Strength in Numbers: Advantages of Group Practice

by Corporate Relations and Business Strategy Staff

Group practices continue to form as an effective strategy for meeting the evolving demands of an increasingly complex health care market. A 2006 member survey by the APA Practice Organization found that approximately one-third of full-time private practitioners are affiliated with a group.

Though group practices may differ in legal structure, their members generally share facilities, personnel and earnings. The creation of a group psychology practice can be an effective way to offer an integrated menu of psychological services in a health services marketplace that values "one-stop shopping." Multidisciplinary groups that also include other health-related services may be even better positioned to meet this marketplace demand.

Some psychologists find that certain attributes of solo practice, including independent decision making, flexibility and individuality, are a good fit for their work style and personality. For others, a group practice offers advantages that make it a desirable arrangement. At some point in their professional career, many practicing psychologists must compare the options for themselves.

Among the following potential advantages of group practice:

Economies of scale. Group practices typically consolidate the administrative and management functions of solo practitioners and therefore lower the administrative overhead for each group practice member. This sharing of resources ultimately lowers the practice's costs and increases competitiveness. Though potentially one of the greatest advantages of affiliation, group members sometimes do not reap the full benefits when they fail to consolidate staffs and other resources and thereby duplicate tasks such as billing. Removing administrative burdens from group members frees them up to spend time delivering professional services and helping to improve the practice's bottom line.

Combined interests and talents. In some practices, one partner may be interested in overseeing or even handling a portion of the business aspects of practice, while other partners prefer to avoid such a role. Combining the strengths and interests of several practitioners can enhance the satisfaction and productivity of individual group members, and the group as a whole.

Enhanced negotiating position. Health care systems and payers often look to lower their administrative costs by signing multiple providers and/or specialties with a single contract. When a practice eases the administrative burden on a system of healthcare, the group increases its own competitiveness.

Greater market access. Group providers may have greater access to patients than solo practitioners do. Having multiple affiliated health professionals and staff increases opportunities for making community connections with potential clients and referral sources. Group practices may also expand their geographic reach by having more than one location.

Pooled capital. Group practices may be able to combine the capital resources of each practitioner in a way that gives them access to tools that might be cost prohibitive for a solo practitioner, such as electronic medical records prime office space, and start-up funding.

Risk sharing. Group practices have greater flexibility to share the clinical and financial risks associated with contracts and the business risk associated with owning and operating the practice. Various legal structures can be created to minimize personal liability.

Enhanced peer consultation. Group practices offer the opportunity to share clinical experience with other practitioners. They also provide easier access to coverage when a group member is away from the practice.

Control. Group practices (particularly multispecialty groups) may have a competitive advantage in the marketplace when it comes to referral sources. By offering the one-stop shopping desired by healthcare systems and payers, multispecialty groups enhance their negotiating position.

Strategic advantages. In the current health care marketplace, practitioners, hospital, clinics, residential treatment centers and other facilities often interact in complex systems of care. Group practices are in an excellent position to contract with, develop, or in some cases, have a financial stake in, these systems of care.

The current health care market requires an understanding of new methods of service delivery and reimbursement. The changing paradigm in health care is that treatment decisions are no longer made in isolation by health care professionals. Today and in the future, groups that can deliver effective services in line with marketplace realities and opportunities are generally positioned to thrive.

This article is the first in a series designed to address the business aspects of group practice. Look for future PracticeUpdate articles on forming a group practice, business planning, managing conflict, streamlining your operations, and financial and legal considerations.