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Sharing to Survive

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With rising malpractice rates, lower reimbursements and an ever more complicated role for the back office conspiring to make independent physicians an endangered species, Chicago entrepreneur Christopher Joseph is trying to create a habitat that increases their chances for survival.

His “physician center” concept—a combination of building space, shared business services and ancillary medical services—aims to help preserve a practice model that many think will soon be extinct.

“Most of the people who deliver healthcare services are in a pretty difficult situation in which they are outmatched and do not have the resources to practice in the future,” says Joseph, founder and chief executive officer of Mercatus Group LLC.

Ten physician practices with a total of 25 physicians—internists and family medicine practitioners, along with specialists in neurology, oncology, hematology, orthopedics and others—are clustered in the Physician Center of Vernon Hills, which opened in 2005. A second center will open in 2007, and three more have been announced—all in Chicago’s fast-growing northern suburbs.

The practices receive services such as electronic medical record hosting, phone and Internet service, IT support, and billing and claims processing from Mercatus. Physicians refer patients to the on-site center for diagnostic imaging, physical therapy, laboratory and other services.

Unlike the more common physician condominium model, the practices in Joseph’s physician center are tenants. Mercatus accepts physicians as limited partners but does not necessarily encourage their investment.

“We don’t believe you solve a business-of-healthcare problem with a real estate solution,” says Joseph.

Rather, the idea is that independent physicians can save money by, say, sharing a phone system and back-office functions such as billing and collections while generating new revenues by providing Stark Law-compliant “in-house ancillary services” to their patients at the diagnostic center across the hall.

Dr. Deborah Winiger, a family practice physician, has seen decreasing business costs and rising revenues since she moved into the physician center. In practice for 10 years, Winiger started her medical career in a group, then went into business for herself six years ago. She finds the physician center provides some advantages of each.

“This allows me to stay solo,” she says.

The group’s diagnostic center is a joint venture with Evanston Northwestern Healthcare, an academic medical center in nearby Evanston, Ill. Too much independence can be a dangerous thing, Joseph says.

“The relationship between independent physicians and hospitals—ever dynamic, ever fragile—is still important,” he says. “We want to advance the position of independent physicians, but not at the expense of the hospital relationship.”

—Lola Butcher