Economics of forming a group

[jbomba]

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I've been talking to a couple of residency friends, as well as a med school friend who went into psych, about the potential to form a group to cover area hospitals. I would imagine the bargaining power would be greater and the chronically understaffed facilities would jump at the chance to get their units entirely covered. What I'm wondering is, how does one appropriately bill for this? Does anyone know how the groups who cover units make money and/or what a going rate is in a high cost of living location? Anything else to consider?

 

[littlefred]

That sounds like a great idea. I think part of how these groups bargain their coverage/services is by negotiating to get a piece of the cake (percentage of hospital charges to insurance). You would also bill the insurance directly for your services (99204 or 5). Hopefully other can chime in, this is from what I've heard mostly.

 

[jbomba]

That sounds like a great idea. I think part of how these groups bargain their coverage/services is by negotiating to get a piece of the cake (percentage of hospital charges to insurance). You would also bill the insurance directly for your services (99204 or 5). Hopefully other can chime in, this is from what I've heard mostly.

So essentially, the group would bill insurance directly for our services. Then we would negotiate a piece of the facility fee? I thought there was also a daily rate that hospitals received - something in the high 3 to low 4 figures. Would there be negotiation for this as well?

 

[nexus73]

I have no experience with this, but I don't think you can get part of the facility fee. I think you can get the contract to be the exclusive group providing coverage and bill insurance, and if the hospital has a poor payer mix, or a lot of uninsured, you can negotiate a stipend to the group from the hospital to offset, but you'll be butting up against fair market value issues just like a regular doctor. Everyone is afraid of getting accused of kick backs.

 

[jbomba]

I have no experience with this, but I don't think you can get part of the facility fee. I think you can get the contract to be the exclusive group providing coverage and bill insurance, and if the hospital has a poor payer mix, or a lot of uninsured, you can negotiate a stipend to the group from the hospital to offset, but you'll be butting up against fair market value issues just like a regular doctor. Everyone is afraid of getting accused of kick backs.

Seems there is a lot to figure out here. But really, how do these groups make money? I can get in with these hospitals and just bill for my services against the patients insurance as an individual doctor. What is the benefit of the group getting a contract then?

Maybe a better question would be, if you had 4-5 psychiatrists who were ready to band together, what setting would be most conducive to creating a lucrative business?

 

[mistafab]

Seems there is a lot to figure out here. But really, how do these groups make money? I can get in with these hospitals and just bill for my services against the patients insurance as an individual doctor. What is the benefit of the group getting a contract then?

Maybe a better question would be, if you had 4-5 psychiatrists who were ready to band together, what setting would be most conducive to creating a lucrative business?

The benefit for the system is that they have more reliable coverage. The benefit for the providers is they have more negotiation power, and may get more flexible work as a group. It can be a win win since training/onboarding is expensive, and call needs to get covered somehow. The group makes money just as doctors do, they negotiate a contract and act as single physicians working on behalf of the group, and bill as a single physician would. The group may have their own biller that they cost-share with, or the group may negotiate straight salary and have the system do the billing.

I would imagine there is no clear "best setting" given lack of assets (excluding TMS, ECT, or real estate). All you need is a system hungry for bodies, and a big enough pool of people to fill that need consistently.

 

[uhmocksuhsillen]

The benefit for the system is that they have more reliable coverage. The benefit for the providers is they have more negotiation power, and may get more flexible work as a group. It can be a win win since training/onboarding is expensive, and call needs to get covered somehow. The group makes money just as doctors do, they negotiate a contract and act as single physicians working on behalf of the group, and bill as a single physician would. The group may have their own biller that they cost-share with, or the group may negotiate straight salary and have the system do the billing.

I would imagine there is no clear "best setting" given lack of assets (excluding TMS, ECT, or real estate). All you need is a system hungry for bodies, and a big enough pool of people to fill that need consistently.

I'm not sure what OP is imagining, but the part I don't get is how is the group making money from the hospital? Are the groups coming in and saying we will take care of all of your needs and in return you give us x dollars a month?

 

[Sushirolls]

If you have 4-5 who are willing to move... and good enough friends to play well, and not back stab each other, here is a your recipe for success:

Find a small rural community that has a Critical Care access hospital, 25 beds.
Their rules allow them, to still be CCAH at 25, but can expand and have 10 extra beds entirely devoted to Psychiatry.
Chances are the population will be heavier on the medicaid/medicare than other regions, that's okay.

