After a significant wave of practices choosing to merge with hospital systems, physicians are starting to consider de-integration and returning to private practice.
It seems that integrated health care, the solution that many thought would be the answer to a variety of our healthcare industry’s challenges, might not have the impact or the endurance it was thought to have. As many healthcare organizations continue to expand, practitioners are contemplating their next step.
Should they work together and become even more woven into the organization? Or, do they throw in the towel and start taking steps to re-establish their private practice? While some might prefer to cut ties, the decision to separate the hospital system brings with it a lot of uncertainty.
Factors to Consider
Each practice has its own unique situation and there is not a clear-cut answer for everyone. Selling your practice to a larger system was not an easy decision, so buying it back, or de-integration shouldn’t be either.
It’s critical to weigh all the information and make a decision that meets your needs, your patients’ needs, and those of a successful business. Here are some key considerations if you’re thinking about diving into de-integration:
1. Evaluate your patient base and payer mix
While the patients in your new private practice may be better insured, they’ll also be a highly sought-after slice of the market that many will compete for. With this type of change, your practice could potentially experience up to 40% erosion in existing patient base. That’s a significant decrease in volume that shouldn’t be ignored.
2. Assess your insurance contracts
The benefit each insurance contract delivered across your entire partner hospital was likely a weighty negotiating factor. Specifically review the reimbursement levels for physician services to see if they’re feasible to continue at the current rate. On the bright side, your potential new status could also offer the opportunity to discuss contracting with the same insurers for additional services.
3. Evaluate available new revenue streams
Raising rates is not the answer, especially in a competitive market, so finding other sources of income is a necessity. Consider adding back the ancillary services that integration did not allow, like in-office x-rays and lab services.
4. Consider your billing and collections system
After de-integration, you’ll need to employ a third-party billing company, or invest in your own computer system and hire people with the necessary skills. Since your patient base will experience some erosion, it’s critical that you’re able to effectively manage billing and maximize collection rates.
5. Determine new group membership
With any group of providers, not all may be on the same page or ready to take the next step. Discuss expectations, goals, interests, and the potential new group’s needs, which will ultimately help determine which providers should be included in the new medical group.
6. Manage the compensation discussion
The integrated solution likely came with a more generous salary option than a private practice can manage. As owners, providers must be willing to accept responsibility and tie compensation, to some degree, to their productivity. It’s an about-face from the reliable and predictable salary arrangement they had as an employee of the integrated system. In addition, the employee benefits package may suffer as well, making it a somewhat less attractive option for qualified, experienced staff.
7. Consider the size of your staff.
When re-establishing your practice, or branching out on your own for the first time, you have to watch your bottom line. While a hospital may have provided ample staff, you’ll need to decide where you can cut back, where to ramp up, and the different levels of service providers your practice requires.
The Bottom Line
In order to responsibly evaluate the opportunity to return to or move to private practice, accurate assumptions around patient volume, staffing, services, revenue, and operating costs are critical.
Be realistic and understand that any new venture will likely carry debt from the buy-back, as well as additional start-up costs. It’s all part of running a business, but if you do the work upfront, the end result should come without any major surprises.