For 90 years, Houston Ear, Nose and Throat Clinic built its success on the "three As": amiability, availability and ability. To ensure its future, it added another "A" seven years ago: astuteness about managed care.
While many practitioners remain in denial about the onslaught of managed care, or have fought it tooth and nail, one of the oldest ear, nose and throat practices in the country has embraced it. To provide health plans with one-stop shopping, Houston ENT has done everything from studying its practice patterns to increasing its number of offices throughout the Houston metropolitan area. While its profits are by no means booming, the practice is holding its own in an extremely competitive provider marketplace, and that's no mean feat.
Before managed care came to dominate the area, Houston ENT -- like many practices -- judged its success by the quality of its services and increases in its patient base, says Stan Shoss, M.D., a partner in the practice.
"Patients have always wanted to come back to us and send their family members and their friends, and (primary-care) physicians have always continued to send patients to us," Shoss says. But about seven years ago, the practice began focusing on what managed-care companies want and need and how they assess physicians they contract with, Shoss says. For example, he says, the practice became "very proactive" in utilization review. Previously, it hadn't done much beyond sending satisfaction surveys to patients.
Several years ago, Houston ENT was among the first practices to ask Blue Cross and Blue Shield of Texas for utilization data on its doctors, says Richard Nelson, M.D., medical director for the Houston and southeast Texas region. Blues network representatives who deal with the practice say its utilization, quality and cooperation are excellent, Nelson adds.
Houston ENT also realized managed-care companies need panels of providers throughout the region if they are going to convince employers to give them contracts. As a result, the practice has systematically sought to merge with smaller practices. In the past seven years, it has added five offices, bringing its total number to nine, with 19 doctors and 75 employees. It is by far the largest ENT practice in the state not affiliated with a university, says Michael Poole, M.D., professor of otolaryngology and pediatrics at the medical school of the University of Texas in Houston.
The practice also boasts a wide range of services. It has virtually all the subspecialties covered -- including neurotology, facial plastic surgery, allergy and sinus surgery -- so patients need not go elsewhere, Shoss says.
The practice consciously sought expansion through mergers, rather than building practices from scratch, Shoss says.
"It's much easier to merge with someone who is established in that area" than to send a doctor from the group to a new office without a patient base to pay for the overhead, Shoss says.
Unlike national physician practice management companies that have overpaid for practices, Houston ENT "has been relatively fiscally conservative in how they arrange their contracts" with doctors, Poole says. "They have not given away a lot when they wanted something."
The practice would not release specific financial information but says it doesn't expend much capital when it merges with another practice. Instead each practice contributes its fixed assets, and the smaller firm's patients become Houston ENT patients. Houston ENT pays for minor expenses, such as moving and upgrading computer equipment.
When the practice purchases expensive laser, audiology and other equipment, it usually borrows money from a bank, although it could pay for the items with its cash flow. Each year, it pays back the loan in an amount equal to how much the equipment depreciates. Shoss says this method makes better economic sense and is fair to all the partners who join the practice at different times during the lifespan of the equipment.
"We have essentially done what PPMs do," Shoss says, by providing management and the ability to stay on top of technology by pooling resources to purchase equipment. He says Houston ENT was "aggressively pursued" by a venture capital firm to be the foundation for a PPM, but an expert adviser said the firm " had nothing to add to us."
Doctors who merged their practices saw the benefits Houston ENT had to offer. It streamlines the business affairs of acquired practices and provides many other services, such as testing, that normally have to be farmed out, he says.
Poole agrees. "It's fair to say that they (Houston ENT) offer the breadth of ENT services that would compete well with any (university) medical faculty."
Poole adds that the expansion of the practice has also helped it negotiate managed-care contracts.
"They certainly have a lot more leverage than a smaller group," he says. The group has been "pretty successful" in dealing with some of the regional managed-care companies, he says.
Another benefit of the mergers is that managed-care companies want to deal with groups rather than individuals, Shoss says.
"If (managed-care companies) have to take on 20 ENT doctors being represented by 15 different corporations, they have to do a lot of quality review and negotiate with each one of these groups," Shoss says. "It compounds their work. We consolidate that; you're negotiating with a group throughout the city." As a result, Houston ENT has been awarded some exclusive managed-care contracts, he says.
Throughout its expansion, Houston ENT has managed the practice to avoid losses and has yet to have a year in the red, Shoss says. One way it does this is by establishing a variety of committees, including computer, personnel and executive panels.
The committees and the practice itself, however, are by no means dictatorial, Shoss says. For example, the practice doesn't have a president or managing partner, and its physicians are encouraged to attend any of the meetings. As a result, Shoss says, split votes tend be rare, and doctors stay committed to the group.
"Nobody's ever left our group without either dying or retiring," Shoss says jokingly.
That Houston ENT is managing to maintain its base is laudable, given the high saturation of ENT doctors in the area, says Clifford Dacso, M.D., professor of medicine and vice chair of the department of medicine at the Baylor College of Medicine in Houston.
"In ENT, it's probably more competitive than in (cutthroat) Southern California," says Dacso, who also practiced there.
Poole agrees, adding that there are about 80 ENTs in downtown Houston at the Texas Medical Center. "Houston ENT, by and large, has developed outside that area in the Houston suburbs," where population growth is rapid, he says.
Shoss says the practice will continue merging and streamlining its business. Five years ago, it installed a client-server computer system that links all its offices. Now, most of its filings are sent automatically and electronically.
The practice also is exploring a large investment in a computerized patient record system to help doctors cope with patients visiting offices other than those where their records are stored. Such capital improvements are crucial for the practice to serve the needs of managed-care companies, Shoss says.