Economic and regulatory changes in the American healthcare system have created a challenging environment for small to midsize private podiatry practices. It is difficult to have pricing power when the majority of our patients have either government-controlled health insurance or private insurance offered by a dwindling number of companies that seem to show favor to larger entities.
Meanwhile, the cost of practicing podiatry continues to escalate, in part due to the cost of compliance with the myriad of rules and regulations from government payers and safety concerns. In addition, it is difficult for solo and dual practitioner practices to devote the time required and/or employ the personnel required to keep up with all of the evolving healthcare system changes and management situations.
One trend in medical specialties such as orthopedics, gastroenterology and cardiology is the formation of extremely large practices of 50 or more providers with centralized management and the complete commingling of practice assets. These companies often form by combining two or more large (greater than 10 doctors) practices in a region to begin the consolidation, and subsequently grow from there. This arrangement probably offers the best way to leverage the power of a large group in maximizing the financial return for the doctor owners.
However, this is more difficult to do when starting with small practices of one to four practitioners that comprise the majority of private practices in podiatry. In addition, there are trade-offs involved, including a loss of autonomy and the required complicated, expensive and possibly contentious practice and real estate appraisal processes. There is also the inability to return easily to the original small practice if things don’t work out, which makes small practice owners wary of this consolidation.
With these issues in mind, let us take a closer look at an alternative approach in which many small podiatry practices can legally form a single large entity in order to achieve improved regulatory compliance, cost savings, improved benefits and services, and ancillary income. This setup is also a way to achieve market coverage and “one-stop shopping” to give the practice an advantage when dealing with the payers in the evolving healthcare marketplace. Doctor-owners of this “mega practice” maintain ownership of their own equipment, real estate and supplies, and have the ability to exit the arrangement with little difficulty should the need arise. This approach has been called a “group practice without walls” and is exemplified by InStride Foot and Ankle Specialists, PLLC, which has over 70 providers in North and South Carolina.1
In this model, all doctors who invested in the company are equal “members” of the company having one vote. Each practice that merged to form the entity is a “division” of the company. The members of the company elect a “board of managers” who are responsible for making decisions on behalf of the members while receiving regular input from the general membership. Divisions may have associate doctors who can become “members” when they purchase a portion of their division. All income generated by each division is allocated to that division. The functions of the “central office” are financed via the monthly dues that the divisions pay on a “per doctor” basis.
The board of managers of the company sets the direction and the policies for the entire organization. The CEO is responsible for achieving the goals set by the board and implementing the policies and initiatives designed for our future success. Below is a synopsis of the various functions of the central office.
Human resources. This department handles payroll, health and supplemental insurance bidding and administration, flexible spending, and 401k contributions and records. The department also ensures compliance with the required hiring and termination procedures. We have over 400 employees and obtain prices for these services at a lower cost than is available to smaller employers.
Compliance. We have a dedicated compliance officer who is trained and certified in Health Insurance Portability and Accountability Act (HIPAA) and Occupational Safety and Health Administration (OSHA) procedures and inspections so we do not need an outside vendor to provide such services. Regular medical record and billing reviews ensure that all of our providers are documenting and coding their services and durable medical equipment items properly and appropriately.
Credentialing and insurance relations. We have a dedicated credentialing specialist to assist with the smooth on-boarding of our providers and keep all of our credentials complete and up to date. This person also assists with chart audits and works with our insurance consultant in maintaining relationships with the payer representatives.
Operations. The operations manager coordinates the implementation of our common practice management/electronic health record (EHR) program with customized templates and a significant cost savings for our doctors. Our doctors have the option of signing up for a related billing service at below market rates. This manager also administers the purchasing program with discounts and rebates that are competitive with any podiatric buying group. The operations department works with the CEO on the ancillary income programs and also helps plan and execute our quarterly meetings with educational, business and social components that are free for all of our employees, and generate a small profit for our company via corporate sponsorships.
Finance. Our central office collects all insurance proceeds and then distributes them to the divisions. All divisions use the same chart of accounts, which the central office compiles and adjusts for the single year-end tax return. The finance department handles the sales taxes reports and payments for the divisions. The company also offers the divisions accounting services and payables management as “à la carte” items at below market rates.
How To Find Success In A Larger Practice
The following items are considered important characteristics for the success of this model of practice.
1) The doctors who join this venture should be committed to its success and not be wishy-washy.
2) Ideally, the divisions would be located to cover a geographic area adequately and distributed in such a way that there would not be significant interdivisional competition.
3) The practitioners should be generally amiable people who get along with each other and they should also practice in an admirable and non-controversial fashion.
4) The board of managers should be energetic but not have selfish motives in leading the company, and there should be regular and forthright communication with the membership.
5) The overhead of the central office should be low enough such that all members consider their monthly dues to be a good trade for the benefits received by being in the group.
The healthcare system in America is likely to undergo great change over the next five to 10 years. Most people would agree it is worth attaining the goals of a) optimizing payer contracts, b) complying with health care and safety rules and regulations, c) developing ancillary income sources, d) minimizing overhead when appropriate, e) aggregating practice data, and f) using “best practices” in operating a podiatry practice.
The aforementioned practice model is one way to prepare for the coming healthcare system changes in an effective yet relatively low-risk manner. We have found this model to be helpful in improving our practices, decreasing practice management burdens and enhancing our overall profitability in the current healthcare milieu.
Dr. McDonald is the President of InStride Foot and Ankle Specialists, PLLC, in Concord, N.C.
Mr. Maccoy is the CEO of InStride Foot and Ankle Specialists, PLLC, in Concord, N.C.
For more information about this practice model, contact the authors at www.instridefoot.com.
1. McDonald K. Is a group practice without walls right for you? Podiatry Today. 2012; 25(10):74–76.