1.800.360.0603

GE Healthcare Camden Group Insights Blog

Hospitals Continue to Acquire Physician Practices as FTC Looks On

Posted by Matthew Smith on Apr 1, 2013 10:28:00 AM

Acquiring Physician PracticesHospitals are increasingly interested in buying physician practices—and analysts say the Federal Trade Commission is becoming more interested in whether these deals are creating antitrust issues.

In its first survey of hospital executives, staffing company Jackson Healthcare found that 52% of the 118 surveyed said their facilities planned to acquire physician practices in 2013—up from 44% who closed such deals in 2012. Jackson’s report, based on a survey in late 2012, was released March 12.

The interest in primary care was overwhelming. Fifty-four percent of executives planning acquisitions sought family practice physicians, and 26% set their sights on general internal medicine practices, making those the top two specialties by far.

Hospitals don’t need to search long and hard for willing partners. Seventy percent of executives said one reason for making deals is that physicians are approaching hospitals with offers to sell. However, the executives have their own strategic goals in mind: 58% said they were considering acquisitions to build a competitive advantage, and 57% said they would do so to maintain a competitive advantage. Executives could choose more than one reason for wanting to make a deal.

Jackson’s survey echoes other recent statements describing growing hospital interest in physician practices. A Jan. 22 report on nonprofit hospital finances by Moody’s Investors Service noted that facilities increasingly seek out physician practices because they help stabilize their market share and improve their bottom lines.

Regulatory scrutiny

As hospitals’ interest in physician practices grows, so does the FTC’s in making sure such deals aren’t violating antitrust laws. “The FTC is just responding to what is happening in the marketplace,” said Alison Cuellar, PhD, associate professor of health administration and policy at George Mason University in Virginia.

Most recently, the FTC, along with the Idaho attorney general, is trying to block the acquisition of the state’s largest independent multispecialty physician practice group by a major hospital operator, St. Luke’s Health System.

The FTC said in a complaint issued March 12 — the same day as Jackson’s report — that the Boise-based hospital’s acquisition of Saltzer Medical Group, which has more than 40 physicians, means it would have too much market power to set rates. FTC officials said St. Luke’s would have about a 60% share of the primary care market.

St. Luke’s acquired Saltzer’s personal property and equipment on Dec. 31, 2012. Saltzer physicians entered into a five-year professional service agreement with St. Luke’s.

The complaint is related to another federal lawsuit filed in November 2012 by St. Alphonsus and Treasure Valley Hospital that seeks to void the acquisition, citing similar concerns. They said St. Luke’s, the state’s largest hospital system, has purchased 22 practices with 200 physicians. A judge did not grant the temporary injunction sought by the two hospitals, so the Saltzer deal went through.

St. Luke’s officials said in a statement that the hospital entered into the agreement to better coordinate care based on the Affordable Care Act, which would reduce rates, not increase them, as the FTC contends.

In the last few years, the FTC has said it would review hospital-physician deals more closely. In August 2012, the FTC ordered Renown Health in Reno, Nev., to allow at least 10 cardiologists to be released from noncompete agreements after the agency found that the health system’s purchases gave it 88% of the local cardiac care market.

However, the FTC approved a “clinical integration model” on Feb. 13 that created the Norman (Okla.) Physician Hospital Organization, a partnership between the Norman Regional Health System and the Norman Physicians Assn. The hospital did not buy the practice, but the two, under the PHO, would be permitted to negotiate joint contracts with insurers. One factor in the FTC’s approval was that physicians would have the right to negotiate contracts with insurers that choose not to sign deals with the joint network.

Strategic Provider Planning, Specialty Mix

Topics: Employed Physicians, employed physician practices, Employed Medical Practices, Family Physicians, owned physician practices, Primary Care

Top 9 Physician Recruitment Perks Offered (Other Than Salary)

Posted by Matthew Smith on Nov 29, 2012 11:05:00 AM

Physician RecruitmentSalary is the most basic component of any physician recruitment and compensation package, but what are the most common benefits outside of salary that hospitals and practices offer physicians? 

According to Merritt Hawkins' 2012 report of physician recruiting incentives, there are several primary perks, including signing bonuses and payment for continuing medical education. Here are nine of the most common benefits, based on the study's examinations of physician job searches last year.

1.    Malpractice insurance (offered in 99% of searches)
2.    Pay for continuing medical education (98%)
3.    Health insurance (97%)
4.    Relocation allowance (95%)
5.    Retirement benefits (82%)
6.    Signing bonus (80%)
7.    Disability (75%)
8.    Education forgiveness (26%)
9.    Housing allowance (5%)

Strategic Provider Planning, Specialty Mix

Topics: Employed Physicians, employed physician practices, Physician Practice Solutions, Physician Recruitment, Physician Onboarding, Physician Acquisition, Physician Acquisition Strategy, Physician Practice Acquisition, owned physician practices, Physician Employment Models

Revenue Cycles of Employed Physician Practices: Questions to Ask

Posted by Matthew Smith on Oct 19, 2012 9:13:00 AM

Employed Physician PracticeAsking the following questions can help healthcare leaders evaluate the revenue cycle strengths and weaknesses of employed physician practices.

