Ontario Family Law Reporter – Return of the General Practitioners Practice Value

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Ontario Family Law Reporter – Return of the General Practitioners Practice Value

This article was originally published in Volume 31 Release 2 (August 2017) of the Ontario Family Law Reporter © LexisNexis Canada Inc.


Times are changing for Ontario’s General Practitioners (“GP”). Gone are the days when a GP’s medical practice had no intangible value (intangible value includes items such as goodwill, client roster lists, etc.). Depending on the type of practice, this is no longer necessarily the case.

To understand where the intangible value arises in a GP practice, it is important to understand the five main practice models that currently exist for self-employed general practitioners in Ontario.

Practice Model Short-Form Pronunciation Number of Physicians Multi-Disciplinary1
Comprehensive Care Model n/a One No
Family Health Groups (FHGs) “figs” Three or more No
Family Health Networks (FHNs) “fins” Three or more No, but can apply to become part of a FHT
Family Health Organizations (FHOs) “foes” Three or more No, but can apply to become part of a FHT
Family Health Teams (FHTs) “fits” Three or more Yes

1 In addition to family physicians, multi-disciplinary practices offer services from other health professionals, such as chiropractors, dieticians, nurse practitioners, occupational therapists, pharmacists, physiotherapists, psychologists and social workers.

Although FHGs, FHNs, FHOs and FHTs (as well as the comprehensive care model) look similar, the key difference is in the way the physicians’ services are compensated by the Ontario Health Insurance Plan (OHIP). Although self-employed physicians typically receive payment through a variety of methods, they are usually categorized by either:

  1. Fee-for-service agreements, the traditional remuneration method where self-employed physicians are compensated a specific amount for each service provided. For example, if Dr. Smith performs eight general assessments and gives three flu shots, she would receive a specified fee for each general assessment and a specified fee for each flu shot.
  2. Alternative payment plans, a newer, more complex remuneration method where self-employed physicians are compensated in any way other than through a purely fee-for-service model. In addition to a fee-for service component, alternative payment plans can also include remunerations methods such as:

a. Capitation funding, where physicians receive, on an annual basis, a fee for each patient enrolled, regardless of whether any services are provided;
b. Bonuses and incentives for achieving specific targets (such as incentives for number of enrolled palliative care patients or for achieving various patient access targets); and
c. Remuneration for administrative duties.

In addition to the main compensation methods, physicians are also often eligible for various incentive programs and bonuses. Funding methods can also be blended together. Although there are many possible combinations and blends, the main compensation model for each practice model is typically as follows:

Practice Model Enhanced Fee-For-Service plus Incentives Capitation PaymentPlan + Enhanced Fee for Services + Incentives
Comprehensive Care Model X
Family Health Groups X
Family Health Networks X
Family Health Organizations X
Family Health Teams X

 

In the past, it was rare for a general practice (regardless of the practice model) to have any intangible value. Ontario had a notorious shortage of general practitioners, and people were figuratively lined up for miles to enlist with a family physician. Patients would flock to a newly opened general practice, in hopes of being at the head of a line of people looking for a doctor. During these times, it was easy for general practitioners to fill their patient roster. Except for in extraordinary circumstances, doctors would not pay for a patient list when they could quickly accumulate their own roster; therefore, practices had no intangible value.

Times are now changing. Depending on the practice model and operating location, there could be substantial intangible value attached to a practice.

Although Ontario has seen an influx of family physicians in recent years, there is still a shortage of family physicians in certain geographic regions (in early 2016, approximately 800,000 Ontario residents do not have a family doctor). These areas of “high physician need,” as determined by Ontario’s Ministry of Health and Long-Term Care (“MOHLTC”), continue to have a shortage of doctors. In these areas, there are several options for becoming a general practitioner:

• Start a new practice as a sole practitioner under the comprehensive care model;
• Join a FHG;
• Join a FHN or FHO through a managed entry process (twenty new physician entrants per month in Ontario); or
• Replace a retiring physician.

Because these areas have a high need for physicians, it is relatively easy to acquire a roster of patients. The relative ease of building a practice causes existing practices to have limited or no intangible value.

In over-serviced areas of Ontario where there isn’t a high physician need, however, it’s a very different story. As a physician interested in having a general practice, there are several options:

• Start a new practice as a sole practitioner under the comprehensive care model;
• Join a FHG; or
• Replace a retiring physician.

Noticeably missing from this is the option to join a FHN or FHO. Until recently, the only way to join a FHN or FHO was to replace a retiring physician. As physicians generally prefer the capitation payment plan over the fee-for-service model, doctors are often willing to buy out a retiring physician in a FHN or a FHO, rather than join a FHG. Until recently, this was the only way to join a FHN or a FHO.

In 2015, the MOHLTC instituted the New Graduate Entry Program (NGEP). Under this program, new graduate physicians are able to join a FHN or a FHO. The catch is that they are not eligible to receive compensation under a capitation payment plan for at least three years.

In the first three years of practice, or until the performance improvement targets are met (whichever is later), physicians in the NGEP receive a capped compensation which is prorated based on the achievement of certain targets. This compensation plan can be significantly less than what a physician could achieve under a capitation payment plan (including enhanced fee for services and incentives) or a fee-for-service model.

Rather than enrolling in the NGEP, building a practice and receiving a capped compensation for at least three years, physicians interested in joining a FHN or FHO are increasingly considering buying into an existing practice. In a recent London, ON transaction, a general practitioner in a FHO sold his patient roster for $75 per patient. Practices in Toronto have recently sold for more and in Ottawa for less. However, intangible values are practice-specific and will require a specific analysis. The general physician field is dynamic and is subject to legislative changes from the Ontario government.

Although most physicians prefer the FHN or FHO models because of the capitation payment plan, the FHG model may also start to see some intangible value in the near future. By purchasing a practice, physicians can choose the age and demographics of their patient-base. In addition, a purchased practice benefits from access to pre-existing organized medical records, an experienced team of staff and ties to other experienced physicians within the group. All of these factors contribute to intangible value in a practice.

As family physicians are starting to see intangible value in some of their practices, it is becoming increasingly important for family law practitioners to understand where this value arises. With nearly 15,000 general practitioners in Ontario and divorce rates on the rise, it is inevitable that family law practices will see general practitioners and their spouses looking for matrimonial advice.

Authors: Ron Martindale and Jeff Rozema