Talk with the small town hospital CEOs and tell them you are shopping around for these small rural communities that will offer the best deal. See if they have any community funds, or simmering donors behind the scenes, to facilitate building a building from scratch.
*in house lab section to run your own UDS maybe even lab draws for CLIA fast machines for CBC/CMP/TSH/lithium/etc
*TMS rooms
*offices
*group therapy room
*Injection LAI / Ketamine infusion room
Then let them know, you will cover C/L for the hospital - available by phone at night - but ultimately will see consults first thing in AM. Cover floor C/L, too, but for a 25 bed CCAH you are talking like 1-2x per month.
Do ECT in the hospital, too
*Use the group room for IOP or PHP or Shared medical appointments, all of those.

Have the group formed as a non-profit... which allows for student loan repayment ease...but means median level salary.
Consider at some point being the Community Mental Health contract holder... or not? weigh those pros/cons later

If community springs to have the building built for you, here is where you excel beyond the median salary, have a contract that separately, in ~5 years, the building is sold by whomever, and First Right of Refusal goes to your doctor group. I.e. you and your friends form a for profit LLC to purchase the building, and now you get equity buildup over time that your non-profit "employer" group just so happens to lease from. Guaranteed tenant, long haul play for retirement.

A solid group of 4-5 people in middle of nowhere won't ever need to worry about competition. And with that group of people, you'll more than be able to provide the needed call - which will be quite light.

The key, is the friendship must be greater than the desire to live in XYZ, but be flexible to locate the best deal.

 

[clozareal]

I think you would bill the same way to the insurance company, but with the group NPI 2 number. The group would have more power to negotiate with insurance for higher rates for certain CPT codes than you would as a solo provider. That would generate more income for those facilities. I'm not 100% sure, but all the psychiatrists in that group would be reimbursed at the same rate for that specific insurance company but I don't understand the nuances of what having different board certifications would do.

 

[jbomba]

So a group gets a higher rate from insurance, and a higher facility fee for the hospital?

 

[Sushirolls]

Maybe. Maybe not. Have to form the group, and "apply" with insurance and see how things shake down.
With the no suprises act everything should be out there and posted on hospital websites, i.e. what their charges are and their reimbursement too.
You can then cross reference the contract offered by the insurance to that.

Just remember, some insurance, simply won't show their rates until after you have signed with them...
A hospital will require you to be in network with Medicare AND medicaid; but you might have some discretion with which of the medicaids and even the advantage plans of medicare.

BUT if you are doing inpatient work, the name of the game is to get broad paneled with everything. Not being IN with one means patient gets big bill and the whole "no suprises" act Scat becomes an issue...
The hospital won't care, and will be glad, because you and your group get to deal with the headaches, because you have your contract to keep servicing...

Starting in outpatient first allows discovery of the insurance contracts, the local population, etc, before diving in to the environment of IP work.

If you do a quick survey of group psych practices, very few also do IP/Hosptal work IMO. You'll see most are strictly OP.

That's why in my recipe of sucess above, I suggested rural CCAH as a location to pursue inpatient, because volume will be low, and local community PCPs and hospital CEO will be delighted to have you for such full wrap around coverage.

 

[Jules A]

Money can be made. Take over ED, CL and unit-which feeds a PHP or IOP. Utilize residents for ED evenings and ED/unit weekends. Ensure ED and CL patients are seen for follow ups.

 

[comp1]

This sounds amazingly complicated. Good luck!

 

[Merovinge]

I would imagine the bargaining power would be greater and the chronically understaffed facilities would jump at the chance to get their units entirely covered.

I think this is largely not the case. Most places that are chronically understaffed are that way because either A) they lack funding or B) are finding profit from their current staffing even if it is suboptimal for patient care. Maybe you do have a chance to get a decent contract out of some places but I don't think that will lead to any significant riches.

I would guess if you have 4-5 psychiatrists the best way to leverage that would be in an OP practice where you can negotiate better with insurance and then build upon this by increasing the size of the practice over time (all MD group, hire midlevels, hire therapists, add interventional services etc). If you are really ambitious you could add on PHP/IOP LoC which has a lot of hoops to go through but can be lucrative and profound work as well as a source of referrals into the practice.

 

[Sushirolls]

...or... all the folks in this social circle go do C&A fellowships, like it, and then open their own group practice where ever they want. They'll get all the referrals for miles and miles around. But by the time they all spilt up, and do fellowships at different locations they will likely not want to herd together after completing it.

 

[Stagg737]

Sushi's here, @TexasPhysician , @randomdoc1 , your wisdom is requested!

