Back to the Future: Another Run for PPMC’s v2.0?

By Gregg A. Masters, MPH

This is about as good a framing of the failed run during the 1990s when the physician practice management (PPMC) industry caught the attention of Wall Street and had a 10 year run before a literal collapse of what many considered a ponzi scheme at heart. Bottom line is Wall Street underwriters hit pay dirt, while the entity managers – at least those who stuck around trying to make the models work, and the physicians who sold their practices to these entites for paper and/or and some cash dipped into deep despair.


As discussed in ‘Waiting for ACOcor?’, we’re witnessing a similar market opportunity in large part due to the passage of the Affordable Care Act, and ACO specific provisions detailing pathways and timelines to scaled risk assumption and population health management for less than risk savvy medical groups and or their parent health systems.

So the executive summary courtesy of CitiBank analysts: Gary Taylor, Ryan M Langston and Patrick Feeley crystalizes the basis for the zeitgeist failure of this once promising rollup and integration business model. For the complete report, click here.

Risk Payment Models are on the Rise

Everywhere, we read and observe new interest by payors and providers to consider alternatives to existing fee-for-service (FFS) payment models. DVA, HUM and UNH have all recently acquired risk-taking physician practices. Hundreds of hospitals & physician groups are forming accountable-care-organizations (ACOs) and hospitals are increasingly directly employing or acquiring physician practices.

PPMs Were Once Perceived as Ideal Risk Vehicles

The original thesis for physician-practice-management (PPM) companies included consolidating, modernizing and capitalizing a cottage industry, but the real perceived opportunity relied on assuming prepaid medical care population ri sk, then lowering hospital utilization.

But Most PPMs Declared Bankruptcy in the Late 1990’s

Eight of the ten largest publicly-traded PPMs in 1997 declared bankruptcy by 2002. Of 35 public PPMs in 1997, only MD is still listed today. We can cite myriad reasons for the downfall, but ultimately the industry overpaid for assets while mispricing actuarial risk, focusing on the wrong patient population & failing to generate organic growth in acquired practices.

Some Things are “Different this Time”

PPMs are now focused primarily on the Medicare (non-commercial) patient population. Physician culture and attitudes have evolved over the last two decades. Also, information technology and electronic health records (EHRs) are vastly more sophisticated today – promising better tools for practice management, clinical integration, care coordination & actuarial analysis.

…but, Reasons to be Cautious

Myriad reasons exist primarily in execution, not premise. It remains difficult to implement systems to manage large groups of physicians, develop actuarial expertise, ac hieve clinical integration, drive care-coordination while dodging irrational competition and the insurance underwriting cycle.

Healthcare Remains “Local”. No National Model will Emerge

In many markets, new or existing integrated-delivery-networks (IDNs) will prove a superior model with critical mass and first-mover advantage vs PPMs. In other markets, large primary or multi-specialty physician groups will become or remain dominant. The goal of creating a “national PPM model” is fallacy. That said, some local & regional markets are large enough to constitute multi-billion dollar revenue opportunities.


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