The Great Land Grab is in overdrive. Physician Practices are consolidating, much to the chagrin of independent, well-run practices throughout the US.
Today, less than 40% of practicing physicians nationwide are independent.
This figure is down from 57% in 2000, and the trend towards consolidation is expected to continue. Many physicians in the 55 years of age and older category view it as one of the few exit strategies available to them other than selling the practice to remaining partners or to a young associate willing to purchase the practice. Since the end of the Physician Practice Management Company era in the late 90s, there is no longer any currency in the form of common stock to offer physicians whose practices are being acquired.
What is driving the trend toward physician practice acquisitions/consolidation?
The hook in consolidation is in monetizing the fair market value of the fixed assets of the current physician practice and the receipt of a check plus a guaranteed income stream for a year or two years after which the physician goes to 100% production as a basis for compensation.
Physician Practice Acquisition is being marketed in the following ways:
- as a way to better coordinate patient care
- provide services at lower costs
- rid physicians of the burden in administering the non-clinical side of their business
- address the fear and cost of the electronic health record system
- maximize managed care contracts
- gain access to group purchasing and lower malpractice premiums
- pay physicians for value and quality outcomes instead of pure fee-for-service
- a way to deal with the general uncertainty and dissatisfaction regarding the changing physician practice landscape
In relinquishing control of their businesses, physicians give up the ability to hire the type of employees they desire by delegating human resource functions to a centralized off-the-premises individual with no sensitivity to the idiosyncrasies of the business in hiring, and more than likely at a lower hourly rate due to profit center parameters.
The counter to those salient points is in the limited sample of my physician practice clients, all of whom are independent in primary care and specialty practices, and who are all doing as well or better financially and in metrics they receive from managed care plans. Consolidation may be good for some and not so for others embracing independence and delivering a highly effective level of clinical and economic results.
So what are problems with physician practice acquisitions/consolidation?
The answer is that the hospitals at the forefront of this movement are looking out for themselves first and the physicians second, if that. The healthcare-reform driven Accountable Care Organizations (ACOs) are being established by hospitals nationwide as a vehicle to coordinate patient care and control the flow of funds from insurance payors and patients and as a way to position their organizations for the movement from fee-for-service to fee-for-quality and outcomes. Over 500 organizations have applied for ACO status in 2013.
Aligning of incentives between hospitals and physicians remains one of the primary impediments to progress here.
First and foremost in the post-acquisition environment, physicians must abide by productivity demands to see increased daily scheduled patients, or face the wrath of corporate delegated monitors in monthly performance reviews. Productivity and efficiency become primary drivers for delivering good care, with lip service being paid to patient satisfaction, patient safety, and good outcomes.
Pressure to meet financial targets becomes a way of life in the consolidated world of healthcare. Physicians are pressured to bypass what is best for the patient by referring them to other physicians employed by the same hospital system. Those physicians who do not meet or exceed the standards set are subject to termination and enforcement of geographic non-compete provisions.
The physician who was an independent or member of the Board of Directors of their practice now becomes a piecemeal worker. And with regard to costs, can the hospital really provide services to patients requiring a procedure at a cost equal to or less than what physicians charge for an in-office procedure? I find this highly doubtful, so the end result may be increased costs post-consolidation to a patient and their payor.
The bottom line on physician practice acquisitions/consolidation.
In summary, consolidation may work for a higher percentage of physicians than for those who are fiercely independent, but there is a sustainable market for both types. Consolidation to some degree may indeed be inevitable as it is in other professions, but it is a complicated transition with no guarantee of success.
The quality of care provided to the patient should be the primary goal.
Government regulations, reductions in reimbursement, electronic health records, and other issues including fear of the future and over-the-top frustration with the administrative part of the practice will only serve to complicate matters. The shortage of primary care physicians (PCPs) – currently estimated at more than 15,000 physicians – to treat the existing base of patients and the looming 30 million people to be eligible beginning in January 2014 when the Affordable Care Act takes effect, combined with increases in the number of Medicare patients to meet the needs of an aging population as well as lower reimbursements to physicians may result in total chaos and a lack of access in the manner patients have been used to.
The overall US physician shortage is expected to rise to 30,000 physicians by 2025. There are currently 130 primary care physicians for every 100,000 people in the US; in Texas, it is only 75 PCPs per 100,000 people, ranking Texas 47th in the US. Our healthcare delivery system may become one highlighted by limited access to the best care unless interests become more aligned between hospitals and physicians with a primary and laser focus on the patients.
A core question is therefore one of priorities: can an employed physician maintain the integrity of his/her role as a care-giving professional and put the patients first when their employer puts production and profitability ahead of patients?