Just because someone builds a physician association, doesn’t mean you need to sign on.

I have noticed an increase in calls from clients asking questions such as:

• “Can you help me create a management services organization [MSO] to protect my referral network from being cut out of payer contracts?”
• “I received a provider agreement from a national eye-care network. Have you heard of it? Should I join?”
• “A group of doctors wants to put together a clinically integrated network. It’s going to cost a lot of money. Should I do it?”

Whenever there is uncertainty in the payer environment — as is the current situation related to the Affordable Care Act, the evolution in payer methodology and the consolidation of the insurance market — doctors look for ways to protect their businesses. The current situation is reminiscent of the mid-1990s when a variety of organizations formed to thwart the perceived threats of “Hillarycare” (a managed care reform plan proposed by the Clinton administration) by looking for ways that ophthalmic practices could join together to protect their interests and access to patients.

The ’90s formation of physician practice management companies (PPMCs) was a reaction to managed care forces and an effort to consolidate physician markets. Many other organizational structures gained popularity during that time frame as well.

While the PPMC experiment failed, other ’90s business organizations survived, and we are seeing a resurgence in physician-hospital organizations, specialty independent physician associations (IPAs) and preferred provider networks.

These organizations typically affiliate with ophthalmic practices, surgery centers and optometric practices to provide the full continuum of eye-care services. They use a variety of organizational structures — most commonly an IPA or MSO — to bind the group. Most are formed solely for contracting purposes or to share in common practice expenses such as computer systems, billing services and human resources.

Given today’s changing payer environment, a common priority of these organizations is the standardization of reporting and delivery systems to meet payer quality and cost containment initiatives.

START WITH THESE QUESTIONS

There are many legal concerns regarding antitrust whenever doctors come together. I’ve seen doctors spend substantial legal fees just to get an entity operational; I’ve also seen situations in which no real benefits materialize that the independent practitioners didn’t already possess. To help clients answer the questions listed above, I always ask a few questions of my own to help understand if there is any value to be gained in these types of relationships.

• What are the payers demanding in your market area? In more densely populated areas, practices already experience demands from payers in terms of reporting requirements and the desire to enter into capitated contracts. Capitated contracts are those in which practices receive a flat dollar amount per insured member per month regardless of the quantity of provided services. In exchange for sharing the risk with the payer, the organization has exclusive rights to those “captured lives” insured by the payer. It is essential that you assess your market and the number of lives that the payers will control to gain a clear understanding of the importance of being able to contract with each payer. If it appears payer activities may limit your access to patients, assess your practice by looking at its strengths, weaknesses, opportunities and threats (a SWOT analysis) from the payers’ perspectives. Below is a look at what payer’s want and several related questions to consider.
• Payers want you to prove value. Do you have strong reporting platforms that provide good data detailing the cost-effective management of patients?
• Payers want satisfied members. What do your patient satisfaction surveys indicate?
• Payers want the full spectrum of eye-care services. Do you provide that in your practice?
• Payers want geographic coverage and easy access for their members. Given their membership, do your practice locations meet their needs?
• Why do you want to form/participate in this type of organization? If you have any glaring weaknesses in your SWOT analysis, such as limited eye-care services, you may want some type of network affiliation to meet payer demands. Beyond payer contracting desires, many practices are considering an MSO to help share expenses with area practices that have similar values and are facing the same challenges. Practices that face major expenses to upgrade IT systems might find it helpful to pool resources with others to make the best investment possible. Also, a desire to outsource increasingly complex functions (such as human resources) might make an MSO attractive.
• How likely is it that national networks will help you retain access to patients? When considering a solicitation from a national network, find out how long the organization has been in business and scrutinize its track record for negotiating contracts. Historically, national networks have gained little traction because payers are regulated by states and are driven by local relationships (primarily with hospitals). Presently, health care is locally and regionally driven.
• Is there a demand from your referral sources? When Meaningful Use was being implemented, I worked with an ophthalmic practice that wanted to develop an MSO with a focus on computer systems and billing for optometric practices. The owners believed that optometrists would want their electronic practice management and health records system. But a quick survey helped us determine that we were trying to solve a problem that didn’t exist for the optometrists; those practices already had systems that worked for them. A little research prevented us from putting together an infrastructure and company that would not have had any customers. On the other hand, optometrists might be interested in an integrated network organization if it could help get them onto payer panels where they have previously been denied access.

BETTER TO BE STRATEGIC AND WATCHFUL

Practices have been working for years to best position themselves for external payer demands. Many already have all subspecialties, including optometry, optical and ambulatory surgery centers. Furthermore, many larger practices already have formed networks of referring doctors to expand geographic presence. Depending on your answers to the questions posed here, you may not need to worry about an affiliation. Certainly you don’t want to invest in an entity to provide services that are not being requested.

This, however, does not give you permission to be complacent. Keep a keen eye on payers and local hospitals to stay abreast of their activities. External forces should always be considered when planning for your practice’s future. Conduct adequate research and give consideration to all options so you can make the best decision and not waste money and time building an organization that nobody wants or needs. OM

Maureen Waddle is a senior consultant with BSM Consulting, an internationally recognized health-care consulting firm headquartered in Incline Village, Nev. and Scottsdale, Ariz. For more information about the author, BSM Consulting, or content/resources discussed in this article, please visit www.BSMconsulting.com .