Ortho Group Supersizes for Independence

With more than $150 million in revenue and 128 physicians, a joint corporation made up of established orthopedic practices allows them to continue operating independently, but with more clout.

More than two dozen independent orthopedic physician practices have joined together to form one of the largest orthopedic groups in the country. With a footprint that spans 32 zip codes in metropolitan Washington D.C., Virginia, and Maryland, 128 physicians, and more than $150 million in revenue, The Centers for Advanced Orthopaedics (CAO), is hoping its size will ensure survival for physicians who do not want to sell their private practice to a hospital.

An expanding orthopedic practice is not news, but the business model CAO has embraced is different than adding physicians into an already existing practice or launching a new practice from the ground up with like-minded doctors. Rather, CAO is a joint corporation that allows established practices to continue operating independently, says Denny Tritinger, executive director of CAO.

"They maintain their own board structure within the group, and their pay structure is the same as it was before," says Tritinger. "This allowed them to feel that this wasn't a merger; this was a combination of practices under one tax ID number, which is a new corporation. But there's a lot more autonomy at the group level."

Being able to maintain independence was a key factor during the formation of the group, says CAO President, Nicholas Grosso, MD, an orthopedic surgeon whose three-location, 14-phyisician group is one of the largest practices within CAO.

"The writing was on the wall," he says, recalling the genesis of CAO three years ago. "We were reading the tea leaves saying, 'We need to get bigger in order to survive in the private practice model.' "

The concept of staying in private practice but forming a single company attracts practices because it offers economies of scale administratively. Already Tritinger says the CAO has already saved on medical malpractice insurance and medical supplies by at least 20 percent. CAO also has leveraged its size with payers, something none of the practices had been able to do on their own.

"They wouldn't negotiate with us, they dictated to us," says Louis Levitt, MD, Secretary Treasurer of CAO. Levitt's practice in Washington D.C. is made up of four "soon to be five" physicians in a single location, and represents the average size of practices that are part of CAO.

Grosso adds that pre-CAO his negotiations with payers were "like David and Goliath," but with 128 physicians behind him, payers were a lot more willing to talk. In fact, CAO negotiated two-year contracts with the major insurers with reimbursement rates that are 10–15 percent higher.

It is ironic that in order to stay in private practice, these physicians have formed a super-size entity—the very thing that hospitals represent and that these independents want to avoid. But Grosso, Tritinger, and Levitt—CAO's executive team—say the arrangement is very different.

For one, CAO has a one-vote-per-practice rule for its board, no matter how big or small the practice. Secondly, if a practice joins CAO, but has second thoughts and wants to back out, it can do so without much hassle.

"When you're getting large groups to form, you're warned not to have an easy 'unwind' agreement, meaning how do you get out of the group once you're in?" says Tritinger. "We knew the benefits of being in would be so overwhelming that we allowed the 'unwind' to be pretty easy … to allow for groups to leave."

There also aren't many strings attached for buy-in. Groups did have to agree to bill under one tax ID number, but physicians weren't required to change their practice management systems (there are 18). The logo and signage has changed to reflect CAO's affiliation, but office managers and secretaries stay the same at each practice, and the business pretty much runs just as it did without CAO.

But with the backing of a corporation, each practice has a louder voice and bigger presence. It's that concept that Levitt says resonates with this group of physicians.

"I spend a lot of my time trying to help groups think bigger than they see themselves as being," says Levitt. "Doctors have never seen themselves as a big company. I give them statistics that we are equivalent to the 60 largest private corporations in the metropolitan Washington area. When they see that … they begin to feel empowered and they see the benefit of the negotiations we had that were never possible before. Those are the wins."

There is currently no "litmus test" for other orthopedic groups wanting to join CAO, but that could change with its development of a Quality Committee they hope will establish best practices and clinical pathways. Grosso says they are trying out the committee process with easy diagnoses such as tennis elbow and sprained ankle, but he's hoping to move into total joint replacements, ACLs, and rotator cuffs soon.

Levitt offers another explanation for not having many barriers to joining CAO. He says it is because asking independent physicians to "conform" is against their philosophy.

"When the institution sets up best practices, I actually believe underlying all of it is, 'How do I save money, and how do I reduce services?'" he says. "One of the reasons we set up as we did is [because] we believe best practices actually improves the quality of healthcare and improves the quality of patient experience, and it's not driven by profit and so much efficiency. I really do believe that the difference between [this and] the hospital model is they do set up obstacles. The owners of this company are all physicians and they, in fact, will set up guidelines that truly benefit the patient and not as obstacles to the practice."