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Doctors Become Businessmen to Control Costs and Quality of Care?


We all remember the 19th Century image of the physician who based all of his recommendations strictly on medical science and the needs of the patient, but today’s economic reality of high-cost healthcare resources has forced many doctors to find ways to cut costs without compromising the quality of patient care. Many are taking on the additional role of businessmen and investing in entrepreneurial ventures.

Cost containment is one reason for the doctor-turned-investor, but according to Jay Weatherly of Salient Health Ventures in Cullman, it’s not the only reason. Some physicians are simply taking advantage of good investment opportunities while others are seeking more control over their practice and their income, he said.

Gary Griffin of Gary Griffin & Associates in Gadsden works with about 30 physicians in a variety of ventures, and he said with more patient care being driven into outpatient arenas, many doctors are investing in ambulatory surgery centers. “Not too many doctors lose money by investing in their own practice,” Griffin said. “New technology is great, but it adds greatly to the cost of a practice. If there isn’t a good return on the investment, the doctor probably won’t do it.”

Dr. Craig Philpot of Birmingham Gastroenterologists said the reasons that doctors invest in business ventures vary from person to person. “Sometimes it’s for the financial opportunity and other times it’s an opportunity to consolidate avenues of care within their specialties to create a more convenient package for the patient,” he said.

Philpot and his partners own the office building that houses their clinic and surgical practice, an investment decision they made for economy and efficiency. “As a group gets larger, doctors look at economies of scale. It makes sense to own your own building instead of paying rent,” Philpot said. “Also, consolidating into one central location avoids duplication of staffing and medical records, for example. The practice is more efficient than it would be if you were trying to manage three or four locations.”

Ambulatory service centers (ASCs) have become a popular investment for physicians in surgical specialties, because these centers provide a way for surgeons to increase income and to have more control over the facilities where they practice. However, before making such an investment, a physician should evaluate the risks, which include the requirement of significant capital and substantial legal documentation.

“The laws for such ventures are complicated and have many regulations, but they generally are good,” Weatherly said. “They provide adequate protection that’s reasonable, and all healthcare providers are aware of them.”

Laws such as the federal Anti-Kickback Statute and safe harbors are designed to prevent the fraud and abuse concerns that are inherent in the operation of an ASC. The anti-kickback law prohibits payments for patient referrals under a federal healthcare program. Violation of the statute is a felony and is punishable by a maximum fine of $25,000, up to five years in prison, or both. Conviction will also mean automatic exclusion from Medicare, Medicaid and other federally funded healthcare programs.

Because the anti-kickback law is so broad, the Department of Health and Human Services established “safe harbors” for different types of ASCs. In each safe harbor, the ASC must be certified as a Medicare facility whose operating and recovery room space is dedicated exclusively to the ASC. The safe harbors also define the qualifications for a center’s potential investors.

Because the laws are so complex, Griffin said it would not be hard for a physician to run afoul of the law without experienced legal counsel. However, he said he hasn’t seen blatant attempts by physicians to “scam” the system.

Philpot said it’s all about keeping the proper focus. “As a physician, you have to remember that your focus is healthcare and taking care of patients, not real estate or any other type of business venture,” he said. “If you keep that focus and make that your motivation, you will always make the right decision and stay on the right track.”

This article taken from the October 2005 issue of the Birmingham Medical News.

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