The unknown size of health care: doctor networks The establishment of doctor networks is taking on such a scale that could significantly change medical care in the Federal Republic of Germany. The doctor networks established today were founded in the 1990s and have in some cases firmly established themselves in the provision of care in their region. With participating doctor's practices ranging from 20 to 150, the network landscape is relatively diverse. The properties of doctor networks as collaborations have advantages and mechanisms that we would like to show below from a business perspective. Physician networks can provide an answer to many healthcare questions and problems in the early 21st century, but they also pose risks that also need to be considered. In particular, the monopoly or quasi-monopoly position poses risks for both the quality of care and the security of care for patients. A look at the doctor networks reveals some aspects that need to be examined for all those involved who want to invest more resources in the establishment of such networks.

>> A desired goal of cooperation is the much-cited synergy effects. In business administration, a distinction is made between density advantages, scope or chaining effects and economies of scale. Although this is “common knowledge” in business science, a look at practice shows that the desired effects of a planned cooperation are rarely clearly classified, precisely described and adapted to their respective company or organizational strategy by initiators and operators. In this way, however, when setting up and developing a doctor's network, opportunities for cooperation are potentially missed and resulting problems and risks for the doctor's network or for one's own practice are overlooked.
Density advantages
Density advantages arise because the customers of a service are spatially concentrated. An example of density advantages is that patients in a medical care center can see several doctors in one trip. An important aspect for doctor networks is when coordination questions within the doctors and non-medical professional groups (therapists, nursing staff, etc.) represented in the network can be clarified immediately - without waiting time.
Density advantages do not yet play a prominent role in healthcare cooperation agreements.
Economies of scale
Economies of scale arise when a network of doctors can increase the number of its patients and services in relation to the individual practice, thereby resulting in savings.
If, for example, several practices coordinate their device purchases and agree on the mutual use of the devices, the level of use of these devices increases for each network participant, which (generally) results in a higher profitability of the devices. Similar effects can also arise from the shared use of a personnel pool or through joint appointment and follow-up management, joint purchasing of materials and better price and discount conditions from suppliers.
Economies of scale and returns to scale were originally the reason for promoting the establishment of medical communities (networks and cooperatives).
Scope effects
While economies of scale ensure better utilization of existing resources in existing concepts, economies of scope enable the development of new forms of service or care. These arise through the integration and connection of the supply services of two or more partners. The effects become stronger the higher the shared patients' need for the entire range of services is.
An example of this are bridge teams in palliative medicine, in which doctors and palliative care nurses bring their respective aspects of the care, medication and treatment of patients into the advice of family doctors and relatives as well as into the work with patients in the home environment.
The currently most important effects among the compound effects are the chaining effects. These arise from the fact that several chain links in a process chain (treatment chain) are more closely connected to one another. In practice, chaining effects arise, for example, through the collaboration between general practitioners and specialists, a hospital and a rehabilitation provider. The indication-related overall treatment process is the objective unifying unit; however, the supply region with the providers available there limits the selection of possible cooperation partners as long as there is no full freedom of establishment. The problem with such collaborations is the very strong bond and responsibility of the cooperation partners to one another as well as good opportunities to gain insight into the organization and processes of the respective cooperation partners. This form of transparency is not welcome for everyone.
Information breaches
Information breaks occur where information is not passed on at all, is distorted or is not passed on at the right time in the process chain. The exchange of information is usually reduced to the absolute minimum of effort and information content. Patients themselves are unwilling or unable to absorb or pass on relevant information.
In many cases, those involved in the process (without consultation) do not know which information can be helpful in which respect (medical, nursing, social environment). The process successor does not know what information is already available in the predecessor.
Breaks in information pose high risks, missing and distorted information has a negative impact on the quality of the process and results, the corresponding measures often have to be taken up and/or repeated at an inopportune time, and corresponding significant additional costs are incurred in the overall treatment process.
Realization of chain effects
and avoiding breakages
