Would Merging Medical Practices Work for You?

ORLANDO — Pediatric practices of all sizes, even solo practices, must know their numbers, including their overhead, payroll, patient load, and cost of supplies, in order to survive, Charles A. Scott, M.D., and Herschel R. Lessin, M.D., said in a joint presentation at a meeting sponsored by the American Academy of Pediatrics.

Combining your pediatric practice with another practice can help control costs and manage patient flow, but for any merger to succeed, the advantages must outweigh the disadvantages, said Dr. Scott, a pediatrician in a private group practice in Medford, N.J.

For example, certain legal actions, such as some types of insurance appeals, cannot be taken by groups of unrelated doctors but they can be taken by an integrated group.

Dr. Scott discussed the big picture perspective on what merging practices usually means for the private practice pediatrician.

“It means one taxpayer ID number, commingling [of] money, and working with someone who might have been a competitor,” he said. As with marriage, mergers are about compromise. You must be able to sit in meetings with your partners, cooperate to achieve your goals, and become comfortable with not being the final decision maker.

A merger can be as large as two regions or as small as two doctors.

“Don't expect your overhead to shrink, but your revenue should ultimately go up,” Dr. Scott said.

One advantage of mergers is the ability to get better deals on supplies (especially vaccines) and to get them quickly, which increases the quality of care in any practice.

Mergers can also streamline personnel and cut administrative costs. Merged groups can have centralized billing, with insurance billing specialists who are often on a first-name basis with people at insurance companies.

Large group practices are also more adept at data collection and can more easily stop using insurance companies that don't value their services—or put pressure on such insurance companies to increase payments to a more reasonable and acceptable level. “We have more data about our own practice patterns and utilization than the insurance companies, so we can hold them accountable to some extent,” Dr. Scott said.

An individual doctor can approach an insurance company and suggest that the company consider certain benefits, such as paying for a brand vs. a generic drug. Merged practices, on the other hand, because they are really one practice, have more power because they can threaten to drop the insurance company en masse, he emphasized.

Potential problems with merging practices include the fact that individuals must subvert their egos to accept decisions made by the group and that individual doctors can't choose which insurance plans to accept.

“You also lose some free time, because there are more meetings,” Dr. Scott noted.

Mergers aren't for everyone. However, if forming a group appeals to you, some options include working in multiple locations, combining offices, and inviting subspecialists to join the practice.

“Remember that you need professionals to help you,” Dr. Scott added. “You can't be your own accountant, you can't do your own investing, and you can't be your own lawyer.”

The bottom line is that the advantages of merging practices must far outweigh the disadvantages, because if they don't, it's not worth doing.

“The ego of the doctors is one of the biggest issues; you have to ask yourself whether you can work with your former competition,” Dr. Scott added.

Dr. Lessin, medical director and founding partner of a group practice in Poughkeepsie, N.Y., provided a “micro” perspective on the finer details involved in merging medical practices into a large group.

The total penetration of managed care and the rise of patient accounts have left many private practice pediatricians underpaid and struggling to collect from patients and insurers.

“The health of your practice depends on your knowledge of your practice numbers,” Dr. Lessin said. “You need to know how much it costs to see a patient.”

Essentially, pediatrics is a high-volume business with a low unit cost, and one of the greatest challenges of a large medical group is developing a budget.

“We plan our budget just like a business,” Dr. Lessin said. He and his partners compare their statistics with national statistics, and they determine costs including what they pay for vaccines and for personnel.

On a day-to-day basis, a large group practice can be very efficient because it has the infrastructure to track patients. “We know how many patients we see in a given location, so we can better plan our doctors' schedules,” Dr. Lessin said.

Patient flow varies with the time of day and time of year, and recognition of the busy times helps maximize the doctors' time. Doctors receive their schedules in advance, and they can spend more time seeing patients without getting bogged down so much with administrative details.