Starting a new business is almost always harder than it sounds. That goes double for physician practice management businesses.
Three PPM companies launched by various provider organizations prove that point. Back in 1996, all three promised to bring innovative models to the market.
In recent interviews with MODERN HEALTHCARE, company representatives cited difficulties ranging from internal operating problems to a reluctant client base. Despite some delays, all three claim to be sticking with their strategies.
In San Diego, 300-physician Scripps Clinic wants to franchise itself by affiliating with other medical groups (Nov. 18, 1996, p. 18). But its ambitious plan to hold a public offering by late 1997 never materialized.
President and Chief Operating Officer Breaux Castleman says it took longer than expected for the clinic to build its own infrastructure after separating from the ScrippsHealth hospital system in 1995. That separation forced the clinic to create reserves and make other accounting changes that put losses on the books, he says.
With the help of a $30 million credit facility, the clinic hopes to generate steady earnings and buy at least one clinic outside its market in order to go public in late 1998 or early 1999.
With no signed deals yet, the clinic is reconsidering the wisdom of attaching the Scripps name to groups it acquires outside the San Diego area.
The clinic also is learning to be flexible at a time when hospitals are jumping in and out of the doctor business, Castleman says. The clinic plans to acquire a management services organization co-owned by Columbia/HCA Healthcare Corp. as part of its first affiliation agreement. Meanwhile, its former parent, ScrippsHealth, has launched its own physician network.
Another organization that had trouble getting its first deal off the ground is Preferred Physician Partners. One of its owners -- Cincinnati-based Catholic Healthcare Partners, a 22-hospital system -- has committed to spending up to $6 million over five years on the venture (Nov. 25, 1996, p. 18).
The PPM's goal was to use the expertise of its other owner, 400-physician Dean Clinic in Madison, Wis., and charge about half of what investor-owned PPMs typically charge.
Early on, the company announced it had a deal to manage Defiance (Ohio) Clinic, an independent 34-physician multispecialty group in northwest Ohio, as well as an independent practice association in Scranton, Pa.
But neither deal came to fruition, and the firm finally signed its first contract with a hospital-owned practice in northern Ohio.
Chief Executive Officer Richard Afable, M.D., blames the lost deals on a local market with low managed-care penetration, which encourages physicians to decide to "do nothing."
Afable hopes 1998 will be a big growth year, bringing 100 physicians under management including at least one non-hospital-owned group. "We need to shake the hospital association," he says.
The Premier hospital alliance formed its own PPM to strengthen ailing practices aligned with or owned by its hospital members. Its strategy has been to transfer the practices to "regional service organizations" owned by physicians, hospitals and Premier (March 18, 1996, p. 5).
Hospitals and physicians contribute practice assets in exchange for stock in the RSOs, with the promise of a future public offering.
So far, Premier Practice Management claims 215 affiliated physicians and says it will have 400 by the end of March. However, CEO Biff Comte says the future of its RSO in Buffalo is unclear because of a pending merger involving the hospital partner, Millard Fillmore Health System.
Premier says it is breaking into the top 10 PPMs based on its number of affiliated physicians and is on track to hold a public offering between 1999 and 2001. However, it declined to disclose financial data.
Premier also declined to name all its hospital partners, saying some are skittish about revealing that they lost money on physician practices.