By eliminating these breaks in the process chain, a wealth of positive effects are achieved. On the one hand, the value of the work of process predecessors is preserved by using their work results as long as they are valid. Secondly, no additional effort needs to be made to keep such results available (media disruption). The additional effort for repeating measures and the risk of copying errors and loss of data/information are eliminated. The overall process effort is reduced significantly. The respective contribution of a service provider in the value chain remains transparent and visible to everyone, which inevitably increases quality. Ultimately, the satisfaction of service providers and patients is higher because no more effort has to be made than is individually necessary. These effects particularly affect the indication-related projects of integrated cooperative care.
Risks of doctor networks
As the number of participating doctors increases, doctor networks begin to represent a monopoly, with the doctors participating in the doctor network sooner or later providing the majority of patient care in a region. This monopoly position can be achieved very early in some disciplines and later in disciplines with a large number of practices.
Monopolies are rightly viewed critically in the national economy. Since competition is generally seen as the driving force for innovation and increased prosperity and monopolies naturally impair competition, it is important to monitor such developments closely so as not to jeopardize the advantages of networking through emerging disadvantages. Possible disadvantages are based on two factors: the negotiating and creative power of monopolies and the risk of economic failure of an organization with a monopoly character.
The negotiating power of a network of doctors is very high, particularly in rural regions where there are no alternatives for providing care to the population. This is because there is no alternative for the cost bearers, as bearers of the security mandate, to transfer the care mandate other than the participants in the corresponding doctor network. The alternative of setting up a new or own care structure does not exist for legal and time reasons, as patient care cannot be suspended during such a set-up. Although the doctor's network is also dependent on the payers as contractual partners, in a monopoly position the doctor's network faces a large number of health insurance companies that it can recommend to its patients, while the health insurance company does not have this option. Ultimately, this means that the doctor network can determine the conditions of patient treatment itself within the framework of the legal provisions. Once the network or the participating doctors have internalized their negotiating power (this is, after all, a novelty since the introduction of the health insurance system), it cannot be ruled out that parameters such as treatment quality and fees will be adjusted according to the doctors' intentions, at the expense of at least the payers .
Another risk is that doctor networks can develop their own economic dynamics that make the participating practices dependent. As the number of practices increases, networking and economic integration (equipment pools, etc.) also increases, the dependence of the individual practice on the functioning of the doctor's network also increases. The insolvency of the doctor network or its operating group can then lead to the collapse of the infrastructure as a chain reaction to the collapse of medical care in whole or in parts.
The risk of collapse increases rapidly if the doctor network generates a substantial share of revenue from direct contracts and would no longer be able to cover its costs if these contracts were eliminated. As part of the risk management of individual practices, such a risk would be prevented by ensuring that the individual practice would still be able to survive even if a network collapsed. Unfortunately, such risk management firstly overwhelms many practice owners, and secondly, many owners could also rely on the principle of “too big to fail”, especially since health care is always a highly politically relevant issue.
In order to secure their own practice, doctor network participants should ensure that the additional resources required through a selective contract are precisely related to the fees and that there is an option to exit from unprofitable contracts. In the interests of security of supply, the aim would be for the additional costs for operating the doctor network to be fully financed from the savings within the framework of standard care, even without selective contracts.
Since, as already indicated, a monopolization of medical service providers could occur for the first time in German history, it is also impossible to predict which methods the state will use to secure the healthcare system. At the latest after the first serious cases of monopolization and abuse, reactions can be expected that will in turn significantly change healthcare.
Common concept grids, roles and patterns
in healthcare networks
Some roles and patterns in the doctor networks and the selective contracts concluded through them are encountered again and again, so that one can almost speak of business models here.
“Manufactory model”
The model is based on the modern concept of a manufactory, i.e. the factory-like, division of labor provision of services. Compared to the “handcrafted” provision of individual services, the manufacturing model is characterized by cost savings in the provision of services and an increase in the quality of treatment through greater specialization of the individual participants and assumption of responsibility for the overall treatment result.
Typically, surgical services are provided along a treatment line for a specific indication, for example in prosthetics (knee endoprosthesis) or in palliative care.

