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VOL. 37 | NO. 35 | Friday, August 30, 2013

Medical practices find going big better for bottom line

By Jeannie Naujeck

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Jim Browne, CEO of Heritage Medical Associates

Across the country, doctors are abandoning private practice en masse, a trend attributed in large part to new federal regulations.

Those regulations require them to spend large sums of capital on business expenditures such as converting to electronic medical records – at the same time their income is being squeezed by reimbursement cuts for older patients on Medicare and bad debt from patients who can’t pay their bills.

Two of the oldest and largest physician groups in Middle Tennessee, Urology Associates and Heritage Medical Associates have remained independent and profitable thanks to a long-range vision, smart growth and good business practice implementation.

Here are some of the ways they have managed to stay independent:

Scale up – to a point

Size matters in the brave new world of health care, and some are predicting the end of the small independent practice – especially in primary care and internal medicine, which are being drawn into accountable care relationships with hospitals.

“Our size and scale allows us to have the technology and the infrastructure to be able to support the physician in a way that they want and need and enjoy,” says Jim Browne, CEO of Heritage Medical Associates, a 100 member multi-specialty practice.

“We are always looking for opportunities and for physicians that would be a good cultural fit.”

Both groups grew early on through mergers of smaller practices and continue to grow through hiring and mergers; Urology Associates recently added several new doctors in Franklin through a December 2012 acquisition.

“[Being] big allows us to hire coding specialists and CEOs that can deal with the city and with the third party payers and build computer systems for us. That’s what big has done for us,” explains Dr. Charles Eckstein, president of UA. But he also emphasizes the importance of a good fit when considering partners.

“That kind of assimilation is important to have over with before you start taking risks together,” he says of bringing on new partners. “If you’re not all together, it’s not gonna work.”

Hire the right people

Eckstein credits good business expertise for UA’s growth.

“A large measure of our growth was hiring people with a high level of expertise to do the purchasing and negotiating. You need good people helping you,” he says.

“Doctors are good at being doctors but they’re generally not great business people. These other things, they burden you a little bit in trying to keep the joy that comes from being a physician, and balancing all these business concerns against that.”

Explore new income models

Heritage Medical Associates isn’t currently contracting directly with employers, but with over 100 physicians Browne says the group can do so and would like to explore it.

Direct contracting allows the practice to provide healthcare to a large group of employees without involving traditional insurance plans, cutting out middle costs and giving employers a break on healthcare costs.

Four Heritage physicians are also practicing “concierge medicine,” a model of service where patients pay a monthly or annual fee of anywhere from hundreds to thousands of dollars in exchange for “VIP status” with their doctor – such as same-day appointments, a private phone line and more time and personal interaction with the doctor. “Patient results and satisfaction have been very good,” Browne reports.

Have multiple revenue streams

Both practices offer numerous ancillary services in-house, such as laboratory and diagnostic work that make life easier for patients and serve as additional revenue sources.

Urology Associates has a surgery center at its Charlotte Avenue complex; such ambulatory surgery centers usually offer services at a much lower cost than hospitals and are preferred by Medicare for that reason.

UA also started Cimplify, a practice management company, in 1997 that provides business and technology services for UA and many other practices around the country.

Skate where the puck’s going

Both Heritage and Urology Associates have thrived through long-range planning and anticipating changes in their business to stay ahead of the curve.

For example, UA implemented an electronic medical records system long before it was required by the government.

At the time, UA wanted to create a more efficient business and to coordinate patient care between different locations.

Now on its third EMR system, the practice is well ahead of most when it comes to digital data-keeping.

A lender who knows your market

Change and consolidation is proceeding at a different pace in different cities.

Develop a relationship with a lender who understands the dynamics of health care in your market and can assess risk accordingly – what hospitals and health systems are operating there, the demographics of the population, ratio of privately insured patients to Medicare and Medicaid members and the pace of claims handling, whether the state is helping more people get healthcare coverage by expanding Medicaid, and what kinds of new payment models are being incentivized by the insurance carriers operating in your market.

“With new facilities, we use local lenders to obtain funds for any expansion we would need,” Browne says. “We minimize our debt level by not owning our buildings.”

At Urology Associates, the practice does own buildings and physician-owners of UA have personally guaranteed their loans from the start.

New physician-partners can buy into the real estate investments or not, depending on how much risk they want to assume.

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