Does Size Matter or is Big Bad?

Dominic J. Bagnoli, Jr., MD, Chief Operating Officer, Emergency Medicine Physicians, Ltd.

Trying to decide whether to join a local group of physicians who staff one hospital or a larger multi-facility group is sometimes an overwhelming decision. Although the decision is not permanent, making the wrong choice can often delay rewards such as partnership and carry with it the burden of relocating. The ultimate employment decision process must involve comparing apples with apples. Some physicians saddle large CMGs with a great deal of negative baggage. Though some CMGs deserve a little criticism, it is inappropriate to categorize all EM groups similarly. With an extremely wide variety of possible group situations, each group must be evaluated individually to provide a true assessment. Group size should not form the sole basis of a career decision.

Some of the advantages of good multi-site groups include economy of scale and reproducing successful ideas at multiple sites. Some negatives come into play when quality is compromised for the sake of the almighty dollar. Groups that are truly committed to quality never lose sight of the potential negatives and continually work to eliminate them. The qualities of EM groups that are both note-worthy and valuable and those that are drawbacks and hindrances are outlined below.

When looking for employment, physicians must answer at least one pivotal question: What qualities are important in a partnership or employer-relationship to have a fulfilling, long-term career? EM is stressful in the clinical hours. Taking on the added stress of the operations of the business should be carefully considered. Medicine has become more of a business over the last ten years, and it is more and more difficult to succeed unless the business of medicine is appropriately addressed. Issues such as billing, benefits' management, risk management, accounting, customer service, and physician services can potentially overload a single hospital group.

The major complaints about CMGs often center around excessive fees for billing and management services, lack of employee control (democracy), and an unfriendly corporate environment. Let's address some of these concerns.

Billing services

For an independent group to obtain billing services, the cost can be as low as 5% of gross revenue or as high as 18%. In addition to cost, it is important to evaluate the service supplied for that price. Single hospital groups can certainly negotiate a low price, but at what cost to overall service? If a billing company is cutting services that would increase reimbursement, is it really a good strategy to negotiate the lowest possible rate? Services such as customer service, appeals, insurance follow-up, provider number acquisition and credentialing can be curtailed at billing companies when the rate is negotiated to a lower amount. An independent billing company is a business, and the goal is to make a profit. Large contract groups have the advantage of either out-sourcing their billing services or running their own billing agency. By managing their own billing company, reimbursement can be optimized and the business can be operated as a service organization, not a profit center. Optimization of the reimbursement is beneficial not only for the physicians but also for the billing company. With this added revenue, large companies can invest more money into services such as compliance and continuing education, as well as returning more money directly into physicians' pockets. One objective way to quantify how well a group is billing is net reimbursement per patient.

Net Reimbursement Per Patient = Gross Revenue - Billing Expense

Remember however that in addition to this "bottom line" it is important to consider the overall service being provided by the billing company.

Management Services

Management services also need to be evaluated. A single hospital group may not pay for management services, but typically they do provide some of these services through individual physicians' time and effort. Unfortunately, they often have less negotiating power with benefit providers, malpractice carriers, insurance companies or hospitals. Therefore, paying a management fee to a service organization that provides benefits and other services can be a good investment depending on the array of services provided. Management fees range anywhere from what appears to be nothing (single hospital group) up to 45% of revenue.

Somewhere in that range is probably the perfect management fee. This issue may represent the area for which most CMGs receive their bad reputation. Physicians perceive CMGs with only being concerned with profitability. Increasing the value of the company on the stock market may become more important than providing service to the physicians and patients. For a CMG to be successful, it must remain a service organization, not a profit center. Providing services to physicians by negotiating lower malpractice rates, recruiting physicians, staffing facilities, providing scheduling, negotiating benefit costs and consolidating payroll, all which will save money, are the only true measures of a successful management company. This measurement may be best represented by this formula:

X = Management Expense - Benefits Received

In successful service-oriented management companies, "X" is a negative number. The best way to accomplish the most cost-effective, management and billing services for physicians is to have total alignment of the organizations. Having physicians own the billing and management company is the most likely scenario that will lead to success. If physicians are employees and have no benefit from the success of the management or billing operation, it can lead to dissatisfaction. It may also lead to an unwillingness to assist these organizations in becoming successful. Physicians must step-up and be financially invested in their own destinies. If physicians are only concerned with maximizing their take home pay and investing nothing in the future of the company, then they have become contracted laborers.

Other Factors

Another important facet to examine is whether or not the company is responsive to the changes in the field. As things change through the years, management and billing companies must be responsive to the needs of the physicians and change in the manner that allows for a successful operation of the organization. Physicians having a vested interest in the success of not only maximizing their check, but also in a commitment to efficient billing service and management expertise, provide a sound basis for progress. So, what is the best group for an emergency physician to join? A group that has many of the attributes described above.

In addition, look for a group that provides equal equity ownership, commitment to EM residency training, the highest standards of patient care, and commitment to the hospitals and communities. Select a group that focuses on equity, good business practices, patient care, and client/customer services – not profits or the stock market. Ideally, each physician should have a vested interest in the success of the billing and management companies and the approval of management and billing fees should come directly from the physicians. Finally, the company should have open books to physician partners for the management and billing operations.

In summary, evaluate each employment opportunity in its entirety – it is not enough to rev iew the salary of physicians or the cost of management and billing services to determine whether the job opportunity is worth pursuing. Determining your future is important, and there are many factors that should be evaluated when making an employment decision. Group size should not be the single deciding factor.

Originally published in the February/March 2001 issue of EM Resident

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