Running a hospital based group as “service” for the hospital, functioning as a sort of clearinghouse for income and expenses, severely limits your group’s future.
It limits the willingness, and the ability, of your group to pursue outside opportunities. That’s chiefly because there is tremendous pressure to pass through to the owner, and often to the non-owner, physicians all available income, instead of immediately investing in, or creating the capital reserves necessary to pursue, other opportunities.
Additionally, “service” groups often suffer from the mindset that the group was formed to provide services at only that hospital, thus taking off the table completely the consideration of other opportunities, even if the group were able to deal with the notion of holding back what would otherwise be income available for distribution.
Of course, “service status” results in a severely weakened position vis-a-vis the hospital, which knows that your group’s very existence depends on renewal of its exclusive contract. That is a horrible position for your group to be in, both in terms of the concessions that the hospital may demand, and that your group may be forced to give – not to advance its position in some other respect, but merely to save its own life.
You spend your professional life saving others, literally. Why not save your own at the same time?
Comment or contact me if you’d like to discuss this post.
Mark F. Weiss