Five Drawbacks of Selling Your Medical Practice to a Hospital

January 15, 2014

While selling your medical practice and becoming a hospital employee has its perks, it also has some big drawbacks.

Physicians across the country are selling their practices and becoming acquired by larger healthcare systems.

Often, they are lured in by higher compensation, simplification of regulatory burdens, and the security a larger system provides.

But while hospital acquisition comes with many perks, it also comes with many tradeoffs. Here are five of the biggest to consider:

1. No going back. You've spent a lot of time and money building up your practice. If you become acquired and the acquisition doesn't work out, it's going to be very difficult to build your previous practice back up again.

"When you become acquired, the [practice's] reputation will still exist, but generally the name goes away, the hospital purchases all the assets, the hospital employs you and your employees," Wade Thomas, a regional manager at Healthcare Strategy Group recently told Physicians Practice. "If ever you decided that employment wasn’t the right choice or, for whatever reason this agreement wasn’t working out, you kind of have to go out and start from scratch from that point. You can buy back your equipment, you could rehire your employees, but essentially you're going to be spending that cash to get that stuff back that maybe the physician doesn't have readily available."

2. Loss of autonomy. You're used to being in charge, making all the big decisions, and setting the culture and tone at your practice. Upon hospital acquisition, much of that will change.

"As an independent physician, the physician has a lot of autonomy," Daniel Stech, a principal at Pinnacle Healthcare Consulting recently told Physicians Practice. "They make the decision in terms of how the practice is going to operate, what kind of culture it's going to have, to some degree what kind of money do they want to make based on how hard they run or how efficiently they run their practice. When they become employees they give up the right to make those decisions."

3. Slower decision-making. You're used to making business decisions quickly and seeing that they are quickly carried out. As part of a larger healthcare system, you will likely deal with several management layers before problems, issues, or decisions are resolved.

"If you're an independent practice and you decide you need a new X-ray machine and whatever the technology may be, you and your partners can make the decision to do that," Bill Cherry, a principal at Pinnacle Healthcare Consulting recently told Physicians Practice. "Being part of a larger system, you don’t necessarily have that decision-making authority. You've got to typically go through the finance department of the hospital or health system and make the request and then they do their due diligence. The timeframes tend to be a little longer than what physicians are accustomed to."

4. More oversight. You're used to taking the reins when it comes to determining how you practice, and how your practice complies with government and payer regulations. Within a larger healthcare system, you will have to comply with that system's rules and regulations, and with its expectations of your work and productivity.

"The hospital has spent money to acquire your practice, employ all of these employees, there are going to be certain goals that the hospital is going to keep a pretty close eye on - how you’re operating financially, and if you’re as efficient as possible kind of thing," said Thomas. "You may have a manager, or a director, or a VP ... saying, 'Well your numbers were this before you were acquired and now they’re down 15 percent what gives?'"

5. Technology troubles. You may have invested a lot of money into your practice management system or EHR. The hospital may ask you to scrap that technology and adopt theirs.

Transitioning to and learning to use a new system, especially an EHR, can be very frustrating, especially if you're not given a voice in the technology decision-making process.

"We didn't really have a lot of input," pediatrician Jeb Teichman, who transitioned from practice owner to hospital employee recently told Physicians Practice. "They showed us a couple of different systems but in the end they didn't actually ask, well they did ask, but I don’t know if they really took our opinion into consideration."