Once believed to be the darlings of the eyecare industry, practice management companies have become objects of scorn and derision. It’s no wonder: Physicians have lost their shirts, practices have been set back years and the entire concept of corporate ownership and management of physicians’ practices has been delivered a huge black eye.

How bad has it gotten? Physicians Resource Group, Inc. (PRG), the giant in the eyecare industry, is taking on water faster than it can bail it out and the number of physicians suing the company continues to rise.

In fact, three physicians we contacted said they wanted to talk but were advised by their attorneys to remain silent because of pending litigation. More than a half-dozen others didn’t return calls.

"A lot of doctors never told the truth about what they knew was going on because they feared that bad publicity would drive their stock down," offers Keith Liang, M.D., medical director of the Center for Sight in Sacramento, Calif.

Consider this: PRG’s stock sold as high as $34 a share in 1996 and dropped to $8 a share in the fall of 1997. The company has since been booted off the New York Stock Exchange.

"Those physicians still locked in (to PRG), should do anything they can to get out before the bankruptcy," says Mark D. Abruzzo, J.D., an attorney in Berwyn, Penn., whose firm specializes in health care.

So, this means you should steer clear of all physician practice management companies, right? Not exactly. Although PPMCs have had troubles, some arrangements could be right for you. It depends on the particular model you’re exploring and on your individual situation and goals. Heed the advice of the experts, do your homework — and be very careful.

Abruzzo doesn’t talk ophthalmologists out of joining PPMCs. But he does paint a worst-case scenario so that his clients are aware of what can go wrong.

"PPMCs made sense for physicians getting out; retiring (as long as they didn’t accept all stock as payment for their practice)," says Abruzzo.

"Right now, I probably wouldn’t approach them (PPMCs)," warns Abruzzo. "I’m not aware of any PPMCs with a track record. I’d be real cautious."

In fact, Abruzzo, who used to set up deals between physicians and PPMCs, says he hasn’t received a call from a doctor interested in joining a PPMC in about 6 months. "I don’t expect the phone to ring anytime soon."

"Doctors should be real careful about any company that tells them they’re going to increase the physician’s revenue by 10%, while cutting their expenses by 10%," warns Abruzzo.

Still, Abruzzo admits that the industry is young. "One of the things that we thought is that there were too many companies," he says. "It’s dropped from about 30 to about 15 companies, and we think that maybe five or so will survive."

Before you contact an accountant, attorney or other professional advisor, one expert says you should ask yourself a simple, yet pivotal question: Why?

"Ask ‘why’ five times after every answer you come up with," emphasizes Mark P. Kingston, a former executive at PRG and at Integrated Orthopedics Inc., a Houston-based physician management services company.

For example: Why do you want to sell your practice to a PPMC? Why would you take stock in the company as payment? Why are you giving up some management controls?

"Why spend $50,000 on an attorney and then ask, ‘why?’ " Kingston recommends asking ‘why’ at every step along the way. A spouse or an independent, trusted friend can ask you ‘why," he says. You don’t need an accountant or attorney until you get close to a deal.

"My advice is to first know your own mindset very well," says Gil Weber, M.B.A., a managed care and practice management consultant in Davie, Fla.

If have trouble giving up control, PPMCs probably aren’t for you. On the other hand, "If all you want to do is see patients, the PPMC concept can make sense," says Weber.

"Everyone is different," adds Dr. Liang. "Some ophthalmologists would rather do surgery inside an eye than put a simple ad in a newspaper for a receptionist," he says. "You need to know how comfortable you can become with handling the business end of practice."

The thing is, says Dr. Liang, while most of science is black and white, most of business is gray. "A lot of doctors can’t deal with that," he says. "I’ve learned a lot from watching what other doctors do; I’ve learned from the good things and I’ve learned from the mistakes, too."

"If you’re a solo practitioner who just wants your practice to grow, you’re better off just getting a partner," advises Daniel S. Durrie, M.D., director of refractive surgery at Hunkeler Eye Center in Kansas City, Mo., which belongs to a PPMC operated by NovaMed. "For the large, dominant practice it makes more sense," says Dr. Durrie, who is a partner in the practice.

"It’s hard to get physicians together; there are a lot of egos to contend with and different approaches. But it’s easier when there’s a management team," adds Dr. Durrie.

Stanley B. Teplick, M.D., medical director of Teplick Laser Surgery Center in Portland, Ore., doesn’t believe PPMCs have much to offer. "You can’t expect a company based in Dallas, Texas, to understand the market in Portland, Oregon," he says.

"There’s simply very little the PPMC can add to my practice," says Dr. Teplick, who bought a practice (not his original practice) from PRG. "They don’t have the tools to add value and I have yet to see a model that works well."

He says that ophthalmologists should keep in mind that a PPMC buys your assets — "and the main asset is you."

Dr. Teplick, and others, warn about the ‘tremendous upside’ that some PPMCs promise. "Watch out when they want to pay for your practice with stock."

When you consider a PPMC, make sure you realize it’s for the long-term. It’s a commitment — a lasting one.

Along the way, be sure the PPMC isn’t dictating every aspect of your practice. "When you go into a restaurant, the waiter doesn’t tell you what to order; you decide," explains Kingston. The PRG model was defined as rigid. It was "do to the doctors" rather than "do with the doctors," he adds.

Any practice management service should be customer-driven. Everyone wants choice, and if a PPMC wants your practice badly enough, it’ll negotiate. "If they won’t negotiate, it’s not a contract — it’s an ultimatum," says Weber

On the other side, don’t blindly sign when the PPMC promises you fantastic profits that probably won’t ever appear.

Physicians enter PPMC relationships full of enthusiasm, anticipating significant benefits for their medical practices, Weber says. But for various reasons, a lot of PPMC affiliations won’t work, and the deals eventually need to be unwound. Weber suggests you have the equivalent of a prenuptial agreement in place at the front end. Chances are you’ll have problems later on, when it comes time to go your separate ways.

You’ll want to have agreement on such issues as repurchasing your practice assets, or PPMC buy-back of your shares if the per-share value falls below a certain level, Weber advises.

Experienced business advisors and attorneys can help build this pro-active strategy and incorporate it into your various documents. (See "What to Look For," at left.)

Communication is still lacking between physicians and PPMCs, says Doug Badertscher, president of Pendulum Practice Management Co., Sarasota, Fla. For too long, too many PPMCs have viewed all practices in the same light. "Here we say, ‘when we’ve seen one practice, we’ve seen one."

Badertscher believes PPMCs have a future, a bright one. But he believes that the type of PPMC that will succeed won’t be the type you’ve been seeing the last several years.

Badertscher and others agree that PRG and others concentrated all of their energy on acquiring practices. Not enough attention was paid to the purchased practices.

If you decide that a PPMC’s right for you, tread carefully. If you’re not sure but want to investigate an exit strategy or plan for the future, read on. The next article will help you make your practice into something that others will be interested in obtaining.

For those physicians considering the PPMC option, and for those who are already members of a PPMC, look for the following:

• a documented history of growing yours and others’ practices
• an open directory of members so you can choose whom to call with your questions
• whether the company audits itself and, if so, whether the audit is available for you to see
• whether the PPMC’s primary focus is on buying practices or on consolidation
• how much control over staff and other decisions you will have within your practice
• if the PPMC is privately held, are there plans to go public? Consider how will that change things
• how long will you be "locked up?"
• if you’re not in an equity position, how long will it take to achieve an equity position?
• a track record that the company can capture and hold managed care contracts
• what protections exist if you want to get out of the contract.