Developing the Spine Center Business Model

Collage of business professionals shaking handsThe first major step in creating a Spine Center is developing a business plan. This plan will serve as a clear blueprint for the Center as it relates to business, clinical and economic issues. This is a critical first step because if there is no agreement between the physicians as to the nature of their interrelationship, clinical guidelines and economic participation, there can be no Center.

The development of the business plan allows all parties to project surgical/physician requirements based on the growth of the program. High visibility marketing, public relations and promotion activities are required to build volumes and compete with local competitive forces. Once the business model has been structured, implementation can be launched by recruiting a multi-disciplinary team, beginning with a core group of specialists. High-profile, well-trained surgical specialists will help develop market domination in the region for the Center. Physician integration is critical in this process in order to map out clinical outcomes, recruit a management team, select an outcomes data collection system, and identify resources for public relations, marketing and contracting.

Clinical pathway algorithms should coordinate diagnostic and therapeutic interventions, maximize clinical outcomes, improve return to work results and document reduced cost of care.

Potential Structures
There are a number of types of cooperative ventures that are available between physicians and hospitals. Physician Hospital Organizations (“PHOs”) are frequently organized as entities jointly owned and governed by the hospital and its physicians.

These can be structured as either a pure contractual arrangement or an entity arrangement. Typically, most healthcare joint ventures are not purely a contractual arrangement, although this structure may be used with physician practice management companies utilizing a management agreement.

Many joint ventures are established as general business corporations, with each of the joint venture participants becoming shareholders of the corporation. Some joint ventures have been established as general partnerships with each of the joint venturers becoming a partner, and the ownership interest of each based on their equity interest in the partnership. Some have used a joint venture in the form of a limited partnership arrangement with one joint venture participant as a general partner and one or others as limited partners.

One of the most common vehicles used today is the limited liability corporation (“LLC”). These entities combine the advantages of limited liability for the owners (as is typical with a corporation) and the pass-through treatment for federal income tax purposes (as with partnerships). In an LLC, each joint venture participant owns an equity interest in the LLC typically as a “member” of the LLC, which is very similar to a shareholder of a corporation or a partner in a partnership.

Other types of business entities exist including limited liability partnerships, professional corporations, closed corporations and nonprofit corporations.

Updated on: 02/23/16
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