition.

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