Stanley Feld M.D.,FACP,MACE
The concept of buying physicians’ practices, have the physician produce revenue by working 12 hours a day and efficiently billing and efficiently collecting billing opened an opportunity for Managers with advanced information technology expertise and equipment. It also offered an opportunity to form national networks to negotiate better fees with the national insurance industries. This represents Price Transparency for negotiated fees from the insurance industry by large physician networks. These National Practice Management Companies could also have immense negotiating power because they controlled the labor force. The development of these Practice Management Companies along with hospital systems controlling their labor force through the IPA frightened the insurance industry. Their promise of reducing the cost to the employer healthcare benefit from 18% of gross revenue to 12% of gross revenue seemed to be fading as their negotiating position was threatened by coalescing groups of networks.
The industry of National Practice Management Companies grew quickly. The Professional Management Organizations (PMOs) had the same notion as the hospital system. If they put a powerful information technology system in place and bought physician practices, maintained the productivity of the workforce, and leveraged the ability of the information systems, they could increase the PMOs value. Once that was accomplished they could go public, and make millions from a hard working labor force (physicians and their practices). The attraction to the physicians was the cash and stock in the PMO obtained from selling their practice. Additionally, the practice debt was taken over, salaries were guaranteed with incentives and the complexity of practice management was gone. The physicians could also buy additional private stock in these startup PMOs. The hope was when the PMO went public the physicians would get an additional payout for their practice. This was supposed to represent additional incentive to make the Practice Management Organization successful. Remember, the physicians could not keep track of their collections and income was falling. Income was falling because of decreasing fees, increasing overhead and poor individual practice administration. The promise of the PMO was to fix all of this. Then the physician simply had to take care of his patients.
None of these management organizations foresaw the inevitable. Physicians were now paid employees for a larger company. The Physicians did not like the corporate rules applied or the restrictions on their freedom to make clinical judgments. No matter how hard they worked their income did not increase. Bilateral mistrust increased. The physicians’ productivity decreased partly because of reduced work hours, coffee breaks, and lunch hours, luxuries they did not enjoy previously. Physicians adopted a 9 am -5 pm schedules rather than a 6 am-9 pm schedule they maintained when they owned their own practice.
Who suffered? The patient and the physician patient relationship suffered greatly.
What happened next?
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