Scheduling

  • Does the practice verify insurance info (using batch eligibility) prior to appointments?
  • Are the patients informed of payment expectations prior to arrival for their appointment?

Registration/Check-in

  • Is the staff trained to collect co-pays, deductibles and past-due balances at check-in?
  • Does the practice have a written financial policy that is provided to all patients?

Coding

  • Does the practice verify coverage for specific services?
  • Does the practice update procedure and diagnosis codes annually, as well as perform a coding audit?

Charge Capture/Claim Submission

  • Does the practice capture 100% of office and hospital charges?
  • What is the lag time from date of service to date of claim submission?
  • Are claims submitted daily?

Cash Application

  • Does the practice use electronic funds transfers (EFTs) and electronic remittance advices (ERAs)?
  • Does the practice load payer allowables and track payment variances?

Denial Processing

  • Does the practice track denials?
  • Does the practice monitor write-offs and have an appeals process?

Accounts Receivable Follow-up

  • Does the practice follow up on all outstanding balances: payer and patient?
  • Does the practice have a dashboard report that is reviewed monthly and compared to industry standards?

Topics: Employed Physicians, employed physician practices, Revenue Cycle, owned physician practices, Physician Employment Models

Employed Physicians Stabilize Hospital Finances

Posted by Matthew Smith on Sep 11, 2012 10:47:00 AM

Employed Physicians, Hospital Owned PracticesIncreasing direct hospital employment of physicians may be starting to pay off for nonprofit hospitals.

Previous reports from credit agencies stated that growing physician employment was straining finances at the hospitals. But after several rocky years, their balance sheets are showing steadiness because of this trend, according to reports from Fitch Ratings and Moody’s Investors Service. In particular, they said, the revenue the physicians bring in from outpatient care is overcoming long-term trends in flat inpatient revenue.

“The hospitals that are in the best financial position are aligned more with physicians,” said Emily Wong, senior director at Fitch Ratings. “This is definitely a key to hospital financial performance and credit-worthiness.”

The Fitch paper, issued Aug. 16, and another document published Aug. 23 by Moody’s found that the operating margins of nonprofit hospitals had stabilized. The overall median operating margin of nonprofit hospitals included in the Fitch report grew slightly from 2.6% in 2010 to 2.7% in 2011. The operating margins of hospitals included in the Moody’s report held at 2.5%.

Analysts said employing physicians is a way for outpatient services to compensate for inpatient revenues, which have been flat or declining for several years. The Moody’s document found that median inpatient admissions grew only 0.1% in 2011 after a decline of 0.4% in 2010 and no growth in 2009. The volume of visits to physician offices increased 4.8% in the second quarter of 2012, according to a June 23 research note by Credit Suisse investment analyst Charles Boorady. Visits declined 8.9% in the second quarter of 2011.

“We expect the shift from inpatient to outpatient to continue, because health reform is moving care to a lower-cost setting,” said Sarah Vennekotter, assistant vice president at Moody’s. “There will be more observation stays and outpatient visits going forward.”

Bringing physicians on board, however, remains a stressor. This strategy can help hospital finances, but it can cost a lot.

“Employing physicians helps with market share,” Vennekotter said. “It can help with creating a firmer referral base, but the related expenses can be quite high. It’s expensive to employ a physician, and there are other continuing pressures on revenue.”

Community hospitals employed 62,152 full-time physicians and dentists in 1998 and 91,282 in 2010, according to the American Hospital Assn. The number of physicians and dentists employed part time grew from 15,837 in 1998 to 24,139 in 2010.

Topics: Employed Physicians, Hospital Employment, owned physician practices, Medical Staff Development Planning, Medical Staff Planning

3 Success Factors for an Effective Physician Acquisition Strategy

Posted by Matthew Smith on Sep 5, 2012 12:15:00 PM

physician acquisitionAs hospitals and health systems prepare themselves for healthcare reform, they are considering many new physician acquisition strategies. Options include offering physicians a subsidized EHR, assisting practices with recruitment, providing access to health information exchange, and acquiring physician practices.

This article addresses the last strategy: practice acquisition and physician employment. To make a physician acquisition strategy work, hospital leaders need to carefully manage three critical key success factors:

People
As any Fortune 500 corporation that has acquired a smaller company or competitor can attest to, one of the most critical, and often overlooked, success factors is effective transition of people. Not only are financial and business systems merging, so too are the cultures and mindsets of the people running the business.

