Change in health care delivery and business is driving tremendous integration activity in all sectors. Hospitals are merging. Medical practices are merging with competitors (typically in single specialties). Size and growth is becoming the magic pill in this era of change and fear. But it is not “necessary” and it is certainly not enough.
“The day of the onsies and twosies is coming to an end.” How many lawyers and other consultants have said this? For how many years? For a very long time. And yet, one and two person practices persist and even flourish! That said, there are clear opportunities available to those practices that embrace the concept of size:
1. Economies of scale. Stuff costs less when you buy more of it, and large practices buy more stuff;
2. Pricing power. To some extent, the larger group gets to muscle back against commercial payers. Though this depends on complex things like the scope of services and geographic availability, the clear truth seems to be that size is a factor in pricing;
3. New income opportunities. Sure. Larger groups have a greater opportunity to develop new income sources. Ancillary services, for instance, are volume driven, so the larger the group, the greater the opportunity.
So, what’s the secret about large practices? Size alone does not fix much. People selling size are selling their expertise and consulting services. They are not in the business of making businesses operational, so their fix is structure (size) alone. Put another way, as someone one said “To a carpenter, everything is a nail.”
There are three medical practices—One, Two and Three. They each have their own challenges, successes and cultures. Put them into one large practice, what do you have for certain? A large practice with a collection of challenges, successes and cultures. Where is it going? How will it get there? Who will run it? Will they fund development, growth, operations, evolution? If questions like this aren’t asked and answered, the only thing certain is that the new large group will simply mirror the challenges, successes and cultures of their component parts.
Size alone is no panacea! And the truth is always the same in business, even medical practice: without business leadership (expertise) and commitment (money) and hard work over time, no business can grow, thrive or evolve. But, as Jerry Seinfeld once said “Not that there’s anything wrong with that.”