Practice size does matter

January 1, 2006

Ob/gyn practices across the country are learning that consolidation into bigger practices may just be the key to negotiating better contracts with managed-care companies and underwriting expensive equipment. At least that's what a few ob/gyn practices have found.

Ob/gyn practices across the country are learning that consolidation into bigger practices may just be the key to negotiating better contracts with managed-care companies and underwriting expensive equipment. At least that's what a few ob/gyn practices have found.

New Jersey-based Lifeline Medical Associates, an ob/gyn practice, has grown 250% over about 6 years and is now one of the biggest physician-owned medical groups in the country. "We've grown big enough that (managed-care companies) have taken us seriously. They know that losing a big panel of doctors is not in their interest. The bottom line is that size, a good business plan, and the right physicians give us a lot of clout in the marketplace," John Feltz, a physician and president and CEO of Lifeline, told Modern Healthcare (10/24/05).

North Carolina-based Women's Care, an ob/gyn practice, is also undergoing continuing consolidation and has reaped the benefits of being bigger. Among the rewards: An increase in reimbursement rates from insurers by about 15% and
"more manageable" malpractice insurance premiums. The long-term benefits also include lower overall costs and better payment rates-which have freed up the cash to purchase big-ticket items like electronic medical record systems.

The result of these more powerful ob/gyn practices could mean less revenue to hospitals, as health plans allocate their pool of reimbursement funds to medical practices that use their size as leverage. Additionally, the growth could mean a shift in services from hospitals to doctors' offices. Already many physicians perform procedures in offices that were once confined within the walls of hospitals. This trend could result in cost savings for managed-care companies and an increase to the bottom line of physicians' practices.