Can Orthopedic Surgeons Still Practice in Small Groups?

Written by  | July 07, 2010 | Print  |
As reimbursements tighten and costs rise, more orthopedic surgeons are considering merging into large group practices or signing on for hospital employment. Bigger entities can negotiate more favorable contracts, provide more capital for projects, reduce unit costs and attract patients by offering a wider array of subspecialties.

But physicians who join large groups have to give up some independence and that's tough for many orthopedic surgeons, says Curt Mayse, a principal with LarsonAllen, based in St. Louis.

"Orthopedic surgeons are by nature very independent, competitive individuals who can have a difficult time fitting into a group culture," he says. A substantial number have held out from the trend of bigger groups. Orthopaedic Practice in the United States reported 20.9 percent of private practice orthopedic surgeons were in solo practice in 2008, while 8.3 percent were in a multispecialty practice and 44.3 percent were in groups of any size.

Some practices can stay small
Mr. Mayse says some orthopedists, such as those in smaller urban areas, are still able to resist the trend toward largeness. If you are the only game in town, negotiating insurance contracts is less onerous.

He says small orthopedic practices in niche subspecialties can also thrive, even in big markets. For example, Thomas J. Grogan, MD, can function as a solo pediatric orthopedic surgeon in Santa Monica, Calif., because he is one of only two in this subspecialty in that part of the Los Angeles area, says Dede Montgomery, his practice manager.

She says Dr. Grogan has not been forced to join managed care networks. "As an out-of-network provider, we get 60 percent of the usual and customary fee of the insurer, and the patient pays the rest," she says. He dropped out of Medi-Cal (Medicaid) many years ago because "it pays too little and too late," she says. The practice does not have money-making MRI or CT scanners and has to send patients to outside centers, but it is has enough money to install an electronic medical record, which will be in operation soon, she says.

Dr. Grogan is adamant about his independence. A few years ago, Ms. Montgomery says, she was discussing renting space from an orthopedic group. "It turned out they wanted to do more than share space," she says. "When they asked for our accounts receivables, we dropped the discussions."

Mr. Mayse says subspecialists in total joints or foot and ankle can also survive in small groups of even three or four, especially if they offer a mixture of subspecialties. "You can make it if you have a good referral network and a strong affiliation with a hospital," he says. In contrast, he says survival is now very difficult for small groups of general orthopedics, which tend to have doctors over age 50, but "they could probably hang on until they retire."

Small practices can share services
What is too small? An orthopedics practice is considered small if it does not have enough volume to offer ancillary services in-house, such as physician therapy and imaging, which can help keep the practice afloat, Mr. Mayse says. But the right number of physicians required to produce that volume — the "sweet spot" — has risen in recent years because reimbursement rates for imaging have declined. He says it used to be that six or seven orthopedic surgeons could support ancillary services but now it takes at least eight to 10.

The alternative is to band together in loose networks and share services. Sharing ancillary services would normally be a Stark violation, but several small groups can do so legally if they share the same premises, says Douglas S. Free, a partner in the law firm of Kessenick, Gamma & Free in San Francisco. By forming a management services organization, these groups can jointly own an MRI as well as share some front office and billing staff, he says.

Mr. Mayse says small practices can also band together and merge billing and the practice management functions under an "umbrella corporation" without violating antitrust laws. He is currently helping some orthopedic surgeons in St. Louis form an umbrella corporation and completed another one in Minnesota. Practices can stay in separate locations but cannot merge clinical staff, he says.

Independent practices can also clinically integrated systems to share services, such as negotiating with insurers in one large bloc, without violating antitrust laws, says Robert Baudino, president of the Baudino Law Group in Des Moines, Iowa. But member practices would have to follow mutually agreed-upon clinical protocols and connect with each other through shared IT systems, he says. Also, clinically integrated organizations often contain hospitals and other specialties.

If the practice has not choice but to join a larger practice, Mr. Mayse suggests joining a multispecialty group practice with no other orthopedic surgeons in it. The orthopedic surgeons could then preserve some independence, such as picking their own medical devices, and would also have a ready source of referrals from primary care physicians and other specialties in the larger group.

Mr. Free is a strong believer in large practices for orthopedic surgeons. "Health reform is producing more uncertainties for the solo or small practice," he says. "It's getting tough to be a solo orthopedic surgeon. Many people still prefer it, but in my opinion, it is not the best way to go."

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