Who Really Owns Your Medical Group?

November 18, 2019

Walmart is famous for its slogan “Save Money. Live Better.”

It’s no surprise that the slogan is aimed at the customer.

But what about the supplier?

There is a tremendous analogy here for medical groups, especially for hospital-based medical groups.

From the start, Walmart employed a low-price strategy. The way they sell at low prices is to buy at lower prices.

Many manufacturers, as they began selling to Walmart, craved the large distribution the stores offered. They’d assess how much Walmart would buy, and look at how many stores Walmart would put their product in. And, then, in order to get the Walmart business and that tremendous distribution, they’d sell to Walmart at very reduced prices.

But as Walmart became a bigger and bigger part of a manufacturer’s business, Walmart began putting the pressure on. They knew that the manufacturer was so dependent upon Walmart for their huge volume and reach, that they could push even harder for really low prices, for low, lower, and lowest prices.

So, what does that have to do with you?

If you’re the leader of a hospital-based medical group, an anesthesiology, radiology, emergency medicine, pathology, or hospitalist group, it’s the same story. And, for those office-based physicians working for a hospital, it’s definitely the same story.

If the huge bulk of your business is dependent upon a single hospital or a system of hospitals, say, six hospitals in XYZ, Kentucky, then who really owns your group? Do you own your group? Or, in essence, does the system, or the hospital, own your group?

After all, if they make a demand on you (“we’re cutting your stipend,” or “we’re reducing salaries,” or “we want you to expand coverage”) then what choice do you have other than to say “yes”? The alternative, of course, whether spoken or understood, is that you’ll soon be an “ex-vendor” or “ex- employee.” [I didn’t say “ex-partner” because you never were treated as a “partner.”]

The real question is, have you, in essence, given away the ownership of your practice entity?

And, should you go to sell your group, if you’ve become that dependent on one large source of business, what sort of a discount will the buyer demand due to your huge, “baked in” fragility?

Think about it: Do you and your fellow physician “owners” really own what you think you own?

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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