Practice Aggregation and Growth Models

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Practice Aggregation and Growth Models


Small practices may have an uncertain economic future. There are many ways to get bigger to survive. 

The field of pediatrics is undergoing a sea of change in its ability to respond to the current economic and political climate. Managed care companies are consolidating and wielding their almost total market penetration to reduce payments and erect hurdles for pediatricians. Costs are being shifted to patients and there is a rise in patient-directed accounts. In the past, small group practices have been able to weather these changes. Going forward, however, they will face increasing challenges. They will be too large to be a boutique, but too small to develop a real infrastructure. They will be large enough to develop large group problems, but too small to develop large group solutions. As pediatric practice changes, practice models must change as well. Therefore, it is important to consider going BIG. 

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What Is Going BIG? 
By going BIG or cooperating with other pediatricians, practices can reap many benefits. They may enact group purchasing or joint ventures and share calls. This may be enough in some markets. However, the greatest benefits can be seen only with real aggregating under several models that allow physicians to legally develop greater market power but require much closer practice integration. When this is done, practices can negotiate fees, have central billing and management, discuss fees, and develop a professional structure for running the business of medicine.

Given the advent of retail-based clinics and health savings accounts and continued inadequate reimbursement, large groups are necessary to maintain clinical quality, keep control of medicine, and gain economic leverage. Large groups or corporations come in several different types.  

  • Organic growth to a large size
  • Full asset merger 
  • Groups without walls
  • Independent practice associations (IPAs) 

Pediatricians must realize that their colleagues are not really the competition. The competition is in how the medical economic pie is divided among employers, payers, and physicians. Getting BIG gives pediatricians much more leverage when trying to compete in this era of inadequate, inequitable payments for services. 

Deciding to Go BIG
In every business, there are recurrent themes. People are different, personal relationships are vital, and your organization must adapt to be responsive to these various needs. Successful physician organizations must focus on competence and quality, rather than personal control. 

With Whom Do I Choose to Go BIG?
Deciding with whom you can successfully work is the key. The more integrated the organization (full asset merger) the more important this becomes. Less integrated organizations (groups without walls or IPAs) require less loss of personal control. Practice culture and economics must be closely examined for compatibility and flexibility. Good advice from accountants, bankers, lawyers, and practice management consultants is vital. 

While there are many models, there is no perfect model. The landscape will determine the best model for the practice. Assessing, maintaining, and improving quality initiatives will be vital to the success of the practice. 

Benefits, Challenges, and the Future 
Going BIG means higher revenue, more clout, improved quality, control over hassle factors, positive increase in lifestyle with more time off and a better income, and diversification of services. On the other hand, it entails organization and planning, managing startup issues, changing practice cultures, management problems, compensation, debt, and increased overhead. While the future of medicine is changing, it will be important to work with your peers to build something larger and continue to offer high-quality services. Pediatricians will need to stick together to continue to lead the profession and field of pediatrics. 

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