BY JEFFREY MCKINNEY
With demand for services up and job satisfaction for providers down, medical franchises are taking off. But beware, one expert says, because ‘franchising in healthcare is not for sissies.’
Walk-in patients with ankle sprains, wrist fractures, concussions and other injuries will soon get instant relief, if OrthoNow realizes its plan to sell 15 franchises across the country this year.
Calling itself the nation’s only orthopedic urgent care franchise, OrthoNow opened its first location in Miami in May 2013 and began selling franchises in January 2014.
The franchisor is betting the concept will score big. Its growth is expected to be fueled largely by offering savings to insurance companies, employers and accountable care organizations, says Dr. Alejandro Badia, OrthoNow’s chief medical officer and CEO. On average, he figures a patient visit at OrthoNow runs $275 versus at least $1,500 at a hospital emergency room.
Enter the world of medical and healthcare franchises, where firms are opening and expanding briskly nationally. Enterprising medical practitioners are using the franchising model to offer less expensive and more efficient services. Baby boomers living longer, seniors demanding more specialized care and soaring healthcare costs are also boosting activity.
Concurrently, reports indicate Obamacare could add more than 21 million people to the insured in the next 10 years, with some 4 million already enrolled this year. U.S. healthcare spending is projected at $4.5 trillion by 2019, according to recent estimates, offering opportunities for the franchises.
Based on the number of locations opened, the Chicago-based iFranchise Group lists some of the hottest franchise categories in the sector and their growth rates during the past three years: medical care (200 percent), medical staffing (105 percent) and chiropractic care and therapy, (both around 60 percent).
But “franchising in healthcare is not for sissies,” says Mark Siebert, CEO of iFranchise.
He says expanding healthcare franchisors must ensure they are complying with state and federal regulations or they could face significant problems.
For example, there are prohibitions that don’t allow healthcare professionals to split patient fees with a third party. So, a healthcare franchisor that takes a traditional “percentage royalty” from franchisees could violate some of these laws in certain states. “An understanding of these issues, and how to work through them, is essential to success in healthcare franchising,” Siebert says.
Tracy Weise, president of Weise Communications, a Denver-based firm that has more than doubled its number of healthcare franchises as clients in the last three years, says there are many more people who need care than can be provided for now in the United States, and franchising can help fill the gap.
And many medical providers are tired of insurance management, high overhead, low return and minimal interaction with patients, Weise says. By moving into a franchised system, “medical providers can focus on what they do best, caring for patients.”
Growth in demand for its services the past few years prompted Preferred HealthStaff Inc. to change its business model this year and begin franchising, says Donna Moyer, founder and of the Fairfield, Pennsylvania-based firm.
Andy Collins and Melissa Speal acquired the first PHS franchise in Hanover, Pennsylvania, in March 2014. Also co-founder of an independent insurance agency, Collins says PHS was a client for a number of years.
“With the population of those age 65-plus projected to all but double between now and 2030, the decision to purchase a PHS franchise was a no-brainer,” Collins says.
Tips for healthcare franchisors
Complex issues affect the structure and operation of a healthcare franchise, says Mark Siebert, CEO of the iFranchise Group, including these:
- Corporate practice of medicine: Some states will allow non-physicians to own a medical practice, while other states will not. These statutes can limit the choice of prospective franchisees in those states and will invariably impact the amount of control that can be exercised by franchisors.
- Self-referall prohibitions (the Stark law): Physicians are prohibited from referring Medicare or Medicaid patients to Designated Health Services in which they (directly or indirectly) have a financial interest. So a physician in private practice may be prohibited from referring certain patients to a separate franchise that he or she might own.
- Privacy laws (HIPAA): For many franchisors, benchmarking franchisee performance is a key element of the value proposition. But under HIPAA, the franchisee will be prohibited from sharing certain data that might otherwise be shared with the franchisor.
- Reimbursement and coding: Medicare, Medicaid and other public and private insurance programs may have provisions that will restrict the situations under which reimbursement will be made and coding differences may impact the amount of reimbursement—requiring careful planning by the franchisor.