Don’t like your PPMC? Tips for voiding a contract

PPMC woes may create opportunities

When the formerly high-flying MedPartners decided last November to get out of the practice management business it marked the official end of the glory days for the physician practice management industry, says many experts.

This sudden reversal of fortune for many physician practice management companies (PPMCs) also could be the best thing that could happen to many of the 238 clinics and 13,000 doctors affiliated with MedPartners, says Jeff Peters, president of Harvey, IL-based Health Directions Inc., a physician practice management turnaround firm.

This reorganization in the PPMC industry gives physicians who are dissatisfied with the protocols and financial controls used by their PPMCs a unique opportunity to get out of their current arrangement and strike more agreeable deals with area hospitals, health systems, group practices, or even other PPMCs, according to Peters.

"Physicians who stay with PPMCs must accept the reality that they may be bought, sold, and managed by people over whom they have little or no control or influence, and that the situation could change at any moment," says Peters. "Physicians with an entrepreneurial bent and a need for autonomy are probably better off cutting their losses and seeking out other arrangements."

Peters recommends that physicians who want to leave their PPMC consider the following tactical options:

• Contract review.

"Simply put, review your contracts for clauses that would render them illegal," says Peters. For example, if a physician resides in a state such as Florida — which prohibits fee splitting and views management compensation on the basis of a percentage of collections — and the PPMC receives its fees based on a percentage of collections, the courts are likely to perceive the contract as invalid.

• PPMC service review.

Working with legal counsel, physicians should carefully review the scope and effectiveness of PPMC services as guaranteed within the contract. For example, did the PPMC provide management support as outlined in the contract? Did it help reduce overhead or secure new patients? If not, the PPMC could be in breach of contract and physicians may find it relatively easy to make a comfortable exit.

• Friendly persuasion.

Broach the subject of leaving with the on-site practice director or manager. At first contact, a non-threatening approach often works best, Peters says. Some suggested opening lines might be, "This situation just isn’t working for me anymore. I’d like to leave the practice by early July and I need to talk with you about how I can make that happen and what it will cost me."

Once you start negotiating new contracts, avoid recreating old problems. Whether establishing a new relationship with other providers or another PPMC, physicians need to first develop a clear picture of what their priorities are, what they bring to the negotiating table, and what goals they have when it comes to such contract basics as income formulas, physician control, fee-based management services, malpractice insurance, and contract renewal periods, says Peters. Here are some of his suggestions:

• Contract length.

Peters advises physicians to negotiate for contracts of two years or less, but never more than five years. "Given the volatility of health care, few physicians can predict where they will be in five years, while others may want to redesign their personal lives," he says. "Long-term contracts preclude flexibility and change."

• Site-of-practice restrictions.

"Generally, when the business relationship goes south, you want to have a way established to exit the contract gracefully and still be able to practice within the same geographic area and specialty," Peters says. "One way to do that is being able to buy out for a relatively low fee." For example, he says, if a PPMC acquired the practice, the buy-out fee should be no more than 50% of the original cash payment.

• Compensation goals.

Physicians who desire some kind of income security should negotiate a relatively high base compensation in return for such trade-offs as working a pre-set minimum number of hours, advises Peters. However, those wanting to maximize their income can bargain for a productivity-based compensation formula.

• Practice control.

Peters says physicians should maintain as much control as possible over practice operations. This should include the ability to accept or reject managed care contracts, determine staffing levels, hire and terminate employees, and set practice fees. Other important considerations: final approval over addition of new physicians and limiting the total number of physicians in the practice and their specialties.

• Fee-based management services.

Does the contract indicate which professional services are subject to management fees? "If a PPMC, health system, or group fails to help a physician manage certain services, then I don’t see why you should pay a management fee for them, " says Peters. For instance, many physicians write papers and give lectures for a fee, for which they receive no assistance but which are still subject to a management fee. Or, sometimes PPMCs charge a percentage of the bonus physicians receive from their risk pool for effectively managing their capitation contracts, even though the PPMC contributed nothing tangible to managing these patients.

• Malpractice insurance.

The practice, hospital, health system, or PPMC should cover your malpractice fees should you decide to leave the practice, says Peters. "The optimum malpractice policy arrangement covers physicians for the time they work with a given practice as well as for any claims filed later for care provided during the same period," he says.