Allied Pediatrics of New York unite to save their bottom lines

Rising operation costs and stagnant insurance reimbursement rates are assaulting doctors' bottom lines, with pediatricians among the hardest hit.

It's a financial dilemma with few solutions - including, for some, moving to another state, retiring early or simply going out of business. For others,

The affliction affects all doctors, but is worst on pediatricians because "we have the least income potential," said pediatrician Dr. Lewis Jassey of Bellmore. "For things we do, like vaccines and minor office procedures, reimbursements have gone down, yet costs have gone up."

Pediatrics has become a "low-margin, high-volume business," agreed Great Neck pediatrician Dr. Gary Mirkin, "where the margin between our costs and reimbursements has become very slim."

Pediatricians often look to make up the difference by increasing their patient load, Mirkin added, while constantly struggling with insurance companies over reimbursements. He considers it symptoms of a managed-care system gone wrong.

"One of the promises of managed care that we got rolled into was that patients would pay the co-pay and the rest would be done automatically - we'd submit the claim and get paid by the insurer," he said. "It often doesn't operate that smoothly."

Mirkin cited rejected and denied claims, as well as claims that seem to "disappear," at least from insurance company records. "I have one or two employees ... on the phone most of the day, talking to insurance companies, trying to resolve problems with claims we've submitted," he said.

At the end of their ropes, Mirkin and other pediatricians decided to hang together, rather than hang separately. In June, they changed their business models and banded together, 50 doctors uniting in a mega-practice that spans 15 Long Island offices.

Under the banner of Allied Pediatrics of New York, they centralized their office work and outsourced billing, payroll and accounting services to an independent management company. Allied Pediatrics even hopes to negotiate better reimbursement rates with insurers.

Meanwhile, member doctors focus on what they do best: caring for patients.

"One thing that we're hoping is that insurance companies will see the value of working with us instead of 14 or 15 separate pediatric practices calling the [insurers] with problems and claims," Mirkin said. "We're hoping to save costs on our end of it. On their end, it will also save costs."

Allied Pediatrics is democratic in nature. The professional corporation has an elected board representing small, mid-sized and large practices, according to Mirkin, the corporation's chief executive. The all-volunteer board makes decisions on issues such as incorporating additional practices and approving vendor contracts, but member practices retain autonomy in their daily operations.

The corporation's management group, NAPA Management Service Corp. of Forest Hills, has already negotiated a contract with a vaccine manufacturer and is about to sign another with a medical supply company, according to Mirkin.

Member pediatricians are paid according to the "profitability" of their practice, based on operating costs minimized by group rates for equipment and supplies.

In the next year, Mirkin said, Allied Pediatrics will look to switch to electronic medical records - a transaction that, done in bulk, will be cheaper than if member physicians attempted it themselves, he noted.

The formation of Allied Pediatrics is part of a greater consolidation trend in the health-care industry, said NAPA Vice President Ron Mullahey, a trend not limited to physicians. Health insurers are merging, hospitals are merging and so will doctors, if they want to remain competitive, Mullahey said.

These unions may cost each doctor a little independence, he added, but could lead to healthier bottom lines.

Many doctors accept this prognosis, though others are waiting for a second opinion.

"I think they have some really good ideas," Jassey said. "Conceptually, it sounds good. But it's still in a new state, and like anything new, has a risk attached to it."

Credit: Alison Snyder