Integrating acquired physician practices has been an ongoing struggle for health systems. Here are some steps to take to ensure a smoother integration.
Taken from Navigant's 2018 Healthcare Outlook, which outlines the issues that will impact providers and payers in 2018 and beyond.
From management and cultural challenges to significant financial losses, integrating acquired physician practices has been an ongoing struggle for health systems since well before the Affordable Care Act (ACA). Loss per employed physician has become the de facto measure of practice acquisition “success,” hardly a positive metric of a sustainable organization. To overcome this, health systems need to manage up the return on these acquisitions, rather than manage down the losses.
Health system practice acquisitions first surged in the mid-1990s and then in 2003, buoyed by an increase in physician non-clinical responsibilities and income insecurity due to such issues as reductions in Medicare reimbursement and medical school debt. The ACA essentially poured gasoline on the fire through meaningful-use requirements and the advent of accountable care organizations (ACO), which presented insurmountable financial and compliance burdens for many independent practices. As a result, physicians increasingly found health system employment a safer and potentially more lucrative alternative to private practice.
By the time practice acquisitions plateaued in 2014, the number of employed physicians had grown by 76 percent to approximately 123,000. Further, 2016 marked the first time the
For many health systems, the rationale for physician employment has become a moving target. Is it a market share/market growth strategy? A response to a competitor's acquisitions? An ACO or "leverage the payers" strategy? The outcome of this indecision: median loss per employed physician tripled from 2004 to 2013, and now is approaching $185,000, according to MGMA.
How can health systems achieve a positive return on physician acquisitions? A large proportion of direct practice losses are a function of "hosting" practices, rather than effectively managing them. Post-acquisition, health systems often fail to take the steps to streamline staffing and support functions, leverage office locations, standardize supply chain purchasing, and optimize scheduling and care co-ordination.
What hospitals can do:
•Prune back the portfolio of employed docs to fit the organization's chosen strategy.
•Evaluate leadership, assigning senior clinical and business management roles management roles based on qualifications and not "battlefield promotions" due to availability.
•Tailor compensation to the organization's volume and value reimbursement mix to ensure physician compensation drives productivity.
•Leverage data to engage physicians and standardize use of medical devices and medications proven to produce clinically equivalent outcomes at a lower / equal cost.
•Enhance revenue integrity by ensuring patient data is documented and translated into a fair and timely bill.
Unless hospitals carefully consider these steps and create a plan to implement them, they could be another statistic in the case of physician acquisitions which drain value, versus driving it.
Navigant'sChris Stanley, MD, is a former health system and payer executive with more than 25 years of leadership experience. He previously oversaw Catholic Health Initiatives' population health efforts across more than 100 hospitals and 17 states.