Breaking a PPMC contract difficult, but doable
Be prepared to start a practice from scratch
If your practice is mired in a stormy, unprofitable relationship with a physician practice management company (PPMC), you’re not alone. Many physician practices signed up with PPMCs in the early 1990s hoping the arrangement would diminish their administrative burden, confer leverage in managed care negotiations, and allow doctors to concentrate on caring for patients rather than taking care of business operations.
But for many physicians, the pot of gold they anticipated at the end of the PPMC rainbow turned out to be something far less valuable, and they’re looking for ways to get out of their long-term contracts with practice management companies.
About 5% of the 75,000 physicians affiliated with PPMCs started the arduous process of unwinding their contracts in 1999, according to Bob Healy, president of Physicians Strategic Resources, an Atlanta-based firm that assists physicians in terminating their contracts with PPM companies.
He estimates that an additional 10% of PPMC-affiliated physicians will sever their relationships in 2000.
"Many doctors joined PPMCs in response to managed care growth. However, many have not received the promised benefits and rewards," Healy adds. Instead, physicians with PPMC contracts may find that they are working harder for less money.
Healy and his partners, all former PPMC and physician network executives, formed a company that deals exclusively with "acquisition unwinds" because of the increasing unhappiness physicians have with their practice management contracts.
Physicians Strategic Resources gets involved after the physicians have started the legal process to withdraw from a PPMC. The company works with attorneys to coordinate all aspects of the process except for the legal issues. (For details on some of the non-legal issues, see related story on p. 13.)
Healy cites three major reasons that physicians want to get out of their PPMC contracts:
1. Many of the transactions were a combination of cash and stocks, but heavily weighted on the stock side, particularly for the younger physicians in the practice. With PPMC stocks plunging in value, doctors are concerned about their investment.
2. When physicians signed up with the PPMCs, they had hoped to reduce their administrative load and see significant increases in net incomes in exchange for giving up a percentage of their revenue for management fees. But many are working harder for less money.
3. Physicians tend to be very independent people and don’t fit well into a corporate culture.
Early happiness turns into disillusionment
In Healy’s experience, physicians typically are happy with their PPMCs in the early stages of the relationship. Costs often drop because of savings in national purchasing agreements for supplies and malpractice insurance. The PPMC also may install sophisticated information systems, take a hard-nosed approach to negotiating with managed care entities, and establish long-range marketing initiatives.
"In the early stages of the relationship, the physicians may see benefits and savings, but as time goes on, they may not see an improvement in their bottom line," Healy says.
But not all physicians are unhappy with their practice management companies.
"There are a few PPMCs that are fulfilling their promise, and if the relationship works, the doctors ought to stay in it," notes Ernest Berger, chief operating office of Physicians Strategic Resources. "We don’t try to persuade the doctors to disengage. We enter the process after they’ve made the decision."
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