John W. McDaniel, MHA

John W. McDaniel, MHA

Founder & Chairman




Hospitals are seeking new and innovative ways to affiliate with physicians that differ from tactics used in the 1990s when hospitals often purchased physician practices to compete with publicly owned physician practice management companies. These new relationships involve a more formal type of relationship with physicians, which might reflect lessons learned through previous less‐than‐satisfactory relationships.

Most hospitals have physician integration strategies as a part of their long‐range plans, but because physicians employed by hospitals lose approximately $190,000 per year, hospitals and health systems must explore alternatives to physician affiliation aside from the traditional employment model.

Affiliation is sought for various reasons. Large hospitals seek a wider reach into communities, while small and rural hospitals seek help with physician recruitment, which has been troublesome over the past years due to 84% of senior medical residents desiring to practice in communities with a population in excess of 100,000 people.  Integration between hospitals and specialists is occurring at a growing rate – in part because more hospitals recognize that successful partnerships with specialists are
lucrative, according to experts.

“Specialists have higher incomes than primary care physicians and they have money to invest in joint ventures for specialty centers,” says Daniel Beckham of the Beckham Co., in Whitefish Bay, Wis., a strategic planning group for hospitals and physician organizations. “In some instances, the relationship involves employment. When hospitals directly employ some specialists, the question becomes, what is the inevitable evolution of that model?”

When developing new affiliation models, hospitals should focus on their most important customer: the physician. Hospital executives have had various employment arrangements with physicians, but they are re‐examining those arrangements because of performance issues, particularly regarding operating losses sustained by hospital‐owned practices.

What’s more, some hospitals have discovered that it is not necessary to own a medical practice or employ physicians to develop meaningful relationships; they have learned that mergers do not necessarily strengthen their business relationships.  Reports also show that some hospitals lost money after purchasing physician practices because doctors didn’t work as hard once they became employees instead of owners.

There are many reasons why hospitals encounter financial losses when they acquire practices, including increased employee benefit expenses, administrative cost allocations and an inability to receive credit for the technical fee revenue portion of ancillary services provided by practices.

As a result, hospital professionals are showing an interest in realigning incentives by developing alternatives to physician employment known as the physician enterprise model or practice leasing.

In this structure, hospitals and medical practices enter into nonequity joint ventures, which help hospital professionals develop relationships with key physicians
through a sustainable private practice model. It establishes a centralized mechanism for
both parties to be involved in improving patient care, enhancing information technology, and using their collective expertise. Some of the benefits:

 Hospitals agree to operate the practice at a fixed percentage of collections, which gives both parties the incentive to produce results;
 No capital expenditures required;
 Hospitals benefit from stronger alignment with physicians in a less formal manner;
 Physicians preserve the private practice model and autonomy;
 Physicians achieve balance of security and independence; and
 The arrangement is much easier to unwind than a practice acquisition.

When hospitals and health systems embark on more formal organizational strategies with physicians, all parties should follow due diligence procedures to ensure regulatory compliance and fiscal responsibility. The hospital or health system should also take all deliberate steps to ensure the new hospital/physician affiliation model is consistent the Stark Law, Anti‐Kickback Statutes and, if applicable, regulations governing reasonable compensation for tax-exempt organizations.

Although hospitals are pursuing a number of alternatives to physician employment, such as co‐management agreements and clinical integration, the Physician Enterprise Model offers an integration strategy for both parties. After the appropriate due diligence is performed, a hospital can offer the practice a reasonable arrangement for ongoing management. Take, for example, a two doctor Internal Medicine practice that collects $1 million annually with operating expenses of $500,000. With this model, each physician would make $250,000 annual income. During due diligence, the hospital discovers that it can improve practice performance through coding compliance improvement and enhancement of billing, collections and accounts receivable management. As a result, hospital professionals believe they can increase collections by $1.1 million annually. Also, the hospital may be able to offer ways to streamline operating expenses through group purchasing arrangements, centralize staffing, and simplified employee benefits so that operating expenses equal $450,000 annually.  Utilizing this example, the two Internists could increase their incomes to $325,000 annually.

Through these types of models, hospitals can develop financially prudent partnerships with physicians and, at the same time, doctors can achieve an elusive balance of security and independence.

John W. McDaniel, MHA

Founder and Chairman

Peak Performance Physicians, LLC

909 Poydras Street – Suite 2600

New Orleans, LA 70112

800-764-2633 (office) 504-453-8108 (cell)

CODING/COMPLIANCE E/M Changes in 2021 for 99202-99215

Betsy Nicoletti, Coding Intel, September 26, 2019;

When CMS announced plans to adopt a single RVU value and bundled payment for codes 99202–99204 and codes 99212–99214 in 2021, many physicians were concerned. In response, the American Medical Association (AMA) worked to revise these codes and definitions. While there wasn’t time to put its additional changes in the 2020 book, the CPT editorial panel made changes that will take effect in 2021.
The following edits relate only to new and established patient visits in 2021, for codes 99202–99215:


When it comes to physician practices, it's 'a seller's market' depending on specialty

by Joanne Finnegan | 

It’s a good time to sell a physician practice, but a lot hinges on the practice specialty, according to one healthcare investment banker.

“It’s becoming a seller’s market,” Jeff Swearingen, founding partner at the healthcare investment banking firm Edgemont Partners said in an interview with FierceHealthcare.

Valuations are strong and there’s still a lot of demand for good practices, which is especially true in “hot specialties” such as gastroenterology, vision care, women’s health and fertility, and orthopedics, Swearingen said.


Unpleasant waiting rooms a bigger issue for patients than long wait times

by Joanne Finnegan | Nov 5, 2019 11:26am

Physician practices may want to reevaluate the state of their waiting rooms, as a new study finds that unpleasant waiting areas are a bigger issue for patients than long wait times.

A new report from Qualtrix found that unpleasant waiting rooms were the single most cited reason that patients said they would stop returning to a healthcare facility, whether it’s a primary care physician office, emergency room or urgent care facility.


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