In contracting, private practices can find strength in numbers

There is strength in numbers, but private practice physicians who organize to better negotiate contracts with health plans also need legal and other professional resources to build their bargaining platform.

That advice comes from Mike Grodus, who is well-positioned to know. He is chief administrative officer of Professional Medical Corp., a Michigan-based physician organization with about 460 doctors that provides contracting, business and technology management services to independent physician practices.

Grodus discussed the evolution of physician organizations—also called independent physician associations, and not to be confused with medical associations such as the AMA or state or specialty societies—and their pros and cons in a recent episode of the “AMA Thriving in Private Practice” podcast.

You can subscribe to “AMA Thriving in Private Practice” on Apple Podcasts or anywhere podcasts are available.

Physician organizations allow doctors in private practice to share business resources and negotiate as a group—with attendant group bargaining power—for their contracts.

Grodus said physicians in private practice should look at using the physician organization umbrella as an efficient method of aligning independent practices “where you may have one or two or three physicians coming together on a larger scale to really use that physician organization as a platform to contract with different health plans to really get into these contracting arrangements that would benefit the entirety of the physicians.”

Doctors who want to join or create a physician organization may need to seek out other professionals who can support their business needs, are experienced in working with health plans and insurers, and can organize with traditional business structures, he said.

“It’s like a regular business,” Grodus added. “You have to have goals. You have to have a mission statement, your core values. You have to have different governance.”

It takes astute clinical judgment as well as a commitment to collaboration and solving challenging problems to succeed in independent settings that are often fluid, and the AMA offers the resources and support physicians need to both start and sustain success in private practice.

For example, the AMA has developed a private practice toolkit on payor contracting that covers these elements:

• Payor Contracting 101 (PDF).
• Payor Contract Review Checklist (PDF).
• Payor Contract–Sample Contract Language (PDF).
• Examples of Significant Payor Unilateral Policy Changes (PDF).

Physician organization staff can help educate the physicians on the different programs and what they need to do to be successful within them.

“Health plans look to see what kind of reporting, what kind of infrastructure either a practice or a physician organization has before proposing a better contract,” he said.

But a principal reason to form a physician organization is to work directly with health plans to pursue better contract terms, both in fee-for-service arrangements as well as in emerging value-based arrangements.

“So, you could go out and talk to the health plans in the area and really ask: ‘Oh, if we bring these physicians together, are you willing [to negotiate]? Do you have contracts?’”

Can a physician organization improve a private practice’s compensation? Probably, Grodus said, while noting that such entities don’t just negotiate pay rates in ordinary fee-for-service arrangements.

Most physician organizations or independent physician associations now negotiate value-based contracts that include performance standards and other metrics that influence payments. Many health plans already use value-based contracts with hospital systems and large practice groups.

Learn more with the AMA about how value-based care is making payor contracts even more complex.

Better pay for physician practices is not the goal of value-based contracts and doctors should not expect instant additional income through forming a physician organization, Grodus said. Incentives vary, and typically there are additional requirements for guaranteeing access and offering new technologies, such as telehealth. But such contracts, if structured correctly, can provide practices the potential to receive additional incentive payments if they better manage their patients’ outcomes.

“There's nothing that's guaranteed in the value-based world. The payers now want to have the physicians take skin in the game in terms of population management, right service, right time, lower cost settings,” he added. The AMA has resources on payment models to help physicians evaluate their options.

Find out more about the AMA Private Practice Physicians Section, which seeks to preserve the freedom, independence and integrity of private practice.