Surgery Private Practice Strategy

[percyeye]

I'm not in this medical field but I enjoy talking business and strategy with any medical specialty.

I've seen twice now in my general area in the past couple of years where one was a General Surgeon and the other was a Plastic Surgeon who had just finished residency and opened their own office in a small city and rural area that did have a need. But within 1 year each of them had sold out to the hospital for a large sum of money (I heard) and now are employees of the hospital in which they had some leverage during the contract talks. It seemed that the rural/small city hospitals were so desperate for the surgery revenue they just threw money at these guys.

It seems strange that someone would go to the trouble of starting of private practice to sell out within a year time frame. Or is this a new strategy surgeons can think about out of residency instead of just being hired by a hospital outright?

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[doc05]

I'm not in this medical field but I enjoy talking business and strategy with any medical specialty.

I've seen twice now in my general area in the past couple of years where one was a General Surgeon and the other was a Plastic Surgeon who had just finished residency and opened their own office in a small city and rural area that did have a need. But within 1 year each of them had sold out to the hospital for a large sum of money (I heard) and now are employees of the hospital in which they had some leverage during the contract talks. It seemed that the rural/small city hospitals were so desperate for the surgery revenue they just threw money at these guys.

It seems strange that someone would go to the trouble of starting of private practice to sell out within a year time frame. Or is this a new strategy surgeons can think about out of residency instead of just being hired by a hospital outright?

This makes no sense. Highly unlikely they sold out for "large sums of money" because newly established practices aren't worth much. If anything, I'd guess that practices were struggling, and the hospitals agreed to take over their debt, in exchange for long-term contracts (essentially slaves of the hospital).

 

[percyeye]

This makes no sense. Highly unlikely they sold out for "large sums of money" because newly established practices aren't worth much. If anything, I'd guess that practices were struggling, and the hospitals agreed to take over their debt, in exchange for long-term contracts (essentially slaves of the hospital).

Practices definitely were not struggling. I have a good friend who is an attending at the same hospital. Again this was rural, you know where you see those advertisements for sign on bonus etc because it is difficult to get a surgeon there. Instead of just taking the bonus he opened his own clinic and in the end they offered him much more than that bonus they offered.

I don't know the Plastic surgeon as well but again it seemed like a very similar circumstance. Go to the Plastics page and read the thread stickied at the top and you can follow along with a Doc that did the exact same thing.

Maybe these were just fluke circumstances. But I thought it was an interesting way to approach it. And they made off much better than just signing right away as an employee.
edit (here is the thread): First 2 weeks in Practice

 

[doc05]

Practices definitely were not struggling. I have a good friend who is an attending at the same hospital. Again this was rural, you know where you see those advertisements for sign on bonus etc because it is difficult to get a surgeon there. Instead of just taking the bonus he opened his own clinic and in the end they offered him much more than that bonus they offered.

I don't know the Plastic surgeon as well but again it seemed like a very similar circumstance. Go to the Plastics page and read the thread stickied at the top and you can follow along with a Doc that did the exact same thing.

Maybe these were just fluke circumstances. But I thought it was an interesting way to approach it. And they made off much better than just signing right away as an employee.
edit (here is the thread): First 2 weeks in Practice

First, that thread is 10 years old. If you read closely, the plastic surgeon was barely breaking even despite having a busy practice. Also, the posts suggest a fee-splitting, non-Stark complying arrangement.

Rural areas can have a rough time recruiting, so they will throw money at you. But bottom line you sell out and become a slave. Once you're the employee, you don't get treated well.

 

[Winged Scapula]

Whatever it is, its not a good strategy (at least not after a year).

My guess he realized all the BS work that went along with PP, the hours and time away from family and figured it wasn't worth it.

 

[percyeye]

My significant other is a mid-level and they worked for a single Doc private practice. They were constantly having money thrown at them to be bought out by hospitals but they valued their independence too much and were afraid of what the hospital would do with their staff. We are seeing every medical specialty being bought up by private equity and hospitals, but for some reason everyone thinks independent private practice isn't worth very much.

