What Are Physician Practice Management Companies (PPMCs)?

What Are Physician Practice Management Companies (PPMCs)?

Consolidation is the driving force in the health care industry today. In order to access managed care contracts and for the overall growth of their practice, physicians are left with no alternative but to join forces with hospitals and pharmaceutical companies. Experts believe that consolidation is the only way to attain a position that allows negotiation of high budget contracts in the health care industry.

So, with consolidation being inevitable, the next question for physicians is with whom to consolidate and at what cost? Globally, solo or group medical practitioners as well as clinics employing hundreds of doctors are constantly searching for partners in the health care industry who will supply the necessary expertise, experience and capital for their growth. In the search for growth and innovation, a physician is left with two choices. One, the taller order, is the expansion of one’s private practice independently. The other easier option is selling the practice to a bigger group like physician practice management companies (PPMC), hospitals or health plans. PPMCs appear to be a popular choice of many physicians leading to the emergence of PPMCs as a multi-billion industry.

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Solo or group practicians and multi speciality clinics often lack the corporate skills, management infra-structure and discipline that is the need of the day. This is because the capital generating structure and management practices tend to be based on individual or a small group’s financial and managerial strength and expertise. These voids are filled by PPMCs who specialize in working with individual general physicians, single or multi-speciality groups or hospital based physicians. PPMCs supply the correct resources to the physicians in the spheres of capital and investment, information systems, management expertise and infrastructure facilities. PPMCs also encourages ‘economies of scale’, financially benefitting their clients.

The affiliated physicians of PPMCs include both physicians whose practices have been purchased as well as physicians of independent practice associations (IPA’s). In the practice acquisition model, PPMCs pays a lump-sum amount of cash, PPMC stock or a combination of both in exchange of non-real estate assets of the practice. Coming under the umbrella of a PPMC boosts the net-worth of an independent physician. A long-term relationship between the physician and PPMC leads to better patient care, a steadily growing practice and efficient management of health contracts. In the case of IPA’s, PPMCs can provide management services in exchange of a negotiated fee. In some cases, a PPMC can itself create an IPA to bring the solo and small group practices acquired by it under one umbrella.

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The payment rate for a PPMC will be defined by numerous factors like the PPMCs own principles, rules and regulations as well as the nature of the practice, revenue generated from it, local market conditions and a variety of other factors. Even though PPMCs benefit physicians in the long run, initial recruitment costs need to be spent from the physician’s pocket. Also, physicians lose a certain degree of autonomy in their own practice. This is, however, compensated by growth of their business and increased profits and thus reports of physicians complaining about intrusion of PPMCs into their decision making, are extremely rare.

It is important to remember that not all PPMCs are created equal. The right choice can provide a tremendous improvement to your practice but the wrong choice will cost you dearly. So, weigh your options carefully, gather as much information about a PPMCs philosophy and values as possible to increase your chances of a successful partnership with a PPMC.

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