Outsourcing by primary care practices on the rise, but proceed with caution

Key Points

A spree of specialty- and hospital-based practice acquisitions in 2010 by national corporations such as IPC and Mednax may have some physicians wondering whether the days of the publicly traded practice management companies, similar to those in the 1980s and '90s, will return.

"We are a national medical group," Singer says. "I'm a doctor. I run a medical group. There's a difference, at least in terms of history. There were very bad business models associated with capitation and taking risk that these lay corporations were trying to do and calling themselves practice management companies."

Marc Halley, president and CEO of Halley Consulting Group, who advises hospitals and practices on acquisitions, agrees with Singer's assessment.

"I have not seen any resurgence of any publicly traded physician practice management companies that we saw in the '80s and '90s focused on primary care," says Halley, author and editor of several practice management and acquisition books including his most recent, Owning Medical Practices: Best Practices for Sustainable Results. "There's just not enough leverage there to make that work-unless you're playing the stock market game-but that only lasts for so long."

Although it's unlikely primary care practices will become acquisition targets, many national management services organizations (MSOs) are looking to take over the administrative functions of your practice-such as billing, collections, human resources, and technology-for a share of your earnings.

"Over the medium term you're going to see good growth in terms of outsourcing," says Vishnu Lekraj, senior analyst with MorningStar Equity Research. "In my opinion, you're going to see a whole lot of medical organizations try and utilize back-office outsourcing companies simply because it's a lower-cost service than doing it in house."

In the information that follows, we'll tell you about the kinds of companies in this market, the services offered, what it will cost you, and what to watch out for when negotiating an agreement.