The Executive Suite: 6 medical practice expansion considerations

Monday, June 17, 2019

6 medical practice expansion considerations

Physicians often dream of expanding their practice footprint. Whether such expansion means multiple locations in the same state or locations across the country, there are steps you can take to grow your practice while also be compliant with state and federal laws.

I have blogged about practice expansion before, and it is still the topic on which I receive the most inquiries. Here are six things to consider before setting up shop elsewhere.

Analyze your success

If you believe you have a successful model, do some internal investigation to understand why it is so successful. Is it your personal presence and involvement that patients adore? Is it the fine-tuned approach to medicine? Is it the brand you have built? Is the model truly something that can be replicated?

Often, physicians do not realize that their presence is the most important part of their successful practice model, and efforts to expand will not work without their physical presence. Many times, this lesson is learned too late, after they have spent time and money on an unsuccessful expansion.

Structure your growth

If your practice intends to expand within the state, consider locations carefully so as to avoid overlap and market saturation. Also, it is not necessarily a good idea to create multiple practice entities for multiple locations. Doing so can create self-referral issues under state and federal laws, which should be closely reviewed by your lawyer, and can also create unnecessary expenses and duplication of services.

Additionally, if you are relying on the “group practice” exception under Stark laws, you can blow the legal definition if you start opening new entities or fail to take into account how new locations impact your compliance with the law.

You should keep in mind that properly formed professional limited liability companies often can be organized on a divisional or site-specific basis to allow a practice greater flexibility. You can explore this option with your advisers.

Centralize your operations

Many practices like to expand their footprint through the use of a management service organization (MSO), where certain practice functions are centralized to serve multiple practice locations. This can include management, billing and other types of services.

The MSO can be owned by non-physicians, which offers attractive opportunities for important members of the practice management team who otherwise may not be able to participate in practice success based on state laws related to fee-splitting and the corporate practice of medicine. However, a MSO model can be risky if you do not consider the legality and associated financial and legal risks before agreeing to such an the arrangement.

Review your payer mix

Depending on whether the services you offer involve private payers, government payers or are simply cash-based services (i.e. cosmetic/spa), your expansion options may differ. Having a clear vision can help make sure you review all the legal issues before you spend time and money on expansion.

If there is even the possibility of federal patients being involved at some point in the future, you should take the most conservative legal approach in your expansion effort. If your practice assumes no federal/commercial patients and then later changes its goals, a complete legal review and analysis of the structure will be required.

Expand your brand

Consider how your practice’s name or brand can play a role in practice expansion, if your name and identity are unique and if can they contribute to your practice’s growth and success. It’s always a great idea to consult with a lawyer who has expertise in intellectual property and can provide some alternative expansion ideas through licensing and brand management.

Tame your ambitions

The idea of practice expansion is exciting, but don’t be in such a hurry to expand your practice. A solid practice with good expansion potential will only get stronger as time goes on. My clients often want to sign a contract right away or they have a partner who wants to do a deal, and they push the expansion forward without proper legal review.

When it comes to healthcare, it’s worthwhile to take your time, do things right and avoid mistakes. It can be costly to miss an important healthcare law in your expansion efforts that can cause undue hard work and hurt your practice’s overall reputation.