Mergers, acquisitions and other types of partnerships remain critical as hospitals face extraordinary pressure to reduce costs, manage care more effectively and improve patient engagement and experience.
Since the inception of the Affordable Care Act, merger and acquisition activity in the healthcare sector has steadily increased. In 2015, there were 102 hospital deals, up 3 percent from 99 transactions in 2014, according to Irving Levin Associate's 2016 Health Care Services Acquisition Report.
To remain viable in an increasingly competitive space, physician practices are joining forces as well. In fact, Moss Adams law firm reported that mergers, acquisitions, and private equity investments in specialty medical groups doubled between 2008 and 2012.
Anthony Gabriel, MD, COO and co-founder of Radiology Partners, recently spoke with Becker's Hospital Review about pros and cons independent practices should consider before joining a multi-state hospital-based physician practice.
Pros
Ability to deliver enhanced clinical value. Dr. Gabriel sees practices coming together because they're able to offer a different value proposition to customers. That value proposition comes in multiple forms, one being technology. Dr. Gabriel said joining a national physician practice presents an opportunity for an independent practice to better integrate with a multi-state hospital through IT. In most cases, smaller practices cannot integrate their technology with their larger hospital partners because they lack the resources to do so. However, when part of a national practice that has strong IT capabilities and resources, smaller practices can have the national practice IT team help them achieve integration with their hospital partners in a way that meets the organization's needs. "If a practice is small, it's difficult to get the right personnel and investment in systems that allow you to do that, but a larger practice is able to better integrate and connect with the rest of the hospital you're working as a part of," Dr. Gabriel added.
Potential for clinical process improvement. Hospitals are able to put together quality improvement programs aimed at achieving meaningful results, whether that means a reduction in readmissions, a reduction in length of stay or other results that are beneficial in healthcare's transition to value-based care. When practices come together there's an opportunity for a large, national practice to use its resources to develop clinical best practices through dedicated teams of physicians throughout the practice. These teams can focus solely on execution and quality outcomes and then share those learnings across the practice. This way, physicians that are part of the national practice can implement these best practices and deliver better clinical results for patients and referring physicians, Dr. Gabriel says. Additionally, he note it's difficult for a practice with less than 10 physicians to afford to develop these types of quality improvement programs without being part of a national practice. "So it's very difficult for practices that are subscale, smaller. By getting larger, they're able to invest in these types of teams, programs and infrastructure that needs to exist to drive this clinical improvement," he added.
No loss of control. An independent practice that joins a national practice does not have to lose control, according to Dr. Gabriel. A national practice can operate through local leadership to best serve the needs of patients and overall community. For large practices to be successful, they need to balance the needs of the national practice with a governing model that ensures local practice teams have control over the local operations. This includes specific clinical processes they use, hiring and firing of local physicians, local hospital interaction and physician compensation. It does not necessarily mean a loss of control for the physicians. "I think a lot of physicians perceive that, 'We're not going to be able to make our own decisions' by joining a national practice, but they can still practice in the way they are used to," Dr. Gabriel says. "Those docs know their local market. They know their patients locally. They're the ones best equipped to make local decisions." The physicians at the local practice set the standard of care for their practice while relying on regional and national support for infrastructure as needed.
Young physicians can provide value. Physician practices are often successful when they offer their physicians shareholding opportunities. Dr. Gabriel believes that the most financial value for national practices can be unlocked for the younger physicians who have a longer timeline to practice. That's if the practice provides some way for physicians to economically benefit as the practice grows, such as through shareholding opportunities. As practices get bigger, the physicians should be able to benefit.
Cons
Lack of individual control. Physicians who have been part of an independent practice may not have as much individual control as part of a national practice. Dr. Gabriel gave the example of a physician who enjoys reviewing accounting statements with advisors every year and choosing a malpractice carrier. This is usually considered a back office function in a larger practice. However, this does not mean that the physician can no longer have input, he or she just won't be the onlyone making these decisions. A national practice can implement teams of physicians from across the practice who can make decisions on back-office administrative roles as a group, instead of independently.
Working with physicians from afar. Dr. Gabriel also pointed out that physicians at national practices don't necessarily see their physician colleagues on a day-to-day basis. They only have that in-person interaction maybe once or twice a year at conferences. If they want to talk with a physician colleague in another state, they typically have to interact with them via conference call. And for some physicians, that's not as comfortable or fun.
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