the Grace Report Provides Important Private Intelligence, Gathered Exclusively
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Headlines- March 13, 2006
THE GRACE REPORT

Headlines- March 13, 2006

Commentary and Opinion by Robert L. Michel:
Workplace Trends Threaten Ob-Gyn Group Business Model

WE’VE BEEN DIGGING DEEPER INTO HOW GENERATION X PHYSICIANS are changing several key aspects of the ob-gyn profession. Like most of you, our common wisdom on this topic centered around the preferences of Generation X physicians to work fewer hours per week— and more structured hours—than their older colleagues.

In the last issue of the GRACE REPORT, we interviewed leading physician recruiters for their perspectives on how Generation X physicians differ from earlier generations of doctors. After all, recruiters work with many different ob-gyn practices to help them attract and retain new physicians. These recruiters had plenty to say about Generation X and why they predict younger physicians will trigger many changes in the traditional business model of the private group medical practice. (See GR, February 20, 2006.)

Having heard from physician recruiters, we next went to several obgyns
who are business leaders of their groups. You will be fascinated to
learn that these ob-gyns are convinced that younger physicians, as they
enter the ob-gyn specialty in greater numbers, will trigger profound
changes to the profession—and not because there will be conflict between the work preferences of Generation X physicians compared with Baby Boomer physicians.

As you will read on pages 3-9, the real issue is the change in
productivity that accompanies a younger physician—and the effect this
change has on the basic economics of the average-sized ob-gyn group
practice. Simply put, Baby Boomer ob-gyns generally accepted the need to put in 80 to 100 hours of work per week. But Generation X physicians will generally not accept more than 50-60 hours of work per week.

For ob-gyn groups, this skews the fundamental economics of the private group practice business model. Steadily declining reimbursement and increases in the cost of doing business mandate the need to see more patients to sustain financial viability. Yet, even as those twin forces work against groups, younger physicians seek positions that allow them to limit their hours. By limiting their hours they have capped the number of patients see and the revenue they generate for their group. Seen from this perspective, traditional group practices will soon be confronting a major threat.

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Gen X Ob-Gyns to Trigger Major Changes in Ob-Gyn

Different preferences in work hours, lifestyles alter the economics of the mid-size ob-gyn group

CEO Summary: For many ob-gyn groups, hiring younger physicians has
become problematic. That’s because many younger ob-gyns prefer not to work the longer hours of older physicians. Then there’s the increased proportion of women in ob-gyn, who want more family time. Although most young physicians work hard on the job, their desire to work fewer hours per week than older generations of physicians alters the fundamental economics of the midsize ob-gyn practice. Individual ob-gyn groups are developing strategies to cope with this developing trend.

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Against All Odds? Ob-Gyn Groups Face Challenges

Changes in physician productivity are likely to further erode troubled finances of groups

CEO Summary: It’s already a tough financial environment for many traditional ob-gyn groups. Overhead costs go up even as reimbursement declines. Younger and women physicians eschew the long hours that older physicians commonly work. Patient safety initiatives mean increasing numbers of patients deliver their babies in large health systems—without having their ob-gyn present, as was common in the past. All of these factors are pushing some ob-gyn groups to seek efficiencies, including consolidation into large groups or becoming part of integrated health systems.

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Consumer-Directed Health Plans To Be Healthcare’s Next Wave

New plans give consumers financial incentives to become savvy buyers of their healthcare

CEO Summary: It is widely known that growing numbers of employers are turning to consumer-directed health plans (CDHPs) as a way to control increases in their annual health benefit costs. But that is only part of the story. CDHPs represent a major transformational force—one that promises to push deep and radical change into the American healthcare system. To give ob-gyns and their practice administrators a comp-rehensive understanding of this important trend, the GRACE REPORT is proud to present this detailed and candid interview with Paul Mango, a consultant with McKinsey & Co. This interview was conducted by Robert L. Michel, Publisher of the GRACE REPORT. Because of its length and comprehensive nature, it will be presented in a series of installments. Part One looks at why employers believe CDHPs are a viable way to reduce year-to-year increases in the costs of health benefits.

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OB-Gyn Buys Franchise to Open Laser and Skin Care Clinic

Ob-gyn finds franchise opportunity speeds up growth of aesthetic and skin-care business

CEO Summary: For ob-gyns seeking to develop a cash business to supplement or replace their medical care income, cosmetic and aesthetic services continue to be an attractive business option. In addition to using an experienced consultant to launch a laser and skin care clinic, ob-gyns can now consider buying a franchise to help minimize up-front costs and speed development time. Dermacare Laser & Skin Care Clinics of Scottsdale, Arizona, says it is possible for physicians to start a franchise clinic for a modest investment and have it operational in as little as 60 days.

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INTELLIGENCE: Late and Latent

ST. LOUIS HOSPITAL ENDS OBSTETRICS CARE

ELBERT MEMORIAL HOSPITAL TO STOP DELIVERING BABIES

Look for the next briefing on Monday, April 3, 2006.

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