Despite the bad taste left in physicians' mouths after practice management companies' widespread failures in purchasing medical practices in the 1990s, these arrangements, an alternative to physician employment and hospital integration, are beginning to make a comeback--with some changes, reports American Medical News.

This time around, practice management companies are on less of a buying spree of struggling, underpriced primary-care practices, and instead are out to make targeted purchases of hospital-based practices within certain specialties such as hospitalist, emergency and neonatal care. And the companies, with more direct experience operating health practices than their predecessors, can also put up the earned funds to acquire the practices without taking out loans or selling stock. Following suit with hospitals, practice management companies no longer pay for goodwill, leading to more modest prices.

But unlike hospitals, which do have an interest in affiliating with primary-care practices, practice-management companies make money only off the practice, not down the line through referrals, Michael Parshall, a medical practice consultant in Schwenksville, Pa., told amednews. The purchased practices--many of which approach the management companies themselves--also tend to be financially healthy and have long-term relationships with hospitals. But in today's marketplace, they need a larger entity to grow, acquire technology or negotiate with third-party payers.

Also in contrast to hospital sales, practice-management companies don't always employ the physicians after buying the practice, the article notes. Rather, practice-management companies handle administration, own the practice's contracts and take in the payments, a portion of which is then distributed to the practice. Physicians can be employees or independent contractors of the management company or of the practice, depending on local laws and styles of practice.

But despite the success of Mednax Inc., TeamHealth, other publicly traded companies as well as some private ones, experts caution to heed the lessons from the first go-round with practice-management companies. In particular, before selling, physicians should assess a company's viability and the long-term view of the arrangement.

"If the company goes bankrupt, you're in trouble," said Nathan Kaufman, managing director of Kaufman Strategic Advisors in San Diego. "Look at their governance and the track record."

To learn more:
- see this article in American Medical News

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