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Reflections on the End of a Practice: Lessons Learned

Foa, Richard P. MD

doi: 10.1097/01.NT.0000388168.79950.20
Departments: Viewpoint

Our group, a five-person, single specialty private practice, recently dissolved. The end came quickly and, I think, as a surprise to everyone. In retrospect, however, the seeds of our demise had been quietly planted years earlier. We had been by most measures successful. We were well known and well positioned in our medical community. We had a strong relationship with two community hospitals where we provided nearly all of the neurological care. We established and maintained a primary stroke center at the larger of those institutions. We enjoyed collegial relationships with the other neurologists in our area — both private and academic. And our group was not torn by obvious conflicts. We liked and respected each other and boasted on our practice brochure that we were one of the oldest and largest practices in our entire state — clearly intending to convey a message of permanence. Yet, over an interval of six months, our group disintegrated.

Perhaps the initial catalyst was the announcement that I would retire after 33 years of practice in private, HMO, and academic settings. This was not a surprise. It was announced far in advance of the actual date and then postponed for nearly a year due to the recession.

A reduction in group size from five to four raised questions about whether the group should remain smaller, enlarging the patient panels for two younger members, or whether a replacement should be recruited. Recruitment would put the practice out on a financial limb until the income of a new associate rose to cover the expense of an initial income guarantee plus added overhead. The consensus, more by default than deliberation, was to let the group shrink. Recruitment could await further practice growth, which was expected since our hospitals were in areas of projected population growth.



The next blow came when a group member was first casually asked to consider a position and then successfully recruited by Kaiser Permanente. She would become an employee free of the responsibility to maintain a referral base. The uncertainties of billing, collections, and overhead expenses that burden a private physician would disappear. Schedules would be set, benefits defined, and income guaranteed. Not only that, the guaranteed income was higher than what she earned after several years in our private group. This was a wake-up call of immense significance. So while her decision to move to Kaiser was from her perspective good, for our group it was a disaster.

With the projected departure of two people, the remaining three were suddenly forced to examine their own situations — professionally, financially, and personally. And their decisions, sequentially, brought our group to its end. While I'm not privy to their private thoughts and calculations, each seemed to conclude that his or her professional future was brighter on their own rather than in trying to preserve and re-expand the group. Two elected solo private practice and one employment as a hospitalist. The group was dead.

Why did this happen? What were the barriers to group cohesion?

First was the problem of the business. No one was really assigned to manage the practice as a business. No time or financial support was offered for someone to take on the task. Too much was delegated to a hired manager who had needed administrative skills but lacked insight into the personal and professional goals of the members. So the group drifted into a situation where fixed overhead costs that were manageable when shared by five became excessive when shared by four and impossible when shared by three. Furthermore, as personal income was permitted to vary widely on the basis of billing and collections, the burden of increased but shared expenses would fall disproportionately on the members with lower revenue.

Next there was the issue of maintaining expected levels of service at our hospitals. Beyond support for the stroke service, the group provided 24/7 inpatient hospitalist and emergency room (ER) coverage at our larger hospital plus consultative services and ER coverage at the other. Electro-diagnostic services (mainly EEG) were also provided to both. Hospital commitments cut deeply into hours available for the office-based care that continued to generate greater revenue. In fact, despite hospital stipends, it was recognized that a day in the hospital generally meant a loss of income when compared to a day in the office.

Finally, and most importantly, there was the issue of what kind of work each of us really wanted to do. There was varying interest in hospital work along with varying tolerance for the pressures of ER coverage and the frustrations of treating acutely ill hospitalized patients. Two in the group liked and promoted commitment to hospital care. For the others, greater satisfaction came from office-based diagnostic evaluations and long-term outpatient care. And the group split itself accordingly.

These problems and divisions are recognizable to all neurologists in practice. What was surprising was that group size, which spread call and buffered overhead costs, had papered over the deepness of those divisions. While huge uncertainties about federally mandated changes in health care lurked in the background, those issues seemed to have little if any bearing on the choices made by my partners. Rather, the group's future appeared to hinge on choices about independence, the operation of a business, and fundamental confidence in the institution of private practice.

From this experience, I find myself fearful that a lot of other practices are similarly in peril if not the entire tradition of specialized private group practice. So what lessons might be learned?

First, know what you want. In the past, young neurologists had an initial dichotomous choice between academic medicine and private practice. Being employed by a large health care organization was an option in only a few geographical areas. Now, however, private practice is no longer the surest path to financial success and employment opportunities with their attendant guarantees are to be found in all large population centers. So to choose private practice means to choose both independence and to operate a business. Having made that choice, it is important to understand what will be satisfying in terms of clinical focus, pace, volume, group size, location, income distribution, and hospital responsibilities. Of paramount importance is whether your goals and values are shared by partners.

Second, if one chooses private practice, learn the business and maintain a hands-on approach to practice management. If solo or in a small group, recognize the time and effort that must be given to this job. If in a larger group, give value to the work of practice management so managing doesn't mean loss of income from reduced patient care. This is a challenge for everyone. But to not thoroughly understand the details means loss of control to hired managers and to administrators in hospitals, in government, and in insurance companies who do understand the business.

Finally, know what you have to offer and assign it real value. Hospitals, PPOs, HMOs, insurers and all of the other institutions competing for health care dollars will take all you will give, and more. If you permit your skills and services to be undervalued, not only you but also your community will ultimately lose. And your practice will join ours.

Prior to his recent retirement, Dr. Foa was a partner in a group practice in Colorado for seven years; before that, he was an associate professor of neurology at Georgetown University. In the fall, he will attend school to learn the craft of building traditional wooden boats.

© 2010 American Academy of Neurology