Consolidations Increase Throughout Local Health Care Industry
Written by Marilyn Bowden on January 13, 2011
By Marilyn Bowden
In anticipation of changes in the way healthcare is delivered, hospitals and other large providers are bringing smaller practices under their umbrella, and doctors who own their practices are merging into larger practice groups.
Locally, said Shutts & Bowen healthcare attorneys Mark Folk and Jim Farrell, while more physicians are going under hospitals or other umbrellas, it’s still not an appreciable percentage, but in the past couple of years the pace of consolidations has picked up.
"Physicians realize that in order for them to deliver their services more efficiently and effectively," said William J. Spratt Jr., a healthcare attorney at K&L Gates, "they need to go to electronic medical records, and in order to improve their efficiency and lower the costs of delivery, they need more sophisticated administrative leadership in their practices."
The biggest expense in most practices is staff, he said, and consolidation into a larger groups helps defray unit costs of health insurance and other benefits.
"We’re seeing a lot of interest among family physician practices in talking with different systems," said Tad P. Fisher, executive vice president of the Florida Academy of Family Physicians.
"A lot don’t want to sell their practices but to maintain their independence and current style of practice. But they are very concerned because they want to make sure that the patient census they currently have will still be there.
"Employers are contracting with health plans that are only using certain systems or hospitals, and that could cause a lot of problems."
Mr. Farrell said the larger impact would be on a doctor’s ability to practice on a profitable basis.
"It’s next to impossible for a solo or small practice to negotiate with any managed care provider," he said. "The providers can’t afford to negotiate with them, and they can’t afford to develop any ancillary services."
"It’s all about net profitability as a practice," Mr. Folk said. "The practice of medicine has gotten more expensive over time, and except in high-end specialties, fewer physicians are willing to make the investment alone."
Chief among those investments is the switch to electronic healthcare records.
That push goes back to the Health Insurance Portability and Accountability Act of 1996, or HIPAA, Mr. Spratt said, which was "touted as facilitating workers and employees to take insurance benefits from one employer to another without losing benefits.
"But in actuality, there was a great deal of foresight in putting in provisions that if healthcare was to become more efficient, we were going to have to adopt more efficient information systems."
Incentives for implementing electronic records systems provided under the American Recovery and Reinvestment Act of 2009, or ARRA, in which the government put aside substantial funds to help defray the costs of converting to electronic records, were in a way a continuation of HIPAA, he said.
But Mr. Folk said ARRA also made it an economic necessity for physicians to adopt electronic medical records systems, "and those are not cheap. So a solo practitioner may have to go to an organization that has the money and the continuing cash flow to do this."
Soon, Mr. Farrell said, practices that don’t opt for e-records will be penalized in that they will see a reduction in their reimbursements from Medicaid and Medicare.
Uncertainty is also playing a role in medical consolidations and mergers.
At this point, Mr. Folk said, "We don’t know what the medical environment will look like. It depends on what regulations come out of Washington and how much unbundling of the healthcare act there is."
The model for healthcare delivery in the future is the accountable care organization, or ACO, Mr. Spratt said.
"They will be clinically integrated systems that will be rewarded for reducing the cost of providing healthcare systems," he said — "in general, groups of physicians, hospitals, outpatient centers and the like that will all be at least to some degree clinically integrated to avoid duplication and unnecessary testing and be more efficient.
"So what we are seeing is that more forward-looking physician practices are preparing for changes to come as a result of healthcare reform, quite a few of which will be implemented regardless of what Congress does in its next legislative session."
Dr. Fisher said the trend among physicians to find a safe harbor inside larger healthcare systems in some ways resembles what occurred when the HMO model was first introduced.
"Then, many went back to individual or small group practices as time went on," he said. "But this time around, how it will all play out, nobody knows.
"We at the Florida Academy of Family Physicians are watching these things very closely and trying to help our members handle it all legally.
"What we don’t want to have happen is for people to lose the continuity of knowledge, patient and family histories, and one-on-one relationships they’ve traditionally had with their family doctors. If that erodes, it could end up costing us a lot more."
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