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A Day at the Office: Will the Solo-to-Small Orthopaedic Practice Go Extinct?

Lundy, Douglas W. MD, MBA

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Clinical Orthopaedics and Related Research: March 2020 - Volume 478 - Issue 3 - p 476-477
doi: 10.1097/CORR.0000000000001141
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As co-President of one of the largest orthopaedic practices in the United States, I’m often asked about the fate of the solo-to-small orthopaedic group. Won’t changes demanded by the Affordable Care Act and Medicare Access and CHIP Reauthorization Act of 2015 [2] make working in these groups untenable?

My answer: Of course not.

There are plenty of orthopaedic surgeons who prefer working in small groups rather than dealing with the inherent issues of being in a large group practice such as loss of autonomy and having less “voice” in governance. Large groups work because the group is all moving in the same general direction (or at least they tolerate the illusion of that unity). There are many good orthopaedic surgeons who do better in an autonomous role or in a small group of partners whom they trust compared to the corporate-seeming setting of a huge practice, and they are threatened when people suggest that the small practice will not be viable in the future. Those in the solo-to-small orthopaedic group may struggle in a group where their specific habits and practice patterns may not be harmonious with a large group practice. I should note that I work in a group of 99 orthopaedic surgeons and physiatrists covering all of metro Atlanta, GA, USA. There are tremendous benefits of mega-group practices, but having intimate, trusting relationships with every one of your partners is not one of them.

If my premise—that there will always be high-quality orthopaedic surgeons who cringe at the thought of being in a large group—is correct, then it seems economic pressure would be the reason to join larger groups or hospital-owned practices. What are the inevitable pressures that could eradicate the concept of small group practice?

Orthopaedic surgeons who helm a small group practice should be financially literate. This sounds like a basic requirement for the job, but not having the fundamentals down cold or knowing how to properly read a balance sheet, income statement, or cash flow statement could destroy a small practice. As elementary as financial accounting is for some, I know orthopaedic surgeons (many of whom are genuine masters at their craft) who could not run a small practice on their own. Larger groups have resources to help them like the OrthoForum, which was established “to meet the unique challenges that integrated orthopaedic group practices face in today’s healthcare environment” [3]. But many of these options are not available to small practice groups, which makes knowing the basics (and subtleties) of financial accounting even more crucial. Heads of small practices who are in need of a Finance 101 refresher course should consult their local accountant who could likely assist in such business matters.

As health care in the United States continues to consolidate [1], the pressure on the small practice will continue to escalate. Networks could develop that would exclude the small practice so that their access to patients would be reduced. Insurance companies could make deals with mega-group practices that small practices couldn’t match. The ability to report the quality data that insurance companies might demand and maintain compliance with governmental payers may reduce the revenue a small practice could realize.

Small groups can survive these pressures by focusing on niche markets like worker’s compensation and specialty care and by delivering personalized service that sometimes gets lost in the large groups. I expect that a large part of referrals will continue to be relationship and referral-based, and small practices that nurture these relationships will be able to maintain future revenue streams.

On the expense side, one of the tremendous advantages of the solo-to-small practice setting is the ability to focus sharply on expenditures. The small practice administrator who effectively limits expenses while providing a quality practice with loyal staff can maintain successful independence from hospital or large-group acquisition. But it is difficult to find that middle ground—slashing expenses makes the practice look cheap and desperate, and the loyalty of the staff is threatened. On the other hand, lavish spending will quickly bankrupt a practice with minimal buffers against economic downturns.

Some of the largest expenses private practice groups of all sizes experience are on personnel and occupancy. Small practices can flourish if they develop loyal staff that are cross-trained in different areas and consistently deliver a high-quality experience to patients. Reward your team and treat them well. (Although this sounds like obvious advice, we all know those who do not follow it). In terms of occupancy, be ever mindful of how much space you need and how efficiently you use it. The practice’s administrator should critically assess workflow and contemplate exactly how much space is needed versus what would be “nice to have”. One of the biggest wastes are the private offices that physicians insist they have to show off their diplomas. These offices are rarely used and usually do not generate revenue like clinical areas do. Lastly, the expense of the bright, shiny office may not be worth the increased cost. The expenses of any office location must also be assessed to determine if there is value to offset the cost. Locating a small practice in a major city could potentially generate solid patient volume, but of course, there is more competition.

Locating a small practice in a more-rural setting has its drawbacks as well. The small practice in rural America faces many similar pressures than those in major cities. I have a good friend who is an excellent orthopaedic surgeon in rural south Georgia far from the interstate highway system and larger cities. Although fairly isolated for the first decade of his practice, he now competes with a satellite clinic from a mega-group practice 129 miles away as well as hospital-based orthopaedic surgeons in his community. My friend can increase the likelihood of his continued success through maintaining good relationships with the referring physicians and families that live in the area. As leader of a large orthopaedic group myself, I can attest that it is very difficult to compete with a beloved local orthopaedic surgeon who is the hometown doctor.

So, will the solo and small group practice of orthopaedic surgery disappear in the future? I don’t think so. It will not be easy, but the drive to remain independent can overcome the pressures that small groups face. Effective maintenance and development of revenue as well as careful stewardship of expenses will keep economic pressures from forcing these groups under. Some of the best orthopaedic surgeons I know wouldn’t last long in the mega-group culture; they can and will survive in their solo and small groups, and I personally look forward to working alongside these physicians for the rest of my career.

References

1. Lundy DW. A Day at the Office: Private practice and private equity. Clin Orthop Relat Res. 2019;477:955-957.
2. Lundy DW. A Day at the Office: The MACRA-sized Headache-Part 1. Clin Orthop Relat Res. 2018;476:1713-1714.
3. The OrthoForum. About us. Available at: https://www.theorthoforum.com/about-us/. Accessed January 6, 2019.
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