Staying Independent Doesn't Have to Mean Going Broke

For all of the doomsday pronouncements about the end of the independent medical practice, one solo practitioner in Texas is bullish on his prospects.

Joseph Valenti, MD, is the founding senior partner for an independent OB/GYN practice that is growing instead of shrinking.

His strategy so far has been to grow by acquiring solo practices that are no longer financially viable. It contradicts the trend of hospitals buying up independent practices, and Valenti says his growth is intentional.

"I would like to help other doctors stay independent," Valenti says. "Right now, it's very difficult, but I believe that if physicians remained independent, it would probably mean better quality and cost less."

Valenti believes that maintaining an independent practice is sustainable with the right tools, such as technology, an organized approach to billing and collections, and negotiating with insurers. He says negotiating skills can save money, but they also cue insurers into business practices that are ready for a value-based environment.

"Physicians who are practicing cost-effective medicine aren't leveraging it," Valenti says. "You need to have data to report to insurers. For example, our midwives have a low C-section rate. When we take that to an insurer, that's a lot of savings: time-off saved, morbidity saved. Insurers are interested in that."

Failure to collect data that shows the quality and outcomes at an independent practice is a problem, but isn't surprising, says Lisa Enright, senior vice president and director of the healthcare practice banking group at Citizens Bank.

"Business acumen depends on the practice," Enright says.

Valenti's expertise did not come from an MBA. It came from on-the-job training when he opened his practice in 2001. Now, 15 years later, Valenti's practice has grown to include six physicians, three nurse practitioners, three certified nurse midwives, and three locations. The lessons he learned in the first year of business are ones he still practices today.

"You have to have be willing to negotiate," Valenti says. "A lot of things need to be shopped and negotiated: supplies, your lease, insurance contracts. And I didn't pay myself for the first four to six months."

Another vital component to managing an independent physician practice is cash flow management, says Enright.

Negotiate and Collect
"Cash flow impacts the ability of the practice to invest in technology and staff that are key to long-term sustainability. The disconnect is when they don't see, 'If I manage what I do really well, it will set me up in the future.'"

This disconnect is all too common, according to Valenti, who recently took over the practice of a solo practitioner because the practice's overhead was running at 90% and was unsustainable.

"They were collecting 48% of billed charges," he says. "We collect 57%. Everything is running on an incredibly tight margin. That can be the difference between staying open and not staying open."

Many physician practices are closing. In 2014, The Physicians Foundation found in its biennial survey of physicians that solo and independent practices were declining. That's no real surprise. Hospitals have been on a buying spree in recent years to secure their market share. In Texas, where Valenti's practice is located, those pressures are the same but he is confident that there is room for independent physicians.

"The system is leveraged against the small practice," he says. "You have to have great billing and collections practices so that it allows for administrative work."

The administrative burden for physicians is enormous, especially for primary care physicians because of the numerous quality reports they are required to do. Valenti, who is a Physicians Foundation board member, says if legislators want evidenced-based medicine, then they should have to practice evidenced-based regulation.

"If I am spending a ton of time away from patients answering all your quality questions, I'm not improving patient care," he says. "How much is too much? I don't know the answer to that question, but I think we're there."

So do a lot of other physicians. Burnout is on the rise, according to Medscape's 2016 Lifestyle Report. One of their biggest complaints is "too many administrative tasks," according the report as well as longer hours and spending more time on a computer.  

Developing a strong, independent practice is admittedly hard work, but it may also be a way to stave off burnout, with either the right investment in technology and staff or a partner.

"A lot of doctors are good at being doctors, but are not skilled at being small business owners," Valenti says. "It's very difficult."