Achieving Financial Success for Owned Physician Practices

By Lucy Zielinski, James Valek

A focused management approach that recreates the dynamics of a private practice turnaround is key to the financial success of employed physician practices.

The trend to acquire physician practices is stronger than ever, yet many hospitals struggle financially after making the move. Hospitals lose an average of $96,286 per employed family practice physician per year, while the average loss on an employed internist is $222,786, according to the Medical Group Management Association’s Cost Survey for Single-Specialty Practices: 2011 Report Based on 2010 Data. For a hospital that owns just 25 medical practices, that could translate into well over $3 million in losses annually.

How can hospitals minimize losses on newly acquired medical practices? In addition to setting realistic financial goals and benchmarks for hospitalemployed physicians, much can be learned from the management techniques that have been proven most effective at helping private medical practices reduce losses and achieve stronger profitability.

At the core of an employed physician practice turnaround are performance goals that keep physicians focused on profit and loss and that are aligned with the physicians’ professional aspirations. Strengthening collections processes also is critical. Most important, both providers and staff require a structure of accountability to keep improvements on track.

To apply these private-practice turnaround techniques to employed physician
practices, hospitals should focus on five targeted interventions.