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Physicians Practices Publications THE BUBBLE BURSTETH It was only a couple of years ago that I wrote in this column about an interesting addition to the trend of consolidating industries, that being the practice of medicine. There was a rush to combine medical practices to streamline costs, access superior technology and diagnostic data, remain competitive and achieve economies of scale. There was also a "sky is falling" mentality among medical professionals fearing that national conglomerate practice management companies were going to control the reimbursable dollars flowing from insurance companies and HMOs. Moreover, physicians were increasingly selling their medical practices to these physician practice management companies (sometimes called PPMCs). Some of the deals were for cash and others for stock. Of the stock deals, many required the physicians to hold stock in companies that were not yet publicly traded. Making the physician a partner of the venture helped to assure, the PPMCs hoped, the physician's continuing commitment to the success of the overall growth of the consolidated company. Wall Street was supposed to love this model. In exchange for the cash or stock consideration, the physicians were bound to pay a portion of their patient revenues to their new "partners" for anywhere from 10 to 40 years and could not practice medicine competitively if they decided to get out of the deal. Then something strange happened on the way to the bank. The supposedly better technology was, in fact, a huge cash investment (charged back to the MDs) in new computer systems that rarely accomplished the desired results. Collections proved to be a nightmare. The PPMCs were far better at salesmanship for growth's sake than they were at constructing an effective model of consolidation. So, 1999 and 2000 has proven to be a time that lawyers skilled in the disassociation of physicians from these ironclad contracts, with their litigation arsenal close at hand, have become a hot commodity. Tax lawyers, too, play an integral role in assisting their physician clients to absorb or mitigate the huge impact of rescinding or otherwise breaking the PPMC contract. These escapes are expensive to the physicians, both in terms of liquidated damages clauses contained in the PPMC contract and in terms of legal and accounting costs. Such are the costs of freedom from contracts the physicians regret having entered into in the first place. Physicians continue to battle the health care delivery system for each reimbursable dollar. Political winds are blowing the physicians' way. HMOs are under intense scrutiny for substituting their fiscal judgment for the physicians' medical judgment. Physicians, previously aligned against any legislative effort to regulate medicine, now find themselves the underdog fighting alongside the trial lawyers against the "establishment" of big money health care interests. What an interesting turn of events! |
