July 1997 Bulletin

Take control of future - organize

Consultants say size needed in consolidating market

If orthopaedic surgeons want to be players in the health care market, they must take control of their future and organize. That's the take-home message for fellows attending the Academy's national conference on "Reshaping Your Practice" in June.

The rapid evolution of the health care market is resulting in consolidation of health plans, creating fewer, powerful organizations; more consolidation of the hospital industry with greater control over planning and health plan negotiations; smarter employers demanding cost and quality from fewer vendors; and smarter, more cynical consumers demanding quality. Meanwhile, federal and state governments will be funneling more money to managed care plans for Medicare and Medicaid health insurance.

Robert Laszewski, president, Health Policy and Strategy Associates, Washington, D.C., called this overview of the market "the clash of the titans." Among the players in the health care market, physicians were described as the least organized and most vulnerable.

The continuing medical education course in Chicago, June 5-8, provided about 150 orthopaedic surgeons and 90 business managers with an intensive review of the rapidly evolving health care market, the basics of various organizational models and strategic options and tactics.

One consultant urged orthopaedic surgeons to "aggregate, consolidate and be relevant to the consumer." Another said there was "too much focus on cash flow and the immediate impact of managed care."

The real challenge ahead is not "managed care, HMOs or hospitals practicing medicine," said Daniel K. Zismer, PhD, co-founder and principal of Partners Consulting Group Ltd. "The challenge is the consolidation of a $1 trillion industry where the purchaser and the provider are organizing to trade access to markets for lower cost and enhanced value."

The principal threats to physicians in the consolidating market, he said, are:

Orthopaedists should strive "to be the indispensable orthopaedic value proposition in preferred markets," Zismer said. The tools to achieve that strategic position include "size and scale." He pointed out that the orthopaedic service in a hospital provided by 27 orthopaedic surgeons organized in one- and two- doctor practices, won't get as much attention as if all 27 surgeons are organized in one practice.

One "average" orthopaedic general surgeon contributes $2.5 million to a community hospital that does $13 million in annual net revenues, Zismer said. Ten orthopaedic surgeons contribute $25 million. He urged orthopaedic surgeons to use that leverage.

Traditionally, orthopaedic surgeons have wanted "to be in my own shop," Zismer said. "That's not wrong, but you're not going to optimize your leverage with the hospital." He urged orthopaedists to recognize that the preservation of the independent practice of medicine is a cause, not a business strategy.

Other tools for strategic positioning are:

Michael A. Wood, chief executive officer, Saint Louis Management Group, told orthopaedic surgeons that the advantages of organized systems are predictable revenues, increased control over revenues, efficient contracting process, control vs. being controlled, more autonomy over treatment decisions, streamlined administration and continuity of patient care.

The action items for forming an integrated medical group are, Wood said, "Don't undercapitalize; remember, there is no optimal organization structure, only highly-functioning teams; and focus on building management and leadership."

In times of change, said David Harrington, KarenZupko and Associates, "know where you are, where you are headed, keep open communications, and extend and develop interdependency by people impacted by change." Using the success of Starbucks, the national chain of coffee stores, as a model, Harrington urged orthopaedists to be attentive to the needs of their customers, the patients.

Questions from the audience, clearly indicated that many orthopaedic surgeons are unsure of how to move from the concept of traditional medicine in which physicians treat patients and perform procedures to what several consultants suggested: patients are customers and medical procedures or services are products and product lines.

Some also are stymied on how to change the behavior of physicians who want to remain autonomous and/or refuse to follow the practices of a group.

The consultants suggested that economics is a key driver of behavior. A market analysis would show what would happen to a practice if employers and the public decided to go elsewhere. Strong physician leaders also are needed.

Other speakers at the conference focused on survival strategies for academic practice, salaried practice issues, payment trends and mechanisms in advanced markets, management service organizations, practice buyouts and antitrust issues.

Theodore J. Vigeland, MD, and Joseph S. Barr Jr., MD, were conference chairmen. Members of the program committee included Paul J. Hirsch, MD; William C. McMaster, MD; Alan H. Morris, MD; Vernon T. Tolo, MD; and Karl Stein, practice administrator.


Orthopaedic surgeons and business managers listen intently to experts who explain practical strategies of working with providers, employers, and payers.


William W. Tipton Jr., MD, executive vice president of the Academy, tells the opening day audience of "Reshaping Your Practice" that the national conference will provide them with potential solutions to dealing with the changes in the health care environment.


Robert Laszewski, president, Health Policy and Strategy Associates, Washington, D.C., says physicians are the least organized and most vulnerable group among the players in the health care market.


Theodore J. Vigeland, MD, conference co-chairman, introduces experts presenting "The Big Health Care Picture."


Herbert Y. Wong, PhD, senior vice president, strategic planning, Columbia/HCA Healthcare Corporation, told the audience that consumer disatisfaction and new technology are driving forces in changes in health care.


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