It's ironic medical professionals work so hard in undergrad, their medical education and work like a dog through residency just to eventually be an employee to that guy in undergrad who was getting drunk and was a Business major.

 

[balaguru]

A private practice is a business. It doesn't matter how good of a doctor you are or how busy you are. If you don't collect enough from payers and patients to cover payroll and rent then you will go out of business. Collecting in healthcare especially if you provide emergent services is ... complicated, to say the least. I imagine many of the practices that sell will look at how much they collect per wrvu. If that number is less than an employer might pay you then the decision to sell is hard to ignore. My office mate left our employer because of poor collections. I am leaving soon for the same reason. I will learn soon enough about running a private practice. My go live date is Feb 1.

 

[Winged Scapula]

A private practice is a business. It doesn't matter how good of a doctor you are or how busy you are. If you don't collect enough from payers and patients to cover payroll and rent then you will go out of business. Collecting in healthcare especially if you provide emergent services is ... complicated, to say the least. I imagine many of the practices that sell will look at how much they collect per wrvu. If that number is less than an employer might pay you then the decision to sell is hard to ignore. My office mate left our employer because of poor collections. I am leaving soon for the same reason. I will learn soon enough about running a private practice. My go live date is Feb 1.

It is possible to be financially successful in private practice. As you noted, it has very little to do with how good of a physician you are but rather the "triple As" in terms of referrals and patient retention, marketing and making sure you are billing and collecting appropriately. Many physicians suck at all of these. I was lucky to start with a partner with a good head for business and it was worth our money to hire an office manager and biller with lots of experience. BUT we are micromanagers and insist on monthly meetings with the latter to make sure we are on target, that we are aware of where the money leaks, and how we can do better. It is a nuisance and I understand why some physicians don't want to deal with it and prefer being employees, but I like having something that I own and the financial benefits are worth the hassle if you know what you're doing.

 

[balaguru]

It is possible to be financially successful in private practice. As you noted, it has very little to do with how good of a physician you are but rather the "triple As" in terms of referrals and patient retention, marketing and making sure you are billing and collecting appropriately. Many physicians suck at all of these. I was lucky to start with a partner with a good head for business and it was worth our money to hire an office manager and biller with lots of experience. BUT we are micromanagers and insist on monthly meetings with the latter to make sure we are on target, that we are aware of where the money leaks, and how we can do better. It is a nuisance and I understand why some physicians don't want to deal with it and prefer being employees, but I like having something that I own and the financial benefits are worth the hassle if you know what you're doing.

My side project is to build an infrastructure that I can offer to other independent physicians for a nominal percentage of collections to address all of the issues you mentioned. I think there is a market for that.

 

[DoctwoB]

My side project is to build an infrastructure that I can offer to other independent physicians for a nominal percentage of collections to address all of the issues you mentioned. I think there is a market for that.

I have wondered about this myself. Are there not already firms that offer this kind of administrative service (billing, collections, HR, etc) to small private groups to leverage their economies of scale?

 

[balaguru]

I have wondered about this myself. Are there not already firms that offer this kind of administrative service (billing, collections, HR, etc) to small private groups to leverage their economies of scale?

There are companies that offer this. They charge around 8% of collections which I think is too much. Running a practice is a data management problem and from what I can tell the groups that I know about don't manage that data very well or give you easy access to performance information. For example, you will hear billing companies measure their performance as a percentage of billed charges. This is a useless metric in my opinion. You can set your billed charges to any arbitrary value. A percentage of that is just as arbitrary. A better way to measure performance is to run a simulation in which everybody has medicare and you collect 100% of allowable charges and compare this to actual collections. You can do all sorts of comparisons with a metric like this. Also I have some pretty cool marketing and CRM ideas which have already been implemented and we are currently using.

