How Hospitals and CMGs Killed Our EM Small Democratic Group (SDG)

[Birdstrike]

How Hospitals and CMGs Killed Our EM SDG

The group I'm with was started by a small group of EM docs several decades ago and was a doctor-owned SDG, initially. They expanded by adding several other ED contracts at other hospitals. Then they added a hospitalist contract and multiple outpatient providers in multiple offices.

Then one day, after many years of threats, hospitals started amputating our ED and hospitalists contracts in favor of cheaper CMG labor. 60% of our group was destroyed in about 12 months time by this activity. Like an octopus we were forced to grow new arms in the form of adding new outpatient offices providers, real estate, investing cash, and taking other measures to boost company valuation and share value.

After initially having been forced to shrink, we are now a bigger group, with greater revenue, but with only a very small amount of it dependent on insecure, hospital contracts. We're still 100% doctor owned. We no longer have an EM contracts, nor do we have plans to add any. It would be too risky for us, with little to gain, by adding a whole division back to our company that can be guillotined by a hospital CEO with one stroke of a pen.

We've had several hospitals inquire about offering to buy us. We've voted unanimously to say no, without even entertaining offers. We much prefer our independence over their cash or empty promises.

---

Members don't see this ad.

 

[Sushirolls]

Got the capital or means to go in the other direction, *gulp*, and buy a hospital? Trend toward the goal of becoming a tiny Cleveland Clinic?

 

[Birdstrike]

Got the capital or means to go in the other direction, *gulp*, and buy a hospital? Trend toward the goal of becoming a tiny Cleveland Clinic?

No.

 

[DoctwoB]

How Hospitals and CMGs Killed Our EM SDG

The group I'm with was started by a small group of EM docs several decades ago and was a doctor-owned SDG, initially. They expanded by adding several other ED contracts at other hospitals. Then they added a hospitalist contract and multiple outpatient providers in multiple offices.

Then one day, after many years of threats, hospitals started amputating our ED and hospitalists contracts in favor of cheaper CMG labor. 60% of our group was destroyed in about 12 months time by this activity. Like an octopus we were forced to grow new arms in the form of adding new outpatient offices providers, real estate, investing cash, and taking other measures to boost company valuation and share value.

After initially having been forced to shrink, we are now a bigger group, with greater revenue, but with only a very small amount of it dependent on insecure, hospital contracts. We're still 100% doctor owned. We no longer have an EM contracts, nor do we have plans to add any. It would be too risky for us, with little to gain, by adding a whole division back to our company that can be guillotined by a hospital CEO with one stroke of a pen.

We've had several hospitals inquire about offering to buy us. We've voted unanimously to say no, without even entertaining offers. We much prefer our independence over their cash or empty promises.

I'd be interested to hear the details of the lost hospital contracts if you are at liberty to say. Were the CMGs truly cheaper? Were you given the opportunity to match their rates? If so what was the walk away point where it wasn't worth negotiating? Did the CMGs absorb your EM workforce or were non-competes an effective deterrent?

 

[southerndoc]

Got the capital or means to go in the other direction, *gulp*, and buy a hospital? Trend toward the goal of becoming a tiny Cleveland Clinic?

Apollo did that.

 

[Birdstrike]

Were the CMGs truly cheaper?

Initially yes. Then they came back later and said, "We can't do it this cheap."

Were you given the opportunity to match their rates?

I think so, but I'm not 10)% sure about this. I came onto the board of the company right after this happened, so I don't know that detail.

Did the CMGs absorb your EM workforce or were non-competes an effective deterrent?

The non-competes were not enough to prevent them absorbing our EM physicians, but were enough of a deterrent to allow us to get them to buy out those non-competes. So in a strange twist of fate, that bolus of money ended up allowing us enough money to pay the outgoing shareholders what they had due in share ownership, and amounted to a profitable year for the company, if only a balance sheet profit.

 

[MechEDoc]

Initially yes. Then they came back later and said, "We can't do it this cheap."

I think so, but I'm not 10)% sure about this. I came onto the board of the company right after this happened, so I don't know that detail.

The non-competes were not enough to prevent them absorbing our EM physicians, but were enough of a deterrent to allow us to get them to buy out those non-competes. So in a strange twist of fate, that bolus of money ended up allowing us enough money to pay the outgoing shareholders what they had due in share ownership, and amounted to a profitable year for the company, if only a balance sheet profit.

Any sense if the hospital is having buyer's remorse with regards to switching to a CMG?

 

[Birdstrike]

Any sense if the hospital is having buyer's remorse with regards to switching to a CMG?

They weren’t happy with the CMG that took our contract. The hospital fired them, and replaced them with, you guessed it, another CMG. After they cannibalized our ER docs, we had no ability to compete to get the contract back.