As physicians face the reality of consolidation in certain segments of the healthcare industry, rising costs such as the costs of malpractice coverage, the tangible and intangible costs of administering a private practice and the critical importance of power in the managed care contracting process, many are moving away from traditional private practices with a few colleagues and making momentous changes in the way they practice.
One way for physician practices to prosper is by strategically restructuring such that they themselves can acquire the scale and resources to accomplish their goals with more autonomy.
Another option that has gained increasing popularity is for practices to join forces with physician organizations with vast resources, economies of scale, significant management expertise and sophisticated information networks such as large practices, hospitals and physician practice management companies (PPMCs). Of course, as with any transition in practice methodology, there are price tags that come with such a movement. There are a few different PPMC models, some including ownership of the managed practices under an umbrella organization and others involving purely fee-based management services such as management services organizations (MSOs). The long-term viability of the PPMC model has been seriously questioned in the past decade as former publicly traded PPMC giants like PhyCor* and MedPartners** quickly rose to prominence and nearly as quickly fell from grace. However some industry experts believe that some of these consolidation approaches, including MSOs and umbrella organization PPMCs, can still be a good solution for physicians in the right format and right circumstances.
As the larger consolidating organizations flourish, so do investment opportunities. McGuireWoods will be hosting a complementary webinar on Thursday, March 25th focusing on issues relating to investment in the physician practice management space as well as the dialysis industry. This webinar is the first in a series organized by Krist Werling, myself and other colleagues at McGuireWoods that will focus on assessing targets, conducting due diligence and related issues in various healthcare niches. Registration is available here, and in future posts we will further discuss the opportunities and challenges in these niches.
* In late 2002, PhyCor emerged from Chapter 11 bankruptcy. One of its divisions, privately-held Pivot Health, continues to provide healthcare management services.
* Following the decline of its PPMC business in the late 90’s, MedPartners began to focus exclusively on prescription benefits management as Caremark Rx and Caremark International, which merged with CVS in 2007 into what is now CVS Caremark (ticker symbol CVS).