the Grace Report Provides Important Private Intelligence, Gathered Exclusively
for OBs & GYNs, Their Practice CEOs, and Key Administrators.

Headlines- June 5, 2006
THE GRACE REPORT

Headlines- May June 5, 2006

Commentary and Opinion by Robert L. Michel:
More Ob-Gyn Super-Groups Are Forming across the U.S.A.

IT’S A QUIET TREND THAT DOESN’T ATTRACT MUCH ATTENTION at the national level. Yet in many communities across the United States, forward-looking ob-gyns are creating regional super groups.

It is the next generation of practice consolidation that originally started
in the 1990s. However, this consolidation is much different. During the
1990s, practice consolidation was driven primarily by two sources. One
source was the physician practice management (PPM) company. These were launched by businessmen who decided they could run a medical group practice better than the doctors themselves. Remember MedPartners, PhyCor, and FPA Medical Management? These were the most spectacular financial failures of this business concept.

The second source were ob-gyns themselves, motivated to form
consolidated practices in their communities as a way to negotiate more
effectively with HMOs and managed care companies. These ob-gyn group consolidations were mostly driven by frustration and the compelling need to counter the onerous financial terms offered by health insurers.

The latest trend of ob-gyn practice consolidation differs from that of the
1990s in an important way. Today’s regional practice consolidations are
initiated by progressive ob-gyns. These physicians are willing to give up their existing practice autonomy to recruit colleagues and competitors into a regional practice organization. They know that a group practice of 20, 30, 40, or more ob-gyns has the size needed to deliver more benefits, including increased compensation, than can be produced by any small ob-gyn group.

The GRACE REPORT is bringing you the stories of these emerging regional ob-gyn super groups. Their experience teaches all of us that it is possible to create large, regional group practices that enhance the professional satisfaction of the physicians, even as it helps them slash costs and boost their overall take-home income.

Of course, getting 40 or 50 ob-gyns practicing in small groups to agree to give up their independence and join a large ob-gyn practice organization has its own challenges. In this issue,Women’s Health Care Group of Pennsylvania shares the secrets of how 15 small ob-gyn groups decided it was time to merge into what is now a 50-physician ob-gyn supergroup.

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Careful Preparation Before Regional Ob-Gyn Integration

Steps leading to regional ob-gyn “super-group” addressed key concerns of all physicians

CEO Summary: It’s a troublesome dichotomy. On one hand, ob-gyns recognize that merging into larger groups gives them increased economies of scale that can lead to lower costs and greater efficiency. On the other hand, most physicians like their autonomy in small group settings and are reluctant to give up that control. Women’s Health Care Group of Pennsylvania (WHCGPA) anticipated these concerns and designed a business plan that offered participating ob-gyns multiple benefits—while preserving small practice autonomy and enhancing overall patient care and increased profitability.

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Leasing Offers Advantages When Buying New Technology

Leasing provides a financing option to acquire latest technology or expand clinical services

CEO Summary: When investing in practice management and electronic medical record (EMR) systems, ob-gyns are learning that they are also making a commitment to buy technology upgrades to support these systems into the future. One consequence is that technology becomes a fixed lineitem expense, the same as rent and insurance. Because most computer hardware has a useful life of just over three years, leasing the hardware (rather than buying with cash or borrowing the funds) can help ob-gynpractices replace and upgrade their hardware whenever necessary.

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Consumers in CDHPs Are Motivated To Use Healthcare in Different Ways

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

CEO Summary: Part one of this special series on consumer-directed
health plans (CDHPs) offered clients and readers of the GRACE
REPORT a detailed look at the specific factors which fueled doubledigit
increases in employers’ health benefit costs over the past six years. In part two, we provide insights into the design of CDHP insurance products, why they are intended to change consumer behavior, and the role government legislation and regulation plays in encouraging the growth in CDHP enrollment. This multipart interview is with Paul Mango, a consultant with McKinsey & Co.Mango is a part of aMcKinsey teamwhich is studying the CDHP trend and, in June 2005, published the first study of howconsumer behavior was changed in large companies which offered only CDHP health benefit options. This interview was conducted by Robert L. Michel, Publisher of the GRACE REPORT. seek effective ways to staff labor and delivery rooms with skilled and experienced ob-gyns. Now a North Carolina company has created a business service that promises to solve these problems for both ob-gyn groups and community hospitals. Under contract to the hospital, its ob-hospitalists provide 24/7 coverage.

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Using the Internet to Attract New Patients to Your Group

Patients are turning to the Internet for answers to healthcare questions and to find doctors

CEO Summary: Patients are now using the Internet as their primary source of information about their medical problems. More importantly, these same patients use the Internet to find their new doctors. This simple fact is about to create new classes of winners and losers in the ob-gyn profession. The winners will be ob-gyns that make Internet marketing a strategic priority for their group practice—thus generating an ongoing and profitable flow of new patients. The losers will be ob-gyns that ignore the evolution of the Internet as an important source of generating new patients—until it is too late!

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INTELLIGENCE: Late and Latent

• COUSIN OF PREZ BUSH LAUNCHED COMPANY TO SPEED DOC PAYMENTS
• MASSACHUSETTS HEALTH INSURANCE MANDATE HAS RISKS FOR OB-GYN GROUPS
  

Look for the next briefing on Monday, June 26, 2006.

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