Is this Y2K Trend Back? Beware the Resurgence of Cloaked PPMCs

Around the year 2000, Physician Practice Management Companies (PPMCs) like Phycor, MedPartners, PhyMatrix, BMJ and others hit the physician practice marketplace and were selling themselves as the White Horse of private practice physicians.? “We’ll buy your practice, give you a check and some stock, then enhance the bottom line of your practice by reducing overhead and enhancing contract rates with insurers and we’ll all win!”? ?And the early adopters did, but not exactly how they planned.

Turns out that PPMCs were playing the market.? The Financial Standards Accounting Board (FASB) allowed long term depreciation of the purchase price, which allowed their balance sheets to look good because the huge amounts paid to purchase practices were accounted for over decades.? But when the FASB changed the accounting standards and forced companies to account for acquisition expenses over a very short time frame, the market (NASDAQ) punched those depressed earnings with a downrated stock price.? At one point, for instance, MedPartners stock was at a multiple of earnings in the 30s.? After the FASB change, their stock price plummeted.? The market driven money to acquire practices (from big stock prices) dried up because PPMCs didn’t win from just stacking company gross income on top of newly acquired practice gross income.?

End of the money train.? End of the stock price increase.? End of an industry.?

But the early selling physicians got a huge win.? They got to keep the money they got for their practices being bought.? And when the bottom fell out of the PPMC biz, those companies early on just gave the practices back to the doctors (without requiring repayment of the purchase price).? Big win for the early sellers.? Physicians who sold after the first wave suffered though.? They were required to give back all the money they got and some had to buy their practices back.

Most confounding to selling physicians was:? the PPMCs couldn’t manage their way out of a paper bag!? They didn’t reduce expenses.? They didn’t enhance income.? Instead, they stumbled around with staff who never ran a practice and seemed to think they’d just figure it out over time.? And they took off when their stock options weren’t worth the paper they were written on.? ??

So why talk about all this now?? Because they’re back!!? But they’re calling themselves something different, like clinically integrated networks or value based platforms or Bill and Ted’s Really Friendly Company.? The sad truth for physicians and medical practices is that if you think someone is gonna come along on a white horse and save you from the business challenges of a medical practice, you’re probably wrong.? Sure, people are out there selling that story, but doctors are human and inclined to think things can be better and quicker if they just swap out parts of their infrastructure. ?Perfect storm.? Again.? What can you do if you wanna believe?? Trust none of them and verify, verify, verify.? And also have all the promises they made to entice you IN A CONTRACT reviewed by a healthcare lawyer. ?Further, include clear consequences for failing to keep them. ?Finally, find the story or belief you have that medical practices should be easier and more financially robust and shoot it in the head.? It’s not true and never was.? ?????????????

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