 

[whacko]

So I am a lurker but also one of two partners in a group with approximately 30 providers (between psychiatrists and NPs). We have hospital contracts with multiple hospitals for various services (inpatient, ED/CL coverage, ECT) and a large outpatient practice with TMS/Spravato/Zulresso. I will tell you that getting to this place was difficult and time intensive. You negotiate with the hospitals to be paid a daily management fee and medical director stipend and your group does your own professional fee billing. You will not get any percentage of facility fees due to Stark Law. In order for hospitals to be interested in this, you have to cost them less than them hiring a psychiatrist themselves. You also have to remember that in this model the hospital is your customer, not your employer. This can make you have a difficult line to follow of prioritizing patient care but not losing the hospital money.

It is hard to give you more specific information as it depends on region. It also depends on how much money you are trying to make out of it as to how you would structure it.

Feel free to DM me and I’ll give you more tailored information.

 

[Merovinge]

So I am a lurker but also one of two partners in a group with approximately 30 providers (between psychiatrists and NPs). We have hospital contracts with multiple hospitals for various services (inpatient, ED/CL coverage, ECT) and a large outpatient practice with TMS/Spravato/Zulresso. I will tell you that getting to this place was difficult and time intensive. You negotiate with the hospitals to be paid a daily management fee and medical director stipend and your group does your own professional fee billing. You will not get any percentage of facility fees due to Stark Law. In order for hospitals to be interested in this, you have to cost them less than them hiring a psychiatrist themselves. You also have to remember that in this model the hospital is your customer, not your employer. This can make you have a difficult line to follow of prioritizing patient care but not losing the hospital money.

It is hard to give you more specific information as it depends on region. It also depends on how much money you are trying to make out of it as to how you would structure it.

Feel free to DM me and I’ll give you more tailored information.

You sound extremely well versed in this, would you be willing to discuss the financials behind TMS/Spravator/Zulresso in broad strokes? Are these things really profit drivers for your practice? Congratulations on your success and thank you for the willingness to share.

 

[whacko]

Zulresso - rarely do it so it really doesn’t make any money. It is resource intensive but it pays for it. If we had enough appropriate patients to run it regularly, it would generate revenue for the practice.

TMS - in order for it to work, you need to have a large internal patient group to have internal referrals to pay for the chair while you market for out of practice referrals. Then it is just an economy of volume. The more volume the more revenue.

Spravato - you need to do multiple treatments at a time in order for it to generate more revenue than an outpatient provider. Using the appropriate codes recommended by J&J, it can generate income. We do 50/50 internal referrals vs outside psychiatrists referring. It has actually led to clinic referrals from PCPs referring for Spravato when their patient is not seen by a psychiatrist.

These are not the primary revenue generators for the clinic but they make enough revenue to justify the space we justify it and it helps market the practice compared to our competitors.

 

[Sushirolls]

Is there a particular inflection point, or range of pt volume, to justify the TMS machine? I.e. Do you need ~5-10 patients in active series per month to break even? Or 10-15? etc.

 

[clozareal]

Is there a particular inflection point, or range of pt volume, to justify the TMS machine? I.e. Do you need ~5-10 patients in active series per month to break even? Or 10-15? etc.

You can ask the TMS device manufacturer for this return on investment calculation. It's 2-3 patients per day to break even on year 1 ROI and 1 patient per day after the first year, although I think it's a bit optimistic since they're trying to sell you the device.

 

[Sushirolls]

That sounds like the key right there, is actually seeing patient 3x, so really just usual office E&M billings.

 

[whacko]

Don’t think about it as how many need to be in active treatment to pay for it but rather how large of a referral base you have. If you look at it as in how many are in active treatment, you will have to be hustling to keep that number coming in and if you stop hustling it will fizzle out and the cost will outrun your revenue. If you wait until you have a large enough referral base where you know your chair will be preferred (either internal patients or colleagues you know will preferentially refer to you), then it isn’t as hard to keep it occupied. You just have to do intermittent refreshers to those who refer to you. Don’t think about the patients that are currently asking for it. Unless you have 20-40 of them (depending on insurer) that will finish, you’re not going to break even. Think about where are the patients a year from now going to come from.

 

[Sushirolls]

I already know for my practice I just don't have the volume, nor the trickle down of those who are logistically motivated, and of course the attrition level on top of that. Just thinking about the big picture as you point out, referral patterns and community volume and how it applies to my new rural low population area. Thanks for the positive comments. They are helpful.