An Alternative to Private Practice Extinction

It's Your Choice

Physicians currently practicing in an IPOP have to decide whether they have the will to stop the typical in-fighting and self-destructive behavior that characterizes most physician owned group practices, especially the smaller group practices. Physicians have to accept the fact that now the business of medicine is more important to the future success of an IPOP and its physicians than any individual physician in the IPOP. The hospitals and medical investors view physicians as a commodity, and do not make a distinction based on individual training and/or skills. If you have a license, are upright and breathing (with no significant prior malpractices claims), a hospital or medical investment group somewhere, sometime soon, will hire you, and probably initially at a salary higher than you are making now. Physicians are viewed as a plug and play, homogenous resource that is parsed by the specialty needed by the hospital or medical investor group at the time of hiring.

The future successful IPOP model now has more sustainable economic value than any individual physician in the IPOP. The "mom and pop" (think Marcus Welby) "eat what you kill" model of old no longer works in today's healthcare environment. The future IPOP success will be based on the aggregation of a larger number of independent physicians in single and/or complimentary specialties who want to be empowered, not, in power. Physicians also have to have the willingness to make the investment of time, energy, and money to build a healthcare business, not a traditional group practice. The new IPOP must be based on sound dynamic business principles that has the goal of having the IPOP last beyond the practice life of any individual physician working, or owning, in the IPOP. The physicians have to stop the "I want" mentality, and move to the "we need" mindset if they are to survive and prosper as an IPOP in the future. If not, the physician can always just go to work for a hospital or medical investor group.


All Specialties are now faced with the same type of decision that had to be made in the 90's by primary care physicians (PCP) as the hospitals and medical investors began acquiring PCP Practices. Many PCPs either made the wrong decision, or no decision, which was sometimes even worse. There are innumerable horror stories about the amount of destruction and debris left in the wake of this debacle. The same PCP acquisition scenario by hospitals and medical investors is beginning to play out for the high dollar specialties now. Some specialties will not be approached by the "systems," because that specialty does not provide a core, incidental, or value-add economic value to said system. Add to this the new specialty of hospitalist in various specialties, the appearance and utilization of nurse practitioners (NP) and physician assistants (PA) (generically described as mid-level providers), and the entry of the healthcare retailers into the market, along with the meteoric rise in the costs of healthcare; you now have a formula for an unprecedented (paradigm, I dislike that word) shift in the healthcare delivery and reimbursement system in this country. It is here now and it is here to stay. The large majority of PCPs failed to meet the challenge. Will the remaining IPOPs do the same?

The following is a checklist for the IPOP to use as a next step decision tool.

  1. Everything is just fine the way it is; do nothing
  2. It's time to sell the practice and retire
  3. It's time to sell the practice and work for someone else
  4. I want to continue as an IPOP, and some of my options are:
    a. Remain as I am and seek organic growth
    b. Contract with the necessary outsourced expert resources to survive and prosper
    c. Merge or consolidate with other likeminded physicians into an IPOP Super Group

The above is the simple 101 GAP Analysis taught in all undergraduate business schools. It is:

  1. Where am I?
  2. Where do I want to go?
  3. How do I get there (SWOT)?
    a. Strengths
    b. Weaknesses
    c. Opportunities
    d. Threats

Unfortunately, most physicians never went to business school to learn the basics of planning, organizing, directing, and controlling the practice's business. They went to medical school to learn how to treat "Illness," but they were not trained to prevent insurance companies from having to spend the company profits by having the physicians doing chronic illness control and outcomes management to save the insurance companies money. Physicians were so worried about socialized medicine, they never saw corporate medicine and medical capitalism coming and it ran over them.

One Possible Solution

There are many individuals and organizations out there with their own solutions for the IPOP survival. However, there are far more working on the IPOP demise. I believe that those with the correct model all have the same core principles that are based on the facts of the current and future state of the healthcare industry. It is the belief that in order for the IPOP to survive and prosper in the changing market, it is going to require a larger number of single specialty physicians coming together from disparate practices, to create single specialty practices (with integrated complimentary specialties) under a new business model, and to spread services over a larger geographic area in order to have the same market advantages and economies of scale as large competitors. Organic growth will be much too slow to compete with the acquisition strategies of the IPOP competitors. The new model is different from the prior IPA model or the PHO model, or even the previous MSO models. All of those old dogs don't hunt in the new world of healthcare. Actually, they might hunt, but they never catch anything worthwhile or sustainable. In the future, it will all be about the ability to access the networks, especially the quality networks. There is continuous integration among other players in the healthcare market that makes it more difficult for an IPOP to find market advantages without a large, well run, flexible, scalable, and comprehensive delivery system. Past attempts to have large physician provider delivery systems have failed because of the use of models such as the PHOs, IPAs, PPMs, Traditional Group Practices, and Hospital Owned Practices. These have core functional flaws in their basic business models as it relates to physician behavior and aligned incentives. Practice acquisition by outsiders has been dormant for a time, but has reappeared in the form of hospitals and medical investors acquiring and employing physicians, especially in the high dollar specialties. One economic problem for physicians with the current acquisition models is that there is no value now being paid for Goodwill to the physician.

