Why Becoming a Group without Walls Might Improve Practice Income

September 22, 2013

Looking for a way to keep your medical practice private? Consider becoming a group without walls which groups offices, but maintains autonomy.

Big might be good in the current and future medical marketplace and a model that brings together multiple smaller practices might also be the answer. This model is often called a network practice or group without walls (GWW) but it basically is a number of small practices, typically in the same specialty, that trade under a common tax identification number but which allows significant autonomy to each location. This might sound complex but it really isn’t, but let’s first look at why it makes sense.

Larger practices typically derive an attractive income stream from ancillary services such as imaging, lab, and therapy. Low volumes in small practices make the investment in staff and equipment prohibitive and current federal regulations (Stark Law) do not allow groups of practices to share these services. Under the GWW model these services fall under the group practice exemption to Stark regulations since they are housed under a common tax ID number. Additionally GWWs can jointly negotiate fees (and avoid federal antitrust issues) and can be more attractive to payers since they cover a wider geographic area and more patients.

If more income is attractive, how do you form a GWW? It's easier than you think. A typical merger of practices requires that funds be pooled, business practices aligned, and management be centralized. A GWW offers options that might be more acceptable to entrepreneurial physicians.

The GWW does require:

• A common fee schedule
• Standardized benefits (such as health coverage and 401(k) model)
• Equally shared ancillary service revenue

Beyond these few requirements, everything else is optional. Some GWWs elect to centralize services such as billing or accounting and some hire a skilled manager to tend to things like payer negotiations, technology adoption, and personnel management but, again, that’s up to you.

 Each "practice" or pod within the GWW is both a cost and revenue center. Income generated by the physicians at the location goes to the location. Bills resulting from staff and supplies are paid by the location. Profits are kept by the physicians. There might be a required payment to the central entity to cover shared costs such as the ancillary services, management, or data systems.

If the owners elect to form their GWW under a limited liability company (LLC) model, then the former practice corporation can own an interest in the LLC as well as individual physicians. Furniture and equipment ownership can be retained at the pod level. So, if things don’t work out, unwinding is not that complicated. Governance is by the physician owners.

Sound too good to be true? It really isn’t. There can be issues tied to deciding which ancillary services to develop, the division of ancillary revenue regardless of utilization of the service, common personnel policies, and managing central staff but these can be minor compared to the benefits.

If you practice in a market with a large number of solo, small two-physician practices, or three-physician practices this might be the answer to better control of your future. The GWW concept works regardless of your specialty. If you are competing against a large private group or hospital network this might be a way to remain independent.

There are some rules about where ancillary services can be located so using an experienced legal advisor or practice consultant might be a good idea. Larger accounting or insurance firms can provide advice on how benefits can be structured. Your practice management software vendor can describe how data can be segregated even though you work under a common tax ID. Forming a GWW certainly isn’t free but typically the investment pays back quickly.

Getting started is the toughest part. Getting colleagues who enjoy their independence to agree on a collaborative model can be tough but the alternatives might be less attractive. Each year a growing number of private practices are margining into hospital-owned networks. If you really want to remain private this might be something you seriously consider.