Promises vs. reality: Know the difference
Shape a positive practice/PPMC relationship
If your firm has decided to link with a physician practice management company (PPMC), you have, no doubt, listened to a lot of their promises - about how your costs will go down and how the company will take care of all the administrative issues you hate so much, such as contracting. And to boot, you'll get stock in the PPMC worth thousands of dollars. But reality doesn't always work out like that.
So what can you do to avoid becoming one of the PPMC horror stories? How can you create and maintain a good working relationship with a management company?
According to Reed Tinsley, CPA, an accountant with the Horne CPA Group in Houston, the best PPMC/practice relationships are built when interests of the two groups are aligned. "This means the doctors will work to enhance practice value, and the PPMC will bring tangible benefits to the table that will allow doctors to accomplish this." For instance, a PPMC can provide capital to expand services, locations, and physicians. But the physicians have to understand they will implement these expansions, he says.
Another characteristic of relationships that work is an attitude of partnership. "The problem with most PPMCs is that they were set up to do acquisitions and not concentrate on operations once the practices were acquired. In this situation, the practices are basically left alone. The PPMC just gets its cut of the revenue stream. The best situation is when both parties work together as partners to grow the practice."
Without alignment and partnership, you can end up in a situation like a PPMC in Houston which acquired practices with good market share for 30% of net revenue. It gave the practices stock in return. But the price of the stock has plummeted - to some $4 per share - and the physicians feel they are getting a raw deal. In addition, Tinsley says, that PPMC did nothing operationally for the groups, didn't integrate the practices and let them remain competitors against each other. "It's a typical case of a PPMC going in and making a lot of promises and not following through."
William Condrell, MD, chief medical officer of PPMC Advocates for Primary Care in Washington, DC, sees the issue from the other side. He says management companies must learn to see practices as their customers. "We provide a service, and what makes the relationship good is when we provide a good service." On the other side, Condrell says, the practices have to treat the PPMC as one of their customers. "They have to be interested in providing good managed care services. They should be on the ball to decrease unnecessary services. That means careful observation of all costs and making sure patients only get the true care they need."
A good PPMC will have models for helping a practice to decrease costs and reduce unnecessary tests and treatments, adds Condrell.
Another way of ensuring a good relationship is for practices to get involved with setting policy and guidelines such as those at Advocates. "We have a policy committee made up of physicians and their peers. That way, if they are included, and we educate them about our decisions, it is easier for them to accept our decisions."
Tinsley says the impact of a bad relationship can be drastic. First, profits sink. "This usually happens when PPMCs' stock prices fall and the physicians see that the PPMC isn't doing anything for them. Then the doctors don't try as hard, production falls, and profits follow." Once that happens, physicians will see their compensation go down, he says, which only makes the morale worse and the situation exacerbates.
When this happens, there is often little you can do to repair the problems, and Tinsley says it is becoming more common. "This is where everything begins to break down." The best way to cure this kind of meltdown is to prevent it at the beginning - by being sure of what you are getting from the PPMC and being clear about what is expected in return.
Even Condrell admits that things can always be better between PPMCs and practices, and if he had a wish list of things that could smooth those relationships, he says it would include more involvement from physicians in creating the administrative systems and policies that govern practices. He also wishes that physicians would be governed more by what is best for the patient than by their fear of litigation. Many, he adds, will run diagnostic tests just to protect themselves from potential liability.
On the other hand, Condrell says a good PPMC will try to minimize the administrative time it asks of physicians. That, after all, is their part of the bargain - they provide management, and physicians provide care.
In addition, he agrees with Tinsley that a PPMC should pay more attention to growing the practices they purchase than to growing their own size by purchasing another practice. That kind of organic growth is better for both parties. "But I don't see that," Condrell admits. "I don't see PPMCs getting more business or marketing the practices they buy."
Because of that, Tinsley thinks that down the road you will see litigation against these management companies for failing to deliver on their promises. In the meantime, practices getting involved in a PPMC relationship should do their homework. Insist on seeing a business plan for the PPMC, Tinsley advises. Ask them how they intend to grow your practice and check up on how well they have followed through with their promises to others.
Finally, says Tinsley, ask yourself if you can do yourself what they are promising you. If you can, you don't need the PPMC, no matter what promises they are making. n
· William Condrell, MD, Chief Medical Officer, Advocates for Primary Care, Washington, DC. Telephone: (202) 333-3999.
· Reed Tinsley, CPA, Horne CPA Group, Houston. Telephone: (712) 975-7450.
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