INTEGRATION OPTIONS

The following document describes several different integration options which may be considered by physicians looking to strengthen their position in their local markets. In general, the level of integration present in the models increases as the list progresses.

Network Affiliation or Association

    These models resemble a club with a general purpose. They are useful for communication, education and camaraderie. The primary benefit of these models revolves around the creation of a forum for supportive dialogue, communication and commiseration. They can usually be developed quickly without significant costs. They are, however, not functional for contracting or for implementation activities.

Joint Ventures

    Joint Ventures are usually designed for developing specific capital projects (buildings, for example). They are usually project driven and generally have a defined primary goal. In most cases, profit or loss distribution is on some basis which is closely related to the amount of capital or risk assumed by the investors. They can involve physicians and non-physicians and their success is defined by a particular balance sheet and income statement related to the project.

Independent Provider Association (IPA) or Provider Organizations (PO)

These models are generally used to organize independent practices into contracting entities. The independent provider association contracts with HMO’s, direct purchasers, or other vendor groups. They should not be confused with preferred provider organizations which can be formed by providers, purchasers or intermediaries. The key distinction between the IPA and the PO revolves around the independence of the individual physician or practice. Provider Organizations usually lack a specific hospital affiliation.

Management Services Organization (MSO)

Under this model, the MSO actually does services for member, client or subscriber practices. It can be formed as an equity (for profit) business or as a cooperative (cost sharing entity). It is normally capitalized in conjunction with a healthcare system, its owners, a PO or by loans. It can be as simple as a billing service or it can actually combine the assets of practices (much like a foundation model). Some MSOs provide staff resources to IPA’s or to networks to assist with contracting activities. Some MSO’s own and manage buildings and have a full complement of staff for practice support. Sometimes, if it is set up to gain outside investors, it is termed a PMC or physician management company.

Physician/Hospital Organization (PHO)

This model is generally nonspecific and encompasses all joint ventures. Usually, the medical staff and hospital form an IPA or a PO and it becomes a partner with a hospital in a variety of medical delivery related ventures. Exclusivity usually becomes an issue since there is generally some selection process to qualify doctors. In small communities, the entire medical staff may be invited to participate.

Practice Foundation

This model includes a non-profit group of doctors acting and behaving like a traditional group practice except that they have specific responsibilities for charity care, teaching or research. The actual assets are owned by a not-for-profit foundation, generally with some kind of hospital sponsorship. Advantages include tax avoidance, the ability to receive grant applications and access to qualified low interest funds for capital.

Group Practice Without Walls

The Group Practice Without Walls usually includes a single billing number, combined pension programs and benefits package and a central fee schedule (unless there is wide geographic diversity). This model is not a true group practice, however, since individual sites (or units or groups) can still manage themselves and make determinations about their own staff, and equipment. Generally, this type of organization is used by a group which seeks the structure to address anti-trust or Stark hazards but who wishes very minimal integration.

Single Specialty Group Practice

This model includes only physicians of the same specialty. The group uses one billing number, one fee schedule, one benefit package, and usually relies on a formal group governance structure and some kind of collaborative income determination methodology. This model, unlike the ones described before it canrepresent a significant level of integration.

Single Discipline Group Practice

This model is similar to the Single Specialty Group Practice but made up of only one discipline such as primary care, vision care, surgery, cardiology and cardiothoracic, etc. The grouping must not be confused with the more general categories of “specialists, non-primary care” or “everyone left out of the hospital deal”.

Multispecialty Group Practice

Multispecialty Group Practices are defined by the same criteria as the other true group practices but include multiple specialties and disciplines. The inclusion and integration of the various specialties should be done in a managed fashion to ensure that the group includes the right mix of specialties and the appropriate proportions to allow for a symbiotic coexistence.

A Purposeful Combination of any of the Above

Examples might include: An MSO with hospital sponsorship. A group practice sponsored by an IPA. A single specialty practice supported by an HMO. Any number of these organizations could be supported or connected with any other with only common sense, financial integrity and regulatory parameters limiting the choices.

INTEGRATION ALTERNATIVES

The following table highlights the advantages and disadvantages of the models described above.

Alternatives Pro Con
Loosely Affiliated Networks
Network Affiliation or Alliances
Joint Ventures
IPAs/Physician Organizations
MSOs
PHOs
Practice Foundation

Contracting only, little business integration

Inexpensive

Non-Threatening

Maintains Group Autonomy

Unpredictable

Loose and ineffective

No economies of scale

No ability to do case management

Group Practice w/o Walls
Individual site autonomy, one billing number with separate site control and accounting Simulates site independence

Low political cost

Easily achieved from a functional perspective

Solid contracting platform

Little or no economies of scale

No group planning or benefit from critical mass

Minimal ability to participate in capitation or case management

Practice Merger
Single Specialty Group
Single Discipline Group
Multi Specialty Group

Negotiated integration as a group practice

Ability to accept capitation

Potential economies of scale

Solid contracting base

Positive environment for physician discussion and exchange of ideas

Group planning

Threatening to existing autonomy

More costly than other options

Functionally challenging

Practice Acquisition
Single Specialty Group
Single Discipline Group
Multi Specialty Group

Establishment of a process for others to join the main practice with full integration under existing rules

Preserves existing culture and autonomy

Established decision making structure preserved

Functional order is preserved

Threatening to target groups
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