The Most Important Lesson I Learned About Physician Groups Came From My Father, Not Law School
Let me tell you a story.
Several people have helped shape my career at different times. In the 1990s, when my brother and I were structuring the Illinois Bone and Joint Institute, my brother had the vision. Stan Weinberger, a brilliant healthcare lawyer at my firm, mentored me and handled most of the design.
I also have the physicians who joined to thank, and my sister-in-law was also a great support. But there’s one person whom I rarely mention but deserves credit: my father, Edward Goldstein.
Let me tell you a bit about my father: he was a partner at Deloitte. He was the head of technical review for the Chicago office, the person with final sign-off on the financial statements of publicly held companies before they were filed with the SEC. A sophisticated, senior role.
But before working at Deloitte, he worked as an accountant at a small firm doing bookkeeping and write-up work for mom-and-pop businesses like dry cleaners, corner diners, and physician groups.
My dad had looked at medical practice books since his career started, and during the founding days of Illinois Bone and Joint, he said something to me that I have never forgotten.
He told me that a medical group is really just a business arrangement, and everything in me disagreed with him.
Why I Thought He Was Wrong
At the time, I thought my father was diminishing the value and role of a physician group. To me, a medical group is a healthcare organization, like a hospital, that delivers care to people. They are meant to heal and serve patients, and calling them a business arrangement felt reductive.
It was like my dad was reducing medical groups to nothing more than noble figures on a spreadsheet. As a young lawyer, I thought I understood the organizations better, so I filed away my dad’s comment. I classified it as nothing more than the perspective of an accountant who saw everything through the eyes of a balance sheet.
But I will soon find out that he was right, although it took me most of my career to understand why.
The Evidence Was Everywhere Once I Knew Where to Look
Over the years, the realization came to me in pieces.
The first came when I served on the board of Sinai Health System in Chicago as chair of the Quality Committee. During my time there, I got firsthand experience with how heavily a hospital is regulated in clinical matters.
Generally, hospitals are accountable to the Illinois Department of Public Health and are subject to oversight on quality, safety, credentialing, outcomes, and care delivery. Then I looked at physician groups, and they lacked the same level of clinical regulation.
In Illinois, a medical group is licensed by the Department of Financial and Professional Regulation, but it does not have anything close to the clinical accountability structure that governs a hospital. This means the state does not regulate a physician group’s quality of care as it does a hospital.
The second realization happened when I developed my Stark Law course and studied the statute intensively. I paid close attention to what the federal government regulated when it came to physician groups. What I found surprised me.
The regulation was not on the clinical side.
According to Stark Law, a group practice is a single legal entity and a unified business not a clinical entity (this does not mean it doesn’t perform clinical functions). When you break down every element of what makes a unified business under the law, every single one is a business element and not a clinical one.
The third realization came when CMS issued the first phase of Stark regulations in 2001. In the regulations, the definition of a group practice included a requirement for the centralized utilization review. This is one of the clinical elements in the whole framework and CMS received significant commentary on it.
However, when the Phase II regulations came out three years later, the definition was removed. The one non-business element in the group practice concept, gone!
This showed me something: even the federal government acknowledged that it was just regulating a business arrangement. My father knew this since 1960, told me about it in the 1990s, and it took me well into my career to fully understand it.
Why This Matters
Now, to why I told this story.
When you accept that a physician group is a business arrangement, you allow yourself to do something: structure the group to optimize its operations and profitability. What you need to keep in mind is that being a business arrangement does not diminish the work a medical group does.
Two truths can exist at once. A physician group can have its clinical mission and still deliver as a well-structured business. Not accepting this truth is one of the reasons why many groups are financially, operationally, and structurally underperforming.
Many owners feel that focusing on the business side betrays their clinical mission, but the opposite is true. Having a well-run business side of things allows the clinical side to thrive, invest, retain talent, and survive.
In the last episode of my podcast, Group Practice with Neal Goldstein, I argued that the business and clinical sides of a medical group can and should be separated. Non-physicians should support and hold physicians accountable for quality, similar to how a hospital board does.
My father’s statement is the foundation of this insight. Therefore, if a medical group is a business arrangement, then structuring it intelligently as a business, while protecting the clinical independence of the physicians, isn’t a compromise. It is the whole point!
Think of it like the relationship between the British monarchy and the parliament. The prime minister governs while the monarch holds a weekly audience with the prime minister to consult, confer, and advise.
While the structure is not exact, the principle is the same. Physicians will always govern clinical care, and non-physicians, in the right structure, can sit alongside them as long as the systems that protect quality are in place.
So, start by embracing what my father understood 35 years ago: a medical group is a business arrangement, and it should be.
This was the focus of the latest episode of my podcast. Click the link in the first comment to listen to the full discussion. In the next episode, I’ll take this one step further into professional risk management — where the business and clinical sides of a practice meet most directly.
Neal T. Goldstein is a healthcare attorney and partner at Patzik, Frank & Samotny Ltd., representing physician groups and individual physicians in corporate and transactional matters.