Whether to jump to an ACO, or to remain as an independent practice?

Whether to jump to an ACO, or to remain as an independent practice?

The roll-out of the Patient Protection and Affordable Care Act (ACA) is fundamentally overhauling the American medical industry. Exponential growth in billing codes, drastic modifications to reimbursement values and processes, and reclassifications of medical entities have all contributed to the confusion of the transition, even while the Act has improved access to health care for millions of American citizens. As full implementation rolls on (with completion expected in 2018), issues and challenges arising from the transition are being identified, evaluated and resolved. One question posed by the transition: when, if ever, is a good time to close a private practice in favor of joining an ACA group?

Even before the ACA, medical centers were buying up physician practices. Solo practitioners across the country found themselves in need of administrative support that was cost-prohibitive to their small practices. Falling reimbursement rates, increased regulations, and the costs of installing electronic health records (EHR) were eroding potential profits.

However, similar practice-buying activities in the 1990s proved challenging, when the purchaser-hospitals couldn’t manage outpatient services on a profitable basis. Those providers were able to go back into private practice because the reimbursement rates remained sufficient to sustain those newly-reopened businesses.

These days, reimbursement rates are not as high as they were in the 1990’s, so remaining an independent medical business is again a cost-challenged option. At the same time, the ACA has enhanced the value of joining with a hospital or coordinated care facility by establishing “Accountable Care Organizations” (ACO). These voluntary organizations were launched in 2012 as a facility to improve the safety and quality of care and reduce health care costs in Medicare.

By definition, an ACO is a group of providers and suppliers of services who together coordinate care for the Medicare patients they share. The goal is to provide seamless, high-quality care for Medicare beneficiaries while lowering costs of medical service delivery. As a “patient-centered organization,” the ACO creates a partnership between patients and providers for care decisions.

In order to have the staff available to meet demand, hospitals across the country have been buying up private physician practices, and physicians have been selling their practices so both sides of the transaction can benefit from continuing financial reimbursement from the Federal government.

For independent physicians contemplating their future as the ACA unfolds through the American medical community, understanding the relative and measurable values of their current practices can give guidance as to whether to jump to an ACO, or remain in independent practice.

Establishing a baseline for current operating efficiencies can also identify where current practice activities are losing money, maintaining a margin or even bringing in unanticipated revenues. In every case, the medical practice as a business will benefit through clarification of its financial situation, especially when considered in context with the implications of the ACA.

Practice administration factors can have a significant impact on the relative profitability of any practice. Optimally, every practice is physician-driven – that is, the physicians are the final decision makers regarding business governance, financial oversight, and patient care decisions. Failure to maintain a physician-directed practice can lead to challenges with medical boards and governmental overseers. Inadvertent administrative ethical lapses can lead to discipline actions, fines, and even lawsuits for the doctor. Fluctuations in practices and policies can confuse non-medical administrative staff, to the detriment of the patient. The complex interrelationships between patients, providers, payers and governments all contribute to the difficulty of ensuring high-quality, ethical medical care is the primary focus of all practice staff. All these factors underscore the need for every private practice physician to maintain a close focus on all the activities going on within the business.

One way to both collect relevant practice data as well as ensure proper and diligent oversight of both patient and business practices is to hold regular entity business meetings. Tracking the frequency of these meetings can determine the level of engagement in the business by all relevant staff, including the doctors. Meeting attendees should include both medical and administrative staff. Agendas should include reviews of general financial, employee and patient activities, relevant medical information and other critical practice information.

Issues that are not raised in these forums should be calendared for discussion, oversight and monitoring with the same frequency as the whole business meeting. Maintaining a close eye on where the money goes is especially important regarding practice profitability. Financial matters not open for group discussions include the costs of employees and potential investments in systems upgrades.

Compensation for all staff is often the biggest line item on the balance sheet. Tracking corporate costs for bonuses, benefits packages, insurances and other economic factors will reveal if or when those costs become prohibitive in terms of corporate economic success. The ACA is also requiring use of electronic health records (EHR) systems, the acquisition and implementation of which may be prohibitively expensive, especially for a smaller practice.

The ACA and its ACO’s are strongly encouraging the members of the American medical industry to join with or create group practices that provide improved health care, reduced costs, and improved efficiencies. Practitioners considering whether to move forward on that path should evaluate all aspects of their practice, including administrative practices and all economic factors. By doing so, each physician will have the knowledge they need to decide whether it is better for them to move, or to remain in their independent practice.

For assistance in determining or enhancing the profitability of your private practice, contact us today.