The Challenges of Practice Acquisitions

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Unlike the first wave of physician practice acquisitions during the mid-1990s, today’s hospitals and health systems are acquiring physician practices to meet a strategic imperative of preparing for health care payment reform. Acquiring an existing medical group can be an effective way to create the physician practice management infrastructure needed to support physician employment and achieve a greater level of integration into the delivery of accountable care as the payment model shifts to value-based pay and population health management. The hope is that stronger physician alignment will leave health systems better positioned to meet the demands of payers, particularly as more health plans move to narrow networks. However, the challenges of practice acquisitions are many including:

  • Increased cost of employing these physicians and their office staff
  • Training on hospital policies and procedures
  • Integrating various in-office systems to the hospital system or conversion to the in-house technology
  • Job dissatisfaction from staff as part of a larger, more structured employer organization
  • Employed physician complaints about being unable to make staff decision and, having less authority over billing and charge coding

There are factors health systems should consider to alleviate some of the challenges of the practice acquisition process:

  • Invest in infrastructure and management that already are experienced with running physician groups
  • Get physicians involved in committees, decisions, recruitment and policy-making efforts
  • Work with a consulting firm focused on better integration and cost reduction
  • Establish a clear plan for creating value from physician buys

By looking at alignment through strategic and cultural needs—and by focusing on the operational components of a practice such as physician productivity, compensation, revenue cycle operations, information technology, and patient satisfaction—hospitals and health systems can better understand the factors that will affect the employment transition, its financial impact, and its long-term success.