DaVita Medical Insights

4 Business Models for Your Nephrology Practice

Challenges in the nephrology industry—including the shift away from fee-for-service to value-based payments—are pushing physicians to consider different business models. Partnering with another organization may provide multiple benefits, including support for participating in new value-based agreements, infrastructure to comply with increasingly complex and burdensome regulations and, most importantly, access to the capital needed to fund technological investments and growth.

Should you consider a strategic partnership? Here are a few questions to help guide your thought process:

  • Are you working harder to maintain your current level of annual income?
  • Have you had to sacrifice work-life balance to maintain your income goals?
  • Have you become disillusioned with the complexity of managing your practice, and is this impacting your satisfaction?

If the answer to any of the above questions is “yes,” it is worth further examining new practice models.

However, before we dive into the various pros and cons of different options, it is important to note that this is a highly individualized decision that hinges on both personal preferences and local market dynamics. Consider the competitive landscape in your market. Is there a large health system or nephrology group that could employ you? Is there interest from large dialysis providers? How about independent groups in the community that might be interested in consolidating? Depending on the answers to these questions, not all of the following options will be available to every nephrologist.

Option 1: Do nothingstay independent

Pros: It may be tempting to do nothing. After all, it keeps the status quo intact, meaning no change in accountability, independence or your current clinical and administrative processes.

Cons: Given the current environment, this could be a risky proposition that results in your practice losing value over time. With the shift to value-based payments, size matters. For instance, if your practice is too small, it could negatively impact your leverage in negotiating contracts. In addition, remaining independent may hinder your ability to recruit new physicians as they consider the long-term viability of your practice.

Option 2: Partner with a hospital

Pros: If you decide to partner with a hospital, your practice will likely remain in an existing network, with little or no disruption for your current patients. In addition, you will likely have a stable referral base. Finally, being part of a larger organization may include additional benefits, such as access to capital and more leverage in contract negotiations.

Cons: Patients with kidney disease can require complex, expensive treatment. As such, nephrologists are often viewed by hospitals as “cost containers,” rather than big revenue generators, which typically describes cardiologists and oncologists. This dynamic can have several important implications in a hospital partnership.

  • Compared to other specialties, nephrology may not experience the same flow of revenue from shared savings agreements, which are becoming increasingly popular as reimbursement shifts to value-based payments.
  • Since hospitals encompass many different providers, nephrology’s voice at the table may be diluted.
  • Although hospitals may have more leverage in contract negotiations, they have to balance the needs and economics of multiple specialties. This may result in agreements that benefit the larger revenue generators at the expense of nephrologists.
  • The future of hospital partnerships is unclear. In some parts of the country, hospitals are in the midst of divesting nephrology practices they had previously acquired.

Option 3: Partner with a kidney care provider

This is a newer and growing option that solves for unique subspecialty needs, much like The US Oncology Network.

Pros:

  • Partnering with a kidney-centric entity can provide specialized insights for your practice—both through tailored data reports and renal-specific management teams.
  • It may be easier to access capital for growth and strategic investments.
  • Your practice governance remains generally intact and integrated into a broader strategic team
  • When it comes to negotiating contracts, kidney disease remains the sole focus, meaning that nephrology does not have to compete with other specialties for attention (or dollars).
  • There may be enhanced kidney care revenue opportunities, as well as cost savings associated with the economies of scale and purchasing power, that national providers can bring to the table. 

Cons:

  • The practice, although functionally independent, exists within a structured framework, where the practice is accountable to the nephrology partner.
  • Along with increased access to regulatory and legal expertise comes another layer of bureaucracy. While some practices find this oversight invaluable, it can also slow some processes and decisions. 

It is also worth considering that a shift away from private practice can often also represent a shift in compensation. This can have both advantages and disadvantages. Today’s reimbursement models increasingly require physicians to take on some risk. That risk is mitigated in an employment model, though potential future upside is often shared.

Option 4: Merge with another independent nephrology group

Pros: Consolidating with another nephrology group in your community can provide multiple advantages, including increasing your leverage in contract negotiations and allowing you to capitalize on economies of scale. Merging with another nephrology group also allows you to partner locally with another organization that is specifically focused on kidney disease.

Cons: Mergers of any kind can be tricky, and this is especially true with physician practices that were previously competitors. Add to that potential cultural differences, and things can get downright contentious. Here are some questions to consider:

  • Will this partnership help establish best practices?
  • How is the potential partner viewed by others in the market?
  • How will the new organization be governed?
  • How will your practice be valued?
  • Who will be make staffing decisions, and how will duplicative functions be addressed?

Pursuing a strategic partnership is a big decision—one that should not be rushed. Nonetheless, carefully weighing the pros and cons, as well as knowing the right questions to ask, will help ensure that you make the best decision for you and your patients.

 

Note: Some of this content has been republished, with permission, from Renal & Urology News.

Robert Provenzano, MD, FACP, FASN

Robert Provenzano, MD, FACP, FASN

In addition to his roles as chief medical officer at Nephrology Practice Solutions and vice president of medical affairs at DaVita Kidney Care, Robert Provenzano, MD, is a clinical professor of medicine at Wayne State University School of Medicine in Detroit, where he earned his medical degree. He completed his fellowship training at Henry Ford Hospital and served as the chief of the nephrology, hypertension & transplantation section and director of nephrology research at St. John Hospital and Medical Center in Detroit. Dr. Provenzano is former president of the Renal Physicians Association and chair of the National Kidney Foundation of Michigan. He is also former CEO of St. Clair Specialty Physicians, PC, a multistate nephrology practice. He has published extensively on kidney care business models and is the chief medical officer of Nephrology Practice Solutions (NPS), a national kidney care management company affiliated with DaVita that oversees owned and managed practices. Twitter: @DrBobPro

Mark Hovermann, MBA

Mark Hovermann, MBA

Mark Hovermann, MBA, is a senior director of corporate development at DaVita Kidney Care.

Lanny Teets

Lanny Teets

Lanny Teets is the director of transactions and growth initiatives at Nephrology Practice Solutions.