Entrepreneurial doctors looking for an alternative to hospital employment and solo practice and seeking increased business opportunities are turning to an emerging option – the mega-group.
A mega-group is formed when a number of single- or multi-specialty practices come together in one organization. There are many nuances to these groups, but they broadly consist of one tax identification number and having centralized billing, collections, accounting, IT and human resources for all of the members.
Illinois Gastroenterology Group is one such mega-group formed from three medium-sized practices in 2010. It has since grown to a 48-doctor organization that is the largest specialty gastroenterology practice in Illinois.
Lawrence Kosinski, MD, one of the founding members, said gastroenterology is an outpatient specialty, so hospitals weren’t jumping at the chance to buy these practices. Instead, his group merged so they could create their own pathology company and want to form an accountable care organization focused on Crohn’s disease management.
“We produce a lot of pathology specimens that have to be read and there was no reason why we couldn’t have our own infrastructure to do that,” Kosinski said. “The formation of a pathology company provided revenue to be able to form a mega-group.”
Kosinski also said the groups understood the importance of having a strong position in the marketplace. There was consolidation going on all around them and he said it was “reassuring” to be able to build a larger group to function as strategic partners in one entity.
Each practice within IGG is an asset holding company and leases its assets to the overall corporation. The groups bill under the same tax identification number, use the same electronic medical record system, and they are building universal clinical decision support tools.
“We designed this like original United States,” Kosinski said. “It is a small federal government with strong state governments.”
Size has also been beneficial for Women’s Healthcare Associates. The Portland, Ore.-based mega-group boasts a whole line of subspecialties, from obstetricians to genetic counselors and maternal fetal medicine doctors to gynecologists. They perform mammographies, ultrasounds and have an in-office lab.
Being able to bring that diversity to the marketplace has allowed the group to negotiate better with health plans and hospitals.
“Our intent was to be an independent practice; we believe in that and think it’s the right direction to go,” said Brian Kelly, the organization's CEO. “But we needed to be collaborators with stakeholders like health plans, health systems and purchasers like employers. By being larger, we could enter into those conversations and be looked at as a partner.”
Mega-groups see benefits like greater bargaining power, cost savings and more access to IT, but there are challenges as well, cautioned Nick Fabrizio, a consultant with Medical Group Management Association.
Creating this structure takes time, money, flexibility and a core group of dedicated physicians willing to get it off the ground. IGG took 18 months to create and Women’s Healthcare is made up of 15 different committees involved in everything from compensation to risk management that meet regularly and report to another management committee.
“It doesn’t necessarily mean that because you are larger you will be more successful,” Fabrizio said. “They struggle financially and have the same issues that smaller groups do.”
Physicians in these groups lose some autonomy and egos have to be left at the door. Practices have to be standardized and rolled out among different offices accustomed to using their own clinical guidelines.
And mega-groups must be careful to avoid problems with the Stark Law and anti-competitive regulations, though Fabrizio said working with an attorney or business consultant soothes that process.