“Fire department model”
The “fire brigade model” means the cooperative networking of service providers to monitor and prevent costly developments in certain indications, for example heart networks or diabetes programs. The advantage for the payers lies in the reduction of the risk occurrence in relation to standard care. The advantages and disadvantages are similar to those of the “manufacture model”. Basically, a disadvantage of the “fire department model” is that concrete success can only be measured in the long term.

“Marketplace model”
The advantages of the “marketplace model” are cooperative networking and spatial focus with short information paths and good transparency between the service providers. It is suitable for the supply of spatially clearly defined areas within which patients can contact the provider (like in a marketplace). can access all of the services that are essential to them.

“Cooperative model”
A “cooperative model” focuses on density advantages, primarily the joint financing and use of services and capital goods. The cooperative model is therefore independent of selective contracts.
Parameters of professional doctor networks
Regardless of the size of the network, the professionalism of doctor networks lies in compliance with certain parameters that are important and significant for the benefit of the doctor network in providing care:
Goals
When it was founded, the doctor's network should pursue defined goals that are linked to concrete specifications as to which effects should be used, how these effects can be measured and which factors have an inhibiting and reinforcing effect.

Network construction
The planned/targeted network structure and communication structure should reveal the goals of the network. Participation should be contractually regulated for the participating practices. The goals must be included in the contracts to such an extent that the benefits and obligations of the network practices emerge from the contract. Professional network management should have coordinated planning for each network practice as to how this practice can be developed within the network of the doctor's network.

Regional reference/patient reference
The practice network should be regionally based so that the service region of the doctor network is reviewed and planned in terms of health care coverage and patient concerns.

Treatment pathways
For the analysis of medical activities and further planning of the doctor network, it is essential to define and monitor treatment paths. Only by observing the treatment paths is it possible to measure the synergy effects in relation to patient care and provide evidence of this. Also linked to the patient pathways is the calculation of the actual costs incurred for the treatment, both within the network practices and in the overall network.