Physicians, other healthcare providers and office staff experience a significant culture shift when transitioning from an entrepreneurial business to being employees of a large hospital system. While they may not be outwardly expressing fear, anxiety or resistance, these emotions are certainly being felt internally and can have detrimental effects on the bottom line.

Hospitals would be remiss if they did not address these concerns and help physicians and staff assimilate to the new organization. Having new staff participate in an employee orientation program is an obvious strategy to ensure a smooth transition, but to have a more sustainable impact, hospitals should create a customized orientation program that meets the needs of this unique employee population. Physicians in particular should be given the opportunity to participate in customized on-boarding programs exclusive of the standard employee orientation. Give them the chance to participate in a physician advisory group or provide an opportunity to connect with colleagues who have experienced a similar transition. In general, it is important to set clear and realistic expectations for those making the transition and those managing the newly acquired practices.

Processes
As a physician practice is acquired and transitioned, its internal processes will change. This requires careful review and planning. First, the following questions should be considered when crafting a transition strategy for the physician:

  • Is the physician on staff at competing hospitals?
  • Does the physician share call coverage with physicians on staff at the employing hospital?

Who are the physician's main sources of referrals? If those sources are physicians, where are those physicians onstaff?

Second, consider needed changes to practice processes. Key questions include:

  • What changes to the operational policies and procedures should be made?
  • Will the practice’s vendors change?
  • Will the practice accept the same insurance plans?
  • How will patient service be affected?
  • Will there be a new financial policy?

Systems
During the acquisition process, review the practice’s current IT systems and determine how to transition them to the hospital systems. Systems involved may include an electronic medical record, a patient scheduling system, e-prescribing and laboratory interfaces. As these systems are reviewed, a data migration of patient medical or demographic information may be considered to save the time and money of re-entry.

Most practices have a practice management system for performing billing. Since most hospitals have their own system, the practice PM system will not be used after the transition. However, since most hospitals don’t purchase the physician's accounts receivable, the physician will be responsible for continuing to work outstanding accounts receivables and collect on outstanding claims. If the physician was hosting this system on a server in his or her office, the hospital will need to determine how to accommodate the practice’s billing needs during the system transition.

Strategic Provider Planning, Specialty Mix

Topics: Employed Physicians, employed physician practices, Physician Practice Solutions, Physician Recruitment, owned physician practices

Building Financial Success for Owned Physician Practices

Posted by Matthew Smith on Jun 22, 2012 3:59:00 PM

The trend to acquire physician practices is stronger than ever, yet many hospitals struggle financially after making the move. Hospitals lose an average of $96,286 per employed family practice physician per year, while the average loss on an employed internist is $222,786, according to the Medical Group Management Association’s Cost Survey for Single-Specialty Practices: 2011 Report Based on 2010 Data. For a hospital that owns just 25 medical practices, that could translate into well over $3 million in losses annually.

How can hospitals minimize losses on newly acquired medical practices? In addition to setting realistic financial goals and benchmarks for hospital employed physicians, much can be learned from the management techniques that have been proven most effective at helping private medical practices reduce losses and achieve stronger profitability.

At the core of an employed physician practice turnaround are performance goals that keep physicians focused on profit and loss and that are aligned with the physicians’ professional aspirations. Strengthening collections processes also is critical. Most important, both providers and staff require a structure of accountability to keep improvements on track.

To apply these private-practice turnaround techniques to employed physician practices, hospitals should focus on five targeted interventions.

Help the Practice Develop a Vision and Strategy
With growing competition from walk-in clinics, a physician can no longer build a medical practice by simply hanging out his or her shingle. This reality is especially true for a hospital-owned practice, which can languish if not actively marketed. To create a strong patient base, a medical practice needs to be consciously differentiated from its competitors and promoted.

Recreate “Ownership” Incentives
A common early effect of becoming hospital employees for physicians is a diminished personal drive to improve practice profitability. To counter this effect, physician compensation should be tied to the practice’s bottom-line performance.

Provide Performance Targets
Private practice turnarounds have been shown to work best when overall financial goals are broken down into specific performance targets for providers and staff. This step is equally important for employed physicians.

Design Effective Front-End Processes
Medical practices routinely lose 15 to 25 percent of potential revenue through a combination of lost charges, high denials,missed copayments, and other uncollected balances. Hospital finance managers can help physicians reduce these losses by establishing sound revenue cycle processes on the front end.

Hold Monthly Check-Ins
Performance targets are important, but they cannot work without accountability. To help keep practice performance on track, monthly check-in meetings should be conducted with physicians and practice staff.

The value of these five turnaround techniques is that they engage employed physicians in the financial success of a hospital-owned practice. Used on a consistent basis, they can help hospital leaders maintain an employed practice network as a financially sustainable enterprise.

Topics: Employed Physicians, employed physician practices, owned physician practices

Subscribe to Email Updates

Value Model, Health Analytics

Posts by Topic

Follow Me