To the Editor:

I completely agree with the aspects of a successful practice detailed in “Five Strategies for a More Vital Practice” [January 2004, page 31]. However, a very significant aspect of practice management is missing: reimbursement and contract management. The insidious undervaluation of physician services has placed extraordinary financial demands on practices across the nation. If a practice does not closely monitor its costs and index its managed care contracts to those costs, no level of investment, systems improvement, governance or commitment to patient service will keep the practice from failing.

Because individual physicians are precluded from group collusion on contract negotiations by antitrust laws, they must be diligent in examining contracts that are historically based on the lowest-common-rate methodology. Physicians must be willing to walk away from low-paying contracts that promise quality-killing volume. Unless a physician or group practice knows its cost profile and is willing to negotiate from a knowledgeable position with a consolidating list of payers, the practice will experience a deceptively gradual deterioration of its profitability.