All of these factors have caused physician incomes to decrease. The new physician payment models such as MACRA, MIPS, APM, and the balance of the alphabet soup (so called value-based), along with governmental regulatory compliance growth, will make it economically impossible for the small IPOP to survive and prosper. All of this has also reduced the amount of time, and in some cases quality of care, that can be provided to individual patients by physicians. The punitive, forced requirements to use EMR/EHR systems (regardless of how efficient the system is or any benefit to the patient) has also reduced the number of patients a physician can see in the same amount of time. The medical schools are having difficulty in attracting the best and brightest to pursue careers as physicians and many residency programs cannot be filled to meet the growing demands of an aging and expanding population. The baby boomers going on Medicare are growing at 10,000 a day. All of these factors are creating physician shortages, creating chronic care issues, and restricting patient access. Just because you have insurance does not mean you have access to healthcare services, especially quality healthcare services. Contrary to normal supply and demand economics, the physician's income is going down instead of up, even though there is a physician shortage. No one can argue with the fact that the ability to provide high quality, cost effective healthcare is diminishing. If something is not done to improve the economic condition of the physicians, the current and growing shortage of quality physicians will worsen, as well as the quality of care to the patients. In the end, it will be society, you and me, who will pay the ultimate price for the loss of quality healthcare. Intelligent IPOP growth is the only acceptable solution. Show me a program that the government has ever done well.

The MedBizonics Model

MedBizonics does not believe it has the only model, but does believe that this model offers a sustainable, cost effective, quality care model that will allow the IPOP to survive and prosper in the future. It also believes that the IPOP model offers the patient the greatest opportunity to select the physicians of their choice and receive the most cost effective and positive outcome driven healthcare. There is a way for the IPOP to succeed if there is the will to meet these new challenges. This model has worked in the past and continues to work today, and will work in the future for those physicians who are willing to operate like a business as part of an integrated medical practice rather than as an individual in a typical group practice fashion. Because the healthcare industry is dynamic, this model does not work for those physicians who are not willing to, or able to, understand the basic business concepts of capital versus labor, and the associated labor compensation relative to the capital investment return concepts which are required in the standard business model, and used in all other successful businesses (including use by hospitals and medical investors.) The physicians who will not, or cannot, grasp these basic business principles that are described by Adam Smith in his most celebrated book, A Wealth of Nations, are those physicians who believe that every dollar collected on a patient that is treated by a physician belongs to the physician who treated the patient. This is wrong-minded, and a continuation of the old mentality of "eat what you kill." It is a Non Sequitur conclusion to the facts. No physician can produce a single dollar of profit without a business structure designed to produce sustainable revenues greater than expenses. There is an independent economic value to sustainable business. That value is over and above the value of any physician's direct labor. This is a concept taught to every first year business student. Most physicians do not recognize the fact that the easiest person to replace in a medical practice, and create the least disruption to the efficient and successful operations of the medical practice, is a physician. This is because the physician comes trained and ready to be plugged-in to the medical practice system with minimal start-up time and training. I have never met a physician who did not think he/she was not competent to treat patients and be of value to the medical practice on day one of starting with the practice. Other clinical and administrative support staff have to be trained and integrated into the unique business processes, systems, and culture of each practice in order to be a productive asset for the practice. It takes years to design and integrate resources and systems in a medical practice organization in an optimally productive and valuable way to allow the physicians to be plugged-in. It is essential that physicians in a medical practice recognize that it is the business of medicine and the development and maintenance of the proper practice structure and management that is the key to the success and sustainability of the practice for all stakeholders in the medical practice; this includes all physicians—owner or not.

The following is the MedBizonics vision for the sustainable, successful IPOP of the future.

Regulatory and Compliance Issues

One of the major concerns expressed by many when first presented with the practice models is the Stark Regulations. Another is the Kick-Back Laws and Regulations, both federal and state levels. The previous attacks on the clinic without walls model is no longer an issue since no sane person would attempt it; the MedBizonics IPOP Model is completely different, and has been legally reviewed to assure compliance with all current laws and regulations. There were reasonable concerns about different types of group practices and their legality until the final Stark Regulations were published and understood. It was fortuitous that the final Stark regulations would be written in a way that fully validated this model. The final Stark regulations provided clarity to areas of previously cloudy concerns, as well as creating opportunities for the IPOP to be more creative in developing better and providing a more flexible business model. However, the new clarity removed any future argument that any violations of the Stark regulations that physicians may commit was not their fault because the regulations were not clear. Therefore, any practice model cannot be done the "physician's way," but must be done within the strict guidelines of, and compliance with, all of the current and future federal and state laws and regulations governing group practices and physician compensation arrangements.

The keys, but not all, regulatory issues that must be focused on are as follows:

The Stark Regulations only apply to Medicare, Medicaid, and other Medicare based insurance plans, like Tri-Care. The Anti-Kickback and Anti-Trust laws generally apply universally to all medical practices and physicians, and may also vary by state at the state level.


This article offers one view of the current and future state of the IPOP.

To learn more, a general outline of future articles is as follows:

I welcome your comments, criticisms, suggestions, and insights. These articles are written to provide the reader the perspective that both MedBizonics and I have on the current and future participation by physicians in the healthcare industry. It is the opinion that by 2020, between 80%-90% of the physicians in the country will not be functioning as an IPOP. MedBizonics would like to assist the remaining 10%-20% of the physicians who will be an iPOP, as well as hopefully increase the IPOP numbers.

L. E. Shepherd, Jr.
MSA, CHBC is the CEO of MedBizonics, LLC. He is one of the founding members and served on the Board of Directors of the National Association of Health Care Consultants. He has written numerous articles on practice, financial and tax management for various medical and dental publications. He also has lectured to numerous medical societies; and taught practice, financial and tax management courses through university medical and dental schools.