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Are Super Groups the Future of Private Practice?

Physician practices are undergoing a tectonic shift. The Affordable Care Act, Stark provisions, state regulation, changes in CPT codes, value based care and lower reimbursements have all driven the consolidation in the physician practice market.

Physician practices are responding to these external factors by selling out to private equity firms and hospitals or forming super groups. A sale to a hospital takes away a physician’s independence. A private equity sale, while it may give the physician the opportunity to cash out, may not always be optimal The interest of the non-physician investors may not coincide with that of the physicians’.

Like anything else, the allure of private equity to acquire physician practices will not go on forever. Multiples will increase, rates of return will decrease and new regulations may limit the ability of private equity to acquire physician practices. Many states have stringent regulations regarding the corporate practice of medicine.

A super group, with the proper structure, vision and leadership, may be the future of private practice. A super group is a group of physicians coming together under one entity and a single tax identification number. The group can either be single or multi-specialty. Super groups will have a CEO, CFO, and general counsel and will have a vision statement for the group along with a set of policies and procedures.

The advantages of a super group are many. The physician can stay independent and provide the standard of care needed of the patient. The interest of the practice and the physician is aligned with the patient.

Sharing of patient information is also easier, especially in a large multi-specialty practice. A specialist can share information with the patient’s internal medicine physician simply by accessing the practice’s EHR in one central location.

Super groups drive economies of scale on many levels. Costs such as malpractice, EMR, supplies, and information technology can be renegotiated when vendors are dealing with a large buyer. Along with economies of scale, collaboration among a group of physicians can result in better patient outcomes.

The super group may have the resources to invest in additional revenue streams such as ambulatory surgery, radiation therapy or dialysis centers. Compliance issues will also be better addressed through the group’s general and outside counsel.

The super group will have the resources to consult with practice management consultants regarding CPT codes, value based care, and training. These are everyday issues that sole practitioners struggle with.

A super group will also have additional financial benefits such better health insurance for employees, a retirement plan and a mechanism for retiring physicians to sell their ownership to new, younger physician owners. Retiring sole practitioners struggle with issues such as practice valuation and practice transition.

The current environment towards higher interest rates and multiples may decrease private equity’s appetite for acquiring physician practices. Hospitals that purchased practices are also having difficulty integrating practices and in many cases have overpaid. With the sole practitioner also struggling to survive, the super group model should be seriously considered by those physicians wishing to stay independent.


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