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Want to avoid making a mistake that could cost your practice tens of thousands of dollars? Don’t play that hunch about opening an office in the high-growth part of the city.
Whether by network formation or practice acquisition, many growth-oriented physician groups are interested in expanding their geographic breadth of service. Fueled by managed care organizations’ (MCOs’) desire to contract with fewer providers, some practices are continually on the lookout for their next office location.
But how do they decide where their next clinic site should be?
Many practices tend to go where the new money is by focusing on the high-growth areas of town. It sounds like a surefire strategy, but it may not be, according to experts.
Consider the example of a suburban ortho pedic clinic in one of the fastest-growing cities in the Eastern U.S. After studying the demographics, the clinic decides its next office should be situated in a high-growth suburb 25 miles away.
The practice had correctly identified the fasting-growing suburb in the area. It had amazing demographics. But the practice did not take into account the radically different referral patterns from their existing clinic. They also failed to recognize that physician-on-call coverage would be difficult given the far-flung locale of the new office.
Within a couple of years the group had abandoned the new office. Ultimately, the practice identified a potential merger partner in a location much closer to its original clinic.
Central to the growth plans of most practices is the acknowledgement that most of their growth is going to come from managed care. In a managed care environment it is important to remember that the focus is on employers and their employees, says Karen Zupko, president of Karen Zupko & Associates consulting firm in Chicago.
The solution to finding the right location for your next office, therefore, is closely tied to the marketing plans of MCOs that your practice contracts with.
For example, imagine that the contract to provide health care to the largest bank in town is up for grabs. That could have a tremendous impact on a given health plan’s requirements in terms of geographic coverage.
Are the bank’s employees all going to be residents of the high-growth areas of town? Absolutely not. "The bank has employees with near-minimum-wage jobs, and it has executives. It has employees who live everywhere," Zupko says.
What the payer needs is provider coverage that is as widely dispersed as the employees it hopes to serve. "So a network that focuses on high-growth areas is not a solution for that employer," says Zupko.
Most of the growth of the 14-physician Atlanta Ear, Nose & Throat Associates has come through the formation of a network specifically established to satisfy the geographic coverage needs of payers. Wherever the plans are adding covered lives determines where Atlanta ENT Associates will open its next office, says Larry Kraska, MBA, administrator for the practice. "We are constantly out there talking to the different payers."
Staying in close contact with current and prospective payers is the best way to get information about what is happening in the market, Kraska says. If the practice is able to establish good relations, it might even be possible to get inside information about employers recently signed up by the payers. In that way, it is possible to eliminate most of the risk associated with opening a new office. You can let the payers decide the location for you.
There’s no need to be bashful with your payers, says Andrea Eliscu, president of Medical Marketing in Winter Park, FL. "When you develop a relationship, tell them: We want to make sure we are positioned to help you have the product in the marketplace that you want,’" she says. Then ask: Where are you going after customers? What county do you see yourself moving into next?
Another group that practices should view as a partner is any business coalition in their practice area. Employers are asserting their presence more than ever in the past, says Eliscu. They are more open about what is happening in the business community and what their values are about health care in their community.