 

[Winged Scapula]

8%?!!!

Wow...going rate around here is 4-5%.

 

[dpmd]

My side project is to build an infrastructure that I can offer to other independent physicians for a nominal percentage of collections to address all of the issues you mentioned. I think there is a market for that.

There ought to be. I am in this sort of arrangement (I pay x percent of collections and in exchange for office space and staff as well as supplies and anything I have needed-thoigh I am pretty low maintenance so I suppose there might be limits I just haven't reached). All the freedom of private practice with none of the hassle. I can literally not fail to profit since if I collect nothing I pay nothing aside from my malpractice and my time. I choose when to vacation and how much call I want to take. Sure I might be making less than if I were really successful in private practice but I am getting more than I would have been as an employee so it works out.

Edit: looks like you were talking about a more limited version but maybe look into a more comprehensive version. The guy I pay owns a lot of office space and has his fingers in a lot of business pies which allows him to offer all the overhead at a rate hard for any individual or small group to beat.

 

[balaguru]

There ought to be. I am in this sort of arrangement (I pay x percent of collections and in exchange for office space and staff as well as supplies and anything I have needed-thoigh I am pretty low maintenance so I suppose there might be limits I just haven't reached). All the freedom of private practice with none of the hassle. I can literally not fail to profit since if I collect nothing I pay nothing aside from my malpractice and my time. I choose when to vacation and how much call I want to take. Sure I might be making less than if I were really successful in private practice but I am getting more than I would have been as an employee so it works out.

Edit: looks like you were talking about a more limited version but maybe look into a more comprehensive version. The guy I pay owns a lot of office space and has his fingers in a lot of business pies which allows him to offer all the overhead at a rate hard for any individual or small group to beat.

Your arrangement is sort of like the current arrangement that I am leaving except I am paid based on wrvu instead of a percentage of collections. Because I was busy enough my take home pay was decent. But my employer was terrible at collecting so it was never going to be sustainable. Based on what I learned about my current biller and my discussions with docs using 3rd party billers I have learned not to trust others with collections. I am not worried about overhead. For my new practice my monthly call pay > overhead x 2 and when I hire a 2nd employee will be around overhead x 2. That leaves 100% of collections for professional services and then some for my take home pay.

 

[dpmd]

Your arrangement is sort of like the current arrangement that I am leaving except I am paid based on wrvu instead of a percentage of collections. Because I was busy enough my take home pay was decent. But my employer was terrible at collecting so it was never going to be sustainable. Based on what I learned about my current biller and my discussions with docs using 3rd party billers I have learned not to trust others with collections. I am not worried about overhead. For my new practice my monthly call pay > overhead x 2 and when I hire a 2nd employee will be around overhead x 2. That leaves 100% of collections for professional services and then some for my take home pay.

I track my collections personally because I am the one who gets the insurance checks and make sure they follow up on aged claims or denials. Since I work part time but have full time staff helping out I think a greater percentage of my total money brought in would be going to overhead.

 

[managedcarefin]

It is possible to be financially successful in private practice. As you noted, it has very little to do with how good of a physician you are but rather the "triple As" in terms of referrals and patient retention, marketing and making sure you are billing and collecting appropriately. Many physicians suck at all of these. I was lucky to start with a partner with a good head for business and it was worth our money to hire an office manager and biller with lots of experience. BUT we are micromanagers and insist on monthly meetings with the latter to make sure we are on target, that we are aware of where the money leaks, and how we can do better. It is a nuisance and I understand why some physicians don't want to deal with it and prefer being employees, but I like having something that I own and the financial benefits are worth the hassle if you know what you're doing.

This isn't being a mircomanager this is what, major consulting firms the firm I work at included advise revenue cycle departments all the time. Metric/KPI meetings, to understand how the cash is flowing is vital to any successful organization not doing it is dumb.

