According to a recently released survey from the American Medical Group Association (AMGA)—the 2019 Medical Group Operations and Finance Survey—the income of medical groups in both independent and integrated practices increased from 2017 to 2018. This positive trend, however, may obfuscate the fact that physicians’ practices typically are not big money makers. Independent practices often produce limited income, but work toward more of a break-even bottom line, distributing pre-tax income in the form of compensation to their physician shareholders. Due to accounting practices and ancillary redistribution, integrated practices usually do not generate income for the health system that owns them.
For independent practices, joining an integrated system offers physicians stable salaries, access to technology, ability to recruit, and the opportunity to disengage from daily practice management responsibilities, including having to deal with collections and patient processing issues. But practices that are part of integrated health systems often lose money overall in part because they do not pay enough attention to revenue generation, according to Tony Javorka, Senior Manager at Blue & Co., based in Indianapolis, Indiana. “With many of my clients in hospital groups, we are trying to instill the culture of a private practice where they are more interested in how they are getting paid and if they have patients coming in the door,” he said.
Whether independent or employed by an integrated delivery system, practices can take steps to increase revenue, such as finding ways to move patients through medical encounters more efficiently, Javorka said. Groups also can negotiate payer contracts that fit the practice. Small practices may be able to see patients more efficiently than large ones, and this could help in negotiating for higher rates.
For practices to remain independent, they must focus on improving customer service, increasing volume, and seeking out ancillary service opportunities, Javorka said. He emphasizes to clients the importance of exploring every joint venture possible with local hospitals. Some practices create professional service agreements whereby a hospital purchases their time to fill a gap in services.
“There are certain practices out there that can make a good go at it and not be employed [by hospitals],” Javorka said. “It depends on how aggressive and active they are with managing costs, their relationships with external parties, and how nimble and efficient they are with their funds.”
Many integrated systems do not have a mature physician organizational culture. This can lead to a multitude of issues and negatively impact performance, said Fred Horton, MHA, President of AMGA Consulting. “Whether they have a healthy or unhealthy culture can impact their ability to perform well,” he said. “With a bad culture, it is virtually impossible to get to good performance.”
In addition, maximizing insurance contracts can be a challenge for practices in integrated systems, Horton said. These systems often focus more on inpatient care, which generates most of their revenue, and may not be as adept at negotiating physician rates with payers.
On the bright side, practices in integrated groups are moving past the transitional stage, and have been focused on improving their staffing levels and increasing productivity.
Another area of challenge in integrated systems tends to be in the form of efficient use of office space and leasing space at optimal rates, Horton said. Not only do practices often pay too much for their space, but many use only part of it or do not use it in the most efficient way possible. “Sometimes it’s because the organization have acquired space for a long-term strategic position, so initially there is more space than needed for the immediate term,” Horton said. “Care must be taken to allocate only utilized space onto the expenses of the group or the ‘system’s’ strategy will negatively impact the perception of performance of the practice.”
The AMGA survey showed that providers are extending hours and incorporating telemedicine to increase revenue. Rose Wagner, RN, MHS, AMGA Consulting’s Chief Operating Officer, said more groups are taking steps such as hiring scribes to improve patient flow and satisfaction. Regardless of the strategies practices are using to increase revenue, almost all can be better about implementation, Wagner said. “I’ve been in lots of organizations that plan, plan, plan and don’t execute—and that’s key,” she said. “They aim and never shoot.”