IPAs and Super Groups: Are They for You?

September 9, 2015

Balancing medical practice independence and collaboration can be tricky. Here are two possible options to consider.

The practice of medicine is generally considered one of society's most-valued services, and in the United States respect for individualism and independence historically boosted the profession's reputation as a solid career. There are no worries about the occupation's prospects for job growth - the U.S. Bureau of Labor Statistics projects employment of physicians and surgeons to grow 18 percent from 2012 to 2022, faster than average for all other occupations.

Still, that growing demand rests uneasily on a shifting base of healthcare reimbursement changes. Getting through medical training requires a high amount of self-determination, so it makes sense that many enter the field envisioning long-term solo practice or small partnerships. But waves of organizational change threaten to clear away those still clinging to independent private practice. It might not be an understatement to say that in this new era, practices working collaboratively may not just be only the best strategy to thrive, but the only way to survive.

"Collaborating is crucial," says practice management consultant Carol Stryker. "… Practices must join forces in a formal way to bring quality of care up, drive costs down, and expand value."

Said succinctly: Size matters, especially when it comes to economies of scale.

"The bigger a physician group is, the more bargaining power they have with payers," says attorney Michael Kreager a business and healthcare law specialist. "[Plus], you'll get more for your money when you buy 100 boxes of gloves instead of only 20."

And with size comes structural changes, so with more moving pieces comes more oversight for practices.

"…Applicable labor laws change when your group of employees increases," notes Stryker. "We're all looking forward while trying to keep our footing in the present day-to-day. The need for physicians to have people on board who are charged with paying attention to every detail, keeping an eye on [human resources] and HIPAA and training, so that you're doing things right and legally - that's here and now."

But don't think that all the added layers necessary for collaboration are too difficult and that your next best option is being acquired by the local hospital.

"Selling out to a hospital means they get to direct how [their] practice operates," Stryker says. "Simply put, physicians can end up trying to keep bean counters happy."

Instead of seeing their hard-earned private practices absorbed into hospital systems, a growing number of physicians are utilizing a pair of options to bulk up and add value: independent physician associations (IPAs) and super groups.

IPAs

IPAs are sometimes referred to as a "practice without walls" - several different practices joined specifically for the purpose of contracting as a group. Each practice bills under its own tax identification number. Each physician in the IPA hires his own staff, has his own rules in place, and runs his practice essentially independently.

Wayne Lipton, who formerly ran a physician-owned IPA, refers to them as "strictly insurance collaboratives." The IPA is in charge of negotiations on behalf of separate independent practices, and it comes with an overhead cost. Ownership varies: The association can be owned by doctors in the organization or not.

Part of the IPA format is a necessary concern about antitrust issues. The Federal Trade Commission (FTC) and Department of Justice enforce consumer protection laws meant to prevent price fixing among competitors. If, for example, a couple of OB/GYN practices want to band together and negotiate rates with an insurance company, the negotiations would occur separately in order to stay within the bounds of the law.

"The 'rule of reason' says that if competitors collaborate in a manner to efficiently deliver medical services and effectively reduce costs of medical services - and they follow the rules - that can be done," says Kreager. "But an intermediary is required to go between the insurance company and each of the practices in the IPA. This inefficient negotiation process is one of the drawbacks of IPAs."

Is It Right for You?

Practice consultant Regina Mixon Bates stresses the basics in setting up groups of any kind, especially given the intricacies of ones like IPAs.

"You're entering into a special type of legal structure, so you have to be prepared to work through development of an operating structure that all members can be happy about - this may at times require the use and support of lawyers, accountants, and consultants who will need to work together to make sure common goals are met," she says.

If you want to continue being as independent as possible and keep running your own show, IPAs make sense. You can get better reimbursement rates than going solo without giving up as much autonomy as you might in other collaborative models. Remember, the association will be required to support overhead expenses for a negotiation liaison. For some, shifting to an IPA might turn out to be a transitional move toward an eventual super group.

Super Groups

An alternative to the bulky negotiating requirements of IPAs are what might be called "super groups" - several practices that join together as a single entity for more than just insurance contracting purposes. While variations abound, super groups can share many practice components - from an EHR to human resources to accounting and more - all under a single, common tax identity.

This "homogenization" is exactly what leads to economies of scale in super groups by way of efficiency and lower overhead, Stryker explains, but at a cost: less physician autonomy. For example, the group may decide to give the new entity a name that does not clearly link each physician's name with the new practice. Depending on the specifics of the group's agreement, you and your partners will be required to arrive at consensus on a number of variables that, prior to joining the super group, used to be your decision alone.

In terms of antitrust worries, Kreager says the FTC has already issued approvals to some very large groups in which the component practices were functioning partly independently, but were demonstrably integrated clinically. He says that super groups with a shared EHR system, in particular, are able to demonstrate both patient benefit and cost reduction through measurable patient outcomes across the entire group. Additionally, Lipton adds, EHR-sharing provides the potential to lessen bureaucracy that might dilute some efficiency of scale, thereby presenting another collective advantage in negotiations with payers.

A common challenge presented by the formation of a super group is when patients feel that their tried-and-true practice experience has changed flavors. Perhaps the new, larger group elects to use a call center to handle appointments, or maybe there are related changes in the checkout process, both of which might be upsetting to long-time patients. There may be a learning curve involved.

Is It Right for You?

If you can give up a little more autonomy and enjoy working with others in parallel leadership fashion, super groups may be the answer for your practice. Collaborating together in this way can mean additional bureaucracy and mindful communication processes, which Lipton says, depending on your preferred work style, might dilute the efficiencies-of-scale benefits for you or your staff.

"When transitioning into a super group, the flavor of the practices changes," says Lipton, who now serves as managing partner of an independent concierge medicine provider. While you should be prepared for some culture shift, you can smooth the transition by entering into this arrangement with practitioners who are on the same philosophical page as you and your staff, he says.

Making Collaboration Work

To truly find strength in numbers, Stryker stresses the human elements.

"Doctors should keep control of the organization; they need to be the executives and continue to drive the group's priorities," she says. "Unfortunately, most aren't drawn to caring about business operations, and that's OK - so long as the people in those operational roles clearly work for the doctors."

And don't forget that collaboration comes with some sacrifice as well.

"For economies of scale to actually materialize, you've got to understand who the owners are, who the business people are, and let them do their work," says Stryker. "You have to acknowledge that you've given up some autonomy. You've got to play well with others."

Tracy L. Morrisis a freelance writer based in Houston, Texas. She's been a writer and editor for healthcare industry publications and websites, as well as a consulting writer for practices ranging from solo physicians to national corporate networks. She can be reached via editor@physicianspractice.com.

This article originally appeared in the September 2015 issue of Physicians Practice.