 

[managedcarefin]

There are companies that offer this. They charge around 8% of collections which I think is too much. Running a practice is a data management problem and from what I can tell the groups that I know about don't manage that data very well or give you easy access to performance information. For example, you will hear billing companies measure their performance as a percentage of billed charges. This is a useless metric in my opinion. You can set your billed charges to any arbitrary value. A percentage of that is just as arbitrary. A better way to measure performance is to run a simulation in which everybody has medicare and you collect 100% of allowable charges and compare this to actual collections. You can do all sorts of comparisons with a metric like this. Also I have some pretty cool marketing and CRM ideas which have already been implemented and we are currently using.

This is only part of the issue. The bigger issue is that most practices don't have any accurate data. A client I worked with couldn't give me a list of all active denials being worked... So it's more about coming up with ways to capture the data (ex. EPIC, Cerner and other EMR) than it is about ways to splice the data. Splicing the data is the easy part getting the data is much more difficult and what practices and organizations need to spend a ton of money on.

The second issue around collections is how it's being done today, having to manually look up so much information on all the different payer rules add on the way contracts are written has gotten practices to the point they are at now.

 

[Winged Scapula]

This isn't being a mircomanager this is what, major consulting firms the firm I work at included advise revenue cycle departments all the time. Metric/KPI meetings, to understand how the cash is flowing is vital to any successful organization not doing it is dumb.

Sure. Regardless of what you want to call it, the fact of the matter is is that many people are not successful in private practice because they refuse to understand or make time to do this. Or in many cases I’ve seen, they hire a firm to do it which charges an exorbitant management fee

 

[balaguru]

This is only part of the issue. The bigger issue is that most practices don't have any accurate data. A client I worked with couldn't give me a list of all active denials being worked... So it's more about coming up with ways to capture the data (ex. EPIC, Cerner and other EMR) than it is about ways to splice the data. Splicing the data is the easy part getting the data is much more difficult and what practices and organizations need to spend a ton of money on.

The second issue around collections is how it's being done today, having to manually look up so much information on all the different payer rules add on the way contracts are written has gotten practices to the point they are at now.

By "data management" I meant all aspects: determining useful metrics, efficiently capturing data, analysis, managing workqueues and actually using the data. I am about 70% done writing an EMR/RCM/CRM solution to do all this.

 

[vhawk]

There ought to be. I am in this sort of arrangement (I pay x percent of collections and in exchange for office space and staff as well as supplies and anything I have needed-thoigh I am pretty low maintenance so I suppose there might be limits I just haven't reached). All the freedom of private practice with none of the hassle. I can literally not fail to profit since if I collect nothing I pay nothing aside from my malpractice and my time. I choose when to vacation and how much call I want to take. Sure I might be making less than if I were really successful in private practice but I am getting more than I would have been as an employee so it works out.

Edit: looks like you were talking about a more limited version but maybe look into a more comprehensive version. The guy I pay owns a lot of office space and has his fingers in a lot of business pies which allows him to offer all the overhead at a rate hard for any individual or small group to beat.

This sounds very much like my situation

 

[dpmd]

This sounds very much like my situation

It's great isn't it. I know I am the kind of person that would agonize over little **** like where I can get the cheapest gauze or whatever if I actually ran my own office. Hundreds of different decisions that I would spend time on trying to get the best deal. This way I avoid that.

 

[thedrjojo]

IDK,I went into medicine for medicine and not business...if I wanted to be a businessman I would have,you know, done that like my brothers and aunt/uncle.

I'm happy in my academic position, salaried, and I think I'm going to be even happier when I start at the VA...

 

[balaguru]

IDK,I went into medicine for medicine and not business...if I wanted to be a businessman I would have,you know, done that like my brothers and aunt/uncle.

I'm happy in my academic position, salaried, and I think I'm going to be even happier when I start at the VA...

The quote in your signature doesn't seem compatible with your position on employment vs independent practice.