Controlling benefits
The implementation of goals of the overall network into tangible results and reliable predictions is the responsibility of controlling these goals on the basis of the data available in the network. Careful control in this matter is what makes it possible to convincingly formulate the advantages of the network in relation to standard care. In this context, controlling does not necessarily mean the use of expensive employees and software, but rather, depending on the level of development of the network, continuous and result-oriented, appropriate identification and observation of parameters.
Requirements for management in different start-up and development stages
Establishing and developing a network of doctors means continuous work, which should be accompanied by professional organizational advice with a frequency of 2 to 3 appointments per quarter, especially in the start-up phase. The content of the support includes coordination and supervision as well as, where necessary, corrections in planning or management.
In existing networks, the next step is to create initial synergy effects and establish individual working groups specializing in the respective diseases, which will work on new treatment concepts in the interests of evidence-based quality improvement. The aim here is to find synergy effects in the sense of benefits, so that a bargaining chip is created between network doctors and payers, on the basis of which selective contracts can be concluded.
These selective contracts will not be able to automatically increase budgets in the future either. Rather, with capped overall budgets and growing quality demands, it can be assumed that the focus will be on higher performance from doctor networks.
In addition to some studies on doctor networks and their professionalism, companies in the pharmaceutical industry have also identified doctor networks as a separate target group and factor in the healthcare system and have carried out analyzes that produce a generally consistent picture:
Of the approximately 700 existing doctor networks, less than a tenth are classified as professional by various German and international pharmaceutical companies, which are already characterized by the conclusion of selective contracts and visible synergy effects.
A further 50 to 70 networks are seen to be well on the way in this direction, although there is a need for support for further development of these networks, which will have to be invested in particular in the selective further development of management concepts and methods.
Around a third of the networks are only in the initial phase, in which a vague idea of establishing a network is followed by an equally vague concept of how to achieve the goals. In this concept, the meaning and purpose, goals and the whole “why?” are not clear. The problem here is that the goal of setting up a network is often more associated with the prospect of fulfilling personal goals than with setting up a network itself, which is why more time and resources are used in imagination and action than in consistently achieving the goal. Actionism is primarily aimed at selective contracts, office furnishings, mission statements, logos and legal forms, for which professional help is necessary and welcome, provided that it is free of charge and does not harm the imagination in any way.
Here, the essential basic requirements of management, namely avoidance of complexity, determination and a keen eye for what hinders or promotes the achievement of goals, are not very well developed. Such network founders fail to recognize that establishing and running a doctor's network requires fundamentally different requirements than running a doctor's practice and that successfully running a cooperative doctor's practice does not mean that this can be transferred 1:1 to a doctor's network.
Doctor networks at this stage require a combination of coaching of the founding network doctors, specialist advice on start-up knowledge and methods as well as organizational advice to quickly overcome obstacles and problems on the way to a stable and professional network. Local authorities also see that the associated costs are well spent and support start-up advice to a substantial extent. Other cooperation partners from the healthcare sector also see the establishment of a reliable partner for outpatient care as an aspect worthy of support and are contributing to the corresponding costs. The allocation of consulting costs of perhaps 100 euros per month (before tax) per participating practice saves a lot of time, money and energy. The long-term support of a network of doctors can be achieved for a few thousand euros per year. Such an investment must be a matter of course for the development of a doctor network with medium-sized standards.
Doctor networks with small practice sizes
We define physician networks with a small number of practices as physician networks with 15 to 50 participating practices. These “mini-networks” are usually characterized by their own or purchased specialist management. The situation in such doctor networks varies greatly. Ideally, the information and communication channels are short and the network management is structured accordingly.
Due to the smaller size of the network, existing opportunities cannot be fully exploited, although the risks of the network can still be managed.
However, you also encounter the other extreme: Management tries to run its own practice in addition to the network and gets bogged down between operational tasks and strategic orientation, there is a lack of appropriate remuneration for innovations, there is no clear direction or a shining eye on the possible importance of the doctor's network prevents a pragmatic and goal-oriented approach to the requirements and tasks that arise. What is important here is the consistent replacement of management tasks in practice management and the enablement of targeted investments.
Large doctor networks
Large doctor networks are characterized by a number of practices beyond the limit of 100 practices. What is positive is that the management of the doctor network is generally professional. With this number of individual practices, strict management is usually established because the doctor network also occupies a monopoly position compared to its individual practices. The aforementioned risks of monopoly formation occur here, although professional management reduces the risk accordingly.
Doctor networks with larger practice sizes
Larger doctor networks (50-100 practices) already have established structures with regard to selective contracts, legal forms of company(s) and IT. Professional management is mandatory. The structure of the participating practices is problematic, as it is often too specialist-heavy and neglects area care in favor of multiple indication-oriented models. Compared to smaller doctor networks, the higher number of practices means there is a lack of flexibility in managing individual practices, and compared to large doctor networks, there is a lack of negotiating power with the health insurance companies and the ability to conclude special care contracts. The situation in these practices is a typical “stuck-in-the-middle” situation in which these networks are at risk due to excessive demands on management and overestimation of their own situation. The size of the network encourages disputes and “trench battles” between participating doctors and management over positions and strategic approaches. What is important in this situation is a clear management orientation, open leadership and communication, as well as the formation and maintenance of a core of practice owners who, despite all the necessary discussions, maintain the stability of the network in this phase.
Conclusion
Doctor networks are a significant factor in outpatient healthcare and, through regional concentration, can quickly develop into a monopoly that can put both clinical care and payers in problematic situations. It is therefore appropriate to rethink the unreflective promotion of practice networks and to demand professionalism from management and compliance with clear guidelines from the practice networks. A large part of the approximately 700 practice networks will have between 5 and 50 connected medical practices. In particular, networks with a size of 50 to 100 practices are in a difficult stage. But it is only here that the stage in which regional concepts begin to make sense in order to be able to build up potential for comprehensive synergies and market power on the one hand. When setting up a doctor's network, it makes sense to provide advisory support, particularly from management, and is absolutely necessary when setting up a doctor's network until it reaches 50 practices. <<

Synergy effects
• Density advantages
• Economies of scale
• Chain effects
• Economies of scope
• Avoiding breakages