The changing business of General Practice

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The changing business of General Practice
Michelle Meads Business Advisor Medical Assurance
Society
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Overview of Presentation

• What does general practice look like now?
• Drivers for change
• A better option?
• Questions

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What does general practice look like now ?

• Number of GP practices in NZ approx. 1,000

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Source MAS HealthyPractice - Subscriber
Analysis Report June 07
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What does general practice look like now ?

• Group practice of 2-6 FTE GPs
• Generally cost sharing arrangements
• Practice (patient goodwill) ownership at
  individual GP level
• Management role shared (GPs/Practice
  Manager/staff)
• Often tensions between individual practice
  group practice needs

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What does general practice look like?

• Cost sharing group practice business model is
  still dominant
• Each GP retains business ownership receives
  their revenue streams related to their patients

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Cost sharing business model
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Drivers for Change

• Capitated funding and proactive population health
  management
• Group practice quality standards
• Increased compliance and administration
• GP stress/work-life balance
• Business and management skill needs
• Better financial returns to owners

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A Better Option?

• GP business all assets owned by group
• Clinical income profit separation for owners
• Financial risk (and return) held at group level
• Larger group practice with specialist business
  management skills

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Economies of scale - amalgamation
Benefits
Concerns

• Less vulnerable to competition
• Succession planning, attracting GPs
• Peer review, quality skills
• Lifestyle, CME/holiday cover
• Potential to increase incomes
• Extended hours continuous care
• Multidisciplinary approach
• Ability to develop sub-specialties
• Ability to better utilise non-GP providers
• Attractive to radiology, pharmacy etc
• Perception of better quality care
• Management affordability
• Enhanced management capacity financial,
  planning, compliance etc.

• Capital requirements for development
• Possible higher debt level
• Exiting existing rooms
• Patients may have to travel further
• Collective decision making
• Less personal image perception
• Ability of partners to work well
• Giving up some autonomy/control
• Slower, consensus decision making
• Need to upskill in corporate governance
• Sharing resources (e.g. nurse)

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Profit sharing business model
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GP clinical remuneration

• What should you expect to earn as a GP?
• MAS Rem. Survey Medians NZ (Rural)
• 55 (60) commission, incl.dummy GMS
• 75 (80) per hour
• 275 (300) per session
• Hourly rates as high as 120 seen
• Dec 06 survey, 111 practice responses

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GP clinical remuneration

• DHB/ASMS MECA for GPs employed by DHBs
• Salary range WEF 1/7/05 113,500 to 163,500
  (55-79 per hour) but includes many benefits
• 40hr FTE week with 30 non-clinical time
• 6 weeks annual leave
• 2 weeks CME leave costs of 8,000pa
• 6 of salary superannuation
• 3 mths min. sick leave
• Overtime at time ½
• Est. total value per annum 160,000 to 220,000
  (75 - 110
• per hour if services contracted).

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Profit

• How should profit be distributed?
• For most businesses profit represents a return on
  investment (what you paid for your ownership
  stakeholding), not your personal efforts in the
  business (paid for by way of remuneration)
• What profit should you expect?
• Ownerships risks are high
• Workforce shortages higher cost
• Complex business, high compliance burden
• Increasing patient service expectations

Reasonable return on ownership investment would
be 15-30 e.g. if cost to own 50,000 then
expected net (after tax) return to owner 7,500
to 15,000 per annum
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Summary

• Traditional small practice cost sharing business
  model not most effective in complex and changing
  environment
• Greater need for specialist business management
  skills
• Benefits with a larger group practice single
  business model but amalgamations are slow to
  progress

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Questions?
Michelle Meads michelle.meads_at_medicals.co.nz Telep
hone 0800 800 627 (MAS)